There's no denying that consumers' media habits have fundamentally changed. In fact, more media consumers say they watch some type of video via computer or smartphone than an actual TV. Changing consumer behavior, coupled with new media companies like Hulu, Amazon and Spotify that cater to it, are calling into question longstanding business models based on ad revenue. How can traditional media and entertainment companies adapt?

Salesforce released the “Connected Audience Report” to better understand the trends shaping the media and entertainment landscape in the year ahead. The findings bring color to how consumer media habits and expectations have fundamentally changed, how digital consumption continues to surge while legacy providers struggle to keep pace, and the business opportunities these changes bring.

Check out the latest research for top factors transforming the media industry. [Click to tweet]

Changing habits — how media companies fuel demand

As a visit with family likely makes painfully clear, large differences exist in how different generations consume content. While traditional media sources like broadcast and cable TV still enjoy large viewerships, millennial and Gen Z consumers (defined as those born between 1981–1999) are now more likely to regularly stream video, TV, and movies online than to watch traditional TV channels [click to tweet]. And it’s not just TV that’s evolved. Younger generations also embrace streaming music services like Pandora and Spotify. In fact, millennial and Gen Z consumers are 3.2 times more likely than baby boomers to stream music online at least on a monthly basis [click to tweet].

As content preferences have changed, so have the way people consume media. When it comes to video entertainment, more millennials say they watch some type of video on a computer or smartphone than an actual TV. Consumers are also increasingly willing to pay for digital media sources, with 61 percent of all respondents having upped their viewership of subscription streaming video in the past two years. Even baby boomers are jumping on board, with nearly half (47 percent) having increased their use of subscription streaming video services over the past two years [click to tweet].

The “me” channel — personalization demands reshape entertainment

Content providers and marketers alike are changing the way they connect with consumers. While traditional ads still help consumers discover new content, personalized recommendations powered by artificial intelligence are the go-to discovery source for millennials and Gen Zers, with more relying on recommendations from content providers (think Netflix’s “Top picks for you”) than from traditional ads. With content providers’ recommendation engines ranking as a top-three source for content discovery, streaming providers wield considerable influence over what gets watched, and by whom.

For media consumers who have cut back on paying for cable and satellite television, many list “I’m paying for content that I don’t care about” as a reason for tuning out. While pay TV bundling of content has long been the go-to business model for cable companies, new players like Sling have emerged to give media consumers a way to select content à la carte based on their own preferences. According to the report, more than half of millennial and Gen Z media consumers say that subscribing to multiple streaming services is still cheaper than a monthly cable subscription. Perhaps tired of years of bundling, baby boomers are more likely than younger generations to elect multiple streaming services in order to avoid paying for content they don’t want.