Power shifts: Altering the dynamics of the E&M industry
The pandemic has brought personal, economic, and social disruption and shocked businesses and the principles that have guided our thinking for decades; the future of the sector is still being largely shaped by the changes in consumer behaviour, which due to lockdowns and the shutdown of many in-person activities, consumers have moved their habits towards digital services.
In order to cope with the challenges in the new landscape, companies plan to change their long-term investments, with a focus on digital transformation and cybersecurity. The development of a digital culture within the organisation is critical to understand changes outside the boundaries of the firm, and companies are investing on talent development and ESG initiatives.
In our Entertainment & Media (E&M) Outlook in Italy 2021-2025, we predict that total E&M revenues in Italy will rise at a compound annual growth rate (CAGR) of +4.9% to reach €39.6bn in 2025. This will represent a strong recovery from the -7.5% decline in revenues registered in 2020 under the impact of the lockdowns and economic recession triggered by COVID-19.
The Entertainment and Media industry was reshaped, and handful of sectors have benefited from COVID-19 and its fallout, from video games to OTT. Following the first hesitant reopening, live events sector (such as cinema and music) shows strong signs of recovery. We expect that the media industry with the return to normalcy will once again be able to demonstrate its agility and bounce back strongly by 2025.
For more detailed numbers on the Books segment register for your copy of the Entertainment & Media Outlook in Italy
The Italian books market was and continues to be affected by the COVID-19 pandemic. But despite 2020’s slight dip in revenues, there is cause for considerable optimism in how publishers and consumers reacted to the crisis, how the sector is performing now and how it is preparing for the future.
Even though total publishing revenues declined early in the pandemic to such an extent that the Italian Publishers Association reported an estimated sales drop between 70% to 85%, spending in the consumer part of the sector actually increased year-on-year in 2020.
Print sales rose marginally, while digital spending rose by a striking 17.2%.
Educational publishing suffered an overall revenue fall, with print hit by far the hardest. But a temporary rebound is expected in 2021.
Professional publishing also declined in 2020, a huge part of which was the fall in legal publishing caused by closed courtrooms. Professional revenues will be hit further by structural changes.
There has been explosive growth in audiobook listening, a trend which predated the pandemic and continued through it. Audiobook revenue is set to increase at a +13.4% CAGR from €43mn in 2020.
For more detailed numbers on the B2B sector, register for your copy of the Entertainment & Media Outlook in Italy
Following a huge fall in B2B revenues in 2020 amid the COVID-19 pandemic, 2021 will represent a major comeback. The market is forecast to grow by +13.2%, partially recovering the -25.6% contraction registered during 2020. The momentum of this recovery will carry forward to 2022, when nearly all pre-pandemic revenues will have been recovered, before growth normalises over the following years.
Business information revenue was fairly resilient through the pandemic, and during 2021 it is foreseen that revenues will almost be back to their pre-pandemic levels.
Trade shows will deliver the biggest absolute gains in 2021 as restrictions on events are eased by the government.
After a sharp decline in 2020 and a large +16.1% positive correction in 2021, directory advertising revenue growth will settle down into positive territory for the first time in years.
Professional books will be the only B2B sector in Italy that will shrink over the coming five years. Trade magazine circulation revenue will also show weak growth over the forecast period, weighed down by falling physical sales. But advertising revenue is more buoyant.
For more detailed numbers on the Cinema sector, register for your copy of the Entertainment & Media Outlook in Italy
In 2020 and early 2021, box office in Italy dipped alarmingly. With cinemas closed for a large part of the year because of the COVID-19 pandemic, ticket sales revenue fell to €192mn in 2020, down from €668mn in 2019, which was considered a bumper year. Cinema advertising revenue dropped to €4.1mn in 2020, down from €30mn in 2019.
One of the most reassuring signs in an extremely difficult period for Italian cinema was the relatively strong performance of some of the local and international titles that were released in cinemas in 2020, in breaks between lockdowns.
A €640mn government support programme for the sector was confirmed in early 2021. The Italian Society of Authors and Publishers (SIAE) also set up an Extraordinary Support Fund for 2020 and 2021, providing €60mn of support to its members.
