During the COVID-19 pandemic, staying at home meant consuming more media than ever before.
Growth will continue for many E&M segments through to 2026, but it will mean being savvy about future strategy.
Multiple disruptive forces and faultlines need to be navigated, but with a focus on trust, there are opportunities up for grabs.
In 2021, Australians spent more on entertainment, media and internet access services than ever before. Despite being a year of uncertainty in health, supply chains and geopolitical machinations, spending was up both nationally and globally. At home, consumer spending rose 6.23 percent, reaching AU$45.6bn. Globally, entertainment and media revenue rose by an even greater 10.4 percent, reaching US$2.34tn.
This growth is expected to continue, with PwC’s Australian Entertainment & Media Outlook predicting 5.5 percent growth through 2022, to reach a total of AU$48.3bn. Over the next 5 years, consumer spend in Australia is forecast to grow at a compound annual growth rate (CAGR) of 4 percent, reaching AU$55.5bn in 2026. Globally, as reported in PwC’s Global Entertainment & Media Outlook, it is expected that the industry will grow 7.3% in 2022, and reach US$2.93tn with a 4.6% CAGR through 2026.
As the global report notes, however, the smooth trend in revenue hides spikiness underneath with powerful forces causing transformation and divergence. These faultlines – occurring between pre–COVID-19 status quo and the digital future, consumer behaviours, market gatekeepers and crashers, digitisation and its next wave, regulators and tech platforms as well as creators, distributors and consumers – have the ability to undermine established market positions and create new rifts.
In Australia, inflationary pressures driven by supply chain disruptions as well as war-affected fuel and energy costs are triggering interest rate rises and combined with rising mortgage and savings rates could lead to less discretionary spend. Second, increasing consumer concern over data and privacy issues could mean further regulation and along with privacy-savvy technology create the potential for uncertainty and a loss in confidence in ad spend – no small concern given Australia’s ad market increase of 20.3 percent in 2021 delivering AU$19.7bn and global’s 22.6 percent growth, representing 32.3 percent of all entertainment and media revenue.
The pandemic and its associated lockdowns have driven higher levels of consumer interest in digital content and services. Consumption will not dip to pre-COVID levels and late-pandemic confidence is providing growth in a variety of forms, with key factors driving growth through innovation.
The development and uptake of subscription-based services – from subscription video on demand (SVoD) television through to online games and music libraries – is the number one driver of growth across E&M segments. Social gaming revenue and advertising continue to climb, and will continue to do so as the gamer niche becomes mainstream. Reconvergence is also driving innovation as digital and traditional linear media channels merge, for example, watching live TV through Broadcast Video on Demand (BVoD) apps. Similarly, the blurring of ads and media (via shoppable ads and retailer media) is creating new opportunities, as are changing business models and the diversification of media streams (such as free-to-air and subscription tv providers trying out mixed models). A return to the premiumisation of ‘in person’ events (concert tours, for example) is on the cards, and of course, the rise of the metaverse, while early in its evolution, could potentially reimagine how consumers engage with all manner of entertainment and media.
As the global report highlights, changing demographics and age groups are affecting the way people interact with media. While not unusual, these behavioural shifts are becoming more accentuated – a combination of the pandemic and the distinctive expectations of younger generations. This offers a huge opportunity in developing markets as young consumers jump on board emerging trends – such as gaming and newer apps and platforms – in massive numbers.
Watch – Free-to-Air television, internet video advertising, subscription TV, filmed entertainment – With significant portions of 2021 spent at home, consumers’ down-time was spent in front of their screens, driving total watch revenue in Australia to a new high of AU$12.39 billion in 2021. Representing year-on year growth of 17.7 percent, this new record figure was a sign of the times, with the subscription TV sector leading the way at AU$4.83 billion. Globally, OTT media saw a strong 22.8 percent growth in revenue, though it continues to decline (from its 2020 peak), as does traditional TV and home video.
Read – News media, books, internet advertising, out-of-home, magazines – Read segments continue to push the boundaries of their channels, as new technologies and consumer distribution approaches blur the lines between medium, channel and content. Books, newspapers and magazines continue to diversify how their content is distributed and packaged to attract new audiences. Traditional segments within this category are likely to experience flat to moderate growth or declines within the forecast period, as declines in print-based revenue is offset by growth in digital variations.
Listen – Live and recorded music, terrestrial and streaming radio, podcasts and audiobooks – Despite some perceived uncertainty, consumers are continuing to habitually use online streaming platforms for music, radio, podcasts and audiobooks at high rates, supporting a year-on-year increase of total revenue of 11.4 percent. The embrace of these technologies is not only supporting the recovery of this sector, it has formed the foundation for significant future growth with total Australian revenue forecast to reach AU$3.7 billion by 2026. Globally, live music is set to reach US$31.2bn, podcasts US$3.3bn and digital music, US$45.8bn by 2026.
Play – Traditional gaming, gaming & web3, eSports – Advertisers’ ability to integrate through gaming infrastructure has been a major factor for this segment, with advertising revenue seeing year-on-year growth of 8.8 percent in 2021. Developing technologies such as Web3 and the adoption of 5G are expected to play major roles in the years to come, as the gaming industry seeks to be a leader in innovation. Overall, the play segment is expected to maintain strong growth, adding another AU$2.4 billion by 2026, taking total Australian revenue to just over AU$7.3 billion.* Globally, video games and eSports is expected to grow at a 8.5 percent CAGR to US$323.5bn by 2026.
Access – Fixed and mobile broadband – Though largely built upon the NBN, the Australian internet access landscape is shifting, with smaller telcos increasing their market share, but the viability of alternatives such as 5G is creating opportunities in the sector The total value of the Australian access market was valued at AU$31.6b in 2021, and is expected to grow to AU$36.7b by 2026, at a CAGR of 3 percent. Globally, it is set to grow at 4 percent CAGR through to 2026, with total revenue expected to reach US$919.4bn.
Looking to 2023 and beyond, the E&M industry will strive to maintain its balance amid disruptive forces, but the overall growth path is clear and strong. For consumers, the present remains very much a golden age, in which a vast array of content, services and experiences are available at price points they can afford. For businesses, however, intense competition and continual disruption remain. Moving forward will require a capabilities-driven strategy for growth, harnessing the perspectives of business, experience and technology and a structured approach to responsible business.
An understanding of the forces that are creating the fractures in the entertainment and media world should inform strategy. It is clear that there is no easy solution for profitable growth in the coming years. The industry’s barriers to entry are too low, and the pace of innovation and change too high, for any one player to sustain competitive edge simply by operating as it has for the past five years.
Trust between consumer, media and advertiser will be key to that differentiation. Despite unprecedented spending by both consumers and advertisers, consumer trust in media has fallen to pre-pandemic levels. This represents a strategic opportunity for those who think and act differently in the service of their customers, but will be an executional challenge, needing commitment, investment and consistency.
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