After the post-Brexit slump and restructuring, media and advertising sectors will flourish in the digital age

07:30am. 24th June 2016. Hours into Britain’s decision to leave the EU. Metro papers stacked on platforms across the country tell a different story. Headlines suggest a narrow ‘Remain’ victory,  picturing Nigel Farage conceding a narrow defeat (minus a pint). The reality? Nigel Farage is heralding Britain’s Independence Day (probably post pint), and threats are already surfacing of economic woe. Digital media, through smart phones, audiovisuals, and similar technology gave us these accurate headlines.

This offers a simplistic but fascinating insight for the short and long term future of the media, audiovisual, and advertising sectors within the UK. Brexit has, and undoubtedly will, create uncertainty for the sector in the short term. The digital age is heading into overdrive, and will be pivotal to its success in the long run. Recent growth figures, and digital projections suggest the UK’s media and entertainment sectors have a bright, long term future. Brexit will simply provide choppy waters in the coming months. Joining the European Economic Area is vital, and will calm these waters. At Forsyth Barnes, we remain informed, and positive.

The expanding digital age

A recent report by EY demonstrates that the media and entertainment sector’s anatomy is rapidly changing. Data received from smart phones, wearable technology, sensors, and appliances will be its heartbeat. Social media platforms, smart phone searches, and sensors will help media, audiovisual, and advertising companies create a single view of their customer. This data will allow media and audiovisual sectors to deliver highly personalized, contextually relevant articles and adverts. The platforms they will be delivered on could make media on smart phones old news sooner than expected. Newspapers will be ancient.

Imagine a world where the billboards alter their advertising and media content to your interests as you walk past them. Headlines will appear on your cooking hob. Sound like the next sci-fi blockbuster? This is a reality. The UK creative sector is going in this direction. The ‘Internet of Things’ gives opportunity for programmatic advertising, and will bring investment opportunities for the UK media and entertainment sector. It is of major excitement to us at Forsyth Barnes.

“For M&E companies to be successful, they will have to address risk and quickly innovate to respond to evolving customer needs and deliver rich content experiences. Only then will the M&E industry find real value in its IoT investments.” Virginia Milazzo, PR Newswire (Source: EY Report)

Post Brexit: The short term impact

But let’s pause for a minute and address the state of the media and advertising sector in the wake of Brexit. In the immediate aftermath, stocks of the largest media firms in the UK tanked. ITV dropped 20%. Sky fell 9%. An article in the Guardian documented that Group M (media arm of WPP) forecasted the U.K. ad spend growth would fall from 7.2% to 6.3%. Since then, all three of these figures have slightly recovered. Enders’ Analysis report rightly addresses the real threat of a recession and uncertainty for UK business. This has halted a full recovery in share prices, and forecasted growth. Inevitably there will have to be a restructuring whilst the UK renegotiates its trade deals with the EU.

We must look beyond these damning share price volatilities. Evidently the sector faces a restructuring that will have a short term impact. To gather a more holistic picture, we must look at why the UK creative sector has thrived within the EU. And what implications leaving the EU has for the digital future of UK media and advertising. Once this restructuring has taken place, the UK media and advertising sector will boom in the digital age.

Enders’ Analysis report  states that the UK exports £380m worth of shows to Europe. The audiovisual sector receives vital funding from the Creative Europe Scheme.  UK media companies comply with consistent and wide-spread data sharing laws that allow data to freely move across borders. This data sharing is essential in guiding the UK’s media and advertising sectors along the digital path. It is essential if the UK is going to flourish in the digital age.

The single market and the UK digital economy clearly have a harmonious relationship. Forecasts of over 7% increases in audiovisual funding for 2016 is one example of a working relationship.

“In our view, it is critical that the UK remains in the Single Market in order to avoid serious harm to the audiovisual sector.” Enders Analysis

It is becoming apparent that joining the European Economic Area is paramount for UK media and advertising. This will mean ease of exporting media coverage. Funding will not be lost. And most significantly, the free movement of data that is fueling, and will continue to fuel the digital age. Accessing data sharing and having compliance laws that are ubiquitous to every EU state is vital.

A positive, long term future

As long as the UK successfully negotiates a trade deal to join the European Economic Area, it will be able to thrive in an exciting digital age. As a new prime minister is announced, and negotiations begin, the short term future of the media industry in the UK will appear calmer. But for the long term future, a restructured industry that allows free movement of data will mean flourishing in the ‘digital age’. It will bring with it investment opportunities. Brexit uncertainty will simply make the waters choppier in the short term.

At Forsyth Barnes, we continue to monitor the short and long term future of the media industry. We remain excited about the UK embracing the digital age.