Webinar recording: M&A in the media sector – the impact of AI

12 June 2024 / Insight posted in Video

On 4 June 2024, we hosted a webinar on the impact of AI on M&A in the media sector, as part of our media corporate finance series. Chaired by Head of Media Esther Carder, the webinar featured James Poulter, who we recently advised on the sale of his AI consultancy Vixen Labs to House 337 (part of Next 15), Jonathan Peachey, COO of Next 15, and Paul Winterflood, media corporate finance partner. Here, they discussed where AI is currently having an impact, where it is heading and what effect it is having on M&A activity. Below we have listed some of the key points from the discussion.

Where are we now?

  • The technological leaps of the last 18 months have radically changed people’s expectations of AI’s potential. Previously lodged in the remit of the CIO’s psyche, this is now top of the CMO’s and the broader C-Suite’s agenda.
  • The breadth of AI capabilities are so broad that there needs to be a clear strategy in place as to how agencies are going to focus their efforts, as well as how they can implement it. Examples of where it can have impact include:
    • Streamlining internal processes;
    • Condensing the user journey;
    • Production process;
    • Customer services;
    • Data;
    • Research;
    • Development into new, foreign markets.
  • The current focus is, largely, on efficiency and effectiveness.
  • Data will become even more important.

In reality, how quickly is everything moving?

  • AI boards are being introduced, illustrating how companies are perceiving the power of AI – concerning and exciting in equal measures.
  • Humans are not being replaced! The tools that are being experimented with are aiming to enhance the input of talent.
  • The speed from experimentation to implementation is not as fast as many would assume. The concerns around AI mean that AI boards are treading carefully; protective policies and limitations are being added to the process, e.g. involvement of legal teams.
  • Full-scale deployment by tech giants is not yet in full-swing. This has been demonstrated in the recent big tech company shows (e.g. Google I/O) where presented examples featured relatively unknown brands or were demos, rather than examples of large-scale deployments that are usually shown.

How easy is it for brands to take AI in-house?

This is not easy because:

  • There will be difficulties when it comes to scalability;
  • Internal teams only focus on the one client that they are a part of – this gives them limited input;
  • In contrast, agencies have the benefit of experience and insight by working with multiple clients. Their value proposition will be the ability to create hyper-personalisation through AI. Agencies with a strategic, consultative approach are likely to be successful.

Impact on pricing models

  • We are not yet seeing AI’s impact on pricing, but this will become an important component that has a significant impact on the financial performance of the sector.
  • Pricing in marketing services is likely to change from being based on input to a value based one depending on output and outcome.
  • As more commoditised work will be automated, the pricing model is likely to change to a subscription/license-basis.
  • For the higher-value strategic counsel, agencies and networks will charge a different way but this shift will be part of a pan-industry process.

The M&A market

  • We will see an increasing trend in merging of ideas & execution teams but on a more holistic scale e.g. media and creative working closer together.
  • The impact of AI will create a wave of acquisition activity over the coming years as it disrupts and transforms the marketing and other functions.
  • Buyers and investors already expect that businesses should have an AI strategy regardless of what their business model is to demonstrate how they are considering its impact.
  • A lot is still unsettled. Smaller players are likely to get bought up by the larger tech companies; businesses previously using their tools will find that they have become part of a larger ecosystem.

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