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Free-to-Air TV, Subscription TV, Online Video, Filmed Entertainment

With significant portions of 2021 spent cloistered away at home, consumers’ down-time was spent in front of their screens, driving total Watch revenue to a new high of A$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 A$4.83 billion.

As consumers are increasingly turning to personalised, on-demand consumption of online video and Connected TV delivered content, advertisers have been shifting their media spend out of necessity, in order to gain reach across a greater variety of platforms within the industry. Creator-led content has also been a game changer for the sector, competing for audiences’ attention, and offering marketers a new opportunity for reach and variation of integrations.

For Free-to-Air (FTA) TV, growth has been underpinned by the rise of Broadcast Video on Demand (BVOD), a medium which is now integral to the planning and buying of TV advertising. Subscription Video On Demand (SVOD) has seen investments in both the quality of content production, the user interface experience and diversification into other offerings such as sports, games and short-form video. Audiences’ desire for premium experiences extends throughout Watch activities, with the Filmed Entertainment sector also seeing significant investments in providing richer experiences to entice people back into theatres and drive growth over the forecast period.

In 2022, there is a continued optimism about the potential for sustained growth in Watch activities, and the ability for advertisers to shift their marketing strategies inline with changes in consumer behaviour.

Total Watch Revenue by Segment (A$ millions) midpoint forecasts

Note, Broadcast Video on Demand (BVOD) has been deduplicated from Online video and as such remains within Free-to-Air TV forecasts.

Free-To-Air Television

The Free-to-Air television (FTA) segment continues to experience a shift in audience consumption. A reengineering of how people consume television of any kind continues, with a changing distribution of audiences across terrestrial FTA, Broadcaster and Subscription Video On Demand services, creating a complex, competitive environment for networks to gain and retain viewers’ attention.

Total Free-to-Air Market (A$ millions)

The FTA sector is evolving and has seen a strong revenue resurgence in 2021, and 2022 forecasts suggesting a return to levels not seen since 2017. Underpinning this evolution is the rapid growth of BVOD across all major Australian FTA networks, who continue to invest significant amounts in improving the user experience of digital programming.

Following the pandemic, the FTA TV industry is experiencing a fluctuation of returning spend across categories. TV advertising from the travel and automotive sectors in particular experienced declines of 55.2 percent and 19.5 percent respectively in 2020, according to Standard Media Index (SMI) data. Since then, the total market has seen a resurgence to A$3.7 billion in 2021, a growth of 12.6 percent, however notable categories such as the aforementioned travel and automotive, plus pharmaceuticals and live entertainment are yet to return to pre-pandemic levels.

The revival of the overall FTA market is expected to continue throughout 2022, with a further forecast growth of 7.9 percent. Government advertising from late-2021 through early-2022 in the lead up to the Federal election has been a solid revenue driver for the sector, especially while other key categories are still attempting to re-establish their post pandemic revenue levels. While growth will slow across the forecast period, a CAGR of 3.7 percent will generate revenues of A$4.4 billion in 2026 based on the midpoint forecast.

Midpoint Free-to-Air Market CAGR 21-26 by Country (%)

When compared to similar markets, Australia’s forecast FTA 2021-2026 CAGR of 3.7 percent represents a strong position relative to other mature global markets such as the United Kingdom (0.27 percent) and Canada (1.84 percent).

On Demand the growth driver

Traditional linear television continues to go through a time of transformation, driven by the changing behaviours of audiences. Linear television is forecast to see a CAGR of -3.0 percent through 2026, falling to A$2.9b billion, based on the midpoint scenario. Whilst linear itself continues its structural decline over the forecast period, a shift to digital content consumption will keep the sector in growth overall.

According to a report commissioned by the Department of Infrastructure, Transport, Regional Development and Communications9, Online Video viewership overtook FTA television for the first time in 2021. The report found that last year, 83 percent of Australian adults made use of online video services, while only 77 percent tuned into terrestrial FTA. The shift to digital TV consumption is driven in part by BVOD, strengthening its position in the market as audiences choose on-demand programming, catch up content, and increasingly stream live linear FTA content. BVOD is forecast to see a strong CAGR of 34.2 percent through 2026, as audiences continue to consume Australian broadcaster programming in a transformed digital, customised experience.

