Entertainment and media businesses raise their game in agility and customer insight - as constant digital innovation becomes the new licence to operate

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.

Singapore sees steady growth in digital platforms and should seize opportunities to position itself as both a test bed and regional digital hub enabled by innovation and entrepreneurship.

Singapore, 5 June 2013 - Across the world, consumers’ access to E&M content and experiences is being democratised 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), 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.

In Singapore, the proliferation of smart devices and extensive usage of social media is resulting in the generation of new business models and new ways of engaging with “digital” customers. This growth in digitally-driven business is also bringing in new entrants to the market to compete with established players, resulting in more choice for “digital” consumers and increased competition for their spending capacity. 

Greg Unsworth, Technology, Media and Telecommunications Industry Leader, PwC Singapore said:

“Given the rapid changes with Singapore’s excellent infrastructure, pro-business environment and technology-savvy consumer base, Singapore is already currently recognised as an ideal location for E&M companies to base themselves to address the fast growing markets in Asia. However, to really harness digital growth opportunities and to help Singapore develop a vibrant ecosystem which allows these sectors to grow sustainably will take a concerted, broad-based, multi-year approach.”

 

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. Locally, of the 5.1% growth in total E&M spend over the next five years, 79.6% will be through digital platforms. The more mature markets of North America, Western Europe and Asia Pacific, including Singapore, will be instrumental in driving the global shift towards digital consumption of E&M services.

  • In Singapore in 2013, mobile access spend, at US$885 million will account for more than 50% of total Internet access spend, overtaking those from fixed-broadband. Mobile internet spend is expected to exceed fixed spend in the US and South Korea in 2013 and the UK in 2015. For some markets like South Africa and Indonesia, mobile Internet spend is forecast to be higher than fixed across the whole forecast period.
  • Digital E&M spend, encouraged by widespread ownership of smart devices, will constitute 48% of all spending in the mature markets, including Singapore, by 2017, which is almost double the level in 2008 and up from 34% in 2012.
  • Singapore is also seeing strong growth in the electronic home video market with 38.3% CAGR over the five year period.

Charlotte Hsu, Entertainment & Media Industry Leader, PwC Singapore said,

“We are seeing exceptional growth digitally in Singapore, especially in the mobile advertising, music and online gaming segments. This is driven by a surge in demand for digital and internet consumption via mobile devices such as smart phones, tablets, and even smart TVs. These devices make connecting to the internet and to digital platforms for information and entertainment so much faster and easier, especially while on-the-go.”

In Singapore, several noteworthy areas of growth are as follows;

  • Mobile advertising is growing from a small base, with growth forecast over the next five years of 20% CAGR.
  • The digital music segment is growing at 15.7% CAGR over the next five years.
  • Online gaming in Singapore is growing significantly and will see a 14.5% CAGR over the next five years, which will overtake console gaming in 2016.

Despite a period of modest growth, some segments will still constitute a significant portion of total E&M spend in Singapore.

  • Following a fall in spending towards the end of the last decade, the out-of-home (OOH) advertising market will enter a sustained period of growth at 8.3% CAGR. This is helped by innovative technologies and infrastructure improvements.
  • Newspaper publishing revenues from sales and advertising, which represent a significant portion of the total E&M spend in Singapore, will achieve growth of 1.4% to 2017, despite a global shift to online sources for news. A similar trend will also emerge in Consumer magazine publishing.
  • Television advertising and subscription revenues will achieve steady growth of 3.5% over the forecast period despite the increasing competition and the evolution of over-the-top (OTT) offerings. Regulation will also continue to evolve in the face of this competition and changing consumer expectations.

Charlotte Hsu, Entertainment & Media Industry Leader, PwC Singapore, 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. 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.

  • Understanding new consumers is key

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 consumers - by delivering personalised, relevant, and ultimately indispensable content experiences.

  • Consumers are increasingly in control but also increasingly confused

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.

  • From ‘mass media’ to ‘my media’

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’ - where 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’ - smartphones and tablets - to comment on and share the experience of TV and other companion content with friends, often via social media.

  • Multi-platform analytics drive advertiser insights into the connected consumer

Outlook shows how advertising spending is continuing to migrate to new digital platforms. However, 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.

  • Content creators must have better insight into what content customers will pay for in order to engage

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 models - including 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 race for content

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.

