Shifts are underway in how entertainment and media companies compete and generate value, as the consumers’ experience becomes their basis for differentiation and revenue growth. To thrive in a marketplace that is increasingly competitive and slower-growth, companies are developing strategies and building capabilities to engage and monetize their most loyal and passionate users — their “fans”.
According to PwC’s Global entertainment and media outlook 2017-2021, this means they must combine compelling content with breadth and depth of distribution, and then connect it all to a great user experience, where content is discoverable easily on an array of screens and at an attractive price.
Increase in direct-to-consumer strategies
Increasingly the models used to achieve this monetization are founded on direct-to-consumer (D2C) strategies, which are enabled by technology progress and characterized by greater choice and user control: over the next five years, Internet video will grow at an 11.6% CAGR, and music streaming at a 20.7% CAGR.
Advertising under pressure
Over the next five years, PwC projects that the industry globally will grow at a compound annual growth rate (CAGR) of 4.2%, lagging behind the growth of global GDP. Global advertising revenue will also grow at a CAGR of 4.2% – down from 5.1% in last year’s outlook.
Mobile advertising is growing apace
The growth of Internet advertising is being powered by mobile advertising, which grew by 58.7% in the past year, and will continue to expand at an 18.5% CAGR through 2021.
Major digital tipping-points across all segment
- Internet advertising now generates more revenue than TV advertising globally. In 2016 an important tipping point was reached in the global advertising industry, with revenue from Internet advertising exceeding that generated by TV advertising for the first time.
- Internet video revenues will overtake physical home video in 2017. Internet video revenues are projected to grow at a CAGR of 11.6% to reach US$36.7bn in 2021, while the terminally declining market for DVDs and Blu rays will have fallen to US$13.9bn.
- Global newspaper circulation revenue overtook publishers’ global advertising revenue in 2016. While newspaper circulation revenue has been on a downward trajectory since 2015, publishers have had the useful lever of cover price rises to partly offset the rapid fall in units. However, the year-on-year dramatic falls in newspaper advertising revenue have been more pronounced, with advertisers deserting print editions in large numbers, and publishers increasingly being squeezed out of the digital ad space by Google and Facebook. The upshot is a historic shift in the dominant revenue streams, as newspaper circulation eclipses publishers’ advertising revenue. By 2021, global total newspaper circulation revenue will account for 54.0% of total publisher revenue.
- In 2016, total digital recorded music revenue overtook physical – and streamed music overtook downloads. The digital recorded music segment was worth US$10.7bn in 2016, surpassing that for physical recorded music, at US$8.5bn, for the first time.
- Virtual reality video revenue will exceed interactive application/gaming revenue in 2019. The consumer virtual reality (VR) content market will grow at a CAGR of 77.0% over the forecast period to be worth US$15.1bn by 2021. Of this, US$8.0bn will be spending on VR video (rising at a CAGR of 91.2%), surpassing interactive experiences and games in 2019.
- Smartphone traffic will exceed fixed broadband data traffic in 2020 The shift towards the smartphone will continue, especially in developing markets such as India and Indonesia, so that by 2020, overall smartphone data traffic across our 19 markets will exceed fixed broadband data traffic for the first time.
- Global physical OOH revenue will slip into decline in 2019. This world increasing trend will reach a tipping point in 2019, when physical OOH revenue slips into decline, falling by -0.2%. By 2021, the rate of year-on-year decline will have accelerated to -0.8%.