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2021 Outlook segment findings

Macrotrends

  • More than a year into the most globally disruptive event of most consumers’ lifetimes, COVID-19 remains the unavoidable force driving the dynamics of the media and entertainment industry. Although uncertainty persists due to varied vaccination rates and the risk of resurgent waves of infection from new variants of the disease, we forecast that the combination of vaccines and more developed virus control systems should support a tentative return to normal for most developed nations in the second half of the year. For the media and entertainment industry, consumers’ desire to once again enjoy live music and cinema will be tempered by caution and ongoing venue capacity limitations. Habits accrued during long periods of lockdown and restrictions will remain embedded, and trends already developing prior to the pandemic – namely a growing shift towards digital products and online sales – accelerated by years. And while sectors like cinema, live music, and trade shows suffered unprecedented setbacks, the persistent growth of digitisation softened the blow for the broader industry.
  • Total global entertainment and media (E&M) revenue fell -3.8% year on year in 2020, by far the most significant drop in revenue — US$81.0bn, or more than the value of 2020’s entire music, radio and podcasts segment — in the history of the Global Entertainment and Media Outlook. As more global regions emerge from lockdown and see increasing rates of vaccination, a forecast year-on-year rise of 6.5% in 2021 and a further 6.7% rise in 2022 will help drive total global E&M revenue to increase at a 5.0% five-year CAGR. However, this seemingly healthy growth comes from a greatly depressed base year — extending the CAGR period to six years provides a less optimistic picture with a rate of just 3.5%.
  • Around the world, pandemic lockdowns made home entertainment effectively the only choice, with internet access an essential. In total, 1.1bn households had fixed broadband in 2020; a further 4.6bn smartphone connections put unprecedented pressure on networks. Total data consumption increased 30% during the year and consequently set off a new, higher forecast growth trend. Increasing connectivity and speed laid the groundwork for E&M bright spots in 2020, as OTT video, video games and internet advertising showed above-average rises.
  • In terms of consumer spending, traditional TV and home video takes the largest share of total revenue, although it will contract at a -1.2% CAGR to 2025. Newspapers and consumer magazine revenue will also contact over the next five years, and VR earns distinction as the fastest-growing segment. In the advertising category, newspapers and consumer magazines will be the only segment to decline to 2025, with revenue set to fall at -1.4% CAGR. In contrast, cinema will be the fastest-rising segment in the advertising category, although this is mostly driven by the rebound in 2021 coming from a very low base in 2020. The same is true of the B2B segment, where advertising growth will be at a 21.1 CAGR over the forecast period, supported by recovery in trade shows.
  • Lockdown measures had significant impact on many E&M segments, most notably cinema, which saw a 70.4% collapse in revenues. Although research shows that consumers still prefer the experience of going to theatres, the pandemic forced movie providers to turn to premium video on demand (PVOD) to fulfill their launch schedules, and this interest in PVOD has raised longer-term questions around the relationship between cinemas and content producers. Successful PVOD releases demonstrated how PVOD can be a bundled increment to the ongoing direct-to-consumer trend, and that content providers with this capability can capture a larger share of a title’s consumer revenue.
  • Restrictions on mass gatherings hit the live E&M sector hard, shuttering conference centres, arenas and stadiums for much of 2020. Live music was the most affected by the pandemic, with revenue falling by -74.4%. As a result, the sector was forced to adapt with creative solutions, such as drive-in concerts at former outdoor cinemas or large car parks. However, these formats are viewed as a stopgap, and many operators turned to virtual experiences as an alternative. Gaming provides a ready-made marketplace for such events, and in May 2020, Minecraft staged an entire festival on its platform, demonstrating an opportunity to sell more music and merchandise through games platforms and making the most of this burgeoning sector.

Consumer books

Print remains the dominant format, but the COVID-19 pandemic was a catalyst for increased adoption of digital formats. Lockdown measures drove uptake in ebook revenues, which grew 8.6% and reversed several years of declining growth. 

