Eight high growth markets are driving overall entertainment and media (E&M) spending; but mature markets remain instrumental in driving the global shift towards digital consumption of E&M services.
Across the world, consumers’ access to E&M content and experiences is being democratised globally by ever increasing access to the Internet and explosive growth in the ownership of smart devices. According to PwC’s annual Global Entertainment and Media Outlook 2013-2017 (Outlook) released today, while spending on non-digital media will continue to dominate throughout the coming five years, the growth is coming from spending related to media delivered digitally. In response, E&M businesses are continuing to raise their game in terms of customer insight and in business model and operating agility, as constant digital innovation becomes the industry’s new licence to operate.
China, Brazil, India, Russia, the Middle East and North Africa, Mexico, Indonesia, and Argentina—will see the most growth nearly doubling their share of total E&M revenues during the Outlook forecast period (2013-2017). The average compound annual growth rate (CAGR) for these markets is more than double that of the E&M industry as a whole; they will account for 22% of total global E&M revenues in 2017, almost doubling from 12% in 2008. In addition the impact of a growing middle class and increased urbanisation in these markets will help reverse the fortunes of some segments of the industry.
At the same time more mature and technologically advanced markets, within North America, Western Europe and Asia Pacific, will be instrumental in driving the global shift towards digital consumption of E&M services. During the forecast period, the strong momentum behind digital spending will trigger significant tipping points in many of these markets.
Opportunities and challenges vary by market and industry segment
As digital innovation and growth continues to dominate the E&M industry landscape, so new trends will emerge in the coming years. The impact of these trends are forecast to vary by market and by segment, and are reflected in this year’s Outlook as tipping points or contrasting market rates. The more mature markets of North America, Western Europe and Asia Pacific will be instrumental in driving the global shift towards digital consumption of E&M services.
China, Brazil, India, Russia, the Middle East and North Africa, Mexico, Indonesia, and Argentina will see the most growth and will challenge the existing ranking of markets by revenue.
After a period of decline a number of segments will start to stabilise or see modest growth, fuelled in-part by the spending power of a growing middle class in a number of the fast growing markets.
Marcel Fenez, Global leader, Entertainment & media, PwC, said:
“The growing affluence of a rapidly emerging middle class consumer with a propensity to spend on entertainment and media experiences, combined with improving infrastructure in many high growth markets is bolstering overall growth rates in a number of key segments. Universally, E&M companies need to invest in developing and distributing content in ways that compel customers to loyalty and take advantage of their propensity to engage in sharing content experiences; this will require enhanced digital media measurement tools and business models that respond to the changing patterns of consumer behaviour.”
He added “It really is all down to focussing on customer insight and being agile enough to respond operationally and to innovate with new business models: that’s the new licence to operate.”
Industry trends are having profound effects on key stakeholders
To harness growth and turn it into rising digital revenues, E&M companies of all types are evaluating their competitive advantages and redefining their positions in the evolving ecosystem—with the connected consumer at its core. To achieve this successfully, every industry participant will need to invest in constant innovation that encompasses its products and services, its operating and business models and—most importantly—its customer experience, understanding and engagement.
Outlook findings showcase how current industry trends are impacting consumers, advertisers, content creators and digital distributors.
Over the next five years and beyond, all E&M businesses will increasingly engage with a new and more diverse global customer base, with different needs and expectations. According to this year’s Outlook, a new middle class is emerging that increasingly accesses the Internet via mobile devices. Outlook predicts that Brazil, China, India and Russia alone will account for 45% of fixed-broadband subscriptions and 50% of mobile-Internet users by the end of 2017. Going forward, the E&M companies that seize a profitable position will be those with the speed, flexibility and insight to engage and monetise an ever more diverse global base of connected consumers¾by delivering personalised, relevant, and ultimately indispensable content experiences.
Over the past five years, consumers have seen an explosion in their media choices. This year’s Outlook highlights that this blizzard of consumption choices is creating confusion in the minds of the consumer and this extends to the legitimacy of the content they access.
In response, PwC believes companies across the E&M industry are having to revisit their business and operating models. By innovating in agile ways and harnessing technologies to gain deep insight into consumers’ tastes and behaviours, E&M companies are starting to define a profitable, consumer-centric, multiplatform future. Smart and flexible distribution strategies based on consumer understanding will also help to deter piracy.
As media consumption fragments across devices, consumers increasingly want personalised experiences: their content on their chosen devices when they want it. This move to ‘my media’ can be seen in ‘cord-cutting’¾where consumers abandon their pay TV subscriptions and instead access the content they want via cheaper, Internet-based content services. Although by 2017, revenues from OTT services are forecast to reach just 6% of overall pay-TV revenues, operators must adapt their services to changing consumer expectations for more on-demand content. A further manifestation of ‘my media’ is consumers’ growing use of the ‘second screen’¾smartphones and tablets¾to comment on and share the experience of TV and other companion content with friends, often via social media.