Given the restrictions Italy ranked at number 9 in the list of top 10 markets worldwide by number of screens in 2020. The country has 3,621 screens – more than other developed markets like Japan, Spain and Canada, highlighting that the Italian filmgoing habit is deeply ingrained.
Attitudes among Italian film distributors and exhibitors toward the major streamers are shifting, with the aim to improve the supply chains and boost employment in the sector.
For more detailed numbers on the Data Consumption sector, register for your copy of the Entertainment & Media Outlook in Italy
The COVID-19 pandemic has had a significant effect on data consumption globally, leading to spikes in demand as people stayed at home. Lockdown and quarantine created increased demand for data for entertainment, online shopping, video chat and conferencing. While the spike in demand won’t be sustained, the pandemic will accelerate trends and shift behaviours, with more people using digital technology for work, communication and entertainment purposes.
Mobile handsets will overtake portable devices in 2022 to become the most popular device for consuming data in Italy.
Video content will continue to account for the vast majority of all data consumed, with a share of 76.9% in 2025. There will be particularly strong growth in OTT video services over the next five years
The COVID-19 pandemic has accelerated trends in communication and the consumption of entertainment that will drive up demand for data.
Italy’s broadband speeds lag behind Western Europe, but the government wants everyone to have superfast broadband by 2026 and is using EU COVID-19 recovery funds to help improve its Internet infrastructure.
Italy scores highly in terms of 5G readiness - above the EU average - and commercial 5G rollout continues, which will increase demand for data.
For more detailed numbers on the 5G sector register for your copy of the Entertainment & Media Outlook in Italy
Access to new spectrum is a critical part of 5G plans, with low bands providing coverage while high bands provide the bandwidth for short range ultra-high-speed services. The 2018 auction of 5G frequencies raised €6.6bn for the Italian government as competition for the key frequencies of 3.6-3.8GHz proved to be intense.
All mobile operators in Italy have activated 5G networks, after the remaining operators launched in the fourth quarter of 2020.
Network sharing agreements have been struck to reduce the cost of deployments.
5G will support uplift to mobile Internet access revenues. Total mobile Internet access revenue is set to grow at a +7.5% CAGR over the next five years, while 5G revenue will grow at a +79.3% CAGR.
The move to Standalone 5G network architectures (SA) will support full 5G features such as ultra-low latency, network slicing and support for high IoT device densities.
Bundling of services in 5G consumer tariffs is limited to few players, and promotional
Activity to highlight network advantages for services, and cross sell those services is currently limited.
For more detailed data on the Internet sector register for your copy of the Entertainment & Media Outlook in Italy
Italy’s telecoms sector will play a pivotal role in the COVID-19 pandemic recovery era. Successive governments have highlighted the need to address Italy’s digital divide, but keeping the country functioning during lockdowns shone a spotlight on the need to improve digital skills and make reliable high speed broadband available for all.
The “new normal”, which will include the continuation of home working and greater demand for home entertainment, along with a desire to close the digital divide, will require high-speed, reliable broadband.
The government has allocated €6.7bn from the National Recovery and Resilience Plan (NRRP) to help accelerate rollouts of UBB (ultrabroadband - networks capable of delivering services of over 100Mbps) fixed infrastructure and 5G through the Italia a 1 Giga and Italia 5G plans. Italy’s total NRRP funding, the majority of which comes from the European Commission’s (EC) Recovery and Resilience Facility, is approximately €260bn
Italy’s broadband markets are competitive with volatile pricing at the lower end of the mobile sector, and new entrants stepping into the FTTH market. 5G FWA is now a very high-speed option for those in hard-to-reach areas.
For more detailed data on the Internet advertising sector register for your copy of the Entertainment & Media Outlook in Italy
The Italian Internet advertising market is the fourth largest in Western Europe, and it is also one of the fastest growing. Its +7.5% CAGR over the forecast period is higher than the regional average of a +6.9% CAGR.
Growth in the Italian digital ad market will be underpinned by improvements in the country’s Internet infrastructure.
