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Facing staggering disruption in recent years, media companies are in the midst of a heated battle against one another to be able to reach consumers. But aside from merging with one another, how do they actually go about finding — and keeping — customers?
Mergers of technology, media and telecom companies have accelerated in recent years, hitting an all-time high of nearly 3,400 deals in 2017, according to Mergermarket. But this coming-together of business segments has been on the horizon for more than a decade. IBM, for example, established a telecom, media and entertainment division back in 2007.
So what’s driving this cross-industry convergence? The short answer is: a fast-evolving confluence of technology, opportunity and need.
On the technology side, ubiquitous, scaleable and ever-present broadband networks have broken down the barriers to entry on distribution, while the maturation of software technologies, virtualization and processing capabilities has enabled rapid and inexpensive product cycles, customer acquisition and distribution.
Meanwhile, telecoms and cable providers are trying to avoid the fate of being commoditized — trapped at the low end of the value chain, offering only the delivery of content at fixed prices and low profit, with minimal opportunities for up-selling.
To further complicate the situation, technology is obliterating traditional business models for telecoms and other providers by eroding their customer base. Cord-cutters and other restless subscribers now can migrate to lower-cost, over-the-top forms of content consumption, without the need for a dish, a cable box or a subscription.
The need to retain subscribers and move up the value stack is attracting telecoms to the content game, the only way they can compete in an industry that has become upended in recent years, led by the subscription-first model pioneered by Netflix. Other subscription-based platforms have quickly followed suit: Amazon Prime, Hulu, HBOGo, and — launching most recently this summer — ESPN+.
As one talent agency director recently told The Economist, “The first thought on everyone’s mind is how do we compete with Netflix?”, both in the US and globally.
These disruptive digital content providers have been so successful in part because they collect and analyze customer data to get a better understanding of consumer preferences. This effort enables them to create personalized offers that build brand loyalty and create an ongoing revenue stream. For traditional service providers and media companies, this data is a compelling strategic asset.
Put it all together — high speed networks for scalable distribution, high-quality premium content and world-class customer data (i.e. the race to hundreds of millions of direct-to-consumer relationships, a majority of pay-TV households, the insights all those relationships and data yield) and the advantages of consolidation for telecoms, media and entertainment companies are apparent.
What’s not as apparent to some companies — particularly those with more traditional, top-down decision-making styles — is how to devise a winning strategy in this new landscape where consumers wield enormous power through the multitude of options at their disposal.
The key to success for any technology-media merger is to build a strategy that centers on the customer experience. This means using technologies such as artificial intelligence, cloud computing, mobile apps, the Internet of Things and data analytics to spur experimentation and innovation. It means companies must be willing to change and adapt quickly as consumer tools and preferences evolve. And, yes — it means striking partnerships to acquire necessary expertise and broaden capabilities to keep up with consumer demands and meet their expectations for content and delivery.
For example, IBM’s Telecommunications, Media and Entertainment division provides companies in these sectors with the expertise and tools they need to build and implement digital content and distribution strategies, as well as the ability to accelerate how they ingest and learn faster through oceans of real-time data. This transforms their businesses while helping them provide the type of personalized experience that today’s mobile, digital consumers demand.
No matter what happens with any of the media mega mergers in the news today, if media companies are unable to leverage the data at their disposal to create a robust and gratifying consumer experience, the competition will pass them by with a click of the remote.
For more visit the IBM Telecommunications, Media & Entertainment site.