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The landscape of digital entertainment is rapidly evolving, influenced by independent creatives, global social media platforms, and industry giants. In this shifting environment, traditional studios and streaming services may need to consolidate to remain competitive.
According to Deloitte’s 2025 media and entertainment outlook, authored by a team of industry executives including Chris Arkenberg, Jeff Loucks, Kevin Westcott, Doug Van Dyke, and Danny Ledger, significant changes are expected as the media landscape faces intensified competition. In an interview, Doug Van Dyke, Vice Chair and U.S. telecom, media, and entertainment sector leader, shared insights on these transformations.
By 2025, established media companies are predicted to contend with not only traditional competitors for consumer engagement but also rising giants in content and advertising. The escalating costs of producing content, particularly in TV, film, and gaming, are pressing challenges, alongside the capital requirements necessary for data centers and artificial intelligence technologies. This year is shaping up to be a pivotal one for transmedia entertainment, highlighted by the success of properties like HBO’s The Last of Us Season 2 and the imminent arrival of movies like A Minecraft Movie.
Van Dyke remarked on the revival seen in 2025, noting the impressive budgets behind major game releases. He noted, “We’ve seen games with development budgets reaching $1 billion. They are delivering expansive and immersive user experiences that can drive long-term revenue.”
“Games are at the forefront of a new era in cross-platform intellectual property,” he added. “Not only are major gaming franchises being adapted into TV and film, but cinematic properties are also increasingly finding their way into gaming. This cross-pollination is creating a robust multi-format fan ecosystem. Studios that excel in multi-format storytelling will likely lead the market in this new age.”
He further emphasized the shift in consumer engagement, stating, “Today’s audiences are not just viewers; they desire to be creators and collaborators within their chosen communities.” This transformation calls for studios to rethink their strategies, focusing on building ecosystems for co-creation with fans, which can generate real-time feedback and foster durable gaming environments.
The rise of global entities producing user-generated content, alongside the increasing popularity of immersive games, has altered audience expectations and disrupted traditional business models within the media. Van Dyke highlighted the dilemma facing major game developers: they must decide how to balance support for user-generated content with conventional game development practices.
As revealed in various studies, including the Digital Media Trends survey, consumers are distributing their entertainment hours more evenly across television, movies, streaming services, social media, and gaming. Younger audiences, in particular, seek both concise, niche content as well as extensive, high-quality programming, indicating a shift in how and where they consume entertainment. At the same time, economic and technological pressures continue to reshape the content creation landscape, advertising strategies, and overall competition.
In terms of business dynamics, Van Dyke stated, “Blockbuster movies could potentially drive significant gaming engagement, creating synergistic franchises that span gaming, film, and television.” He noted that successful films can serve as effective marketing tools for games, leading to increased game sales. Major brands like Microsoft, Sony, and Nintendo have acknowledged that film adaptations can enhance game sales.
Moreover, the media and entertainment ecosystem is now significantly influenced by leading subscription video services, social media platforms, and major technology corporations that harness data for audience targeting and enhancing brand engagement. While gaming evolves as both a standalone interactive segment and a symbiotic element of video entertainment, it captures an increasing share of viewers’ time and revenues.
However, despite the growth of gaming, advertising metrics show that games account for only 5% of overall advertising budgets. Disney’s CEO Bob Iger has emphasized the need for significant investment in gaming platforms like Epic Games, underscoring where younger generations are congregating.
Van Dyke noted, “Brands are starting to recognize gaming as a core component of modern entertainment. Media companies must adapt their intellectual property strategies to align with shifting consumer behaviors across consoles, cinemas, streaming platforms, and gaming.” Game engines are becoming essential tools, facilitating the integration of content from games into TV and film productions.
Traditional media companies often find themselves in a precarious position as they compete not only for subscribers but also for advertisers. These companies face increasing financial pressures with rising content creation and distribution costs. Additionally, they must invest in new advertising technologies to grow and adapt to a global market influenced by streaming platforms and gaming enterprises.
Van Dyke remarked that gaming trends are increasingly leaning towards social experiences. Games fostering community-building and shared interactions will likely retain player interest. Generative AI has emerged as a significant force within the entertainment industry, enhancing operations even as it challenges existing business models. Both established players and newcomers are leveraging generative AI for various applications, signifying potential disruptions and opportunities for innovation.
The forthcoming landscape in 2025 is expected to be shaped by three crucial trends: the rise of ads and aggregators, competitive disparities among market players, and the empowerment provided by AI technologies.
Economic uncertainties are also anticipated, with the industry facing fluctuations in demand, debt costs, and regulatory changes. While the last couple of years have seen stagnant revenues, 2025 is forecasted to be a year of recovery, driven by significant game releases and the introduction of new gaming consoles.
