Cover image by: Illustrious.
By the end of 2021, there will be an average of four streaming media subscriptions in US households. In Germany, there will be two. Those numbers will continue to rise, globally, and Germany’s is even expected to double by 2023.1 However, this is only one aspect of the dynamic in media monetisation. With innovative offerings and powerful streaming providers, like Netflix and Spotify, subscription models have captured the hearts of media users. Acceptance of these and other new revenue models have played a key factor in the media industry’s success – determining how content is monetised and how the money flows. But the landscape continues to transform, with additional revenue pillars on the rise, such as e-commerce and donations to media professionals, and shifts of power among suppliers a distinct possibility.
Revenue models are crucial for the evolution of the media industry, but it is clear that media monetisation will look different by the end of this decade. How will it develop? In the best case, the new monetisation options will not cannibalise established ones, instead adding up to considerable market growth. But nothing is guaranteed, and two unanswerable questions loom behind the future of media monetisation: Who has control over loyalty? And what is the focus of attention? Media companies, advertisers and all links in the media value chain should begin imagining the path forward, preparing for all potential eventualities, and perceiving relevant changes at an early stage – without ever underestimating the immense market dynamics at play.
Deloitte’s Center for the Long View, along with our global media experts, conducted a study to develop four extreme but valid scenarios for the evolution of media revenue models up to the year 2030. We offer this tangible look into the future to help gauge how media monetisation will develop and yield respective options for action, supporting strategic decision-making.
This is a salient moment in time to cast our eyes forward; recent statistics show that media revenue models could currently be at a tipping point. Here is why:
These observations are a snapshot of our world today, but they alone cannot give us a picture of the future of media monetisation. A wider-angle lens is needed, to encompass each stakeholder and the many driving forces surrounding them.
Eight discrete stakeholder groups, summarised in figure 1, are the protagonists of Deloitte’s study. They should all be preparing to react to each of the potential future developments we will describe in our scenarios. Their significance varies greatly in the respective scenarios: The ‘winners’ in one may lose importance in another. Figure 1 also provides an overview of the market ecosystem, relevant to the future of media monetisation, and helpful orientation for digesting and analysing the four scenarios.
We collated the drivers that will plausibly shape the future of media monetisation from expert interviews and our unique external environment analysis; the latter is based on natural language processing algorithms applied to media analysis. Applying social, technological, economic, environmental and political (STEEP) factors and a survey to rate the drivers enabled us to cluster the drivers and rate their relative uncertainty and impact on the future of media monetisation (see figure 2).
We identified two types of relevant driving forces that support our scenarios:
Twenty-two driving forces fell into the ‘critical uncertainties’ category; because they are both highly uncertain and presenting a high impact, they became the focus of our analysis for future developments. We tested those drivers by measuring their interdependence with, and relevance to, each other. We then clustered them according to their relatedness. Finally, we created a matrix based on those two questions that the future of media monetisation rests on: Who has control over loyalty? And what is the focus of attention? Our four scenarios stem from the two axes shown in figure 3.
The exact future of media monetisation is practically impossible to envision, and three particular factors are blurring the picture even more:
In the face of all this uncertainty, it is worth acknowledging what we do know. There are several ‘critical trends’ that our analysis revealed alongside the critical uncertainties (see top left of figure 2). According to our global media experts, they are most likely universally valid, contextual factors of the future media industry. Although they will have a decisive influence on how media monetisation looks in 2030, they are less relevant as distinguishing features of the four scenarios. Regardless, five of them point to important, expected future developments and were factored into the scenarios:
Conventional strategic analysis does not offer much in a highly uncertain environment, but the scenario lens enables perspectives beyond the usual three- to five-year planning horizon. It is not about predicting the future, per se, but depicting the risks and opportunities of specific strategic options in detail – scenarios illustrate relevant but opposing forces, or drivers, rather than specific future events. In other words, they are narratives set in alternative future environments that are affected by today’s decisions and trends.
Deloitte’s scenario approach can elicit robust responses by offering four plausible and distinct futures. They vary significantly and provide a sense of context and practical application by demonstrating the underlying drivers. This can help planners model strategies, according to potential impact.