Total Free-to-Air Market by Sub-Segment (A$ millions)

The rise of Total TV

2021 was a year the phrase ‘Total TV’ came to greater prominence, with networks no longer referring to a separation between linear TV and BVOD, rather their connection. Modern consumers have the ability to move fluidly between their TV sets, mobile phones and other smart devices. Although providing an agile experience for audiences, this has previously resulted in significant fragmentation and a challenge for marketers to measure reach. A driver for this is believed to be a shift towards people streaming linear through BVOD, while BVOD viewership in general continues to grow.

2021 was also a year dominated by the return of sport, with major events, particularly the delayed 2021 Tokyo Olympics10, drawing in viewers. The Seven network utilised their BVOD platform to extend their coverage of the Olympics, giving audiences a broader opportunity to consume live and on demand content.

Catch-up for reality programing including The Block, Married At First Sight, Masterchef Australia, Love Island, Survivor and The Bachelor reman as strong draws for BVOD audiences, with networks also looking to differentiate via back catalogue content.

Underpinning this ‘Total TV’ transition is the development of industry audience measurement capabilities, with the launch of OzTAMs Virtual Australia (VOZ) paving the way for linear and digital platform audience reporting. While the rollout of this measurement system may have been slightly slower than the industry originally anticipated — delayed until mid-2021– the ability for buyers and publishers to more fully understand cross-platform TV viewership is a welcome development which will likely support advertiser investment into Australian broadcasters through the forecast period.

Popular entertainment shows were once again dominated by reality formats, with Married at First Sight, The Voice and The Block all having multiple episodes with audiences surpassing the one million mark in linear TV ratings in 2021. This trend is continuing in 2022, with an episode of Married at First Sight in early March attracting a linear television Total People audience of 1,672,000 viewers. However, when inclusive of the full watching period, the total viewership increased to 2,212,00011, highlighting the importance of cross-platform measurement to deliver an accurate representation of audience scale.

Connected TVs create prominence challenge

Whilst Australia’s FTA TV networks continue to grow audiences and revenue through their respective BVOD services, a growing area of concern in the industry is that of “prominence”. Unlike in the pre-digitised era with simple ABC-7-9-10-SBS on the dial, BVOD apps now must compete with a broader set of apps either pre-loaded or available to download on connected TVs. As such, broadcasters are increasingly required to negotiate with TV hardware providers to ensure their BVOD app’s visibility within TV operating systems. The greater competition in this space highlights the importance for BVOD providers to differentiate themselves by providing improved user experiences and content options for audiences to remain top of mind and drive usage.

A government-backed Future of Broadcasting Working Group was launched in early 2022, with the aim of developing an industry view on how this issue may be solved to ensure a fair and level playing field for BVOD and SVOD platforms. Similar reviews have been delivered overseas in recent years with the UK’s Ofcom delivering recommendations in 2019 for legislation to ensure viewers can continue to find and access the UK’s public broadcasters’ linear and on-demand services, across a range of connected devices and protect the prominence of broadcaster content that is made available without charge.

Internet Video advertising

All video remains a driving force within the sector

Online video advertising revenue is by no means limited to BVOD. The total online video segment in lept a further 33.1 percent in 2021 to A$2.74 billion and this growth is expected to remain healthy throughout the forecast period. Short form video as an advertising format continues to grow its popularity among advertisers due to typically lower price points and scalability for short term brand awareness.

Forecast growth across both in-stream and out stream video advertising revenue can be attributed to consumers’ increased usage of video streaming services. YouTube, Facebook, Instagram, Snapchat, and relative newcomer, TikTok, remain dominant, though most major internet portals such as, Nine and Yahoo! now have significant video revenue streams.

Social video becomes shoppable video

Having only officially launched in Australia in 2019, TikTok now reaches over 7 million Australians over the age of 18, each spending an average of 23.4 hours per month on the app12. For comparison, 22.6 trillion minutes of TikTok were watched globally in 2021, more than double the 9.6 trillion minutes of Netflix13.

Not limited to TikTok, social video platforms are rapidly becoming a central part of the trend towards ‘shoppable ads’. Influencer marketing has been on the rise for some time, engaged by marketers to showcase products to their followers through sponsored posts, reviews and hands on-demos. Increasingly, technology platforms are offering in-video advertising options — so called shoppable video. These formats within TikTok, YouTube, Instagram, Facebook, Snapchat, Pinterest and others are offering marketers the capability to directly connect consumers to the products they see in marketing videos. In a hark back to shopping TV channels, this reduces resistance between video and purchase and is likely to push further growth in the online video segment through the forecast period.

