How the CFO function is reworking media and leisure

The following is a contribution from Stephen Blume, Vice President of Finance at Symphony MediaAI. The opinions expressed are your own.

Historically, media and entertainment CFOs were seen as leaders who managed expenses and always looked for ways to cut overheads. But these views are becoming obsolete.

Media and entertainment CFOs today prepare for tectonic changes in consumption as the pandemic subsides.

The pandemic accelerated the trend towards convenient in-home streaming services that offered a variety of choices. Many media and entertainment companies have acquired new customers at little cost. However, new content and affordable pricing options are required to keep these viewers’ subscriptions.

Media and entertainment companies also need to make sure they define their streaming strategies. Not all of them will have the same reach as Netflix. It will be important to serve niches and develop unique offerings in order to stay competitive in this area.

Stephen Blume

Courtesy Symphony MediaAI

These shifts are why six out of ten CFOs report that the demands on their role have increased since the beginning of the pandemic, requiring real-time forecasting and predictive analytics capabilities.

Technology as a differentiator

The role of CFO in media and entertainment has become increasingly complex. Ad-supported video on demand (AVOD) and other direct-to-consumer models have complicated sales management and data analysis workflows designed for traditional license and sales revenue. Binge and churn subscribers and general customer churn have shifted the organizational focus to KPIs like Customer Lifetime Value (CLV).

The good news is that as this complex ecosystem reacts to the end of the pandemic, revenues are unlikely to decline. They’ll grow at a much slower rate, however, as streamers gained so many subscribers last year. Unfortunately, that also means the cost of customer acquisition is likely to rise as media and entertainment companies compete for market share through promotions and prizes or through mergers and acquisitions, the latter of which have already started deals between them Amazon / MGM and Warner Bros. / Discovery.

This increasingly complex, competitive, and data-driven media and entertainment industry requires CFOs to take on more strategic roles in their companies. You can – and should – develop new skills to deliver strategic value in a landscape that changed dramatically just five years ago. This increasingly also includes a commitment to new technologies.

According to Ernst & Young, 58 percent of executives are from the media and entertainment sectors prioritize Process automation to optimize “low-value but necessary activities in labor-intensive corporate functions”. Gartner continues reported that 75 percent of CFOs expect to invest more time and effort into the implementation of artificial intelligence (AI) in 2021 than in previous years.

Much of the media and entertainment industry has already migrated their infrastructures to the cloud and integrated advanced analytics into their products. Think about streaming platforms, content algorithms, and subscriber behavior tracking. By using the same Skills can accelerate CFOs’ financial intelligence. Those who are able to navigate records for new perspectives and insights can identify revenue opportunities, risks, and operational efficiencies that might otherwise not be visible.

Finance teams can use AI to reduce operational overhead, scale data analytics, and improve decision-making quality with continuously available information. AI-powered insights also empower finance teams to deliver value to stakeholder functions such as marketing, sales, product development, and customer experience.

According to IBM, CFOs in the top performing companies are better at using AI and analytics to perform tasks like earnings analysis, planning, and reporting. The provision of real-time, predictive and highly accurate data greatly increases the value of the CFO when it comes to making strategic business decisions.

Disruption brings opportunities

According to a Financial Management Magazine surveyare turning CFOs from stabilizing companies during the coronavirus pandemic to rebuilding revenue streams. For many businesses, investments in technology and data are vital when they recover. Legacy systems need to be replaced allegedly the number one IT priority among M&E executives in 2021.

Subscriptions shifted from a primary source of income to one of many potential moneymakers. AVOD is projected grow by 11 percent CAGR by 2025. Streaming platforms compete with traditional studios, claiming three of the eight images nominated for best motion pictures at the 2021 Oscars.

At the same time, new challenges have arisen for media and entertainment CFOs in terms of customer loyalty and expansion, contractual and legal matters, and sales and license fees. The pandemic accelerated the social and economic trends that fueled these changes.

A Conviva study found Americans spent 44 percent more time watching streaming content in the fourth quarter of 2020 than a year earlier. And in late 2020, Netflix found that of its more than 200 million subscribers worldwide, 37 million had been added in 2020 – including more than 8.5 million new viewers in the fourth quarter alone. More recently, however Netflix reports weaker than expected revenue growth for the first quarter of 2021 due to the easing of bans and tougher competition in the streaming space. The numbers show that even the most successful media companies need every tool imaginable to keep fickle customers after the pandemic.

Data-driven insights enable CFOs and their companies to determine the content that the most viewers are getting and then analyze those viewers in-depth, such as how many viewers prefer which genres and leads, and other analysis. Equipped with AI to sort mountains of data and generate that insight, CFOs can take control of discussions about actor payments and royalties, license distribution, and advertising fees. Going a step further, these insights will make it easier for CFOs to track new growth indicators. In addition to churning rates, they can and should pay attention to customer lifetime value, average revenue per user, average revenue per content, and the total number of hours spent on their service offering.

time to act

Industry conditions have created immense opportunities for CFOs who can use their data to gain future-oriented insights. Incorporating the same analytical skills into the finance functions of media and entertainment companies will speed time-to-insight and ensure that revenue streams across the organization – marketing, content creation, product development, and more – are aligned. It also provides an opportunity to find growth opportunities.

CFOs still have to play the role of company resource allocation, but now they can have more meaningful investment conversations. You just have to employ the right technology to get them where the insight goes.