Discovering a Path to Media
At Pathfinder, we recently held a ‘Path to’ event dedicated to Media, the sixth part of a series of talks on how the future is being shaped in several industries, featuring handpicked players from the corporate and startup worlds. We decrypted the sector’s trends and invited our audience to then identify existing problems and pitch innovative business solutions. Stay tuned for our next episode on November 5th at 6:30pm at The Family Paris, where we will focus on the healthcare sector. With industry leaders and startups, we will break down the healthcare value chain and understand the different trends affecting and shaping its future.
On stage, we welcomed Mathieu Gallet (Founder of Majelan, and ex-CEO of Radio France), Jean-David Blanc (Founder of Molotov and Allociné), Vincent Giret (Director of France Info) and Bérénice Lajouanie (Director of Les Échos). The roundtable was led by Miguel de Fontenay, Pathfinder’s CEO and Partner at The Family.
Here are several topics and learnings that were touched upon during the debate.
A rapidly changing environment
The media industry, which has been heavily impacted by the advent of digitization, is evolving very rapidly with challenges and opportunities emerging. Undeniably, the value on the chain is shifting at the bottom of the chain towards the end user, with the winners being those able to get direct access to highly solicited consumers. Capturing their attention is the ultimate goal in a world overflowing with content.
The media value chain has evolved from a very linear/vertical perspective, to a complex ecosystem impacted by the emergence of new technologies as well as behavioural, environmental and societal evolutions which give birth to new entrants (GAFA, Startups, Tech companies …). Positions and roles are redistributed along the value chain: producers are becoming distributors and distributors are beginning to create their own content.
This has given rise to a highly competitive market, as we witness a battle over the most exclusive content in order to win audiences which are cluttered today into communities (Millennials, Gen Z, Seniors), with different needs, whether they be seeking information, education or entertainment.
The new fight for audio
Audio-based media is witnessing its revolution, with the emergence of new formats such as podcasts, which leverage the rise of new technologies (i.e., 5G, AI…) and new consumption habits shifting towards new devices (i.e., mobile, internet of things..). What’s interesting with audio as a medium is the ability for consumers to do other tasks at the same time. For Mathieu Gallet ‘Podcast is for audio, what blogging was for writing and what Youtube was for video.’ It’s a very accessible format, enabling anyone to become a producer with a minimum of resources and express their voice.
Digital-native players
New entrants have the competitive advantage of starting with a blank page and ‘thinking digital’ from day one in terms of experience, putting the user at the center. Majelan, a podcast streaming experience, is both an aggregator (platform) and a producer (studio), as Mathieu Gallet believes ‘the creation of value is through experience, which comes with great content.’ Digitization has multiplied the opportunities shifting from a ‘closed world’ to being less subject to the ‘physical object’ (TV or radio).
Digital, as stated by Jean-David Blanc, also enables us ‘to make the content accessible and affordable’. Platforms such as iTunes and Spotify have allowed consumers to purchase individual music tracks as opposed to full albums. These streaming platforms represent today 80% of music production revenue.
The agility of digital players also enables them to rapidly adapt and pivot according to evolving needs. Netflix is an interesting example of a company that has pivoted twice. The service, which started by delivering physical videos on tape and DVDs by mail, pivoted to the streaming business as the format was exploding as more bandwidth became available. The second pivot was its shift from a reliance on third-party content to become one of the largest producers of original programming.
Traditional players
Legacy brands such as Les Échos and France Info have on the other hand had to deal with the gruelling challenge of going through their digital transformation. Traditional players have the double task of optimizing their core business and thinking of new revenue streams. Their strategy so far has, nevertheless, mainly been to focus on becoming multi-media groups by extending their presence across sound, video, and print through acquisitions.
Les Échos has focused on delivering specialized economic and financial news and high-quality editorial content for its demanding target (high-income earners). For the press, Berenice Lajouanie stated that ‘digital has enabled us to multiply audiences’ and serves the printed format. The transition to paywall (online paid subscription) has proven that ‘quality and trust pays’. Yet there is a need to think of other businesses, which they have done through acquisitions of media brands targeting a similar audience and with the launch of services to build engagement with their community (conferences, training programs, etc…).
For Vincent Giret from France Info, for centuries ‘media have neglected their clients, we never sat next to them…’ and we have shifted ‘from a product economy to an economy of relationships’. Being close to the customer and owning the data to be able to personalise content also requires traditional players to become more agile. As an example, The New York Times has pivoted several times, and today gets more revenue from readers than from advertising. For Vincent, ‘traditional players can no longer act alone in this space but we need to create a system of interdependence, we need to work differently and to create alliances.’
