The E&M revenue revolution: 5 key capabilities for new revenue streams

Making money through one, two, maybe three revenue streams may once have been a viable strategy, but for most Entertainment and Media (E&M) companies today, it’s about as relevant as a fax machine. Digitization has permanently reshaped the global E&M ecosystem. A proliferation of digital platforms has created more direct and personalized distribution, while content has become increasingly immersive and available on demand. Competition for user engagement and spending is fierce. Gone are the days when reliance on just a few sources of reliable revenue is enough to survive. If companies expect to be competitive, they must find ways to extend their businesses, brands and users aggressively into new sources of monetization.

Why? The forces at play

If there seems to be a sense of urgency about all this, there’s good reason. Traditional sources of advertising and subscription revenues are drying up—and quickly. The largest digital platforms are absorbing the lion’s share of digital ad growth, and spending and consumption habits are changing at record speed. Meanwhile, many companies remain overly reliant on legacy media revenue streams whose current is ebbing. Absent significant new sources of revenue growth, the strategic options for these companies will inevitably narrow to continued rounds of cost cutting and preparation for their eventual consolidation. Developing new sources of income has therefore become a vital, strategic imperative.

What? Emerging models

Subscription services. Podcasts. Branded merchandise. Live events. Advanced advertising products. Members-only offerings. Content production and licensing. Direct-to-user microtransactions (think in-game purchases during live video gaming events). TV networks and film studios are offering more of their content through streaming video services. Online publishers are creating physical experiences and products. Sport leagues and video game publishers are converging in eSports. Of course, the “what” is important. But it’s not sufficient. Building new revenue streams also requires making significant changes to strategy, operating models, and company culture. Companies accustomed to meeting their financial goals on the basis of a few dominant sources of revenue will find they need deeper insights into their users and fans; stronger acquisition as well as retention expertise; and more coordination across functions and partners that impact the overall user experience.

How? The right capabilities

There are many different approaches to building new revenue streams, but five key capabilities underpin the most successful efforts.

1. Data analytics and insights – Perhaps the most valuable asset for E&M companies seeking new revenue streams is first party data. Connecting, integrating, synthesizing and activating first-party data across content offerings, ad products, and user relationships helps generate more robust insights into who their users are and what they want. Strengthening expertise in data analytics and management of first-party data is a foundational building block for companies focused on developing new fan-centric revenue streams.
2. User acquisition and fan retention – Fans watch more, listen more, participate more, share more, advocate more and—most importantly—spend more. E&M companies must adopt new approaches to acquiring, retaining, and rewarding fans. Successful companies are applying the insights from analytics to predict which users can be converted to fans and how to increase their loyalty and revenue per user.
3. User experience – Winning companies assume responsibility for the user’s overall experience. They activate fan interests and passions to reinforce existing relationships; create a “wow” factor that inspires fans to share, attracting new fans; and incorporate fan feedback to improve offerings over time and make them more personalized. Meeting fans’ expectations requires taking an end-to-end view of user engagement and their total experience.
4. Strategic revenue management – Strong, top-down leadership from executives with oversight for all of a company’s monetization efforts is essential. They must understand revenue trends for key brands, user segments, and initiatives; competitive dynamics that affect the addressable market; and drivers of attribution, conversion, churn, and lifetime value. They have the decision rights to optimize existing businesses, kill efforts that are languishing, and green-light new growth initiatives. They are willing to have tough discussions internally about the trade-offs and expectations associated with new revenue streams.
5. Fortitude – There’s a specific mindset required to build new revenue streams: patience. It doesn’t happen easily or quickly. These efforts require sustained focus, commitment, and resources. Leadership teams need to ask themselves important questions about the dynamics of their businesses, products, and fan bases and be willing to rethink their strategies, operating models, culture, and talent.

Companies are winning by building portfolios of connected and complementary revenue streams that tap into the value of their most engaged users—their fans. They’re pairing content and distribution expertise with stronger capabilities in data analytics, user acquisition & fan retention, user experience, and strategic revenue management to accelerate their revenue generation. As a result, these companies are embracing the “revenue stream revolution” and positioning themselves strategically as well as operationally for profitable growth. 

For an in-depth exploration of the revenue stream revolution in entertainment and media, you can find my article in strategy+business 

For more on capturing fan-centric business, you can read about it here