  • The dominance of print will continue over the forecast period in terms of total revenue, but publishers will need to adopt multichannel strategies to address the ebook turnaround.
  • Regional variation in consumption preferences is significant, with the US seeing strong growth in print, whereas in the UK, print sales fell and audiobook sales rose by 47% in the first half of 2020. Over the same period, ebook sales grew 18%, due to the government’s decision to do away with VAT on digital books. The fastest-growing consumer book market in the world is India.
  • Although consumer demand for books remained steady, lockdowns drove more people to buy books online, primarily via Amazon. Traditionally in-person discount bookfairs moved some of their sales online and, in the future, such bookfairs may consider hybrid in-person and digital sales models as the industry explores new ways to reach customers. 
  • Consumer behaviour in other segments is influencing adoption of digital books, with podcasting coexisting alongside audiobooks and in some cases, the formats mutually reinforcing one another.

Business-to-business media

Trade show revenue suffered unprecedented collapse due to COVID-19—in fact, it was one of the worst-affected industries in the world and became the smallest B2B sector behind trade magazines.

  • The sharp fall in trade show revenue—at -71.7% in 2020, the steepest fall of any B2B category on record—is expected to be followed by an almost equally steep recovery, adding US$25.5bn in revenues between 2020 and 2025.
  • Asia Pacific fared better overall than any other regional B2B market in 2020, falling -15.8% versus -18.7% globally. This is largely due to the region’s handling of the COVID-19 crisis, with rigorous testing and tracing and strict lockdowns that kept infection rates to a minimum and allowed economic activity to restart more quickly.
  • While all B2B sectors lost revenues in 2020, business information was the strongest performer and least affected by the pandemic, being neither dependent on physical interaction nor the sale of printed products. The sector also benefits from digitisation and the increasing sophistication of data analytics, which provides more value to customers.
  • The pandemic magnified the existing trend away from physical print formats, and professional books and trade magazines suffered from added pressure in 2020 as advertisers retreated from print and consumers disproportionately avoided buying physical professional books.

Cinema

Cinema revenues contracted at unprecedented levels due to the COVID-19 pandemic and changed the face of the industry, with physical cinemas and streamers now existing side by side. However, signs of a cinema revival are already underway, and the sector is expected to rebound after the crisis-driven slump of 2020.

  • The cinema sector has good reason for a positive outlook post-COVID-19 – cinemas are reopening around the world, demand for filmed entertainment remains high, and the product line for 2021 and 2022 includes new installments of some of the most lucrative franchises in cinema history.
  • Many cinemas that closed during the pandemic are not expected to reopen, and exhibition giants that posted huge losses – such as AMC, which posted 2020 results -89% down on 2019 results – or abandoned expansion plans in 2020 will refocus on consolidation.
  • Independent distributors found opportunity amid the crisis, as major studio releases were held back and multiplexes looked elsewhere for low-budget movies to show. However, Hollywood studio pictures are expected to quickly reestablish themselves at the top of the box office charts.
  • With a quarter of US cinemas closed for most of 2020, it’s not surprising that China surpassed the US as the world’s biggest global box office market. Although the Chinese market will continue to grow, reaching US$11.0bn by 2025, the US market is expected to rebound and reach US$11.3bn by the end of the forecast period.

Data consumption

The pandemic drove demand for internet connectivity to new heights in 2020, with some telcos reportedly carrying up to 60% more data on their networks than they did before the crisis. Lockdown measures prompted consumers to increase time spent watching video streams and add newly launched subscription services.

  • Global data consumption in 2020 increased 30.4% over the previous year, and is expected to rise at a 26.9% CAGR between 2020 and 2025.
  • The pandemic revealed that access to affordable, reliable broadband services is not only a basic human need for work, education, entertainment, and accessing services, but is also crucial in helping governments apply socioeconomic policies aimed at supporting people and organisations through the crisis.
  • Video is still the largest content category by far, accounting for 78.3% of global data consumption in 2020. COVID-19 also sped up underlying trends in TV and online video, resulting in a general push toward online video and accelerated pay-TV cord-cutting.
  • Gaming will be the fastest-growing content category over the forecast period, with games accounting for 6.1% of consumption globally by 2025. Mobile gaming grew rapidly during the pandemic, and its portability and accessibility will keep consumers engaged after lockdowns have been lifted.