In our first scenario, the market is characterised by a fragmented and open ecosystem that includes a large number of local content providers who maintain a multitude of paid customer relationships. In this highly connected and hyper-digital world, the level of innovation and technological development is extremely high. Customers are used to micropayments and direct, blockchain-based payment methods. Content is cheap and easy to consume in small doses, and subscriptions are easy to cancel instantly. Individual, pay-as-you-go transactions and subscriptions are the dominant revenue models. Advertising has lost ground and remains relevant only where it is maximally targeted. In this context, telecommunications and platform providers leverage their data and establish advertising sales houses.
The high standardisation and availability of technology results in low market-entry barriers. This creator economy allows everyone to implement their own content and business models while also providing a good breeding ground for media start-ups and scale-ups and their innovative offerings. As a result, the media landscape is fragmented and margins are low, due to atomistic competition. An open partnering culture secures a minimum level of transparency.
Regulators ensure there is competition and a wide variety of content, preventing global heavyweights from dominating the field. DPCs cannot leverage their global blockbuster content, instead acting as one of many distributors of platform-as-a-service solutions for smaller media companies. In this scenario, local content producers and intellectual property owners are the winners, since they can use their direct access to media consumers in order to grow. They successfully implement e-commerce and in-app purchases as additional revenue models. Consumers maintain a wide variety of paid contractual relationships but choose individual content to suit with a high degree of sovereignty.
In this scenario, numerous revenue models have prevailed in an open ecosystem world, with large DPCs taking on the central aggregator role. DPCs provide their technology and set the rules of the game, which funnels the variety available in the open metaverse-ecosystem and allows DPCs to monetise their global content. Local content remains relevant but is supplied by partners. The DPCs’ search and recommendation functionalities provide orientation in the overwhelming content flood but, on the other hand, this shapes a global mainstream media culture in line with DPC preferences.
Data, analytics and AI are omnipresent and freely available to all market participants in this highly innovative environment. As media has become almost entirely digital, smart technologies can predict consumption and pave the way for targeted advertising. DPCs can fully leverage their massive capabilities in those areas, while traditional agencies have been displaced. Regulation is in place but is unable to break the supremacy of the DPCs. Ad funding strongly benefits in this scenario: The extensive availability of data allows for highly targeted advertisements that fully meet media consumers’ needs. More than that, some content is offered for free in exchange for consumer data. Subscription models survive as flat-fee access to premium DPC content, but the majority of payments are transaction based. Alongside these, a new generation of blockchain-based technologies and crowdfunding platforms enable small local producers to monetise their content directly. The latter, in particular, ensures variety despite strong DPCs.
DPCs differentiate themselves with exclusive content and sports rights. Local producers benefit from partnerships with the large platform providers but are making themselves increasingly independent through direct customer and payment relationships. In this way, the dominant role of DPCs tends to come under pressure.
In this world, global DPCs command the bulk of media revenues through both subscription models and highly innovative forms of advertising. In a completely unregulated market environment, DPCs benefit at all levels: They can make best use of their financial power, monetise their global blockbusters, collect user data and leverage their analytics and AI capabilities. DPCs have created their own metaverses and act as central aggregators for all types of content, consequently ‘locking in’ media consumers. The level of technological innovation is high in this scenario, and DPCs set global standards. The outcome is an oligopolistic market structure with a high price level.
Revenue models based on individual transactions play practically no role in this scenario. In order to exploit the high media-revenue potential, the dominant DPCs rely on two main revenue models: First, there are constant revenue streams from subscriptions in this locked-in market landscape. Second, DPCs benefit from maximally customised and targeted forms of advertising. In addition, they cross-finance content through their e-commerce business. Due to DPCs’ end-to-end dominance in the advertising market, media agencies are becoming obsolete. Local content providers are pushed into a pure production role and depend on the DPCs for direct customer access. Small local aggregators and content producers have largely been eliminated. Media consumers can access a wide variety of different content, but the offerings usually follow a global one-size-fits-all approach that completely ignores country-specific tastes and requirements. In the end, consumer sovereignty is weakened – “You can check out any time you like, but you can never leave,” as the song goes.6
In our last scenario, regulatory measures create local champions and lead to a limited variety of offers that are primarily monetised by paid content. Regulators strongly protect local media and have pushed back large global players. Instead, traditional media channels, like newspapers, still play a prominent role. The dominant revenue model is subscription based. Advertising is less significant for future media revenues, not least because stakeholders are not incentivised to collect the data needed for targeted advertising. National media houses and telecommunication incumbents are the winners in this scenario: They are aggregators and super-aggregators, and act as content gateways for consumers.