Total Online Video Market (A$ millions)

Subscription TV

The Australian streaming landscape is more diverse than ever, but this isn’t always good for consumers who may find the content they want to watch spread across more platforms than they are willing to pay for.

Total Subscription TV Market (A$ millions)

Over 75 percent of households were paying for a streaming service in 2021, which is expected to rise to over 80 percent by the end of 202214. The average household pays for 2.3 subscription television services, spending A$40 per month15 on video streaming services in 2021, rising to A$55 when all forms of entertainment subscriptions are included16. The Australian sector was valued at over A$4.82 billion in 2021, and is forecast to grow to over A$6.51 billion by the end of 2026 at a CAGR of 6.2 percent based on the midpoint forecast.

Australians have even more choice when it comes to streaming services

The Australian streaming landscape is more competitive than ever, with Netflix, Stan, Binge, Amazon Prime Video, Apple TV+, Disney+, and more recently launched in 2021, such as Paramount+. This is on top of more niche streaming services, such as BritBox, Shudder, AMC+, Hayu, and the recently launched news specific service, Flash.

Despite this, Netflix was still the number one streaming service in Australia reaching over 12.8 million Australians (14+) according to Roy Morgan research released in early 202217. Foxtel’s portfolio of services retains the second spot, growing 23 percent to reach over 7.1 million citizens when compared to October-December 2020. Stan, Amazon Prime and Disney+ are each watched by over 4 million Australians on a monthly basis according to the research.

Netflix increases prices and aims to crack down on account sharing

Netflix further increased its local prices at the end of 2021, with its most expensive tier now priced at A$22.99 per month. This makes Netflix the most expensive non-sport streaming service available in Australia.

For the first time in a decade, the streaming giant lost subscribers. Its first-quarter earnings showed a loss of 200,000 subscribers globally, and it expects a loss of a further two million subscribers by the end of the second quarter18. Netflix didn’t provide information as to how many of these losses occurred in Australia, and it remains to be seen if this was simply a blip or a sign of things to come.

It is believe Netflix hopes to counteract these reported subscriber declines by addressing account sharing -- which the platform estimates occurs in over 100 million households globally. A new feature is currently being tested in markets such as Chile and Peru, and adding on a sub account could cost Australians an extra $3 or $4 per month if the feature launches locally19. Local research suggests 24 percent of Australians are using a friend or family member’s Netflix account20.

Netflix increases prices, looks to ad-supported services and aims to crack down on account sharing

Furthermore both Netflix and Disney+ are reported to be introducing more affordable, ad-supported price tiers this year. In addition to making these services more accessible to price sensitive customers, advertising creates a new revenue pillar for these businesses. Analysts estimate that Disney+ will generate US$1.8 billion US ad revenue by 2025, and Netflix21 US$1.2 billion.

Sports streaming is becoming increasingly fragmented

Sports-focused streaming services have gone through a major upheaval over the last two years, thanks to new entrants in the space. Foxtel (Kayo), Stan Sport, Optus Sport, Paramount+, and Amazon Prime are now all competing for local sporting rights.

This saw Optus spend A$600 million to retain its Premier League rights until 2028, making it the biggest international sports right acquisition in Australian history22. As a result, Optus will no longer offer Optus Sport to its mobile and internet customers for free. Optus customers will instead pay A$6.99 per month, while non-Optus customers will pay A$24.99 per month, up from A$14.99 per month.

Foxtel’s Kayo also increased the price of its basic plan from A$25 per month to A$27.50 per month. This fragmentation of rights across services creates challenges for consumers to both know where they can access their favourite sports, on top of increased costs. Where a Foxtel Sports bundle may previously have cost ~A$30 as part of a wider subscription and cover the majority of non-free to air sports coverage, consumers are now faced with up to A$80 in stand alone or add-on fees for sports coverage accesses.

Streamers could face local content quotas

A Federal Parliament report from late 2021 recommended that streaming services should be forced to spend at least 20 percent of their local revenue on Australian content, including drama, documentaries, and children’s programs23. This idea may have been inspired by countries that have legislated similar sized obligations for VOD companies. France requires a 20 percent investment of earned revenue in producing domestic content. Italy requires up to 20 percent of net revenue to be invested in purchasing domestic and European content from independent producers. However, most other countries have a 1-2 percent obligation, or no obligation at all.

Amazon and Netflix have both made considerable investment in original Australian content in the last few years. It was expressed in the Federal Parliament report that this investment could decline over time without a regulatory framework in place.