  • Characteristics of new business models for content creators to engage connected consumers

To ensure their content remains relevant and valuable to their audiences, content companies must build new business models around five imperatives:

    1. Harnessing the power of second screens - exploiting connected portable devices to deepen engagement with, and access to, the primary content.
    2. Continuing evolvement of the windowing of video content - to meet the needs of connected consumers.
    3. Bundling, in order to add value for content providers, operators and consumers - people still love a bargain, including a bundle of services for a ‘discounted’ rate.
    4. Overcoming the challenges of personalisation - by understanding consumers while respecting their privacy.
    5. Encouraging and facilitating content discovery and recommendation - confused, connected consumers need help navigating to the content they want.
  • Digital distributors must deliver a differentiated experience to help deter piracy

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 price - via the right experience. It’s also vital to sign-post where the legitimate content is available.

 Greg Unsworth, Technology, Media and Telecommunications Industry Leader, PwC Singapore 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.”

 

ENDS

 

Additional notes to editor - key statistics from PwC’s Global Entertainment and Media Outlook 2013-2017:

  • Mobile broadband will be a key driving force

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%.

  • Consumer spending on E&M: traditional media will dominate in the near term

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.

  • Consumer E&M content spend will increasingly shift to digital formats

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.

  • Growth in advertising E&M spend: Internet and video games set the pace

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 advertising spend, China will overtake Japan in 2016

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

  • Online TV advertising revenues will triple between 2012 and 2017, but will remain a fraction of traditional TV revenues. In Japan and South Korea, online TV advertising will, on average, more than double every year until 2017. Such aggressive growth will see Japan become the third largest market for online TV advertising globally, behind only the US and the UK. South Korea’s emergence will see it move up to number eight.
  • The US will still dominate global TV advertising revenues, accounting for 39% of the global total in 2017, which is only a modest drop from 2012’s 39.4%. But the fastest rates of growth will be in other markets, including Kenya (16% CAGR), Indonesia (15% CAGR), India (12% CAGR), Nigeria (11% CAGR) and Brazil (10% CAGR).
  • In out-of-home advertising there will be double-digit CAGR growth in two countries—India (11% CAGR) and Brazil (10% CAGR), fuelled by a trend towards urbanisation and investment in transport infrastructure.
  • Mobile will be the fastest-growing video games sector over the next five years, with revenues increasing from US$8.8 billion in 2012 to US$14.4 billion in 2017 by a CAGR of 10% as an increasing number of consumers turn to smart phones for entertainment.
  • Revenues from the worldwide physical-home-video market – sales and rentals of DVDs and Blu-ray – will be worth less than box office for the first time in 2014. In 2014 the physical home video market worldwide will be worth US$36 billion compared to worldwide box office of US$38 billion.
  • Consumer spend on console games will increase by a CAGR of 5% from US$24.9 billion in 2012 to US$31.2 billion in 2017 as new consoles reignite interest in console gaming. This growth will lead to North America overtaking Western Europe to regain its number one position for console sales in 2014.
  • The online video advertising market boomed in 2012, with an increase in the annual revenue of approximately US$1 billion, representing year-on-year growth of 33%. This growth is set to continue over the forecast period with revenues reaching US$12 billion in 2017, boosted by 26% CAGR.
  • Live music is continuing to grow, with sales of tickets and sponsorship forecast to generate revenues of US$30.9 billion in 2017, up from US$26.5 billion in 2012, a CAGR of 3%. This growth will more than offset continued decline in recorded-music revenues.

Press access to Outlook content online
To request press access to the online Global Entertainment and Media Outlook 2013-2017, contact Candy Li at candy.yt.li@sg.pwc.com. This will allow you to illustrate this and other media stories both by extracting detail from the Outlook dataset and analysis at a segment and country level, and by creating charts on-screen that can be exported for use with your stories.

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 and Music.

 

About Outlook insights

Much of the content in this press release is taken from Outlook insights, which is drawn from data in the online Global entertainment and media outlook 2013-2017. PwC continually seeks to update the onlineOutlook data, therefore please note that the data in Outlook insights, and this press release, may not be aligned with the data found online. The online Global entertainment and media outlook 2013-2017 is the most up to date source of consumer and advertising spend data.

 

Digital Spending

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.