The media and entertainment sector is made up of several segments, each of which has reacted differently to digital transformation, with some taking advantage of it, while others have not had positive results. One thing is certain, none of these areas, after this revolution, will be the same as before.
Media and entertainment sector is a diverse sector. It includes a large number of segments (books, radio, television, etc.) that have very precise and diverse characteristics.
This means that what happens within one sector is not necessarily reflected in other sectors; in the same way, every sector will not react the same when a transformation occurs. This is exactly what has happened with digital transformation.
Digitization has brought about considerable changes in most every industry. In sectors like finance, food, and banking, these changes are mostly homogenous and largely depend on an individual player’s ability to adapt to innovation. This is not the case with the media industry. Here, the changes can be very different from one segment to another.
Radio: still going strong
To kick-off, let’s look at one of the most long-standing forms of traditional media: radio.
Radio continues to be a relevant form of media, not only because of the number of people it can reach, but because it is a sector that has shown a certain flexibility.
Digital transformation has affected this sector only to a limited extent, at least according to data reported by Ter-Tavolo Editori Radio on the audience of national and local radio stations in Italy, which seems to be growing compared to 2018 except for some limited cases (such as RDS, Radio Italia, RTL 102.5, Rai Radio 1, and a few others).
Net of statistics, the radio sector is interesting to observe because it has undergone considerable changes, since, perhaps more than other sectors, it has been receptive to change.
One such change is undoubtedly the birth of the web radio phenomenon. The main radio stations also have a digital platform that runs its program schedule live or makes it possible to view some broadcasts on demand. This has allowed the different radio stations to increase their audience, giving many more people the possibility to enjoy their content, also using different devices.
One of the main effects of digital transformation was, in fact, just that: to make it possible to listen on other devices, not initially designed to perform this type of function, such as smartphones, personal computers, or tablets.
Another trend brought about by digital transformation is the podcast, an extremely successful platform that delivers audio files with diverse content, accessible via mobile apps and online channels. By their very nature, podcasts are complementary to radio that enriches the listening experience for users, who can choose between a linear or on-demand use. Podcasts have revolutionized radio also because they allow listeners to personalize what they listen to, making them absolutely free to choose what to listen to, when and how.
This has also been made possible by the fact that there are now hundreds of dedicated platforms and applications where users can browse and download the podcasts they are most interested in. All of these aspects have made podcasts popular, and the type of content has become increasingly relevant for the radio industry.
This is reflected by the fact that major Italian publishers and advertisers (among others) are incorporating them as part of their own digital audio strategy in order to take advantage of these opportunities.
Digital Audio, which refers to this new sector of Media and Entertainment content, has become a considerable source of additional revenue compared to the traditional model of advertising sales. Suffice it to say that, in the United States alone, estimated revenue for 2020 could represent about 30% of total investments in radio, compared to about 20% in Europe (lastampa.it).
Books: paper beats digital
Given the above-mentioned trends, you might think that an area such as books and publishing would have been negatively affected by the digital transformation. Instead, publishing is one segment of the media and entertainment sector that is showing positive signs of growth.
PWC forecasts that the market for books in Italy will grow by 0.2% between 2019 and 2023, ensuring a level revenue of around €2.2 billion (pwc.com). This is despite the fact that Italians continue to consume traditional books, preferring to read a printed volume rather than buy its digital version.
The e-book, in spite of its good starting points, has never made it into Italy. Suffice it to say that, between 2010 and 2016, the digital book market reached €67 million, which corresponds to about 5% of the market, and in 2018 the same sector decreased by 17.2% (key4biz.it).
However, a very interesting trend, which is already quite widespread in other countries, namely self-publishing, has also arrived in Italy. Digital transformation has allowed the formation of numerous dedicated online platforms, where an author, without the intermediation of the publisher, can publish his work directly and sell it either through these platforms or from physical points.
Thanks to this “democratization of publishing” made possible by digitalization, more than 11,600 self-published ebook titles were offered in Italy in 2018, equivalent to 22.8% of digital publications.