Internet access

The COVID-19 pandemic accelerated the already fast-growing global trend of increasing data consumption, testing the network capacity of fixed broadband and mobile operators as demand for data and connectivity from consumers and businesses soared.

  • Total internet access revenues will increase at a 4.9% CAGR to US$880bn in 2025, as consumer demand and increasingly ubiquitous access drives growth. 
  • The rise of bandwidth-hungry services such as e-commerce, streaming and on-demand viewing and video-calls during lockdowns made the rollout of next-generation infrastructure such as fibre broadband and 5G a commercial and political imperative.
  • Mobile internet access continues to drive the market, with revenues rising to US$880bn in 2025 due to the global ubiquity of smartphones and the favoured status they enjoy in developing markets. Nearly a billion new smartphone owners will emerge over the forecast period, along with 681mn new mobile internet subscribers.
  • In the US, the “big four” mobile operators have, with T-Mobile’s takeover of Sprint, essentially been reduced to three. AT&T, the third largest mobile operator in the US, has expanded into pay-TV with its acquisition of DirecTV.

Internet advertising

The COVID-19 pandemic had significant impact on the internet advertising sector in 2020, but it wasn’t all bad news – although many budgets were curtailed or frozen during the height of the crisis, lockdown measures drove the appeal and usage of digital media content and services. Revenue growth in the internet advertising sector slowed but remained strong at US$336.2bn, with moderate growth expected to continue through the forecast period.

  • Ongoing concerns and challenges for the industry include measures that will make it more difficult for advertisers to serve personalised and targeted content, including Apple’s app-tracking transparency feature and Google’s plan to phase out tracking cookies in its Chrome browser by 2022.
  • Mobile consumption of digital media continues to be the strongest driver of the internet advertising market across the globe, due to several factors including continued advances in devices and connectivity, the ongoing rollout of 5G technology, and continued popularity of mainly mobile social platforms like Facebook, Instagram and YouTube. Global mobile internet advertising revenue is forecast to reach a value of US$332.3bn, or 67.9% of total internet advertising revenue, by 2025.
  • Globally, internet advertising grew in all regions during 2020, with the lowest growth seen in EMEA, due to key European markets being hard-hit by the pandemic’s spread and resulting government-mandated lockdowns. Moderate to strong growth is expected in all regions from 2021 onwards, with expansion in Latin America and Asia Pacific expected to be strongest at respective CAGRs of 9.2% and 8.7% between 2020 and 2025.

Music, radio and podcasts

COVID-19 lockdowns dealt a severe blow to the live music sector but boosted the live streaming sector. Podcasts are now a mainstream entertainment format in many markets, and even the pandemic did not slow the phenomenal growth in that sector as people sought more entertainment at home during the crisis.

  • Global music, radio and podcast revenue will rise at an 8.9% CAGR from US$78.1bn in 2020 to US$119.4bn in 2025, with music segment growth driven by the expected rebound in live music after the disruption from COVID-19 passes.
  • Radio accounted for just over half (50.7%) of global music, radio and podcast revenue in 2020, up from 43.7% the previous year due to the decline in live music revenue. Global radio revenue was worth US$39.6bn in 2020, down from US$45.2bn the previous year, and is expected to return to pre-pandemic levels in 2022.
  • Continued declines were seen in physical recorded music sales across all regions, with worldwide revenues set to fall from US$5.8bn in 2020 to US$4.2bn in 2025. Also in decline is the digital music downloading format, which has suffered at the hands of music streaming services and is forecast to fall at a -26.7% CAGR to just US$292mn in 2025.
  • Global digital music streaming revenue is forecast to reach US$29.3bn in 2025. The world’s leading international paid-for music streaming provider, Spotify, is set to expand into more than 80 new markets with a combined population of more than 1.0bn. Amazon Music may now be on a par with Apple Music, as the former picks up customers through uptake of its smart speakers and the Amazon Prime user base.

