It’s growth – but not as we knew it
Over the coming five years, global entertainment and media revenues will continue to grow – in line with its historical trend – slightly behind global GDP. But this apparently consistent picture masks deep discontinuities, as digital drives revenue growth and spending diverges across different segments and countries. In 2018, non-digital media will continue to account for the largest share of global spending, TV will still be the biggest advertising medium, and the US will be the world’s biggest entertainment and media market. But – respectively – digital revenues, Internet advertising and China will all have dramatically narrowed the gap. This evolving environment will be characterised by six underlying shifts.
Advertising revenue is outpacing consumer revenue in the migration to digital. Digital revenue from advertising has risen from 14% of total advertising revenue in 2009 to 25% in 2013, and will hit 33% by 2018. In contrast, digital entertainment and media consumer revenue in 2018 will account for just 17% of total entertainment and media consumer revenue. Meanwhile, non-digital advertising revenue will rise at a CAGR of only 1.9% through the forecast period.
By 2018, Internet advertising will be poised to overtake TV as the largest advertising segment. As recently as 2009, Internet advertising revenue was US$58.7bn and TV advertising revenue was more than twice as big at US$132.0bn. But Internet advertising revenue will rise at a 10.7% CAGR to reach US$194.5bn in 2018, just US$20bn behind TV advertising. We are approaching a major tipping point in the advertising universe.
The biggest challenge is monetising the digital consumer. Although consumers are embracing digital content experiences, consumer revenue from digital sources – excluding Internet access – will reach only 17% in 2018 from 10% in 2013. More must be done to encourage not just consumers’ digital behaviours, but their digital spending.
Rising consumer revenue may be driven by 24/7 access. Two of the best-performing consumer sub-segments use a model by which consumers pay for round-the-clock access: digital music streaming, where revenue will grow at a 13.4% CAGR, and electronic home video OTT/streaming, set to rise at a 28.1% CAGR. Growth rates such as these will not only offset a slow-moving non-digital consumer market, but may also point the way forward for other segments.
Revenue growth is being driven by Internet access rather than content spending. A concern for content providers is that spending on Internet access may be taking share away from spending on content and services. In 2013, 45% of total entertainment and media revenue came from consumers, 30% from advertising and 25% from Internet access. But by 2018 Internet access’s share will rise to 30%, while the proportion from consumers will slip to 41%.
Two-thirds of revenue growth from consumers and advertising will be digital. Of the US$241bn growth in total entertainment and media consumer and advertising revenue from 2013 to 2018, US$157bn will come from digital sources. So 65% of global entertainment and media growth – almost two in every three extra dollars – will be from digital.