New media companies are not recouping all of that lost value to traditional media, according to Oliver Wyman's 2009 State of the Industry Report. Instead, market value is flowing to other sectors.
For media companies, 2008 was a very bad year. The sector lost 47% of its market value in 2008, to $409 billion, a steeper decline than most broad stock markets.The mobile communications sector gained in share of total CMT market value, in part because consumers are more willing to view content on mobile devices, and because telecoms operators have developed business models that offer content as a loss-leader in order to generate healthy margins on subscriptions.
"Media companies risk becoming add-ons to the telecoms players' plans," said Robert C. Fox, head of Oliver Wyman's Communications, Media, and Technology practice. "They face the challenge of better understanding what consumers actually want and will pay for, as well as finding new areas of growth in emerging markets and through online advertising models."
Over the period 2003 through 2008, some value shifted from traditional to new media — but the absolute loss in traditional media was not offset by the absolute gains in new media.
Traditional media — including media agencies, publishing, and broadcast and entertainment — lost 32% of its market value, or $137 billion, while new media (online content and services) gained 102% or $58 billion.
The State of the Industry report ranks media companies in a Shareholder Performance Index (SPI). The calculation of the SPI, which is based on a five-year moving “window” of data, enables consistent comparison of shareholder returns by adjusting for the volatility of returns, differences in local interest rates, and mergers and acquisitions. Overall, the media sector posted an SPI of 104, with only the online content and services sub-sector ranking much higher, at 167. Media agencies posted a dismal 69 and publishing a 92, while broadcast and entertainment came in at 110.
The top three SPI media performers were Tencent Holdings of Hong Kong (No. 1 among all CMT companies), Naspers of South Africa, and NHN of South Korea.