Riders on the Storm: How Media & Consumer Digital Businesses Can Win In The Era Of Turbulence

As 2024 kicks off in earnest, how do you plan for the year ahead when there’s so much uncertainty, volatility, and change.

As leaders contend with the twin challenges of a cyclical downturn and accelerating industry disruption, a new approach is needed to navigate these stormy waters.

This article provides a framework to help businesses to ride out the storm, and to prosper in a changed market when skies clear.

It’s informed by my own experience at the coalface as an Operator, and more recently as an Advisor to leading Media, Entertainment and Consumer Digital businesses, along with insights on what companies across the ecosystem can learn from each other as they face the common challenge of building IP businesses for the digital age.

So, as we start the year, it’s a good moment to step back from the noise and reflect on the current lie of the land: 

1. We are just 6 months into a cyclical downturn. 

Demand remains subdued across the industry with ad budgets and subscription products feeling the pinch as consumers tighten their belts.  

Appetite for VC, Private Equity and Debt funded investment continues to be impacted by higher borrowing costs, historically high bond yields, and lower exit multiples.

 Whilst some recovery is possible in H2 24 as inflation eases and there is greater certainty post the UK and US elections, it could take much longer for markets to rebound.

2. The structural shift to digital consumption is accelerating, impacting the economics and sustainability of analogue businesses models

 In TV, UK viewing amongst 16-24s fell by a seismic 33%  in the last recorded 12 months, and US cord cutting reached record highs ,with cable platforms expected to lose 9 million customers in 2023 (circa 12% of their total).

In print media, newspaper and magazine circulation is falling by around 10% per annum in the US and UK and is down around 60% from peak levels.

Whilst in video gaming, sales of physical games have declined rapidly in the past 3 years. According to Sony’s latest results physical now accounts for just 4% of Playstation game sales.

As the downturn bites, the case for making further investment in legacy print, TV and other media assets weakens, adding fuel to the current downward spiral.   

Incumbents caught in this trap are consolidating in the hope that scale will create a more sustainable future.

3. ‘Pure play’ Digital businesses are going through their own transition

 Big Tech are 'right sizing' business operations, scaling back on business diversification, and cutting staff as they return to more normalised growth (still 10% CAGR) after the pandemic uplift.

With cheap money no longer on tap, loss making industry trailblazers (ref Spotify , Epic Games, and Buzzfeed ) are reining back on growth and focusing on the path to profitability.

Whilst the disruptive potential of Generative AI is unleashing a new wave of innovation & investment that has the potential to transform industry economics. 

4. As industry change accelerates, there are pockets of opportunity everywhere

In every part of the industry there are near term growth opportunities, despite the prevailing headwinds.  By way of illustration:

• Live Immersive Events like Abba Voyage are booming, capitalising on the potential of new technologies to heighten the audience experience. 

• Social commerce businesses have a huge opportunity to leverage the power of influence to sell curated products Direct to Customer, and build on success of brands like Inamorata. 

• Owners of ‘Tier One’ sports franchises have significant opportunity to use digital channels to deepen fan engagement and expand the universe of products they sell.

So how do leaders navigate this challenging market environment?

To prosper, Operators need to be both prudent and bold.  Restructuring existing business operations to release cash to weather the current storm whilst continuing to invest in their digital future.

Making the right Restructuring and Investment calls will involve doing things differently from previous cycles.

Restructuring initiatives will necessarily need to be bolder but have the potential to deliver materially more bottom line impact.

 In the face of accelerating industry disruption operators will need to make tougher decisions on which legacy businesses are unsustainable, don’t contribute to long term value creation and are ultimately non- core (and should be sold or shuttered).

Whilst at the same time, they will have the opportunity to realise ‘game changing’ Digital Operational efficiencies.

Big Data insights will enable operators to implement transformative zero based costing initiatives (informed by a deeper understanding of business unit cost and value drivers) .

• Cloud, Generative AI and other emerging digital technologies have the potential to streamline supply chains and deliver big operating cost savings and improve margins.

• Agile, digital ‘Ways of Working’ can be systematically deployed to deliver measurable improvements in execution speed, quality and cost.          

• Emerging digital distribution channels and (dynamic and value based) pricing will play a central role in squeezing more value from existing IP, brands & products. 

Investment decisions will be guided by the imperative to continue to invest in the future, given the jeopardy of doing nothing at a time of seismic industry change. But for many, ambition will need to be scaled back as cash is currently at a premium as the cycle bites.

Winning businesses will adopt a ‘Minimum Viable Investment’ approach, identifying what additional digital infrastructure and capability is needed in the near term to stay competitive, and using ringfenced funds from restructuring initiatives to pay for it.  

Operators that don’t have cash to invest should look for digital partners willing to underwrite the commercial risk of digital investments, given the need to do ‘what it takes’ to stay relevant.

However, those that can afford to make bigger bets will pull ahead of their rivals. Operators that lead industry consolidation, scale in growth territories & verticals and steal market share from competitors via tactical M&A will strengthen their position as the market evolves at pace and stay in control of their destiny.  BSkyB's experience in the last recession is a case in point. The opportunities at this moment for brave, visionary leaders with access to capital are significant. As Formula 1 legend Ayrton Senna famously noted “You can’t overtake 15 cars when it’s sunny, but you can when it’s raining”.

Making the right restructuring and Investment calls will help business to come through the current maelstrom.  But that alone will not be enough.  Organisations will also need to find new ways of building resilience to deal with the emotional stress caused by navigating such stormy seas.

Finding, promoting and empowering adaptable leaders who know how to bounce back from setbacks, deal with ambiguity and pivot their teams at pace, and investing in employee wellbeing & support so teams continue to feel heard & psychologically safe will be key foundational steps.  

But real strength will come from certainty that customer needs businesses are addressing will endure, and belief that core competencies in understanding how to delight audiences will remain relevant as ever.

As we contend with an undeniably challenging market environment in 2024, it’s worth remembering King Solomon’s wisdom, ‘This Too Shall Pass’. 

We know the current storm is a moment in time and the skies will clear. Whilst uncertainty remains as to whether the current cycle with be short & shallow or long & deep, we can be confident demand will rebound.

However, what is evident is the world will look a little different as we come out of this current phase. 

So those at the helm of the ship will need to remain hawkeyed. Collecting and analysing data for signs that the current cycle is ending so they are ready to start sailing in calmer waters, ready with a plan to capitalise on the next wave of industry evolution.