Shifts in the Entertainment and Media sector

The fastest-growing segment globally over the five years is expected to be Internet advertising

Total worldwide entertainment and media revenues will rise at a compound annual growth rate (CAGR) of 4.4% in nominal terms over the coming five years, from US$1.72 trillion in 2015 to US$2.14 trillion in 2020, according to PwC's Global entertainment and media outlook 2016-2020​.

This growth rate represents a slowdown from last year’s 5.5% growth in industry revenues, and will lag behind overall global economic growth during the five years. But a closer examination brings a different picture into focus. Entertainment and media is a dynamic, diverse industry with steady and sustainable growth. And while its strong aggregate growth is not shared equally by all participants, impressive growth and opportunities can be found in many areas of the industry. Drastic slowdowns in some areas and stagnation in others coexist with spectacular expansion in “hot” countries, regions, and sectors, creating a multi-shifting global media landscape.

In 36 out of the 54 countries covered by PwC’s Outlook, entertainment and media spending is growing more rapidly than GDP, often by a factor of more than 50%.

 

Spending patterns are changing at multiple levels

The differences in growth rates at a country level are overlaid by wide variations between segments. The fastest-growing segment globally over the five years is expected to be Internet advertising with a CAGR of 11.1%, ahead of Internet access at a 6.8% CAGR.

By contrast, magazine and newspaper publishing are expected to suffer declines. However, even here there will be wide variations between territories.

Against this diverse and multifaceted background, profound changes in spending patterns will continue. Revenue across entertainment and media is steadily shifting from publishing businesses to video and Internet businesses—in particular those that provide over-the-top (OTT) services and monetise consumer data. Direct consumer spending models will remain strong, while spending on Internet access, including mobile data, will rival advertising.

 

Five key shifts emerge

As these high-level trends play out, our research has pinpointed key shifts occurring in each of five dimensions of the entertainment and media landscape: demography, competition, consumption, geography, and business models. Simultaneous and interrelated, these five shifts influence and play off one another.

 

Demography: Youth will be served

Our analysis of national entertainment and media markets globally reveals an almost perfect correlation between the relative size of the under-35 population and growth in entertainment and media spending—confirming that younger consumers are now the primary drivers of global growth.

 

Competition: Content is still king

In a world where Netflix can launch in 130 new countries in a single day, it’s easy to assume that content is becoming more globally homogeneous. But the reality is that content is being redefined by forces of globalisation and localisation simultaneously—and that while much of the industry is growing more global, content tastes and cultures remain steadfastly

 

Consumption: The joy of bundles

The ability for consumers to design and curate their own media diet has been one of the most powerful trends to emerge in the industry. But the bundle is far from dead, with video and cable incumbents—which were initially slow off the mark—now fighting back by offering their content on an integrated omnichannel basis, on TV, laptop, tablet, and smartphone.

 

Geography: Growth Markets

Generally, entertainment and media companies had one set of expectations about developed markets (slow growth, low regulation, easier to access) and another about developing markets (rapid growth, high regulation, harder to access). But the dynamics are shifting rapidly as disruption pushes markets to develop in different ways, meaning “opportunity” economies—even within the same region—can display significantly varied growth patterns.

 

Business models: Transforming with trust

Today’s entertainment and media market includes technology companies racing to become hybrid content companies, and traditional publishers evolving the other way to emerge as hybrid technology companies. This underlines how the growth of technology and digitisation is acting as a centripetal force—breaking up existing relationships; pushing large, generalist entities to give way to smaller specialists; and allowing smaller, nimble competitors to beat out incumbents.

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Konstantina Logotheti

Director - Marketing & Communications, PwC Cyprus

Tel: +357-22555108

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