On Strategy Showcase: 2024 Media Highlights with Michael Beach
Podcast Information:
- Title: On Strategy Showcase
- Host: Fergus O’Carroll
- Guest: Michael Beach, CEO of Cross Screen Media
- Episode: 2024 Media Highlights with Michael Beach
- Release Date: December 27, 2024
- Description: Exploring the pivotal media trends and strategies from 2024 with industry expert Michael Beach.
Introduction
Fergus O’Carroll welcomes listeners to a special episode of On Strategy Showcase, featuring Michael Beach, CEO of Cross Screen Media and author of Screen Wars. The episode delves into the most impactful media stories of 2024, offering deep insights into the evolving landscape of media consumption, advertising, and strategy.
1. The 2024 Election: A Mirror to Media Fragmentation
Challenge of Reaching Consumers
Michael Beach begins by analyzing the 2024 presidential election, highlighting it as a reflection of the broader challenges in today’s fragmented media environment.
Michael Beach [00:56]: “There are over a million video advertisers in the US that are buying advertising on Facebook and Instagram. ... the more targeted and measurable it is that it can be sold, that group will pay a higher CPM.”
Excessive Media Spend yet Limited Reach
Despite the enormous investment—approximately $1 billion per campaign with 60% allocated to media—political campaigns struggled to reach certain voter segments. Beach emphasizes that even with substantial spending, reaching the desired audience remains elusive.
Michael Beach [05:28]: “Political campaigns are spending way more money per target than any other industry would spend and then they're still running into issues reaching people.”
Lessons for Brands
Brands can learn from political campaigns by adopting more focused media strategies. Beach suggests that businesses should:
- Avoid Mass Reach Assumptions: Recognize that reaching the entire target audience is increasingly difficult.
- Targeted Advertising: Focus on specific segments that are more likely to convert, similar to political persuasion efforts.
Michael Beach [14:11]: “There is a certain thing of if you have a million customers and you're looking at the 300 plus million Americans, there's probably 20 million people that your next million customers are in that bucket.”
2. Linear TV: Dominance of Sports and News Amid Declining Ratings
Sports and News as Linear TV’s Pillars
Beach outlines that linear TV remains predominantly occupied by sports and news programming, which constitute 93% of the top 100 rated shows.
Michael Beach [19:57]: “Last year 93% of the top 100 rated shows on linear TV are sports. The other seven are news or maybe an award show.”
Declining Audience and Changing Consumption Habits
Despite the dominance of sports, overall linear TV ratings are declining as audiences fragment and younger viewers shift to streaming platforms.
Michael Beach [22:06]: “The audience is declining. There are blips where they go up, but most of the time it's declining.”
Impact of Cord-Cutting and Attention Span
Cord-cutting has significantly affected cable news networks, leading to a shrinking audience base. Additionally, Beach notes a rewiring of attention spans, with younger generations preferring shorter, more digestible content formats.
Michael Beach [22:34]: “Younger people just aren't learning really how to sit down and consume a long-form product like that.”
3. Convergent TV: The Rise of Streaming and Its Economic Implications
Definition and Current Landscape
Convergent TV describes the coexistence of linear and streaming TV, with a predicted shift toward exclusively streaming within the next decade.
Michael Beach [26:17]: “Convergent TV is kind of the period we're in now, which is linear and streaming TV kind of coexisting.”
Market Consolidation and Dominance of Netflix
Netflix emerges as the "alpha dog" in the streaming space, leveraging its scale to generate significant profits from original content despite high investment costs.
Michael Beach [28:21]: “Netflix is the alpha dog. They are here for the long term... they generate the most profit from streaming of any company.”
Economic Models: Linear vs. Streaming
Beach contrasts Netflix's high-risk, high-reward model of investing in original content with YouTube's revenue-sharing approach, highlighting Netflix's superior profitability due to its massive subscriber base.
Michael Beach [29:05]: “Netflix could spend 10 times as much money on a show and make the same or more profit than Peacock.”
4. The Transition of Live Sports to Streaming Platforms
National vs. Local Impact
While national sports events like the NFL moving to streaming have significant implications, local sports face more immediate challenges as traditional Regional Sports Networks (RSNs) struggle with declining subscriptions and revenue.
Michael Beach [40:47]: “At the local level, RSNs are losing their distribution deals, leading teams to lose a major revenue stream and means to reach their fans.”
Financial Strain on RSNs
RSNs, burdened by long-term contracts and declining subscriber bases, are increasingly unable to cover the high costs of sports broadcasting, leading to bankruptcies like Bally Sports.
