Q3 2022 insights into Digital Media.

Alec Dafferner, Partner at GP Bullhound, said: “We are seeing various trends shaping the digital media landscape in Q3. Competition for the ownership of sports rights is heating up among Big Tech, as high viewership traffic promises new subscribers in the future. We are also seeing non-gaming apps surpass gaming apps for the first time this year. Lastly, streaming companies continue thinking of ways to reinvent themselves through ad-supported models and new original content. On the dealmaking side, digital media remains active, with a healthy pace of investments in the sector as global consumption of digital media increases.”

What’s trending this quarter in Digital Media?

Big Tech aims for sports

• Sports rights have become a valuable asset and tech giants like Apple and Amazon have taken notice, both recently winning major sports rights deals with the National Football League, Major League Baseball, and Major League Soccer in the US
• The value of sports rights is at all-time highs and as trillion-dollar tech companies enter the playing field, they will only rise higher – in 2024 alone, Disney, Comcast, Paramount, and Fox will pay a combined total of $24.2bn for sports rights
• Most of the rights still belong to legacy media companies but the pressure is on as tech giants can leverage large cash balances

Gaming apps revenue buffers

• US app store revenues have historically been dominated by gaming apps; for the first time, non-game apps have surpassed gaming apps in revenue generation
• This shift is driven by the subscription model adopted by non-game apps, compared to the microtransactions of gaming apps

Streaming shifts strategies

• Streaming services have evolved into a dichotomy of free or ad-supported models versus subscription-based – so far, the free option is winning ground
• Subscription-based services are feeling the heat: The largest paid-TV providers in the US, representing 93% of the market, lost two million subscribers in Q1. Netflix alone lost nearly one million in Q2. Paramount+ added 3.7 billion subscribers globally in Q2, but their other streaming services lost 2.4 million
• Meanwhile, ad-supported video-on-demand platforms (Tubi, Pluto TV, Freevee, Xumo) and ad-supported versions of subscription services (Hulu, HBO Max) are expected to generate nearly $19bn in revenue this year, doubling from 2020
• Media companies are looking to cash in on free-streaming platforms
• Paramount bought Pluto TV for $340m in 2019, which is expected to bring in $1.2bn in ad revenues this year. Tubi was acquired by Fox Corp in 2020 for $490m and is projected to generate $830m this year. Amazon launched its own ad-supported streamer, Freevee, in 2019, and Comcast bought Xumo in 2020
• Other major streaming players are looking to re-strategise; most notably, Netflix is highly focused on the rollout of its ad-supported model, having partnered with Xandr to provide a cheaper ad-supported tier that targets 40 million viewers by Q3 2023. Other players are engaging in M&A and creating original content to drive subscriber growth

Enquiries
For enquiries, please contact Alec Dafferner, Partner, at alec.dafferner@gpbullhound.com

About GP Bullhound
GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s best entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 12 offices spanning Europe, the US and Asia. For more information, please visit www.gpbullhound.com.