Business Strategy

Meeting the youth demand: Time Warner sale and the future of media

Meeting the youth demand: Time Warner sale and the future of media

If the Millennial wave knocked the media and entertainment industry off its feet, we can expect Generation Z—the powerful cohort born after 1995—to bring a constant flood of change.

Look, for example, at the proposed sale of Time Warner to AT&T.

AT&T, the largest wireless carrier in the U.S. and owner of satellite TV service DirecTV Now, agreed to buy Time Warner, home to HBO and CNN, for $85.4 billion. If approved, this deal would create one behemoth content and delivery service, potentially distributing shows like Game of Thrones to millions of wireless phones, satellite TVs and broadband subscriptions.

“If you’re sitting in Time Warner’s and AT&T’s shoes,” said Dan Coates, president and co-founder of Ypulse, a consulting firm focused on youth, “content is the driver of the mobile experience. And when it comes to the guys who make content, they can’t just rely on cable companies to distribute their content.”

How Gen Z wants to consume content

While 65 percent of Generation X watches cable TV on a television, only 55 and 45 percent of Millennials and Generation Z respectively say the same. That’s a steep decline. Not only that, one in five Gen Zers don’t watch TV at all.

Instead, they’re streaming content on-demand and across as many as five devices. Remember, Gen Zers are said to be ‘born swiping.’ In fact, they’ve almost entirely abandoned TV and desktop computers in favor of consuming content on mobile devices.

Cue the rise of streaming services like Netflix, Pandora and Amazon Prime—and hordes of young consumers ditching cable TV for online subscriptions. Netflix, for example, is crushing growth expectations this year, thanks to strong Millennial and Gen Z support. Approximately 69 percent of Millennials and Gen Zers tune into Netflix—a jaw-dropping 79 percent increase over previous generations.

Gen Z and behemoth content and delivery services

Wireless carriers like AT&T are now competing outside of the telecom industry, and against media disruptors such as Netflix. To survive, corporations are creating new business models by joining forces, and likely bringing a slew of potential customers with them.

AT&T, for example, needed to diversify its business to meet the demand of young consumers. The sale of Time Warner would hopefully package its already popular content from HBO, Turner Sports and CNN in a way that Generation Z and other digital natives prefer to consume: online and on-demand.

This sale also means that AT&T will control both the distribution channels and much of the content that millions of Americans tune into. Many pundits, reporters and politicians worry that this would give AT&T too much control over media consumption and might spur a flurry of more acquisitions, thus exacerbating the problem.

Herein lies the challenge: if companies think that Millennials were hard to win over, Gen Z will soon dominate every market, demanding better content, faster delivery and more agile technology. Generation Z currently has a direct global purchasing power of about $44 billion, a number that is expected to quadruple by 2018. This powerful generation will topple traditional media and entertainment once and for all—and then we’ll see who’s left standing.

Get the facts on how changing preferences of young consumers is affecting every industry. Download the ‘Everything Guide to Generation Z.’

Download the Enterprise Guide to Generation Z



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