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The rise of new Media Superpowers
The GAFA’s rise has played a prominent role in redefining the traditional game. Social networks have become influential media and the main source of news online. These giants’ strategies lie in diversifying in other industries to be present for users 24 hours a day, across a ‘one-in-all platform’. They also have the advantage of dominating and easily penetrating new markets with the massive financial resources they are able to invest. As an example, Apple recently announced its diversification into services, launching streaming services in the press, video and gaming. They also communicated their intention to spend more than $1B in the production of original content.
The Almighty Netflix
When it comes to innovation, no player has succeeded in applying disruptive innovation better than Netflix. Clayton M. Christensen, an HBS professor, sees a disruptive company as one that “targets segments of the population that have been overlooked by competitors, delivering an inferior (but more tailored) alternative, often at a lower price.” The two founders, who had no experience in movie rentals, set out on a mission to reinvent the movie rental experience and came up with something totally new, convenient and at an affordable price. The company has kept this innovative DNA, proving that it’s better to disrupt yourself than to be disrupted by someone else, as they did with their second pivot to streaming.
And ever since, traditional legacy players have merely been trying to catch-up, with strategies that seem to focus on how to counter Netflix and the GAFAs instead of inventing new experiences. But why should disruption stop at Netflix ?
Legacy brands vs user-generated content
While user-generated content is emerging, it also gave rise to the threat of fake news, bots being used to spread fake information and ‘synthetic content produced with AI’ starting to be witnessed, said Vincent Giret. This is where ‘brand’ comes in as a very powerful asset, coined to mean trust among consumers, thanks to journalists’ ability to provide certified information.
Moreover, for Jean-David Blanc, the publisher’s brand enables them to give consumers an ‘angle and point of view’ in a context where ‘the more we have access to plenty of options, the more we need reference points…’
What’s next?
There has been a massive converging trend for Vincent Giret, as ‘radio, TV… all mediums converged to mobile, but some analysts predict this trend has reached its maturity stage and consumers will be redirected towards vocal assistants, smart speakers, connected cars… so many realms that will transform the experience.’ The job will always be the same: to tell stories in the best possible way and to provide verified, certified information; but the experience must be reinvented. While consumption habits are not crystallised, they are in an accelerating transformation. The membership model is also reaching saturation as consumers can’t subscribe to 50 different offers — they will have to choose… and for Millennials, information is not necessarily the priority.
Reed Hastings, Netflix’s founder, declared two years ago that its main competitor was sleep. Today his competitors are Fortnite and Youtube. Media players are therefore competing with any player capable of capturing communities’ attention. The interactivity of content and the level of engagement with consumers will be critical in offering great experiences that must aim to be disruptive. While the shift to digital has been a huge facilitator in the creation and distribution of content (including user-generated content), producing high-quality content adapted to users and their evolving means of consumption will always remain key.
To conclude, the media industry is going through a turning point and questions are yet to be answered. Lawmakers are intervening heavily to respond to this changing environment. In France, the government is currently discussing an important audiovisual reform which includes the obligation for media streaming platforms to invest at least 16% of their turnover in local content production. Broadcasters will also get the right to feature movies any day and any evening of the week (it is currently restricted to Wednesdays, Fridays and Saturdays to encourage consumers to go to the cinema on other days).
Players and media types are becoming more interconnected than ever. It’s interesting to see how TV channels in France are partnering to offer a new experience through ‘Salto’, a joint venture between several broadcasters which was authorized by the anti-trust commission. Radio channels have since announced their intention to launch their own common streaming platform. Press players are massively adopting paywall and for many still pursuing their digital transformation. They are facing an increasing demand from consumers in terms of information communication, with all the effects and dangers that it entails, including fake news spread through social media.
Which new experience are we going to offer is still a pending question. Netflix shouldn’t be perceived as an obstacle to innovation, and traditional corporates should stop focusing only on defensive strategies against Netflix but should rather focus on inventing new experiences to offer their customers. There is a realm of opportunities which is wide open and untapped: how to address the rise of consumer tribes which can’t be identified only by traditional factors such as age, gender or location but by their collective common behaviours and interests… how to address the topic of digital inclusion ? These opportunities require players to adopt a mindset oriented towards ‘inventing’ rather than ‘improving’.