Michael Beach [43:09]: “The RSNs were paying more out and rights to the team than they were making from subscribers.”
Impact on Major Networks
National networks such as NBC, ABC, CBS, and Fox, which heavily rely on live sports for advertising revenue, face significant revenue declines as sports content migrates to streaming platforms.
Michael Beach [43:45]: “They’re going to lose their mass reach vehicle. That could have a lot of implications for the business...”
5. Hardware Acquisitions and the Future of Smart TVs
Walmart’s Acquisition of Vizio
Walmart's purchase of Vizio signifies a strategic move to integrate hardware with advertising and data analytics, positioning itself strongly in the smart TV ecosystem.
Michael Beach [33:34]: “Walmart's going to do the same thing with the Vizio operating system and customers, but a big deal.”
Trade Desk’s Entry into Smart TV Hardware
The Trade Desk’s announcement to launch smart TVs raises questions about market viability and consumer adoption, highlighting the challenges of introducing new operating systems in a competitive hardware market.
Michael Beach [36:55]: “Nobody outside of the ad world has ever heard of Trade Desk. So why would they buy a TV?”
Economic Viability of Smart TV Models
Beach explains the low-profit margins on hardware sales but highlights the lucrative advertising revenue model once consumers engage with streaming content.
Michael Beach [38:31]: “Within three weeks, they've made more money from the advertising than they have from selling you the TV.”
6. The Future of Streaming: Subscription vs. Ad-Based Models
Economic Shifts Towards Ad-Supported Streaming
Beach anticipates a significant shift towards ad-supported streaming models, driven by better targeting, measurement capabilities, and an influx of advertisers previously absent from linear TV.
Michael Beach [47:58]: “CPMs with more measurement and more targeting... Facebook makes more money per hour for advertising than broadcast primetime television does.”
Projected Revenue Growth for Streaming Ads
The revenue per hour of advertising on streaming platforms is expected to surpass that of linear TV within the next decade, driven by the increasing effectiveness and value of targeted ads.
Michael Beach [49:45]: “Streaming could see CPMs double compared to linear TV due to targeting and measurement.”
Balanced Hybrid Models
While subscription-based streaming remains prevalent, ad-supported tiers are becoming more attractive and profitable, offering consumers flexibility and advertisers enhanced targeting.
Michael Beach [54:20]: “Streaming will shift more towards ad-supported models as targeted advertising becomes more lucrative.”
7. Looking Ahead: Predictions for 2025
Economic Model as a Driving Force
Beach asserts that the underlying economic models in media are the primary forces driving change, leading to consolidation and strategic realignments across the industry.
Michael Beach [54:31]: “Economics is gravity for this industry. The impact of the underlying economic model is just starting to be felt.”
Continued Consolidation and Reinvention
Expect further consolidation among streaming and traditional media companies as they adapt to the evolving landscape, with a focus on niche markets and innovative revenue strategies.
Michael Beach [56:36]: “Leagues outside the NFL are really scrambling. It's changing everything.”
Persisting Influence of Major Players
Despite the rise of streaming, major players like Netflix and YouTube will continue to dominate, pushing traditional media companies to innovate or risk obsolescence.
Michael Beach [53:32]: “We use the term convergent TV because it's going to be at least a messy decade of transition.”
Conclusion
Fergus O’Carroll wraps up the episode by reiterating Michael Beach's contributions, mentioning his book Screen Wars and his newsletter State of the Screens. The discussion underscores the intricate and rapidly evolving media landscape, emphasizing the need for strategic adaptability in both advertising and content delivery models.
Fergus O’Carroll [57:02]: “Michael, thank you, man, for coming on and sort of wrapping up the year for us here. We appreciate it.”
Key Takeaways:
- The 2024 election highlighted significant challenges in reaching fragmented audiences, providing lessons for brands on targeted advertising.
- Linear TV remains dominated by sports and news, but declining ratings and changing consumption habits signal a shift towards streaming.
- The migration of live sports to streaming platforms threatens the traditional revenue models of major networks.
- Hardware acquisitions, like Walmart’s purchase of Vizio, illustrate the convergence of advertising, data, and hardware in the media ecosystem.
- The future of streaming lies in a balanced approach between subscription-based and ad-supported models, leveraging advanced targeting and measurement.
- Economic models are the primary drivers of change in the media landscape, necessitating strategic realignments and innovation.
Further Resources:
- Michael Beach's Book: Screen Wars – Available on major platforms such as Amazon.
- Newsletter: State of the Screens – Subscribe at stateofthescreens.com
For more insights and detailed analysis, subscribe to future episodes of On Strategy Showcase.