Newspapers and consumer magazines

The COVID-19 pandemic gave this sector an unprecedented shock, stripping tens of billions of dollars in revenue in a single year and leaving publishers subject to intense competition for reader attention from rivals like Google, Facebook, TikTok and Snapchat.

  • Total newspaper and magazine revenue fell by US$23.5bn between 2019 and 2020. Although the shift to digital continues to accelerate, digital income is set to account for just 24.1% and 29.9% of total newspaper and consumer magazine revenues respectively by 2025.
  • The consumer magazine market will reach a significant tipping point in 2023, when digital advertising overtakes its print counterpart with revenues of $11.3bn compared to print’s $10.3bn. This signals the speed of print magazine advertising’s decline rather than digital advertising’s replacement of print.
  • The number of print newspapers sold and subscribed to on average each day globally will decline by 24.1mn by 2025, with the biggest fall in print readership across Western Europe (-5.4% CAGR). The most resilient region will be Asia-Pacific (-0.2% CAGR), which accounts for nearly 80% of all print product consumption.
  • As tech giants such as Google and Facebook generate significant revenue from newspaper and magazine content, even digital publishers are challenged to reach commercial viability—a challenge highlighted by the merger of former upstarts Buzzfeed and Huffpost.

Out-of-home advertising

After enjoying consistent growth prior to the COVID-19 pandemic, OOH suffered a sharp contraction in 2020 as lockdown measures kept people at home and indoors. Although worldwide OOH revenues fell by -27.4% amid the crisis, the rebound is expected to be nearly as steep.

  • OOH’s expected revenue rebound of 20.4% will be supported by several factors, including pent-up consumer demand, historically high personal savings rates, advertisers eager to reach eyes and wallets, and a global economy set to grow 4.7% in 2021 following a contraction of -5.1% in 2020.
  • Digital OOH (DOOH) revenues fell less sharply (-20.7%) than physical OOH revenues, which dropped by -30.9% in 2020. In the midst of the pandemic, DOOH still claimed an additional 3.1 percentage points of market share as the crisis accelerated the shift away from physical OOH.
  • Despite limited market growth, a burgeoning area of the physical OOH market is so-called ambient OOH, which can be independent of media assets like billboards or involve signage in unconventional locations. Although this model is difficult to roll out at scale and revenue is likely to be limited, the emergence of a new dimension of physical OOH helps ensure its relevance.
  • First established in Internet ad buying and pioneered by Google Ads, programmatic OOH is now establishing itself across domestic markets and helping to drive the digital growth that will ensure OOH continues to outperform traditional advertising media for the foreseeable future.

OTT video

While 2020 was a year of extreme growth for OTT video, with more than US$12.0bn added to the market, the next few years will require providers to find new and innovative ways to secure access to consumers as consumption subsides to pre–COVID-19 levels.

  • Total OTT video revenue will near US$94bn by the end of 2025, representing growth of more than 60% over the five-year period beginning in 2020.
  • Market growth in 2021 will be softer due to a combination of a reduction in demand and an exhaustion of the customer conversion pipeline. Globally, growth will decrease from 29.4% in 2020 to 13.2% in 2021.
  • TVOD grew in 2020 as the primary window for major Hollywood productions, but will remain a fairly minor part of the OTT ecosystem when its long-term trajectory returns to normal operation in 2021. SVOD will continue to outpace TVOD and increase its share of total OTT revenue to 86.6% in 2025.
  • More saturated large markets—such as China and the US—are growing more slowly than small ones like Latin America, where double-digit growth in Brazil and Mexico will drive 13.1% CAGR over the next five years.

Traditional TV and home video

COVID-19 had a largely negative effect on the global pay-TV market, accelerating the trend of consumers moving away from traditional delivery and towards the internet and creating a physical barrier to on-premises installation and even the rollout of infrastructure.