Outlook shows how advertising spending is continuing to migrate to new digital platforms¾globally digital media will account for 37% of advertising revenues by 2017, up from 26% in 2012. But the traditional tendency to separate digital from other forms of advertising is arguably questionable. As audiences increasingly consume media across multiple screens, devices and platforms, advertising must also become platform-agnostic. The ability to attract advertising revenues in the future will depend on offering advertisers credible, cross-platform metrics that define and measure audience reach, engagement and relevance.
Like other industry participants, content creators need to adapt to the demands of connected consumers. This means getting closer to the behaviours and needs of those consumers than ever before. This includes harvesting data from social media, adapting the way products are created and distributed, and embracing new business models¾including partnerships. As they pursue these strategies, the good news for content creators is that content’s central role in attracting, engaging and retaining consumers has, if anything, been positively strengthened by the fragmentation of media choices.
The rising value of content has fired the starting-gun on an industry-wide race to acquire it. Recent years have seen several major acquisitions of content assets, as consumers’ rising expectation of ubiquitous access to premium and library content drives companies to focus on licensing and/or acquiring content, as well as on developing deeper customer engagement and insights.
To ensure their content remains relevant and valuable to their audiences, content companies must build new business models around five imperatives:
Tackling piracy in the connected era cannot rely just on consumer education and tighter regulation and enforcement, important as those are. It means understanding consumers in order to deliver the right content to the right people, at the right time, place and price¾via the right experience. It’s also vital to sign-post where the legitimate content is available.
Marcel Fenez concluded:
“The old rationale of the E&M industry was to achieve complete control over the content life cycle from development through distribution. The connected consumer is the ultimate game changer—control is now in the homes and hands of E&M customers. Now E&M companies have to not only offer engaging content, but also an exceptional digital experience. This puts a tremendous burden on E&M companies of all kinds to find that ideal balance of the right content at the right price at the right time through the right medium.”
Additional key statistics from PwC’s Global Entertainment and Media Outlook 2013-2017:
Growth in E&M revenues will be driven by digital services enabled through both fixed and increasingly mobile broadband. Household broadband penetration globally is forecast to increase by 11 percentage points to 51% in 2017. However, that growth will be dwarfed by growth in mobile broadband, whose penetration will rise by 31 percentage points from 2012 to 2017 to reach 54%.
There is a clear and ongoing challenge in converting digital consumption into digital revenues. The 9% of overall consumer E&M spend on digital content in 2012 will rise to just 16% of total spend even by 2017.
Though physical media will still account for the majority of E&M advertising revenues by 2017, digital media, thanks to significant growth in Internet advertising, will account for 37% of advertising revenues by 2017, up from 26% in 2012.
Consumer spending on E&M content is continuing to shift away from items that would traditionally be physical purchases—such as boxed video games, DVDs and music CDs—and which have traditionally represented the majority of the market. Indeed, in 2008 spending on physical constituted 88% of total spending, which has dropped to 73% today and which will continue falling as consumers become more accustomed to purchasing digital media and become more digitally advanced. By 2017, physical purchases will represent just 53% of spend.
Within the E&M sector as a whole, Internet advertising will be the fastest-growing segment, with a 13.1% CAGR during the forecast period. The segment is currently worth US$100.2 billion and set to reach US$185.4 billion by 2017. Video games at a 6.5% CAGR and TV advertising at a 5.3% CAGR are also showing strong growth.
In terms of the largest markets for advertising spend, China will surpass Japan to become the second-largest market in 2016 as the Japanese advertising market matures and begins showing less room for growth.
Additional notable segment statistics and tipping points
Press access to Outlook content online
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About the Outlook
PwC’s 14th annual update of the Global Entertainment and Media Outlook 2013-2017, is a comprehensive online source of global analysis for consumer and advertising spend. With like-for-like, five-year historical and forecast data across 13 industry segments in 50 countries, the Outlook makes it easy to compare and contrast regional growth rates and consumer and advertising spend. And new this year, it also contains individual country commentary for all segments. Find out more at http://www.pwc.com/outlook.
Segments covered by the Outlook
TV subscriptions and licence fees, TV advertising, Internet access, Radio, Out-of-home advertising
Video games, Filmed entertainment, Newspaper publishing, Consumer magazine publishing, Business-to-business, Internet advertising, Consumer and educational book publishing
Digital spending consists of fixed broadband and mobile Internet access; satellite radio subscriptions; digital PC and console gaming; online and mobile gaming; electronic home video; digital newspaper circulation spending; digital consumer magazine circulation spending; digital trade magazine circulation spending; consumer, educational and professional eBooks; online and mobile Internet advertising and digital music.