Media Tech Investment
What is Media-Tech?
Media-tech companies are providers of media, entertainment, and the technology that supports the innovations in media, entertainment, and social media. The metaverse, for example, is an attractive growth area that will introduce new entertainment, content, and an entire virtual world requiring whole new tech to support that growth. OTT (over the top) providers such as Netflix, Disney +, and Apple TV have greatly expanded the content choices and distribution venues for the consumers. The content distributed is generally created by the company itself, or created by another body, but organized and presented by the media-tech company in a way that allows for the content to be delivered to customers efficiently.
What are some of the key characteristics of companies within the Media-Tech space?
Firstly, almost all media-tech companies embody an entrepreneurial spirit - founders and senior management have to be creative to develop innovative platforms that will benefit the ever-growing media industry. Additionally, the end product, also known as the “platform” of each company should also have a well-defined purpose that addresses key questions for example:
- How can we support media companies so that they can deliver their services more efficiently?
- How can we as the Media-Tech company generate revenue from such services?
What makes the Media-Tech industry so exciting from an investment perspective; what opportunities exist within the industry?
From an investment perspective, it is clear that the Media-Tech industry is appealing. Major media organizations from around the world, such as The Guardian, have already made plays into the Media-Tech industry. Several other large American venture capital firms, such as Luma Launch, Third Wave Digital and Mucker Capital have done the same. Notably, Erik Rannala, managing partner of Mucker Capital, has previously been quoted saying that he doesn’t “believe we are in a bubble, but that software and information technology are fundamentally changing the economy.” Luma Launch’s managing partner Laurent Grill on the other hand believes that with opportunities to establish new social media platforms diminishing due to increasing challenges, messaging will emerge as a leader in the future of social and interestingly, Scott Rupp, managing director of Nordic-based media conglomerate Modern Times Group (MTG), has directed his investment focus towards the eSports market, which is projected to grow to approximately $1.62B by 2024, up to 50% is from its current value of $1.08 in 2021. As we can see, individual VCs are adopting different strategies and there is no clear consensus on what is best. The Media-Tech industry offers an abundance of opportunities for firms both big and small to exploit, which should not be surprising given its inherently diverse nature.
Growth and Development in the Media-Tech/OTT streaming industry
In 2020, the global market for OTT Services & Devices was valued at approximately US$77 Billion for the year. This is primarily attributable to the covid pandemic which resulted in an increasing number of people staying at home in lockdown; currently, a significant portion of all video consumption derives from phones and tablet PCs, both of which allow the user to view material “on the go”. This industry is expected to grow at a CAGR of anywhere between 18.3% to 29.4% over the next 5 years, reaching a value in the US$217.5 Billion to US$1 Trillion range by 2027.
Several factors are driving the market’s rapid growth. Primarily, it can be attributed to a world where the usage of smart computing devices is at an all-time high combined with a fast-developing media/entertainment industry. Consumers these days are demanding online streaming services more than they ever have, and this increasing product demand is accelerating the growth of the industry. Notably, the consumption of online media & entertainment platforms is growing at rapid rates in developing economies like India & China, two countries that are having a huge positive impact on the overall growth of the industry. According to research conducted by mobile marketing platform InMobi, 46% of viewers are watching more content online as compared to before; other consumer surveys have shown that the peak hour for OTT consumption is no longer 10 pm to 12 am but rather, 7 pm onwards. Secondly, the rapid emergence of 5G is also expected to result in higher demand for OTT services for consumer entertainment purposes shortly; these next-generation network services would increase the speeds at which data is transmitted, allowing for improved video streaming with enhanced video resolution.
Due to increased competition in recent years resulting in less than favorable growth, those companies who seek differentiation and those trying to break into new markets have undergone M&A deals and other strategic partnerships, both of which the Media-Tech industry is ripe with. This presents opportunities for smaller players and startups to solve existing problems, addressing issues that exist in the current models operated by the larger players. A key strategic focus of these partnerships is on marketing, an area that is constantly evolving as advertisers are always on the lookout for new ways to attract customers - this opens up a window of opportunity for startups to enter the industry and exploit this niche, developing advertising platforms that can better market the services of Media-Tech companies to their desired audience. Another major area for smaller firms to potentially exploit is the continued improvement and refinement of personalized content. If smaller players can enhance process efficiencies and optimize the user experience on existing platforms, they would be of great assistance to the existing Media-Tech giants.
Arguably, the enforcement of lockdowns across the world due to outbreaks of COVID-19 has had the greatest impact on growth in this industry - traditional TV channels have been unable to film new content during the pandemic so viewers have moved towards OTT streaming platforms to watch the latest shows and movies. Additionally, a greater number of OTT service platforms, like the India-based Zee5 are now offering bits of their content for free while others are producing new content on their platform. Zee5 has recently experienced over 50% growth in its “minutes viewed” category and a further 80% increase in subscriptions.
With demand for live streaming also projected to take leaps shortly, OTT platforms and providers will likely offer additional live streaming channels. Moreover, OTT content is expected to undergo substantial developments, with individuals being able to access live/breaking news on platforms such as Youtube or Facebook Live. Major broadcasters in the United States are also expected to strengthen ties with multichannel video programming distributors (MVPDs) to offer ready versions of live and linear feeds which would then most likely be bundled as OTT products, further contributing to the growth of the market.
On the whole, the OTT devices & services market and overall Media-Tech ecosystem are constantly growing and evolving. Where it was previously the case that smaller players had little to no chance in competing with the giants in a more traditional media & technology market, the emergence of Media-Tech has allowed smaller firms to adopt niche strategies that focus on ways to provide support to the giants through helping them market products and improving the efficiencies of their processes, rather than compete with them directly - all players have a specified role to fulfill. Additionally, the rapid growth of advanced networks like 5G, combined with all-time highs in consumer demand for streaming and digital services only means that this major shift in direction towards a digitalized future is very real, and one which is here to stay.
