Moderate

Media

Whilst there is pressure on traditional media, online channels continue to perform strongly making it a dynamic time for the sector.

Sector trends & challenges

  • Strategic pivots

    For traditional media, declining circulation has driven a strategic pivot towards subscriptions and new revenues, generating opportunities for businesses to assess strategic decisions such as non-core divestment and partnerships.

  • Cash and Liquidity

    Margin pressure exists across the sector, exacerbated by the required investment in infrastructure and content to ensure businesses stay relevant in a crowded marketplace. Working capital optimisation and margin improvement is vital.

  • Privacy, security & censorship

    COVID-19 has not only impacted media revenue trends, but has increased the attention being placed on GDPR, security and the ethics of censorship. Companies must now invest heavily in robust systems and address long-term strategy.

Sector rating profile

The team at Interpath have observed a low to moderate volume of restructuring activity in the sector over the longer term. The print sector in particular has been in structural decline and finding the transition to digital/technology led media ever more challenging in a global marketplace.

 

The pandemic has added an additional accelerant in changes to societal behaviour whilst also adding complexity to the production of onscreen media (film/television). A post COVID-19 rebound is likely but timescales for that remain uncertain.

Media

The media sector is defined pretty broadly, covering ‘traditional’ media such as news and magazine publishers through to television and radio production and broadcast and then on again into the digital space. The blurring of the lines between media and technology sectors is likely to be a key feature of the post-COVID-19 economic recovery. We might see an increase in mergers between companies from different sub-sectors in order to increase diversification, improve the ability to deal with a dynamic market and increase longevity.

For traditional print, COVID-19 has been challenging time, with newspaper circulations perceived to have fallen, and a number of titles no longer permitting their volumes to be published. The regional press has particularly struggled, and the impact of continued cost savings is increasingly visible to consumers. Market consolidation is likely if smaller regional businesses continue to struggle to generate profits. Non-core divestment could help some businesses survive, however larger national companies will certainly be looking to make acquisitions and increase market share.

Privacy (GDPR), security and reliability concerns mean companies are being held to increasingly high operating standards in the form of an increase in regulation. Companies must now invest more to ensure they achieve these new higher standards which increases pressure on liquidity and working capital. The recent increase in interest rates might cause an issue for companies with high debt leverage and an increase in refinancing within the market could occur. There are huge opportunities for media companies to achieve high levels of growth over the coming years but only if GDPR regulations are met and liquidity is managed.

The sector is continuing to see disruption due to the COVID-19 pandemic and consequent changes in societal behaviour. Print circulations for example are currently suffering a significant decline, and subdued advertising revenues may occur for the foreseeable future. There is also a potential for an increase in future subscription cancellations. Similarly to many sectors, some production challenges have arisen from Covid-19 social distancing measures and lockdown restrictions. The slowdown in production has reduced the ability of companies to service fixed overheads, rent and HMRC arrears. Non-core divestment might be required to reduce costs and ensure sufficient profits are made.

Brexit and the trade deal between the UK and EU are likely to cause a shift in the labour force within the sector as companies look to new hires to meet their skills and expertise requirements. Structural changes are being seen across the sector with companies trying to adapt to digital led content and we think further consolidation is likely. Many Start-ups are burning through cash investments, resulting in a need for alternate funding to see products through the development cycle.

An increase in production costs for television programmes and films are putting pressures on profit margins, however there is likely pent-up demand for new creative outputs following recent restrictions. A boom in UK TV and film production post-COVID-19 could provide a good level of upside. Multi-platform media brands are those likely to be more resilient over the coming year.

Find Your Expert

Mark Raddan is Interpath Lead for the wider Technology, Media and Telecommunications sector. Anthony Mayes leads our approach to the Media sub-sector nationally. For a full list of our senior people with experience in this area use the button below.

Our senior team