Report Overview

5-year Outlook: Media sector in Australia and NZ

Contents

Introduction

At the beginning of each financial year, Venture Insights reviews the emerging technology and market changes that will shape the media industry in the Australia and New Zealand markets over the coming five years. One of the aims of this process is to identify the trends that are expected to have the biggest commercial impact. Some trends are part of the broader macroeconomic environment while others are industry specific. They can be initiated either on the supply side, or they could reflect changes to buyer or audience demand patterns that would ultimately drive a response from suppliers.

Our views on these trends informs our short-to-medium term research, and flow into our forecasts for the media sector published each March and September.

The final scenario (or scenarios) developed for the media sector reflects our view on the long-term trends in market structure, competition, and regulation that will drive pricing and volumes across the advertising, video, audio and print industries.

Our view

A ‘new normal’ is emerging in the ANZ media sector, one that is surprisingly consistent across video, audio and print industries. As on-demand digital alternatives have taken hold, both subscription and ad-based, the traditional media have responded by launching their own on-demand offers, complete with programmatic platform technology to maximise yield. Digital capabilities are being used to move into new areas such as podcasting, and other formats are in the pipeline. Television, radio and print are at different stages on this journey, with print leading the way, and radio behind television. These ‘traditional’ media will be the epicentre of change over the next five years.

The traditional media industries will go through a major transition over the next five years. This transition is being enabled by new technologies like fixed and wireless IP network technologies, the proliferation of programmatic platforms in the advertising market, and the rise of new kinds of on-demand media that can be delivered and monetised on content delivery platforms. The resultant explosion of competition has put pressure on traditional media, and the days of traditional media dominance cannot be recovered. But these changes have also given them weapons to fight back that they will increasingly use.

Despite the rise of IP media delivery, which traditional media will certainly exploit, we expect traditional technologies of delivery will remain. Terrestrial broadcast transmission will even increase in capability in some cases, and even hardcopy print will still be around. Investment in programmatic advertising infrastructure will also boom as they push into on-demand content and work to maximise advertising yields in these new markets.

The traditional media is evolving a hybrid model, combining traditional mass content-delivery platforms with new targeted on-demand ones that diversify the content offering while bringing the traditional media into competition with a wide range of new players in the “long tail” of the content market. These traditional technologies are crucial to preserving their ability to establish and entrench mass market brands, and this is what will differentiate them from “born digital” players.

It is therefore crucial that television, radio and print ensure that the techniques for evaluating programmatic campaigns take into account the importance of long-term awareness built through mass advertising on traditional delivery platforms. This is essential if advertisers are to go on recognising mass media as a premium brand-building environment. Significant work will also need to be done to create collaborations and governance structures that span the media industries to manage the agreed standards and frameworks that platforms will need to assemble hybrid mass/digital campaigns. This will television, radio and print access to a new market of small advertisers.

Commercially, the broad picture is of higher competition, falling prices, but a big increase in advertising inventory that will see overall ad revenue rise, though subdued economic growth will be a drag on the industry going forward. Search and display advertising, dominated by Google and Facebook respectively, are now an established part of this picture (though they will face increasing regulatory headwinds), but better measurement systems will ensure that yields improve elsewhere.

In contrast, we expect the ‘born digital’ side of the industry, represented by the AVOD and SVOD providers, audio streaming and podcasting platforms, and new publishing platforms like Substack, will consolidate and stabilise over the coming years. Slowing growth will maintain pressure on subscription pricing. Even so, new niche forms of content will continue to arise which will offer opportunities both for subscription and for ad-supported players.

These changes will have some consequent effects in some segments of the media sector. Regional and rural media, with low revenues and high costs, are where the trends will hit hardest. We expect that Australia’s regional television model will require significant structural reform by mid-decade.

In the production sector, the need for new content to supply on-demand markets will lead to a golden age. Indeed, we foresee significant capacity issues in skilled labour and specialised facilities in Australia and New Zealand that may take years to resolve.

With the media sector facing new costs in the form of platform investment and rising content costs, cost control will be crucial for the foreseeable future. The media sector has already made big cuts in editorial and operational staffing, but more will need to be done as costs continue to rise elsewhere.

Macroeconomic context

Media technology trends

Media market trends

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Figures

Figure 1 Change in consumer behaviour

Figure 2 Australia and New Zealand GDP and population growth trends (historic and 2021 forecast)

Figure 3 Australian multifactor productivity growth in 2019-20, hours worked basis

Figure 4 Labour productivity in New Zealand

Figure 5 Digital value added and share in aggregate value added (%), 2016-17 to 2018-19

Figure 6 COVID-19 impact to some consumer behaviour patterns

Figure 7 Australian per capita daily viewing (minutes)

Figure 8 Mobile operator 5G population coverage in Australia and New Zealand

Figure 9 What is the highest definition television set in your household?

Figure 10 Estimates bitrate for full HD video using different compression technologies

Figure 11 ANZ ecosystem for content production and distribution

Figure 12 SVOD share of viewing in Australia, six months to June 2021