  • The pandemic served to accelerate existing trends—including the decline of satellite, which should see some recovery under non-COVID-19 conditions, and cable, which is under pressure in North America due to high prices and in Asia-Pacific due to competition from IPTV—rather than create new ones. 
  • Of the four forms of distribution—cable, IPTV, satellite and pay-DTT—cable has seen the largest decline in terms of households, losing 81mn households over the last five years.
  • North America remains the largest traditional TV and home video market with a 42.3% share of global revenues, or US$94bn, in 2020. However, revenue is falling, and the region will account for just more than a third of the global market in 2025.
  • Governments in EMEA and APAC, which make up the majority of public funding for content, expect to roughly maintain current levels of licence-based public funding over the next five years. Public licence fee revenue will be the only component of the traditional TV and home video sector to see growth every year annually to 2025.

TV advertising

Broadcast revenue will not recover to pre-pandemic levels until 2025, by which time online and connected TV advertising will add a combined US$22.6bn to the global industry.

  • After a difficult decade in which broadcasters coped with declining viewership and threats from online advertising while still investing in infrastructure and technology, the sector will near a tipping point by 2025, when revenue from online and connected TV will be just US$1.0bn smaller than multichannel TV advertising revenue.
  • Declines in advertising revenues can be explained by competition from online advertising and reduced consumption, but also by demographics—linear broadcast reaches an older audience as younger segmentations rapidly adopt OTT.
  • North America retained its position as the world’s largest regional market in 2020 and is expected to remain so through the forecast period, with a CAGR of 4.0%. The second largest and smallest markets—Asia-Pacific and Latin America, respectively—will enjoy similar growth, with EMEA the slowest-growing at 3.2% CAGR.

Video games and esports

Video games and esports are still growing globally, with social and casual gaming outpacing traditional gaming as the latter transitions to digital revenue streams amid the decline of physical sales.

  • A new generation of consoles, improved digital offerings and a resurgent global PC market will drive growth in the segment, which will reach $194.7bn in 2025, with social and casual gaming accounting for nearly 60% of the market.
  • By 2025, PC gaming will be 99.8% digital, leaving the console market as the only remaining—and shrinking—piece of physical retail in the global video games industry. Revenue from physical sales will fall from 48.2% of the global console market to just 35.5% by the end of the forecast period.
  • The US maintains a strong traditional gaming base, while China is dominated by mobile gaming. Although China was expected to overtake the US on the strength of its social/casual gaming sector, the two markets are growing at a similar CAGR and will maintain near-parity.
  • The success of music and video subscription models holds enormous appeal for technology and gaming companies, but platform holders have an interest in their own hardware and walled-off ecosystems. Microsoft now offers access across different generations of console, PC and mobile devices, signaling a more open approach.

Vitual reality (VR)

Despite manufacturing challenges in the first half of 2020, the VR market continues to grow amid a period of readjustment, with an uplift in spending during COVID-19 lockdowns to just over US$1.8bn.

  • The market failed to achieve its full growth potential in 2020, despite expanding by 31.7% in a year when many people were stuck at home with little to do. Slower than expected consumer adoption of VR has led to an increasing focus on the enterprise category and VR’s potential for commercial applications.
  • The product mix of the VR installed base is changing rapidly as consumers shun low-quality mobile headsets in favor of more sophisticated standalone and home models, which should have the positive effects of deepening consumer engagement, encouraging game development, and influencing manufacturers to refine their products.
  • Although gaming will remain the most prevalent VR content over the forecast period, VR video generated US$615mn in revenue in 2020 and will grow to US$1.4bn in 2025. Providers are now solving some of the problems—such as bulky headset designs and high prices—that initially caused a lack of demand and slow uptake.
  • VR content makers are challenged by a low addressable base and are eager to apply a mix of monetization strategies—such as those seen in console, PC and mobile gaming categories—to generate more revenue from the existing user base.

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Werner Ballhaus

Global Entertainment & Media Industry Leader, PwC Germany

Tel: +49 211 981 5848

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