Companies in the telecommunications and media sectors are in a battle for survival!

They are facing a dire need to innovate their products and services, and to revisit their business models.

The digital disruption is begging for a complete overhaul of the processes and systems followed by media.

Dwindling profits

An analysis of the quarterly financial results of the media and telecom companies in the region reveal dwindling profits.

Saudi Research and Marketing Group which publishes Arab News among others reported $14 million net income for Q4, 2016, shrank in Q1 2017 to $4.81m, and again in Q2 2017 to $1.8m, or an 87% drop in income in just two quarters.

Saudi media firm Tihama Advertising and Public Relations Co. reported a loss of $2m in Q4 2016 and a loss of $1.86m in Q1 2017.

The company marginally recovered in Q2 2017 and reported a net income of $421,000.

Kuwait CableVision Company reported that the Group incurred a net loss of approximately $400,000 during the period ended June 30, 2017, and, as of that date, accumulated losses amounting to $7.93m.

Culprit

The digital disruption is posing new challenges to news, entertainment and paid media, and regional players were quick to react to this transformation, but the overall response from the media industry was a bit disjointed.

When media houses turned to digital platforms to offer their products and services, the advertising industry was not convinced on return-on-spending. By the time advertisers warmed up to digital media, most of the media companies’ budgets marked for digital platforms had been exhausted. Experts views this as  ‘death by short-termism’.

The fan: The new boss

Media is fast becoming an industry where users come first. Strategy&, formerly Booz & Co, says an entertainment and media (E&M) offering today simply cannot thrive without the economic, social and emotional power of fans.

“Premium content is expensive and getting more so. Distribution is a brutal battle for (digital) shelf space where only brands that are ‘most wanted’ can hope to win. The steady march of digital technology has ushered in a direct-to-consumer environment, characterized by greater choice and user control. There is simply too much competition for users to allow E&M businesses to survive on experiences that cater to casual ‘eyeballs’ or infrequent users,” noted the 2016 Strategy& Industry Trends report on entertainment and media.

“Now, you must create a fan-centric business.”

US-based Christopher Vollmer, a Partner at Strategy& and PwC’s Global  Advisory Leader for Entertainment and Media, says: “Entertainment and media businesses designed around and for fans command multiple strategic advantages. They know more about who their users are, what they want, and how and where to deliver it.”

“Today’s fans also recruit tomorrow’s,” he adds.

“Avid fans cannot get enough of the content they love. They binge on it. They share it. They talk and post about it. They create more of it,” he continues.

“Avid fans will seek out content-fueled interactions across a diversity of experiences, provided those interactions ignite and power their emotional connection with, say, a sports team, a film, or a video game. For many fans, the quality of these experiences is further amplified when it translates into social connections; fan-to-fan relationships; and active communities united by shared passions, values and interests.”

Changes needed in GCC

There is a need for the media houses in the GCC, especially in Saudi Arabia, which has a large population, to capitalize on connected users and create a complete experience for social media happy users.

For the past decade or so, content in GCC news media has been driven by Public Relations (PR) companies.

As a result, content differentiation between competitors is minimal. New relationships and fresh processes should be defined among news producers, advertisers and PR companies to create content with users at the center. This might result in some trade-offs for these three stakeholders in the media industry.