The Italian digital advertising market reached total revenue of €3.4bn in 2020, a 3.7% year-on-year increase from 2019. The COVID-19 pandemic had a short-term impact on the market, but revenue is expected to bounce back in 2021, with +12.0% year-on-year growth predicted.
The Italian digital advertising market will benefit from planned improvements to Italy’s Internet infrastructure. The Italian government is using EU COVID-19 recovery funds to improve its broadband and 5G networks.
Social media is the fastest-growing online advertising category overall. This reflects the increasing popularity of social media in Italy, with 77% of Italians regularly using social media, compared to the worldwide average of 49%.
Video is the single most important online advertising category in the Italian market. As video streaming increases in popularity, traditional broadcasters are also making gains.
The Italian government has shown a willingness to intervene in the country’s digital advertising market. Italy’s digital services tax (DST) was launched in January 2020 and applies a 3% rate to revenues generated online. The tax will be replaced by a broader G7 agreement to standardise taxation.
For more detailed data on the Magazines publishing sector register for your copy of the Entertainment & Media Outlook in Italy
Taking into account both the consumer and trade magazine markets, the impact of the COVID-19 pandemic has been considerable, with combined revenue for the sector dropping -26.1% from €1.6bn in 2019 to €1.2bn in 2020. A short-lived bounce-back will increase revenue to €1.3bn in 2021, but the market is not predicted to recover to pre-pandemic levels within the next five years.
Despite a brief spike in revenue during 2021, after a large COVID-19 related drop the year before, Italy’s consumer and trade magazine market is predicted to remain relatively flat over the next five years, increasing slightly to €1.2bn in 2025, at a +0.3% CAGR. In 2025, revenue will be well below pre-pandemic levels.
While revenue from digital advertising and subscriptions to consumer magazines is expected to increase this uptick is coming from a low base and will still not be sufficient to counter the continual decline in the print market in the long term.
The impact of COVID-19 on Italy’s magazine market has forced publishers to accelerate their digital transformation schedules and to substantially cut operating costs during the year in order to counter revenue decline.
In order to support the population during the pandemic, many publishers offered temporary free access to their digital titles. Giving the population an opportunity to read behind the paywall has encouraged consumers to continue with these digital publications once the free offer expires. As a result, by end-2020, readership of weekly magazines was up 56.8% on the previous year, while monthlies were up 64.6%.
Because trade magazine publishers can rely on the loyalty of their B2B subscriber base thanks to the specialist nature of their magazines, they are easily able to convey their readers on to digital offerings. While the pandemic left many publishers exposed to the cancellation of exhibitions, conferences and trade fairs staged around these same publications, they were quickly able to organise digital equivalents.
For more detailed data on the Music, Radio and Podcasts sector register for your copy of the Entertainment & Media Outlook in Italy
Italian music revenue was worth €446mn in 2020, down significantly from €993mn in the previous year, and from €874mn in 2016. However, total music revenue is set to increase at a +21.4% CAGR over the forecast period to reach €1.2bn in 2025.
The Italian recorded music market continued to grow in 2020, while the live music sector was hit hard by COVID-19-related social restrictions that put an end to concerts and other live performances for much of the year.
Due to the pandemic, Italian live music revenues declined by -78.7% in 2020 to total just €150mn, though the segment is set for partial recovery in 2021.
A survey from music promoters association Assomusica found that more than half of venues polled feared that their businesses would fold because of COVID-19.
Digital music streaming continues to drive recorded music growth, with the streaming segment up over 30.1% in 2020 to be worth €192mn.
Radio advertising revenue declined by -23.3% in 2020, falling from €433mn in the previous year to just €332mn in 2020 as advertisers reduced their budgets. DAB+ radio increased its footprint thanks to a legislative boost for digital radio.
The Italian podcast audience reached 15.6mn in 2020, up from just 3.8mn in 2016. Amazon Music, which recently acquired podcast production firm Wondery, entered the podcast market in 2020.
