Pulling the future forward: The entertainment and media industry reconfigures amid recovery
Five year projections of consumer and advertising spending data across 14 segments and 53 territories.
What impact has COVID-19 had on the entertainment and media outlook? Which new media segments will emerge and which existing ones will disappear? Has this year’s dramatic increase in streaming really changed everything? In a time of unprecedented disruption, the Outlook provides the kind of clear insight and data that can help fuel your investment decisions.
year on year (YOY), over the top (OTT)
Subscription TV revenue of US$94.2bn in 2019 will contract at a -2.9% CAGR to US$81.4bn by 2024, due to a mature market and cord-cutting, largely resulting from wide acceptance and demand for SVOD platforms as well as competition from vMVPD offerings. The United States, however, still remains the world’s biggest pay-TV market by some distance, accounting for 39% of the total global revenue in 2019.
Despite an acceleration in cord-cutting in 2020 due to COVID-19, the rate of decline will likely lessen towards the end of the forecast period. Traditional pay-TV providers will focus on optimizing programming as a lever to increase video profitability, as well as continued investments in personalization, aggregation, speed and the best-possible digital experience.
There is perhaps no other business as negatively impacted by COVID-19 as the cinema industry - theaters were shut down, blockbusters movies were rescheduled and movie production ground to a halt.
Total US cinema revenues plummeted to US$3.5bn in 2020 from US$11.4bn in 2019, but is projected to rebound to US$9.1B in 2024, representing a -2.4% five-year CAGR. Film production levels, which were at an all-time high in 2019, tumbled in 2020 with the effects expected to take many years to work through the system.
When we look back at 2020, we will realize that this pandemic has changed the industry forever, as evidenced by the first ever “mutual agreement” to shorten theatrical windows, initial experimentation with in-home premium video-on-demand and increased usage of owned and operated subscription video-on-demand platforms to launch movies that were otherwise supposed to head to theaters. What the future looks like for the cinema business is more opaque than it’s ever been in recent history.
Subscription VOD revenue of US$13.5bn in 2019 will grow at a 12.7% CAGR to reach US$24.5bn by 2024, due to a surge in new, well-funded streaming offerings coming online combined with an increase in consumer demand as a result of COVID-19. Advertising video-on-demand is also becoming increasingly important as providers offer cheaper and free, ad-supported tiers that target a currently underserved market.
In the short-term, the lack of new content, due in large part to production shutdowns, may begin to strain streaming platforms without extensive libraries. However, over the next 5 years, we expect that there will be an increased focus on international expansion as well as content and intellectual property acquisitions to support growth and user engagement.
The US video game and eSports industry continues to see healthy growth across all segments. In 2020, total video games and eSports revenue in the United States was US$29.1bn, up from US$27.2bn in 2019, and is set to grow to US$37.1bn in 2024 at a CAGR of 6.4%. Console and PC markets are accelerating their shift to recurring revenues, such as micro-transactions and downloadable content, while cloud-gaming is gaining momentum. In addition, the mobile gaming space is continuing to see growth as the life of franchise games (including sequels and spinoffs) has exceeded expectations and the overall business model is becoming more economical - further proof of this is sustained level of M&A activity in the space during the first of half of 2020.
The US relinquished its position as the world’s largest eSports market, with 2020’s revenue of US$314mn behind Mainland China (US$408mn), yet ahead of South Korea (US$223mn). Media rights is the fastest-growing sub-sector of the US eSports market, rising at a 17.5% CAGR, though still trailing sponsorship revenues growing at a 11.7% CAGR.
The United States remains the largest global internet advertising market, despite shrinking 3.4% from US$125.2B in 2019 to US$121.0B in 2020 as brands cut advertising spend amid the COVID-19 pandemic. However, internet advertising will likely regain momentum with the market expanding at a 4.9% CAGR between 2020 and 2024 to reach a value of US$153bn.
While the US still lags behind China and other Asian markets in some areas, it remains a hotbed of innovation and consolidation. Furthermore, some of the defining recent trends in the internet advertising market, like the continued rise of video and mobile advertising, have taken hold much earlier in the US than in many other markets. Mobile continues to dominate, accounting for 70.6% of US internet ad spend in 2020.
Yet, despite the positive growth we’ll see from the internet advertising market over the next five years, it will not completely fulfill its potential until a simplified, industry-wide consensus on measurement and transparency is reached.
The COVID-19 pandemic has accelerated and amplified ongoing shifts in consumers’ behaviour, pulling forward digital disruption and forging industry tipping points that wouldn’t have been reached for many years. As a result, the E&M world in 2020 has become more remote, more virtual, more streamed, more personal and – for now at least – more centred on the home. Winners and losers will emerge based on their ability to leverage enabling technology to deliver truly distinctive content and experience options, while navigating regulatory and privacy hurdles.
Understanding where consumers and advertisers are spending their time and money in the entertainment and media industry can help inform many important business decisions.
PwC’s Global Entertainment & Media Outlook provides a single comparable source of consumer and advertiser spending data and analysis. Regardless of how you influence business decisions, the Outlook can help you understand industry trends so you can capitalise on new opportunities.
Global Technology, Media and Telecommunications Leader, Partner, PwC China
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Technology, Media and Telecommunications Advisory Leader, PwC US