PwC’s global media outlook 2016–2020: six key trends

Originally published on TheMediaBriefing

Every year PwC produces an annual study looking at major developments in the world’s media and entertainment sectors. Blending five-year forecasts and historic data from the past half decade, the report is a rich repository of information for busy media execs.

Covering 13 segments and 54 countries, most of these findings are only accessible to subscribers, although some top-level insights, analysis and discussion are available on their website. Chris Lederer, Partner, PwC’s Strategy&, Entertainment & Media practice walked TheMediaBriefing through some of the key takeaways from this year’s new report.

“At the highest level,” Lederer explains, “our annual Global entertainment and Media Outlook shows a mature media industry with slowing growth prospects.”

Yet, despite this overall trend, Lederer finds:

“There are massive opportunities for growth inside this multi-shifting global media landscape.

“The industry remains extremely dynamic with pockets of growth scattered across the increasing complex and competitive global market.”

Below are six major takeaways from the study which highlight some of these complexities.

1. Youth population size can be more important for growth than GDP

“The countries with large populations under 35 are faster growers than countries with larger aged populations,” Lederer observes.

More specifically, PwC’s analysis found that “on average, E&M spending in the 10 youngest markets is growing three times as rapidly as in the 10 oldest markets.”

For example, in a country like Pakistan — a nation where c. 70 percent of the country is below 35, spending on the Entertainment and Music industries is projected by PwC to grow at 10 percent CAGR over the next five years.

“By contrast,” Lederer tells us, “Germany and Japan — two much wealthier countries with among the lowest proportions of people under 35 — sport a meager E&M CAGR of about 2 percent during that same period.”

The influence of youth is clearly manifest in a number of PwC’s predictions for a number of media verticals. Globally, their website states, magazine revenue for consumer and trade publications is projected to be “virtually flat through 2020, experiencing a compound annual decline of 0.1 percent.”

However, this trend will be bucked in those emerging markets — such as Peru (+6.3 percent CAGR) India (+4.1 percent) and Indonesia (+3.4 percent) — nations which enjoy both a growing professional class and sizeable youth populations.

“Put another way,” Lederer explains, “growth in E&M spending is more influenced by the age of a country’s population than by its comparative wealth.” This he says “underscores the vital importance of youth on emerging areas.”

Image source: https://www.pwc.com/gx/en/industries/entertainment-media/outlook/img/magazine-2-2.png

2. Developing markets are where much of the action is

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

“In many developing markets,” Lederer states, “E&M spending is growing more rapidly than the economy at large.” Within this, he singles out Venezuela, Argentina and Indonesia as the countries which “will likely produce comparatively higher E&M growth rates.”

Of particular note to newspaper execs, Latin America is identified by PwC as the only region where newspaper revenues will increase during the rest of this decade.

Although this growth, at 2 percent, is modest (as is the relative revenue of this sector when mapped against other major regions,) this success is, nonetheless, in marked contrast to the rest of the world.

Image source: https://www.pwc.com/gx/en/industries/entertainment-media/outlook/img/newspaper_3.png

3: Established markets remain important

“Beyond zeroing in on the fastest-growing markets, such as Indonesia, India and Peru, entertainment and media companies must continue to focus on those that are generating the greatest absolute dollar growth — such as the US and China,” Lederer cautions.

North America will continue to be home to the largest market for TV revenues, dwarfing other regions (both on their own and — just about — in aggregate).

Meanwhile, revenues in the US for both home video subscriptions and OTT streaming services will — at US$17.19bn — represent around one-third of the global total.

In the next decade, however, this picture may eventually change.

“China will see the strongest growth, [in home video revenue] with a 31.3 percent CAGR taking it from fifth in the world in 2015 to second in 2020, with revenue of US$3.11bn.”

Although that still leaves it some way behind the US, it will be interesting to see what happens if this growth continues.

Image source: https://www.pwc.com/gx/en/industries/entertainment-media/outlook/img/tv_video_1.png

4. Here comes China

One area where China will overtake the USA in the next few years is in box office revenues.

Cinema goers will have noticed the desire of Hollywood Producers to increase their appeal to Chinese audiences, with the country featuring prominently in blockbusters like Skyfall and Mission Impossible 3.

By 2017, it’s expected that China will be the largest market for cinematic box office revenues. PwC estimates that there are 15 new screens opened every day in China every day, equivalent to 5,475 new screens every year; and 27,375 by 2020.

China, along with the UK and Denmark, will become during 2016 the first countries “to reach the tipping point where total digital advertising revenues surpass their non-digital equivalent.”

This sits against a wider advertising backdrop whereby 2016 is also the year when global Internet advertising revenue will surpass TV advertising. Total Internet advertising revenue will be a US$260.4bn business by 2020, PwC predicts.

Image source: https://www.pwc.com/gx/en/industries/entertainment-media/outlook/img/internet-ad-1.png

5: It’s hard to be a world-beater

“While much of the industry is growing more global, content tastes and consumption preferences remain steadfastly local,” Lederer finds.

As PwC’s website notes:

“In common with many markets around the world, China’s electronic home video market is dominated by OTT/streaming, with players like Tencent and Alibaba — but not Netflix, at least for now.”

Lederer warms to this theme by commenting that if companies want “to capture attention and build value… [they] need to first understand local consumers and consumption and create a foundation of content based on these preferences.”

“The most successful companies focus on local and then complement with more regional and “global” content, and deliver an experience again based on more local platform alignment.”

For online TV providers, against this backdrop, there are opportunities to harness IP technology and known users preferences to provide a more targeted advertising experience.

However, the rise of ad-free subscription services such as Netflix and Amazon may hinder this adoption and the growth of online TV ad revenues.

Although traditional TV ad revenues continue to fall precipitously, multichannel and online providers are expected to see fairly minimal revenue growth. “Online TV advertising,” PwC says, “will still account for only 4.8 percent of global TV advertising revenue in 2020.”

Image source: https://www.pwc.com/gx/en/industries/entertainment-media/outlook/img/tv_ad_2.png

6: Traditional habits die hard

“The media bundle lives on,” Lederer says. “Far from going a la carte… video and cable incumbents [are] now fighting back by offering their content on an integrated, omnichannel basis, on TV, laptop, tablet and smartphone.”

A key strategic component for these players in delivering this strategy is live sports events and premium entertainment shows.

PwC note that in 2016, 30-second slots for advertisers in the Super Bowl reached a new peak of US$50mn, whilst “intensifying competition for sporting content saw record fees paid for the English Premier League soccer and NFL football in 2015.”

“The biggest linear audiences and therefore advertising spend — will be attracted by entertainment shows with live interaction such as voting, and by live sporting events.”

This reflects that for all of the change undoubtedly happening across our industry, there remain some constants. It will be fascinating to see how many of those hold true in 2020.

Image source: https://www.pwc.com/gx/en/industries/entertainment-media/outlook/img/tv_ad_1.png

— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —

Damian Radcliffe is the Carolyn S. Chambers Professor in Journalism at the University of Oregon, a Fellow at the Tow Center for Digital Journalism at Columbia University, an Honorary Research Fellow at Cardiff University’s School of Journalism, Media and Culture Studies and a Fellow of the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA).

He is an experienced Digital Analyst, Consultant, Journalist and Researcher who has worked in editorial, research, teaching and policy positions for the past two decades in the UK, Middle East and USA. Connect with him on Twitter at:@damianradcliffe


Originally published at www.themediabriefing.com.

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