Media is a fast-moving environment, and where there is change there is investment opportunity Shutterstock

Media is a fast-moving environment, and where there is change there is investment opportunity Shutterstock

Change is in the nature of the global media industry, so we don’t know what form it will take in the future nor the risk/reward outlook for investors. Martyn Hole, Investment Director at Capital Group quotes Bill Gates: “People often overestimate what will happen in the next two years and underestimate what will happen in ten.”

Three blockbuster M&A deals occurred in January 2022, the nature of which will have most Baby Boomers and Generation Xers scratching their heads. Few in these cohorts have heard of Activision Blizzard or the games it sells, fewer still will be able to grasp why Microsoft is planning to pay US$75bn for this firm. Ditto with Take-Two Interactive’s US$12.7bn plans for Zynga (with its FarmVille franchise) and Sony purchasing Bungie (the creator of Halo and Destiny) for US$3.6bn.

This is just a taste of how demographic and technological change have intersected to create major new value streams in recent years. Millennials and younger generations have an instant, instinctive feel for the cultural significance (and thus the earning potential) of Activision Blizzard’s Call of Duty and World of Warcraft game franchises. Bringing these iconic brands into the Microsoft stable is easier for them to comprehend, and thus could help them to spot potential investment opportunities.

Yet even though today’s 30-40 year-olds are to a large extent digital natives, will they be able to grasp so readily the revolution that could be unleashed if the metaverse concept develops? This immersive and expansive digital world would offer the potential for people to interact, transact, play games, attend concerts, watch movies, meet co-workers and more.

Might it be today’s pre-teen Generation Alpha that is able to feel completely comfortable with this new way of interacting with the world? Will they be the ones best placed to have an instinctive feel for the related investment opportunities?

Traditional linear TV viewing and movie attendance are in decline, with the TV viewership of the 16-24 age group down by 70% according to a Nielsen study. “With streaming services able to offer the premium content people want when they want, it is mainly sport, reality shows and news that require viewers to watch live in sufficient numbers,” said Mr Hole. “This comes at a high cost for TV companies, with the rights of the English Premier League for three years costing US$6bn, and with a year of the National Football League at US$10bn,” he added.

“Another feature of this space is how a variety of businesses are working to capture this market,” Mr Hole added. As well as TV companies and pure-play operators such as Netflix and Disney, there are the likes of Amazon and Apple that are carving out lucrative niches as content platforms.

Meanwhile, in the social media sphere, the once dominant Facebook (owned by MetaPlatforms) is starting to feel somewhat dated. Instagram, TikTok, WhatsApp and Twitter are catering more closely to the needs of certain groups of users, based on their age or usage.

Online gambling has changed the concept. “No longer is this about having to visit somewhat louche betting shops, but it is about attractive online platforms that unite live events and games with gambling,” said Mr Hole. Once considered to be a largely male activity, the likes of online roulette are attracting a growing female clientele.

Companies that provide the hardware to make these experiences happen could also be potential winners. 5G and 6G mobile systems, semi-conductor producers and their equipment suppliers should be well placed to benefit.

“Media is a fast-moving environment, and where there is change there is investment opportunity,” said Mr Hole. “Avoid having pre-conceptions and embrace the possibilities.”.

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