For more detailed data on the Newspaper Publishing sector register for your copy of the Entertainment & Media Outlook in Italy
Italy’s major newspaper publishing houses used the nation’s increased appetite for online news during the COVID-19 pandemic as a springboard for accelerating their own ‘Digital First’ strategies. However, the forecasted uptick in some digital categories will still not compensate for the overall decline in print revenue.
In early 2020, GEDI announced that La Stampa was to become the first Italian newspaper to go ‘Digital First’, a massive transformation for a traditional newspaper established more than 150 years ago.
According to the Reuters Institute Digital News Report, Il Sole 24 Ore is seen as one of Italy’s most trusted news brands (72% trust score), third only to the ANSA wire service (80%) and Sky TG24 news channel (74%).
Sports titles suffered both advertising and circulation losses from the cancellation of major domestic and international sporting events, especially during the first half of 2020, due to COVID-19 restrictions.
For more detailed data on the Out-of-Home Advertising sector register for your copy of the Entertainment & Media Outlook in Italy
The COVID-19 pandemic has been especially punishing for the OOH advertising market, which depends on outdoor footfall. Advertisers naturally shifted to digital channels and mobile in particular in 2020 to reach consumers under lockdown in their homes.
Italy’s out-of-home (OOH) market growth will rebound sharply in 2021, in line with a steep economic recovery and a return to public life, following a 2020 disrupted by the COVID-19 pandemic. Annual growth of 21.7% is forecast, with revenue set to hit €158mn.
The OOH advertising market will not return to its pre-pandemic level until 2024. The ease of lockdown in April 2021, combined with the government approval of a recovery package, will prove pivotal for the Italian economy and its OOH market.
Over the forecast period, total OOH revenue will rise at a +8.7% CAGR to reach €197mn in 2025, by which time the market will be beginning to stagnate due to falling physical OOH demand and a maturing digital sub-segment.
Digital OOH (DOOH) will have nearly doubled its market share between 2016 and 2025, it will become the dominant OOH advertising medium in Italy in 2024, and in 2025 will account for 52.0% of total revenue.
The benefits of digitalisation in OOH have been laid bare by the pandemic and advertisers will reallocate their spend away from traditional formats at the same time that media owners upgrade their inventories.
For more detailed data on the OTT Video sector register for your copy of the Entertainment & Media Outlook in Italy
Italy is the fourth largest OTT market in Western Europe and will be the fastest growing market in the region over the forecast period, at a +20.2% CAGR. The COVID-19 lockdowns meant that Italians spent more time at home seeking entertainment. SVOD platforms benefitted in particular, as there was greater demand for access to boxsets and original programming.
SVOD which will continue to drive the OTT market forward. SVOD was attributable for 85.1% of OTT market revenue in 2020, and this will reach 91.8% in 2025.
The OTT market was relatively small in 2016 with few international players established in Italy and just 1.7mn subscribers. The demand for SVOD saw this reach 6.9mn by 2019, before accelerating to 10.9mn in 2020. There remains room for further growth.
The important Serie A domestic football league rights were won by SVOD platform DAZN in March 2021. The move marked a significant boost to the streaming platform and wider OTT market, given the league’s popularity in Italy. Sports OTT services will see the largest subscriber gains by 2025.
Italy’s 5G network continues to develop and will play an important role in boosting mobile OTT use through enhanced download and streaming speeds. Fast broadband connections will also be a key driver of the OTT market, particularly as video resolution continues to grow and requires additional bandwidth.
For more detailed data on the Traditional TV and Home Video sector register for your copy of the Entertainment & Media Outlook in Italy
Traditional TV market revenue in Italy has been hit by the difficult macroeconomic environment in recent years. The situation was exacerbated by the onset of the COVID-19 pandemic, with revenues contracting -7.2% in 2020 to €4.6bn. While the market will return to muted growth later on in the forecast period as restrictions are lifted and the country moves past the COVID-19 recession, revenues will remain below pre pandemic levels.
Subscription TV revenues fell -10.2% in 2020 and the market will continue to decline for several years before plateauing towards the end the forecast period, with a -3.4% CAGR generating revenues of €2.3bn in 2025.
