This is the second in a series of articles based on the findings from our recent media marketplace survey looking into how media companies are addressing the rise of DMS and other changes in the marketplace. The first post discussed media executives’ top concerns and priorities for the rest of the year. In this article, we will examine media executives’ predictions around industry M&A activity, the Upfronts/Newfronts sales model and increased pressure on profit margins.

The first half of 2015 saw some significant media mergers and acquisitions, including Verizon’s acquisition of AOL, and more big deals seem to be on the horizon, with T-Mobile discussing a potential merger with Dish Network. The vast majority of media executives who participated in our survey (79%) told us they expect M&A activity to increase throughout 2015.  They also predict that acquisition targets will most likely be digital companies. This is due to the expected, heightened effort of media companies to improve their DMS pricing models and advertising measurement capabilities.

Half of respondents believe acquisitions will be made to protect existing market share, while the other half of respondents think they will be made in order to expand product or service offerings. Across the board, improving an integrated, multi-channel inventory offering is the most commonly cited driver of M&A activity by all survey demographics (C-level 32%, senior management 39%, finance 31% and marketing 41%). This proves that the rise of DMS channels has raised the bar for many media companies, and they are now looking to expand their capabilities and protect their footprint through strategic acquisitions.

Survey findings also indicate that about two-thirds (63%) of respondents anticipate that the current Upfronts/Newfronts sales model will change during the next three years. Among the survey demographic groups, senior managers and financial officers most frequently say the sales model will change by 2018 (68% and 64%, respectively), and the majority of C-level and marketing executives agree (58% and 62%, respectively). A potential change to the sales model could shift market emphasis on premium data and analytics over premium content, impacting both media companies and advertisers.

As media companies build their DMS inventory and pricing models, media executives note that they are facing increased pressure of profit margins, and 71% of respondents predict pressure on profits will increase over the next 12 months. This widespread concern around pressure on profit margins moving forward may help explain why so many media executives expect that the Upfronts/Newfronts sales model will change.

The recent rise of DMS channels is dramatically changing the media industry. While promoting consumer engagement and leveraging content will likely remain crucial components of media companies’ strategies, the way the industry executes these tactics is quickly evolving. While a new normal has yet to be established, in the meantime media companies can better position themselves for success by carefully considering the priorities and predictions of key industry players as they relate to their business.

If you’re interested in reading the full report, Operating in Today’s Media Marketplace, you can find it available for download here.

The opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaVillage/MyersBizNet management or associated bloggers.