Entertainment, toys and games companies are experiencing a shift from analog to digital that is changing the ways everything is consumed. Consumers are being more selective about what content they choose to watch. Analysts say they use more bandwidth — with 80% to 90% of traffic on the internet being video — and are less tolerant of advertising. There are differences by demographics on which kind of content and platform the audience prefers, with Millennials favoring mobile and preferring fewer ads; younger teens preferring content they feel is authentic, with digital-native content being perceived as more authentic than studio-produced content; and Baby Boomers preferring content that fits a living room setting, analysts say.
Another big theme in the space according to analysts is convergence, that being the blurring of the lines between what a cable company and a telecom do. The television ad market is quite strong, some analysts say, adding that advertising in general is strong. They say there’s been a focus on improving the existing system both in terms of measurement and in terms of how TV companies’ revenue streams. The last two years were weak for TV advertising, some of which was related to fears that viewership wasn’t accurately measured, but some analysts say there is more comfort with viewership-measuring methodologies now. Analysts say we are seeing early signs that advertisers are moving back toward traditional media or are having more sophisticated ad buy strategies than just digital. Others, however, say the pendulum hasn’t quite turned back and that ad spending remains focused on the digital realm.
Ad spending is not expected to grow faster than GDP because companies advertise for customers when they think they have money to spend. For operators, analysts say there has been consolidation, which has given them leverage to set lower rates for TV networks. Some analysts are positive on media and entertainment, saying these companies are either transitioning toward a digital future, or they are sticking to their traditional strengths. One example is the newspaper industry. As their cost structures are no longer tied down to printing plants and expensive downtown buildings, analysts say they are capitalizing on the heavy online traffic they get from their local markets and they are moving towards video content.
In the toys realm, analysts say the new parents of the Millennial generation do more research on the toys they buy and don’t necessarily shop at brick-and-mortar stores. Analysts also say the tie-ins or media convergence, where product is backed by content such as television programs or movies, is growing in the high single digits while commoditized product grows in the low single digits. Product discovery and brand creation isn’t happening in front of the television on Saturday mornings, but rather through digital formats. There are toys that have been moved away from basic learning and development, and they are moving toward elevated intellectual development such as STEM. Analysts add that the quality of toys is increasing as well.
Full report available here.
Interview Highlights: Benjamin Mogil of Stifel, Nicolaus & Co. on Entertainment, Toys and Games
October 13, 2016
Interview Highlights: Stephanie Wissink of Piper Jaffray & Co. on Entertainment, Toys and Games
October 13, 2016
Interview Highlights: Amy Yong of Macquarie Group Limited on Entertainment, Toys and Games
October 13, 2016
Interview Highlights: Tim Nollen of Macquarie Group Limited on Entertainment, Toys and Games
October 14, 2016
Interview Highlights: Michael Kupinski of Noble Financial Group on Entertainment, Toys and Games
October 17, 2016
