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Cancelled public events and online streaming boom: <br> How Procurement can help Consumer Media firms overcome COVID-19

Cancelled public events and online streaming boom:
How Procurement can help Consumer Media firms overcome COVID-19

Bans on group gatherings have caused global consumer habits to adapt to new realities as a result of the current pandemic. With more time on our hands due to social distancing, consumers are hungry for content and information, which is leading to increased pressure on business operations for Consumer Media firms. On the flip side, the practical impediments to content productions and cancellation of live events are forcing companies to think outside the box which requires a great deal of collaboration in the ecosystem.

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Content producers and distributors are seeing demand increase while they struggle to safeguard content creation

  • Streaming services are booming as shown in figure 1. Additionally, TV consumption in Italy and South Korea has increased by 12-17%, two countries which are further along the pandemic curve – a report from World Economic Forum
  • Nevertheless, interruptions in content production are threatening revenue targets in the mid-term as most companies could run out of new content by the end of summer as pointed out by Bloomberg
  • There is also a knock-on effect on box office revenues due to delays in movie launches

 Figure 1: Percentage spike in streaming services between 14th – 15th March 2020

Video-on-demand services and broadcasters face cashflow risks and operational pressure

  • Whilst the spike in demand for video content presents customer acquisition opportunities, advertising budget cuts are eroding parts of their revenues. High budget advertising campaigns have been halted by many companies
  • Broadcasters operations are stretched as they need to deliver content at a faster speed while having to comply with safety rules
  • Web-based platforms such as YouTube and Netflix are rapidly adapting their IT systems in response to higher traffic by reducing video quality to avoid straining the internet

Music sector is taking a hit

  • Music streams and sales are declining, with people choosing video content over music
  • While Music Labels are partially recovering their sales through viewership of music videos, they need to find different ways to bridge the gap against projected revenues
  • Music streaming services are also facing tough times and are looking at alternative ways such as increasing their podcast offering which is popular with consumers nowadays

The impact of COVID shows different nuances within the Consumer Media landscape, although most companies seem to share a common concern: safeguarding business operations while taking advantage of the changing demand landscape to strengthen market position.

Procurement can tackle these arising challenges by being at the forefront and leading the organisation through vigorous actions.

As Anne Nguyen, BCG Managing Director and Partner, puts it:

“Covid will fundamentally impact Consumer Media businesses way beyond the end of the lockdown. Procurement can make a real difference in helping organisations adapt to rapidly changing consumer behaviours.”

Time for action:
What can Procurement do to steer organisations through the crisis

The procurement mantra to boost resilience is: sniff the danger, play the liquidity card in your favour, and embrace creativity within the supply chain. Procurement and Finance leaders can take four steps right now:

1. Measure your risk exposure

  • Assign a risk score to your A-suppliers based on service criticality and epidemic related attributes, i.e. government restrictions and resilient operating model
  • Engage in close discussions with suppliers on the critical supply path to jointly assess updates on COVID supply implications and to avoid delays or interruptions to the business
  • Regularly track suppliers’ risk to guarantee operational performance, particularly in customer services and IT infrastructure as they face increasing pressure

2. Augment the supply chain

  • Position Procurement as an innovation hub for both spotting innovative providers with cutting edge content or identifying new technology / channels to reach more customers. Speed to market is king at the minute, with consumer behaviours shifting rapidly
  • Produce content locally and/or in less affected geographies to mitigate the effect of national regulations that halt content productions
  • Leverage opportunities to use back catalogue or de-prioritised content and negotiate competitive terms

3. Optimise cashflow

  • “Switch-off” tail expenditure and redirect to preferred suppliers who provide better terms
  • If cash is not an issue, consider offering shorter payment terms to support your key suppliers in exchange for cash discounts or improved overall terms
  • More specifically, offer upfront payment or bulk buying in exchange for improved prices. Understanding how best you can support your suppliers will often bring unexpected results. Supporting the creative community of media producers and freelancers now will help them to prepare for the rebound and put your business in a stronger position when the time comes

4. Control costs

  • Engage cross-functionally with budget owners to create spend visibility and re-allocate non-critical elements towards business-critical activities; for example, the need for new cleaning equipment vs acceleration of IT digitalisation projects
  • Cut discretionary spend by streamlining purchasing processes, e.g. a stricter PO authorisation process or “no PO no pay” measures
  • Consider deploying what we call a “fast track” office, responsible for funneling all non-planned expenditure through a rigorous approval process and applying commerciality (i.e., market engagement, negotiations etc) to all approved spend. This is a simple way to generate immediate Quick Wins

The road ahead will be challenging and Procurement will continue to play a critical role in driving growth, preserving ongoing operations and controlling costs.

 

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