A lack of diversity in Australia’s media and entertainment workforce in terms of ethnicity, gender, age and thinking is dragging on the industry’s growth, according to a PwC report released today.
PwC’s 15th annual Australian Entertainment & Media Outlook shows that growth in total consumer and advertising spending in the sector grew by 6.4 percent in 2015, compared to 6.8 percent in 2014. The sector grew by 6.0 percent globally and 7.4 percent in Asia Pacific.
According to Megan Brownlow, Editor of PwC’s Australian Entertainment & Media Outlook, the uptick in growth is moderate, in part reflecting our better data capture this year with the inclusion of newspapers’ direct sales bookings and more digital advertising plays. She says the Australian industry is not without its challenges in the long term and should diversify in a number of different ways to ensure future growth.
“As we look across Australia’s media and entertainment landscape there is only moderate growth and pockets of high growth in digital. The online ad spend continues to grow, and consumer spending is growing in areas like interactive games,” Brownlow said.
“We are forecasting low growth ahead, so the time has come for the industry to do things differently. Embedding diversity – in your talent, your geography and your business models – should be considered a strategic imperative in the search for growth.”
Growth in consumer spending in 2015 was 5.1 percent, in a large part due to good performances by the box office and interactive games especially from digital in-game purchases. The advertising market grew by 8.7 percent compared to 9.1 percent in 2014, but revenues were spread over many players and channels. Internet advertising experienced the most growth at 28.6 percent.
For the first time, the Australian Entertainment and Media Outlook also includes geospatial economic modelling to identify who epitomises an entertainment and media industry employee in Australia, finding 82.7 percent of the national entertainment and media workforce are monolingual, speaking only English at home, and the average age is 27.
The modelling also revealed 37 percent of the national entertainment and media workforce live in Sydney and of those, 24 percent live in the eastern suburbs or the inner west. The second highest concentration is in Melbourne, with workers congregating around St Kilda and Richmond.
In radio the homogeneity of on-air talent is even more pronounced, with 75 percent male, white and over 35.
“It turns out the Van Vuuren Brothers’ Bondi Hipster characters are alive and well in media,” Brownlow said. “The average employee in our media and entertainment sector is 27, male, Caucasian and lives in Sydney’s Eastern suburbs or the Inner West.
“Similar to the world we see depicted by media, entertainment and media businesses do not reflect an Australia that’s becoming more diverse by the day. It’s a case of chicken and egg and means the industry is not as well equipped for growth as it should be.
“Studies have shown diversity improves business outcomes. To move the dial in the entertainment and media industry greater focus needs to be placed on tackling unconscious bias and similarity attraction in recruitment.”
Asia opportunity passing us by
PwC's technology, entertainment and media industry leader, David Wiadrowski, believes smart businesses will communicate to the Australia we are now, and gain exposure to high growth markets to our north. He stressed the importance of “not letting the Asia opportunity pass us by”.
“PwC’s research shows that by 2030, four of the world's’ five largest economies in purchasing power parity terms would be in Asia, and the region would account for more than 50 per cent of global GDP. Asia will be home to 3.2 billion members of the consuming class, many of whom will live in 21 of the world’s 37 megacities, which will be located in Asia,” he said.
“There is low growth ahead in the entertainment and media industry in Australia, but by contrast high growth in the regions around us. We need to get better at finding new opportunities overseas, particularly with our neighbours to the near north.”
“However, the problem is we are selling off our entertainment businesses rather than buying into exciting growth markets. There has been a lot of consolidation of Australian businesses and overseas companies coming in for market share, 1 in 4 of which are from the USA.
“There aren’t a whole lot of great success stories when it comes to Australian entertainment and media businesses working on the ground in Asia. When it comes to geographic diversity in this sector similarity attraction, short-termism and risk aversion are alive and well.
“We need to get better at taking risks, making long term bets, and we need to see ourselves differently. Most Asians consider Australia to be part of Asia; we would definitely benefit if we adopted that way of thinking. When Australian businesses go to Asia they must think and act Asian - not the stereotypical Australian approach.”
Business model diversity essential to survive and thrive
The rush of consumer and advertising dollars from traditional media to digital will continue over the next five years. Interactive games are set to be the fastest growing consumer sector, with a compound annual rate of 8.1 percent out to 2020. Internet advertising is on track to account for 50 percent of the total Australian advertising market by 2018, a year earlier than previously projected.
The internet advertising market will reach $10,009 million by 2020, compared to 3,610 million for free-to-air TV, 3,055 million for newspapers, and 1,396 million for radio. Mobile advertising is projected to grow by 169 percent between 2014 and 2016, and to account for 41 percent of the total internet advertising market.
Brownlow believes that to thrive in the rapidly evolving environment companies need to drive both innovation and efficiency.
“Embracing new approaches to content development, distribution, operations, technology, and monetisation is essential. You need to have a number of different revenue streams. Particularly traditional players who are being squeezed by digital as it will help you get back to where you once were in aggregate,” she said.
“Business model diversity has been increasing over the last few years. Publishers have moved into live events, free-to-air television into subscription video on demand, and gaming business models have proliferated with reward for engagement one of the most interesting coming out of mobile gaming.
“To thrive in tomorrow’s environment the industry should approach each new technology as a business model opportunity. We are about to have virtual reality and augmented reality launch into the market. These will enable a myriad of applications for the industry, particularly for high-end and high-margin offerings like luxury goods and services marketing.”
Wiadrowski points to the out-of-home segment as one seemingly traditional media platform that has done really well over the past year, with a compound annual growth rate (CAGR) of 14.8 percent in 2015 compared to 4.0 percent in 2014.
“The out-of-home industry has gone through a revolution over the past year or so with the rollout of digital signs that allow advertisers to serve video ads. This extends TV campaigns to the outdoor environment and has the advantage of not being able to be ‘turned off”. This has resulted in better engagement for advertisers and a better experience for consumers.
“This sector also provides a case study for the potential digital disruption affords. The ability to recognise mobile devices that are within range of particular sites, and overlay other data, will revolutionise the out-of-home advertising sector. The dichotomy between traditional and digital is all but obsolete, if it ever existed in the first place, and businesses that think this way will outrun the rest.”
Over the next five years Australia's total entertainment and media market is forecast to grow at a 4.1 percent compound annual growth rate (CAGR), from $38.9 billion in 2015, to reach $47.4 billion in 2020.
Consumer spending continues to dominate the entertainment and media market, and is expected to grow to $28.7 billion by 2020, a CAGR of 3.7 percent.
Advertising spending is forecast to reach $18.7 billion by 2020, a CAGR of 4.7 percent.
© 2016 PricewaterhouseCoopers. All rights reserved.
At PwC Australia our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
Corporate Affairs Senior Manager, PwC Australia
Tel: +61 2 8266 3175
Mobile: +61 467 654 011