In my last entry, I unveiled my predictions for macro-economic conditions. Today, I want to focus on the media space and look at how certain changes will impact media in 2009.
The advertising industry is probably going to be one of the most affected industry this year, hit by the double wammy of a slower economy and a push to digitization.
The economic slowdown will result in a substantial drop in advertising expenditures for traditional media: Newspapers and magazines are already feeling the pinch and I suspect it is not too much longer before television, radio, and display advertising go through the same changes.
Direct media will continue to do OK, however, as it is result oriented and this fully measurable.
Online advertising will continue moving towards performance-type models with CPMs dropping substantially and CPCs and CPAs becoming the de-facto standard.
Social Media will see a sharp reduction in investments unless it can prove that it can perform better than other forms of advertising, as companies will be less interested in experimenting this year. This will put pressure on pricing models relating to social media. One potential way to fight back is to highlight targeting and demonstrate as such targeting benefits ad buyers.
The net-net of all this is that advertising agencies and their holding companies are going to feel pretty squeezed this year, unless they start developing marketplaces than can help their customers purchase bundles in a more efficient and more cost effective fashion. Because ad agencies have generally been slow at reacting to changes in their industry (we’re over 10 years into web-based advertising becoming mainstream and some ad agencies buyers are still questioning its impact), I’m not very hopeful for their short term outlook and positively worried about their long term one.
Print media is about to have one of the worst years of its existence. Newspapers will continue to fail and at least one major newspaper will close by year end (by major, I mean one of the top 100 newspapers in the country).
Most magazines will see substantial drop in their advertising base and many will move to web-based only productions, transforming themselves from print publications into web-based ones. In the process, many of them will have to shed staff as the economic model for web-based publications tends to be much more thinly staffed than that for prinit publications.
Other magazines, like The Economist, The Atlantic, Harper’s, and The New Yorker, will continue to thrive as print continues to be a better place for long form writing than the web. As other publications depart for the web, those long-form, more reader-oriented (and by reader, I mean people who READ instead of scan articles), will continue to thrive, with their advertising base increasing in value.
Media: TV and Movies
The movie industry will, at best, remain flat, and probably see a small decrease in revenue.
TV, on the other hand, is in for a major shake-up. Just as newspapers are starting to feel the pinch of the Internet, IP-based video is going to have a substantial impact this year, eroding audiences as they increasingly choose the place and time for the shows they want to see and, in some cases, may even demand the way in which the media offerings are offered to them.
Just think of the current offerings: today, you can watch a show on television, you can buy it from iTunes or Amazon, you can stream it (or at least stream older episodes) on Netflix as part of you rental plan, or you can watch in in an advertising supported mode on either hulu.com or the station’s own site. On hulu.com, you may have a choice of advertising either watching a two-minute commercial before the show and watch the show uninterrupted or you can watch the show with some limited interuptions as you would on regular TV.
However, today, most of that experience is based on the assumption that you would be using your computer to do so. A new class of devices is starting to appear that are offering access to some of those services directly from your TV: Apple started with their AppleTV device and companies like Roku, LG, Samsung, and others also now have offerings on the market. This will become more common and continue to erase the mark of what TV networks are about. The focus will continue to shift to shows, giving more power to creatives who can deliver the goods to an audience and lowering the usefulness of aggregating middlemen, which is essentially the role TV networks currently play.
In turn, advertisers will want to pay less for TV as they can measure those audiences less than they can those online and see decreasing return on investments for their TV-based advertising expenditures as compared to their digital ones.
So the bottom line is that traditional TV will suffer as more an more of video production is moving to an IP stack.
In the next entry, I will look at general technology related trends that may emerge over the next 12 months.