Piracy is back on the rise

In 202124, 30 percent of Australians consumed some content online unlawfully, up from 15 percent in 201925. The wider availability of legal alternatives such as Netflix was attributed to piracy’s initial local decline, but experts are concerned that the growing number of streaming services has customers returning to illicit content consumption.

Transition and blurring lines in subscription entertainment

Foxtel’s latest set-top box allows customers to access the pay TV’s content without the need for a cable or satellite connection, further supporting the business’s digital transition. Foxtel will no longer have access to the Telstra cable network as of June next year, and as such, has been migrating customers to satellite connections since 2018. Satellite installation isn’t always practical so an internet driven set-top box is a natural solution.

Moreover, Foxtel has seen continued growth in subscribers to its Kayo, Binge and recently launched Flash services.

In another example of blurring of models, Netflix started offering its subscribers access to mobile video games at no extra cost late in 2021, playable on iOS and Android devices. The streaming service has acquired three game developers in less than a year and currently offers 23 games as of mid 2022.

Subscription services are also becoming increasingly common with Microsoft and Sony now both ostensibly offering “Netflix but for games” options for their respective consoles, where players get access to a large pool of titles for a small monthly fee.

Filmed Entertainment

In what was another year hampered by disruption and forced closures, the industry has moved to a period of ‘fluid recovery’, as the sector normalises after two turbulent years.

With tentpole releases either delayed, having release windows shortened, or for some, sent straight-to-streaming, 2022 is set to deliver the cinematic content consumers and exhibitors alike have been waiting for since the pandemic began.

Despite the challenges of 2021, government support and the investment in Australian film production continued26, as production resumed on Elvis, and commenced on Thor: Love and Thunder27, with the respective films slated to hit screens in June and July 2022.

With film-watching largely taking place at home over the past two years, exhibitors have felt pressure now, more than ever, to create unique and premium theatrical propositions that entice people out of their homes, and can compete in this streaming age.

Total Filmed Entertainment Market (A$ millions)

Total Box Office Revenue (A$ millions)

Total Cinema Advertising Spend (A$ millions)

With a backlog of supply, the sector’s recovery was supported by the progressive rollout of new releases, and the innate ability of cinema to tap into consumers’ sense of nostalgia

After slumping in 2020, the past year saw the industry start to climb back, growing 8.7 percent on the previous year. Though box office revenue took the sharpest dive in 2020, falling 67.3 percent year-on-year, it grew 50 percent in 2021 to A$605 million, and it’s tipped to reach A$1.22 billion by 2023 — a return to pre-pandemic levels. This optimism in the industry is shared by all major markets, with forecasted 2021- 2026 compound annual growth rates for Australia, the US, and UK all exceeding six percent.

Theatres are seeing supply continue to build, with both studios and distributors working through the pandemic induced backlog, and audiences are finally getting to experience an array of heavily anticipated titles such as No Time to Die, Dune and Top Gun: Maverick. The wait did not disappoint, with No Time to Die coming in second in the 2021 Australian box office with A$34.3 million, following Spiderman: No Way Home which amassed A$55.27 million over the year. Australian film Peter Rabbit 2 brought in A$21.96 million, pipping the Screen Australia-supported film, The Dry, on A$20.1228 million. In 2022, Top Gun: Maverick has pulled in A$59.5 million in four weeks (as at 23 June 2022), leading the 2022 Australian box office by A$20 million29.

Cinemagoers have, initially at least, returned to theatres, with exhibitors citing up to 90 percent of frequent moviegoers have been back, albeit on a less frequent basis. In making this return, exhibitors have noted relative increases in food and beverage spend per head, even rising above pre pandemic levels with consumers seemingly excited by the chance to leave their living rooms and treat themselves to the nostalgic things they used to, including movie popcorn and choc tops on a night out. However, engaging lower frequency consumers and older audiences continues to remain a challenge for exhibitors, though the increased diversity of the 2022 movie slate may change this.

Total Filmed Entertainment Market CAGR 21-26 by Country (%)

Theatres and streaming platforms: rivals or partners?

During the heights of the pandemic, the approach to film releases was turned on its head. A number of studios that had straight-to-consumer offerings were able to pivot their planned theatrical releases to these platforms, and this approach has lasted as late as March 2022, with Pixar’s Turning Red being released direct to Disney+ despite the picture’s expected widespread appeal.