Another effect of digital transformation is an increase in the number of examples of the use of books through other media. One example is that of audiobooks, which thanks to the popularity of podcasts, are becoming more and more popular, to the point that more than 4 million Italians listen to audiobooks.
Another example, instead, was the presence of Netflix at the Bologna Children’s Book Fair, which according to experts, marked the beginning of a “fascinating dialogue between the book, the screen, tradition, and the future” from which it clearly emerges that what you see inevitably influences what you read.
Not a good time for newspaper
The books segment is less well off than the newspapers and magazines segment, which continues to show signs of suffering, although this is not necessarily related to digital transformation. On the contrary, the latter could offer interesting opportunities to relaunch the entire segment.
For example, publishers can create an online version of their magazine in order to increase your audience and meet the needs of users, who increasingly need to access the content they prefer how and when they want. This is exactly what many leading national and international newspapers and periodicals have done, sometimes recording better market performance than their print version (primaonline.it).
The path to follow, then, is this one, all the more so if you think of the – decidedly positive – economic results that major US newspapers like The New York Times, The Boston Globe, and The Washington Post recorded when they decided to reduce the perimeter of their paywall by reducing the number of articles available for free. Thanks to this courageous choice, newspapers have recorded an increasing number of subscribers to the digital-only model, which reached 2.5 million users and led to revenue growth of $1.68 billion compared to $1.56 billion the previous year.
This strategy has allowed us to face a problem that the media must manage: that of credibility. In fact, some of the more negative aspects of digital transformation, from a competitive perspective, is the increased amount of sources from which people can get information.
While this has led to an increased number of online-only publications, at the same time, the chances for a user to run into false news have increased; just think of the problem of fake news, which often spreads virally because of social networks.
“Forcing” people to subscribe allows newspapers to gain status among users and, equally important, ensures that increased freedom on the internet does not affect the quality of the products provided to readers.
Television is still king
Despite digital transformation, television in Italy remains one of the most relevant, if not the most relevant media for penetration capacity. It is no coincidence that, according to Censis, more than 90% of households have at least one television set and 86% of those interviewed said they watch television at least once a day.
Despite this, television has also undergone a digital transformation, and, in its own way has begun to show the signs of digitization.
The first of these is the arrival and affirmation of streaming television. All the main networks have already planned to transmit part or all of their programs on digital platforms, so as to allow users to enjoy the content at all times and especially from mobile. This is particularly important in light of the fact that the smartphone is one of the most widely used tools for surfing the Internet and that one of the most prevalent actions is watching video content. The relevance of these platforms, among other things, is demonstrated by the fact that Auditel-Censis has also begun to take an interest in these new dynamics, reporting on the number of people watching television in “non-traditional” ways in 2019 (auditel.it).
A second effect of digital transformation has been the emergence of new competitors in the market, which have revolutionized the way that a television product is conceived. Here, we’re talking about giants such as Netflix, Amazon Prime Video, and Disney Plus, which have made on-demand the main mode of video and which, moreover, have created new social phenomena such as binge watching, imposing seriality as a winning format in terms of narrative and market.
Another aspect is the new complementary effect between television and other media. For example, think about what happens on social networks during major television events such as Sanremo or the Oscars. On these occasions, the network becomes a natural meeting place, where people exchange views, opinions, and memes about events they are watching through another media.
In some cases, real listening groups are organized for live commentary on events, which enables new forms of connection, making television more than purely a passive form of entertainment. It is no coincidence that Facebook has experimented with a specific chat mode, the Facebook Watch Party, which allows users to watch and comment on videos directly with friends, facilitating interaction while viewing content.
Digital transformation has also given impetus to some emerging sectors that are becoming increasingly relevant.
This is the case, for example, of gaming, which has found a very promising segment in e-sports. Although revenues from this segment in Italy are still below the level of other countries, PwC expects the Italian consumer e-sport market to grow significantly, with a CAGR for 2018-2023 of +51.6% (engage.it).
The same thing, although not at the same rate, will also happen for the augmented reality sector, which is expected to grow by about 23% in the same period.
It is easy to imagine that these areas, precisely in light of these perspectives, will become important in the future to stimulate the creation of new types of content and will push the different players to innovate on the current models of entertainment.