Data-driven M&A: Unlocking value and driving growth for media companies

The media sector’s evolution over the last 30-plus years reads like one of the stories it produces for audiences. And the last decade has been particularly dramatic. With M&A as one enabler, the first phase of revenue acceleration involved vertical consolidation of content distribution channels and streamlining costs based on scale. The second phase was a race for content to dominate the streaming market.

As traditional strategic distribution business models wane, streaming and user-generated content (UGC) platforms have emerged, pushing the technology, media and telecommunications (TMT) industry to find new ways to shore up revenues. This push is existential. While 45% of CEOs PwC surveyed don’t believe their company will be viable in 10 years, among media CEOs it’s 57%. The ability to access and leverage data has become a game-changer in this landscape and can serve as a fundamental value driver.

Tapping into this value isn’t easy. In fact, 46% of TMT companies say data monetization is one of their most significant challenges to transforming in the next three to five years. M&A could expand these capabilities and help you reinvent your business model, and you’d be in good company: 84% of TMT executives are already getting into adjacent or new market segments that require new capabilities.

The value of data

Savvy media companies use data from customer preferences and online behavior histories to personalize experiences and selling strategies. This approach can enhance their own products and services and drive monetization possibilities. It also creates opportunities for third parties or B2B providers to tap into their customer base or aggregate data via collaborative tech like data clean rooms. However, it’s wise to keep in mind that data sharing comes with privacy and compliance considerations.

Privacy and data security concerns complicate access to individual identifiers, prompting media companies and advertisers to source third-party data and use artificial intelligence (AI) to augment their limited access. Additionally, cookie deprecation and ever-expanding global privacy laws further reduce data access — making first-party data even more valuable. This is especially critical for media companies. Data on viewing habits and content preferences can help inform the creation of more engaging content. For example, streaming platforms can analyze how genres, actors and directors are performing among different audience segments and use those insights to make production –– and acquisition –– decisions.

Turning data access into monetization strategies

Personalized recommendation systems are the most visible, direct way that media companies harness customer data. For Netflix, approximately 80% of the content users watch is launched via these recommendations, which may save millions of dollars that might have otherwise been allocated to reduce customer churn. Amazon's recommendation engine reportedly can boost sales significantly –– and by measurable metrics.

Ad-based platforms enabling third-party access to customer data can also deliver value. For example, targeted ads displayed on Facebook achieve an average click-through rate (CTR) of 0.9%, significantly surpassing the industry average of 0.1%.

B2B data monetization for companies generally can involve selling data as a standalone product or yield even more value by bundling it with a complementary product or offering it as a service. Businesses can also engage in data enrichment.

M&A challenges and tactical approaches

As media companies look for ways to win in the face of declining traditional models, subscription fatigue, and financial and digital disruption overall, data –– especially first-party data –– can open up new revenue streams. And M&A can provide a targeted path to expand access to first-party data. Although key players are leveraging data to deliver key business outcomes, data-driven deals face the same challenge as any M&A: the market knows they often don’t deliver the expected value to the acquiring company.

Addressing the following challenges can help obtain greater value from a deal, from negotiation to closing to integration:

Technology integration

Challenge

Technology platforms are often layered and involve legacy infrastructure and support – all of which house important customer data (e.g., preferences, content consumption patterns, ad engagement, spend). Before you can harness the overall power of data, integrate your technology across business units to provide a holistic view. Understand that this can be a complex, multi-year effort.

Tactical approaches to consider

Build an end-to-end data architecture that supports the business model you select and includes data and ad tech platforms so you can offer:

Business model development

Challenge

Data monetization models are still emerging and demand out-of-the-box thinking. Defining the right model to monetize data –– with respect to content, advertising, business relationships and product development –– can be daunting. Remember, nearly half of TMT leaders say data monetization is one of the most significant challenges impacting their business strategy.

Tactical approaches to consider

Organizational planning

Challenge

For media companies, data monetization can lead to ownership and governance challenges. Structuring the business to assign proper ownership across technology, digital product, content, sales or marketing and finance teams is critical to success and requires education and cross-team collaboration.

Tactical approaches to consider

Evaluate your organization’s operational and functional readiness to leverage data as a competitive advantage with these critical tasks in mind:

Privacy considerations

Challenge

Adhering to changing data privacy laws (and differences by region) will likely be a challenge for the foreseeable future. The acquisition of any company comes with some level of data risk, and media organizations looking to acquire and use customer data should be able to answer the following:

• Is the acquired organization or acquired data operating in or collecting personal data in regions outside the buyer’s current operations?
• Does the data collected by the acquired organization introduce new regulatory requirements or risk (e.g., healthcare or financial data)?
• What is the acquired organization’s current level of compliance and capability to comply with regulatory requirements? And, for data acquired via business relationships, what is the level of compliance of the organization with respect to data privacy, security, etc.?
• Are there contractual permissions, obligations and restrictions related to the acquired organization’s collection and use of customer personal data?
• What is the buyer’s risk tolerance for potential targets that might be operating in gray areas of permissible data use?

Tactical approaches to consider

Looking ahead, data will likely play an even more prominent role in the sector value story. It’s critical to get tactical integration approaches right –– and quickly. Consumers expect personalization. And 82% of consumers are willing to share their personal data in exchange for a more personalized experience. Media players with access to first-party data about consumer preferences will likely have the advantage. And for those with multiple products and platforms this opportunity is even more compelling, as data across touchpoints creates a clearer picture of the customer. Data savviness, especially combined with the use of AI and analytics, is already becoming a critical strategic differentiator and advantage. The winners in this story will likely be companies that quickly excel and outmaneuver their competitors, while also adapting to regulatory changes.