Google, Amazon, Facebook, and Apple (GAFA) have already had a profound impact on the digital media and TV & video segments of the media industry, driving many players to either partner with them or team up with old foes in a bid to survive. But the tech giants are becoming more ambitious and actively expanding their presence across more media segments and new consumer touchpoints – and the back-end technologies that drive them. Ovum expects a swathe of "mega-partnerships" to emerge across all segments of the media and entertainment industry as incumbents maneuver and evolve to compete with GAFA.
The gaming sector has already witnessed one such move. The looming threat of Google's Stadia cloud gaming platform, Apple's Apple Arcade gaming subscription service, and an anticipated entry from Amazon has already driven Sony to enter a cloud technology partnership with Microsoft, its main competitor in the console market. In the words of PlayStation CEO, Jim Ryan, "When you've got these big, very large companies coming into your space, I think simply viewing the world in the terms you viewed it in the past 25 years, with the competition you've had over the past 25 years, is probably not a very sensible approach to take."
Ovum agrees with this assessment: making friends out of enemies in a bid to compete against the scale, data, and technological integration enjoyed by GAFA is something we've been recommending to our media clients for some time. But the fact that GAFA are also very keen to present themselves as technology partners gives media companies something to ponder: is it worth also partnering with tech giant new entrants with the scale, technology, and funds to swallow up entire parts of their industry's value chain?
And this is certainly GAFA's intention. As Figure 1 shows, while the provision of back-end technology to media players is a nice means of revenue diversification, taking control of the relationship with the consumer is going to be far more valuable. As such, GAFA are becoming more ambitious with the launch and augmentation of their own of direct-to-consumer media offerings.
Source: Ovum WTVIS, Ovum Media Transformation ICT Services Forecast: 2018–23
Operating across both the technological and consumer-focused value chain also has significant advantages for those with advertising at the heart of their monetization strategies – primarily Google and Facebook, but increasingly Amazon too. Indeed, this presence allows them to generate even more data and insight that can be used to deliver more relevant and valuable advertising across multiple consumer touchpoints, devices, and contexts.
New approaches to partnerships are going to be crucial to compete with this omnipresence. Mega-partnerships between industry leaders will be required to achieve the required scale, although this will not be enough on its own. Collaboration across media silos – from TV to digital publishing to video gaming – and external consumer touchpoints (i.e. retailers, who are also facing the threat of GAFA) will also be essential.
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