Tv network

What TV network finance teams can learn from other industries

Data is the currency of the future in media and entertainment (M&E). Yet companies that monetize their content by licensing distribution partners face backlash in an area critical to success in our current media landscape: data sharing.

Outside of basic information, licensing agreements typically don’t require distributors to share audience data such as content preferences, viewing habits, or demographic details. As financial industry executives prepare for the NAB Show in Las Vegas next week, they should consider how to put data at the center of future growth strategies.

Without this data, organizations must make strategic revenue decisions without insight into audience expectations, affinity, and asset performance. This is suboptimal, especially given the investments required to acquire and produce content and the complexity involved in determining return on investment across traditional licensed distribution and emerging direct-to-consumer models.

This requires a change of perspective, from a distributor-centric has a content-centric model. It’s no longer a question of “How is the number of MVPD subscribers changing?” Instead, it’s “How do we maximize profits for Season X of Series Y through various possible combinations of distribution partners and monetization models?”

For example, even with the decline in Olympic viewership, NBCUniversal attracted viewers for the Tokyo games through a personalized experience on Peacock and various linear channels, a flagship prime-time broadcast, and a savvy social media strategy. .

The approach created dynamic advertising options that paid off; Revenue for NBC’s media unit in the third quarter of 2021, driven largely by the Tokyo Summer Olympics, rose 47.5% to $6.8 billion, “reflecting advertising revenue and higher distribution revenues”, the company reported.

As finance teams face the future, they must pursue a similar multi-pronged, data-driven approach. How can companies mine data to build trust around content investment? And once you have the content, how do you maximize its value across all platforms?

Leaders will certainly seek answers to these questions at NAB. But they would also be wise to look for clues in two other sectors that have undergone similar changes: music and retail.

Music: performance-based contracts
Most consumers aren’t loyal to record companies, the same way they aren’t loyal to movie studios or television networks. When it comes to music, they’re into artists, genres, and often rotating playlists that are an eclectic mix of the two. At best, they’re loyal to platforms that offer easy access to their changing tastes, like Spotify.

This is why the economics of streaming music royalties is incredibly complex. In addition to subscriber-based revenue-sharing deals with Spotify, Apple Music, and other platforms, labels enjoy various pricing deals based on a host of variables (the number and location of streams, for n to name a few). It is widely seen as advantageous for popular artists and the labels that represent them to negotiate longer contracts and per-stream rates. For its part, Spotify said it “doesn’t believe a ‘rate per stream’ is a meaningful number to analyze.”

The parallels with traditional television revenues are obvious. As finance teams approach similarly complex digital revenue models, it’s never too early to start negotiating licensing deals that require distributors to provide the audience and content data that will be taken into account. account in the terms of the future agreement. Of course, figuring out how to most effectively use data to validate distribution strategies if and when they are obtained is an ongoing challenge. Last year, EY found that nearly half of M&E executives believed their company would soon fail without reinvention.

These efforts come amid major disruptions in M&E as many finance teams seek to balance traditional linear and digital/DTC revenue. This is the paradox of linear decline; organizations must maintain the healthy cash flows still fueled by pay-TV subscription models while betting on the future, which will be digital and data-driven. A content-centric approach considers both. This requires knowing what the consumer wants, of course.

Retail: know your customer
A crucial pivot for M&E finance teams in the coming years is to treat audience data as an invaluable asset and recognize that it is the key to unlocking ROI, attracting advertisers and distributors, and creating long-term resilience. Few industries know more about using data to engage customers than retail, especially the consumer packaged goods (CPG) and e-commerce segments.

CPG companies that derive revenue from distributors (such as grocery store chains) can use real-time data to know what’s flying and what’s not, allowing them to adjust proactively address storage and supply chain needs to save money and time. It’s not hard to extrapolate how media finance teams could apply the same level of data analysis to provide content acquisition and production teams with actionable insight into audience demand, segmented by distributor, user segment and even title.

Online retailers often use predictive analytics to predict customer behavior based on past shopping habits. The same recommendation algorithms behind Amazon’s streaming content services are at work in their e-commerce platforms. M&E organizations that effectively incorporate these detailed forecasts into their financial models will also be ahead of their competition.

“One key is for entertainment providers, digital platforms and advertisers to understand the nuances between consumer segments and how sentiments vary across media types and generations,” Deloitte wrote in its trends report. media 2022.

Financial executives familiar with these practices add immeasurable value. Whether monetizing content through linear or digital methods, licensed or direct to consumers, understanding the data sources available to enable these practices is essential. Aggregating internal and external data sets, from device identification to payments to gain revenue insights, will quickly become the domain of M&E finance teams.

Steps to success
Networks that license content to linear and even digital distributors may not have real-time insight into content performance today. But finance and distribution teams can take the following steps to ensure they move forward:

None of these solutions solves the central problem of limited access to channel partner data. But if the music and retail industries are any indication, organizations that independently prepare for industry-wide data sharing standards are best positioned to weather future disruptions.

Finance teams can get a head start by using the data they already have to deepen their insights. Many CFOs attending the NAB show have this information at their fingertips. They just have to unlock its value.