How diversifying their revenue streams can help media and entertainment companies step up their game
At the moment, almost every business is trying to figure out how to make cuts. In the case of media and entertainment enterprises, this is especially true. When the economy is struggling, customers start to scrutinize their discretionary expenditure, which includes their entertainment budgets. Even if there isn’t a recession, the media and entertainment business would ultimately suffer if consumers choose to cut back on their spending, according to Naveen Sarma, senior director of S&P Global Ratings who focuses on the media industry. The Media and entertainment industry must inevitably adapt to this shift in consumer purchasing. Diversifying their sources of income is one of their most useful tools.
Offering more ad-supported models is one approach for media and entertainment companies to diversify their revenue sources. Recently, streaming services like Disney Plus and Netflix announced their plans to increase their reliance on ad-supported business models in order to diversify their revenue sources. Netflix informed staff members in May that customers might start seeing an ad tier before the end of 2022. However, for media and entertainment organizations, just introducing new ad-supported models is not likely to be the best course of action. Even while there are good reasons for media and entertainment organizations to explore this route, doing so could reduce customer loyalty and happiness. According to research, 79% of U.S. consumers find streaming service commercials to be bothersome and 69% find them to be repetitive. Making adverts more relevant, for instance by using algorithms and machine learning, is one way to enhance the experience, but doing so may be counterproductive for businesses. Fortunately, media and entertainment organizations wishing to diversify their revenue streams have a number of different options at their disposal. One particularly fascinating and lucrative opportunity is brand alliances. Over the past year, a number of powerhouses in media and entertainment have begun to put more emphasis on brand collaborations. For instance, the music Media Network, a new “media and data network,” was just unveiled by Universal Music Group. The Network “connects brand partners with the greatest inventory of original artists and music content from Universal Music Group in the world.” Although marketing alliances are nothing new, media and entertainment businesses are now increasingly eager to create cutting-edge brand partnerships centered around experiences. It would be wise for media and entertainment organizations to learn from Netflix and Stranger Things if they want to seek brand collaborations as potential new revenue streams. In Stranger Things’ third season, Netflix collaborated with around 75 different brands. According to Fast Company, it “played off the cultural momentum behind the concert and the general idea that this was a unique collective event.” For the upcoming season, it collaborated with companies including MAC Cosmetics, Doritos, Timex, and 3D Doritos. The immense potential of NFTs can be used by the media and entertainment industries to expand their sources of income. When Disney released its Disney Pixar Pals NFTs collectibles earlier this year on the digital collectibles marketplace Veve, they sold out in less than a day. The collection included nearly 55,000 NFTs based on Disney movie characters. NFTs offers substantial revenue potential for music labels as well. Major labels are set to sell music videos as NFTs, as Variety has reported, with Warner Music Group and Universal Music Group both revealing a selection of music-based NFTs in their most recent earnings calls. In general, we may anticipate media and entertainment industries establishing connections with NFT experts and marketplaces to diversify revenue sources. This new strategy may allow customers to interact with media and entertainment organizations in an entirely new way with their favorite characters, movie and television program scenes, and other content,” according to research by EY.
Companies in the media and entertainment industry need to respond in efficient ways as they confront significant obstacles. Revenue diversification is important, but media and entertainment organizations should consider more than just introducing new ad-supported models. Instead, businesses should focus on avenues like brand collaborations and NFTs that could give them a more secure foundation to withstand upcoming economic headwinds.