The urgency to adapt is paramount as enterprises endeavor to stay relevant in a crowded marketplace. Current research shows that U.S. consumers average around six hours of daily entertainment consumption, a figure unlikely to increase in the near future. This presents challenges as studios aim to understand and adapt to global markets amid these pressures.
Competition for Video Is Much Bigger
Leading streaming services have gained market dominance through data utilization and effective global expansion, leaving many other studios struggling to find profitability. As competition intensifies, these prominent social video platforms enjoy substantial advantages in reach, audience engagement, and technological infrastructure. Their inherent network effects and economies of scale allow them to provide unique advertising solutions that can reach both local and global audiences.
The financial stability of big tech companies enables them to absorb losses while investing in original content and bundling services with other revenue sources. As the enjoyment of entertainment becomes increasingly competitive, studios face pressure to elevate their offerings and innovate through means like strategic partnerships and mergers, seeking to consolidate content and audience reach.
This asymmetry in the competitive landscape pushes studios to adapt and evolve, potentially igniting further collaboration to solidify their market positions. Innovations will likely encompass joint ventures to build broader audience bases and enhance their identities in premium video entertainment.
Studios Bulk Up to Face Fearsome Competitors
The struggles of subscription video on-demand (SVOD) services reflect a broader realization of the challenges intrinsic to their business models. As pay TV programming continues to decline, studios may separate their traditional and streaming offerings, reevaluating where to direct their investments amidst heightened competition.
In the United States, growth in premium SVOD subscriptions saw about a 10% increase in 2024, though overall global subscriber growth appears to be flattening. As services turn to less explored markets like the Asia Pacific region, they must balance subscriber acquisition with potential reductions in average revenue per user.
Top streaming platforms have managed to raise subscription prices without significant losses in user bases, providing ad-supported options for price-sensitive customers. However, these shifting business models necessitate a larger viewer base to attract advertisers, as many companies look to strengthen their audience footprints.
The introduction of ad-supported models has led to a surplus of advertising inventory, resulting in reduced costs to reach consumers. As advertisers increasingly favor social platforms and hyperscale technologies for their large-scale advanced AI investments, collaborations among streamers may become commonplace in their efforts to enhance audience engagement and develop live content that resonates with viewers and brands alike.
Companies may seek distribution channels through social platforms to create excitement and enhance viewer interaction. However, this strategy must be balanced, as younger demographics value quality streaming content just as they do social media offerings.
Ultimately, studios may need to optimize their portfolios, diversifying from expensive premium content to more economical genres like reality TV and documentaries while exploring global storytelling through localized content and advanced analytics. Increasing engagement through fan-driven content could enhance retention and boost the monetary value of back catalogs.
Meanwhile, studios are urged to adopt modern operational tools and integrate AI capabilities into their advertising strategies, allowing for refined audience analytics and campaign effectiveness. They may need to navigate regulatory environments surrounding tariffs and other controversies impacting the gaming sector.
Data and AI Power the Advertising Ecosystem
Traditionally, studios have driven revenues through various channels, but many of these have dwindled. The rise of subscription video on-demand services has prompted some to build their own competitive advertising platforms, often reliant on efficient data utilization. However, disconnects in ad placement and overall content engagement remain challenges.
While there is robust growth in advertising spend on streaming services, particularly in the connected TV (CTV) sector, advertisers increasingly expect efficiency and engagement in their campaigns. The unique intricacies of streaming content can hinder effective ad placement, leading to occasional mismatches between viewer interests and ad delivery.
Advancements in social media platforms have spurred the evolution of ad technologies, shifting towards data-driven paradigms that enhance audience targeting. Generative AI has emerged as a critical asset, capable of producing numerous ad variations for specific audience segments, refining engagement through rapid testing.
As competition for ad dollars escalates, streaming providers are projected to enhance their advertising technologies, unifying their ad offerings to create seamless experiences across multiple content streams. Success will hinge on a clear understanding of audience identities and behaviors to optimize targeting and campaign efficiency.
Navigating Through Uncertainty
The media and entertainment sector is grappling with a plethora of challenges: heightened competition, the influence of independent creators, and the rapid evolution of interactive entertainment. The transformative potential of generative AI looms large over this landscape, promising both opportunities and hurdles that industry players will need to navigate.
To thrive, many media companies must modernize processes to embrace emerging technologies while protecting their market share from both established giants and agile newcomers that have capitalized on data-driven content consumption trends.
Uncertainties persist, particularly surrounding the long-term viability of generative AI and its application across various facets of the entertainment value chain. The outcomes of current investments, the evolution of AI capabilities, and general market trust in these advancements remain points of analysis moving into 2025.
As the industry ventures deeper into this landscape, it will demand adaptability, strategic foresight, and an understanding of emerging trends that could play pivotal roles in shaping the future of entertainment. The ability to pivot when necessary while maintaining a clear vision will be integral for navigating the complexities ahead.
Source
venturebeat.com