The pay-TV market has suffered from cord-cutting in recent years, with a difficult macroeconomic environment and increasing pressure from the OTT market. Pay-TV households fell to 4.6mn in 2020, down from 6.7mn in 2016.
Satellites saw a -10.3% decline in households in 2020, but will remain the most popular technology. IPTV is the main growth platform, overtaking pay-DTT in 2023.
Physical home video is becoming an increasingly niche market as streaming platforms dominate viewing. Revenues fell -32.8% in 2020 and will account for just 1.5% of the traditional TV market in 2025.
For more detailed data on the TV Advertising sector, register for your copy of the Entertainment & Media Outlook in Italy
Italy is the fourth-largest TV advertising market in Western Europe, after the UK, Germany and France. This is despite a challenging macroeconomic environment limiting growth in the TV advertising market for several years. Italy’s economic struggles saw the TV advertising market decline by -3.8% in 2019 and this was exacerbated by the COVID-19 pandemic in 2020. Italy’s GDP contracted by -10.6% in 2020, having a severely detrimental impact on TV advertising as revenues plummeted by -9.0%.
As advertisers continue to seek access to the largest live audiences, free-to-air channels are still attributable to the majority of budgets. Free-to-air broadcasting accounted for 81.4% of total TV advertising revenue in 2020.
The TV market received a boost in viewing time in 2020 as people stayed at home seeking entertainment during the pandemic. Despite this, advertising budgets were cut due to the economic uncertainty the pandemic caused.
The long-term shift towards on-demand viewing and online video continues to boost online TV advertising. By 2025, some 8.8% of TV advertising spend will be attributable to this sector. Connected TV advertising will also grow rapidly to 2025, with revenue hitting €176mn in 2025.
For more detailed data on the Video games and esports sector register for your copy of the Entertainment & Media Outlook in Italy
The Italian video games and esports market is fast growing. Total revenue was €2.5bn in 2020 and is set to reach €3.8bn in 2025, at +8.3% CAGR. This growth is primarily driven by the social/casual sector, which is not only significantly larger than traditional gaming, but is growing at a more increasing rate as well. Social/casual revenue in 2020 was €1.5bn, compared to traditional gaming €958mn, and its much healthier CAGR rate (11.3% compared to 2.8%), means the social/casual sector will be more than twice the size of the traditional category in 2025.
Italy’s social/casual gaming segment overtook traditional gaming as recently as 2018, but now dominates the market accounting for 59.9% of total revenue in 2020, a share that will reach 68.6% by the end of the forecast period.
The COVID-19 pandemic has disrupted gaming events and production, but has led to greater consumer engagement and a shift in the wider cultural perception of games.
Console gaming continues to dominate the Italian traditional sector and has been boosted by the launch of the PS5 and Xbox Series X, although supply has been disrupted by both the pandemic and a global shortage of computer chips.
Online/microtransactions revenue is driving growth across all sectors, reflecting the growing sophistication of mobile gaming, and the Fortnite-influenced acceptance of free-to-play models in the traditional market.
The new console generation has underlined the importance of cloud gaming, which is set to play an increasing role in the global games market, and which is already firmly established in Italy, with all major services - and various mobile offerings - available to consumers.
Italian total esports revenue was €10mn in 2020, and esports will continue to be the fastest growing sector of the games market, reaching €32mn in 2025, after increasing at a +25.8% CAGR.
Expanding 5G coverage is facilitating the further growth of mobile gaming and is laying the foundation for mobile esports.
For more detailed data on the Virtual reality sector register for your copy of the Entertainment & Media Outlook in Italy
Italy’s VR market continues to expand, albeit at a slower rate than initially anticipated back in 2016, when there was a lot of excitement about this technology. VR has failed to match those expectations because it continues to face a “chicken-and-egg” situation over content: games developers are reluctant to make large investments in VR until headsets become widely adopted, while consumers are holding out for better content. The number of VR headsets in Italy will grow from 389,000 units in 2020 to 692,000 units in 2025.
An overview of the key highlights of 16 relevant market segments, in English as well as Italian. Download PDF:
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Partner, PwC Italy
Maria Teresa Capobianco
Partner, PwC Italy