Due to intensive data regulation, the level of innovation and technological development is low in this world. The market environment does not foster an intense start-up culture and lacks innovative media services, while M&A are also restricted. Regulators only allow market consolidation to a certain degree, in a bid to avoid players having high market power. Therefore, DPCs are less relevant in this scenario, since regulatory requirements prevent them from contributing their scale and data expertise. As a result, their premium global content is not available. The entire media industry stagnates, and revenue potential cannot be exploited because media consumers face a limited and uninspiring media landscape that lacks international ingredients. Therefore, consumers’ willingness to pay is limited to the bare minimum of information, sports and entertainment.
The already existing interplay of technical innovation, media offerings, new customer requirements and corresponding revenue models have set in motion a spiral of change – and it is occurring remarkably quickly. The metamorphosis brings with it immense market dynamics, and all stakeholders must keep pace with them, starting with setting the right strategic course at an early stage. The strategy must focus on the company itself, first and foremost, but the constant changes in market structures must also be closely observed and, if necessary, incorporated.
Zooming in on the future of media monetisation, the companies involved should sharpen their focus on five strategic fields of action:
Addressing these five fields of action may, in our view, invite more opportunities than risks, when it comes to actively shaping the future of media monetisation. Companies that succeed will be alert, aware and hyper-focused on the erratic loyalty and attention of consumers. They are planning for all possible outcomes but are ready to tweak those plans at a moment’s notice. Because as we look back at our pandemic-occupied past year, and ahead to media in 2030, the only thing certain is that nothing can be foretold with certainty.
The methodology of this study is based on the scenario development approach practiced by Monitor Deloitte. The seven-step approach applies the guiding scientific principles of objectivity, reliability and validity. The study is the outcome of research, interviews, questionnaires and workshops involving technology, media and telecommunications experts from the Deloitte Global network, industry professionals and experienced scenario practitioners from Deloitte’s Center for the Long View (CLV).
Scenario design began with identifying the focal question of the underlying issue. Scenarios are tools for shedding light on the strategic challenge, and the focal question sets the scope. Since we could tell an infinite number of stories about the potential future of media monetisation, we first had to agree on the issue or strategic challenge to address. We chose the question, ‘How will the future of media monetisation look in 2030?’
Because scenarios help understand dynamics that shape the future, our next step was to pinpoint the forces driving the answer to the focal question. Driving forces are fundamental sources of future change, shaping the course of events and dramatically enhancing our ability to imagine future scenarios. They can be grouped into five categories, known as STEEP: social, technological, economic, environmental and political factors. (However, these are only handles, as most issues involve more than one of these categories.) Driver selection was aided by expert workshops using Deep View, an AI-based trend-sensing and analysis machine that helps avoid the bias of the traditional approach, which often occurs based on the character, mood or preferences of the scenarists.
We primarily focused on driving forces showing critical uncertainty, as opposed to those that are pre-determined and make up trends already in the pipeline; the latter are unlikely to vary significantly in any of the scenarios. Critical uncertainties carry the potential to tip the future in one direction or another. They have two fundamental characteristics: unusually highly impactful and uncommonly uncertain or volatile. As a part of the scenario methodology, in a third step, we identified the critical uncertainties behind the focal question. Initially, all uncertainties appear unique, but by stepping back, we reduced uncertainties to clusters that serve as the building blocks for our scenario set.
The scenario framework was developed in the next step, by focusing the entire list of related uncertainties into two orthogonal axes. We then created a matrix, consisting of crossing and independent axes that allowed us to define four very different quadrants of uncertainty. In the underlying study, we used the relevance of creativity and of mass marketing as critical uncertainties and developed four distinct but plausible future scenarios.
The CLV scenario approach includes two additional steps that help enterprises make use of the defined scenarios: developing strategic options and monitoring the scenarios. We can use the scenarios to derive potential consequences for market stakeholders, in this case creative agencies and media companies, for example. Existing strategies are tested against each scenario and adjusted where necessary. We can apply Monitor Deloitte methodologies to identify, dissect and analyse businesses’ strategies, formulating new strategic options that are suitable for all or individual scenarios. As it is important to provide long-term scenario monitoring, to ensure the validity of defined strategic options, we have developed CLV Gnosis: an AI-based modular tool that tracks movements towards individual scenarios in real time and indicates where the future is heading.