Competing in the attention economy
Adapting to the new era of M&C
The media and communications landscape is undergoing a significant transformation, shaped by the cord-cutting trends of the last decade and accelerated by the rise of ubiquitous connectivity and the attention economy. This major trend is forcing media and communications companies to adapt their strategies to maintain their relevance and profitability.
Cord-cutting drives new solutions
Over the last 15 years, cord-cutting has transformed the industry. Cord-cutting trends have now led to just under half of US households shedding traditional pay TV services, such as satellite and cable video, forcing media and communications companies to find new ways to reach and engage audiences and generate revenue. Investing in streaming services can combat the decline in traditional pay TV and allow companies a better way to collect data on viewer behavior to personalize content and advertising.
Cord-cutting has impacted other sectors as well. Telcos and cable companies have leaned heavily on broadband services to offset video subscriber losses, and advertisers are moving investment dollars toward digital advertising, as targeting and personalization capabilities of streamers and other digital media are superior to print and linear TV. The results of cord-cutting have changed this ecosystem of providers and how they compete for consumer attention.
Streaming services transform the content model
Traditional business models are becoming less effective, and new models struggle to reach profitability. Traditional media players are still trying to hold onto their cash-rich cable partnerships while building streaming businesses that will replace them. This friction has resulted in very public carriage disputes with companies like Disney and Charter, with the latter refusing to pay premium rates for bundled content. More disputes like this could follow as streamers and carriers attempt to grapple with business model disruptions.
Adding to the web of potential disruptors is the transformation of the entertainment industry’s content model. Streaming is at the heart of the SAG-AFTRA and Writers Guild strikes as unions blame streamers for eliminating recurring revenue streams like residuals for its talent. While restricting residuals helps maintain cost structure, streaming economics are plagued by high licensing costs and low average revenue per user. Only three streamers have managed a profit—Netflix, Max, and Hulu—while others continue to focus on narrowing losses. Streamers have begun to roll out ad-tiered services, crack down on password sharing, and raise their prices to nearly double in the last two years to focus on driving revenue.
To address overall profitability, streamers have also started testing different types of bundling options to lower acquisition costs and grow subscribers; for example, Disney+ is bundled with the purchase of an UberOne membership, and Paramount+ is free with a Walmart+ membership. Making this form of re-bundling successful requires investment in platform services to enable integrations and make the user experience as frictionless as possible.
Companies leap into adjacent industries
Grabbing and sustaining consumer attention relies on a complex and delicate ecosystem of partners and competitors. Engaging audiences remains at the core of winning the attention economy. Creating meaningful content that consumers can connect to is just as critical as finding the right place for engagement to capture and sustain audience attention. As consumers, we don’t just have one screen anymore—we interact with the same services across TV, mobile devices, gaming platforms, etc. Much of this convergence will rely on the service layer architecture provided by wireless and internet service providers and its ability to allow consumers to be seamlessly immersed in the ecosystem no matter where they are or what device they use. The pivot from traditional distribution layer to experience-oriented is becoming critical to attracting and sustaining audience engagement.
The ecosystem of content, connectivity, and distribution used to have players that relied on each other, but to extract maximum commercial value, companies are starting to play in adjacent industries, further augmenting the competitive landscape. For example, YouTube launched YouTubeTV, a live TV streaming service, in 2017 and is now the fourth largest live TV provider with six million subscribers and growing. Additionally, Comcast continues to invest in its X1 platform while entering a joint venture with Xumo, a media player company, to offset losses from equipment revenue. Furthermore, Apple and Amazon have made large deals to carry live sports and may be interested in bidding on NBA media rights as the league’s deal with Disney and Warner Bros. Discovery expires after the 2024-2025 season. As the landscape continues to evolve, we should expect industry sectors across media and communications to explore new options to remain competitive.
Thriving in the attention economy
Competing in the attention economy will require companies to create new strategies and solutions and transform their business models. With the looming threat of further disruptions, M&C companies need to consider their position in this new experience-oriented business. As business models transform to maximize profitability, what areas of the value chain will be monetized? Who will manage the experience? What will the competition look like? The ability to bring experts with wide exposure across these competing industries and the technologies available to support innovative business models and solutions will prove invaluable to maintain relevance and thrive in the face of continued disruption.
Slalom contributors: Rob O’Sullivan, Jacqueline Carloni