For films that did make it to the silver screen, many did so with shortened release windows before moving to streaming services. Despite gaining global recognition via award wins in early-2022 — including the Academy Award for Best Picture — Apple’s CODA received only a limited box office release in mid-2021. With a same day release on Apple TV+, the award winning film only managed to pull in US$1.6 million from the box office30. Whilst the straight-to-streaming model provided new content to consumers at a time when many were confined to their homes, in emerging from the pandemic, uncertainty remains about whether traditional theatrical release windows will return in the new world.

Industry leaders have contended that those studios with straight-to-consumer offerings understand that keeping a theatrical release window is imperative, with the revenue source likely too great to forgo31. Theatrical release window length is expected to fluctuate for the foreseeable future as some exhibitors opt for longer windows to maximise potential gains, particularly in the case of blockbusters, while others will shrink to 45 day windows to quickly transition to streaming platforms. This was the case with 2022’s The Batman moving to US streaming service HBO Max after approximately 44 days, despite it still playing in theatres32. Conversely, 2021’s Spider-Man: No Way Home and 2022’s Doctor Strange in the Multiverse of Madness both extended their planned theatrical release windows. With more blockbusters to come — including Avatar: The Way of Water, the sequel to the highest grossing film of all time — it is expected that release windows will remain fluid for the foreseeable future.

The accessibility and widespread distribution power of streaming platforms remains a legitimate challenge for theatres, with industry leaders feeling strongly that unless a film has a theatrical proposition it will struggle to get people out of their homes. Though consumers may choose to watch a film, answering the ‘why do I need to see this in the cinema?’ question will be fundamental for studios and distributors alike.

The ‘premiumisation’ of the cinema experience

With the world of movies available from our living rooms, consumers are demanding more from out-of-home activities, wanting both the content and experience quality to be worth their while. Coming out of the 2021 lockdowns, exhibitors have seen a greater uptake of more premium in-cinema experiences, such as HOYTS LUX or Event Cinemas’ Gold Class. Perhaps initially driven by the desire for social distancing, cinemas continue to see consumers choosing these experiences, with many inclined to ‘treat’ themselves.

This desire for rich experiences extends beyond the physical to the sensory. With ‘at home’ consumer audiovisual technology reaching new heights, consumers are expecting more from their out-of-home experiences. Exhibitors are responding, with industry players committing further investment in audiovisual infrastructure to ensure a differentiated viewing experience. Hoyts in particular is reported to have spent A$250-300 million in the last eight years on capital improvement, readying themselves for the ‘streaming era’33. Technologies including Samsung Onyx and DOLBY ATMOS have been embraced by some cinemas, offering far more advanced visuals and sound than anything consumers could experience at home, with exhibitors using these experiences to set themselves apart.

Capital improvements and audiovisual technology aside, exhibitors continue to focus on ways to reinvigorate and enhance the cinemagoing value proposition for consumers, and heighten the sense of occasion in a cinema visit. Whilst exploring alternative content is not new for cinemas, exhibitors continue to experiment with hybrid experiences, mixing film with live music, trivia, or karaoke, and live screening concerts. BTS’ ‘Permission to Dance on Stage’ beamed direct from Seoul, Korea in early 2022 and achieved box office success, with bands such as Twenty One Pilots also releasing ‘one night only’ cinema experiences this year34.

The summer of 2021 saw Sydneysiders getting to experience Wonderdome, an immersive cinematic ‘pop up’, which showcased films in a 360-degree dome35 that felt more planetarium than it did theatre. While in the US, the Sundance Film Festival has held a ‘metaverse’ version of the event for the past two years, where attendees could ‘sit’ in a virtual ‘cinema’, and enjoy the screened films. Reportedly, this felt incredibly similar to an in-person experience, so much so, attendees could see heads bobbing and hear people talking36.

Though cinemas largely play in the physical space, the industry remains vigilant of the digital world, and how they can continue to provide the unique, sensory, and premium cinematic experiences to differentiate themselves and give reason to consumers to continue visiting in person.

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Laurence Dell

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Partner, PwC Australia

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Jeremy Thorpe

PwC Chief Economist, PwC Australia

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Contact us

Laurence Dell

Partner, PwC Australia

Tel: +61 386 032 151

Dan Robins

Director, CMO Advisory, PwC Australia

Tel: +61 439 531 447

Samantha Johnson

Partner, PwC Australia

Tel: 61 2 8266 7458

Jeremy Thorpe

PwC Chief Economist, PwC Australia

Tel: +61 416 245 535