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Burgeoning entertainment and media industry segments such as virtual reality (VR), e-sports and music streaming illustrate an intensifying focus on users and the vital role of ‘fans’ as a source of competitive advantage.
According to consultancy firm PwC’s Global entertainment and media outlook 2017-2021, the consumer VR content market will grow at a compound annual growth rate (CAGR) of 77.0 per cent over a five-year period and be worth $15.1 billion (€13.4bn) by 2021. Meanwhile, total global e-sports revenue will rise to $874 million in 2021, increasing at a 21.7 per cent CAGR, and music streaming will experience a 20.7 per cent CAGR over the five-year forecast period.
“Accelerating change in technology, user behaviour and business models has opened up a gap between how consumers want to experience and pay for E&M offerings, and how companies produce and distribute them,” said Deborah Bothun, PwC Global Entertainment and Media Leader. “The right user experience bridges this gap. To deliver it, companies must pursue two related strategies. First, build businesses and brands anchored by active, high-value communities of fans, united by shared passions, values, and interests. And second, capitalise on emerging technologies to delight users in new ways and provide superior user experiences.”
Rapid advances in technology drive direct-to-consumer strategies
As companies compete to create the most desired user experiences, advances in technology are at the heart of their strategies. Combined with a great user experience, companies can harness technology and data to create a virtuous circle—one in which increasing consumer engagement and attention lead to the capture of more data and more insights into what users want. Increasingly the models used to achieve this monetisation are founded on direct-to-consumer (D2C) strategies, enabled by technology and characterised by greater choice and user control.
“Amid an ever-greater supply of media, businesses that are fan-centric will find themselves with audiences that are more engaged, more loyal, and spend more per capita,” said Christopher Vollmer, PwC Global Advisory Leader for Entertainment and Media. “To thrive in the experience-driven marketplace characterised by this year’s Outlook, companies need to attract and harness the economic, social, and emotional power of fans.”
E&M growth will lag GDP as advertising comes under pressure
PwC projects the entertainment and media will grow at a CAGR of 4.2 per cent, lagging behind the growth of global GDP. Global advertising revenue will also grow at a CAGR of 4.2 per cent—down from 5.1 per cent in last year’s Global entertainment and media outlook. This slowdown reflects pressures on ad-supported business models, driven by consumers’ preference for ad-free experiences and advertisers’ dissatisfaction with the current measurement capabilities available with digital media. While advertisers are still willing to spend, growth in ad spend is now overwhelmingly driven by Internet advertising.
Mobile advertising is growing apace—but still needs better measurement practices
The growth of Internet advertising is being powered by mobile advertising, which grew by 58.7 per cent in the past year, and will continue to expand at an 18.5 per cent CAGR through 2021. But despite this growth, wired Internet advertising still accounted for 61.6 per cent of total Internet advertising in 2016. Also, the robust growth of Internet advertising actually masks an embedded form of inertia. Without accepted measurement practices to provide transparency on the efficacy and efficiency of the major platforms, premium brands are reluctant to take on perceived risks in concentrating more of their advertising in digital mediums, resulting in larger agencies and their clients holding back their ad dollars.
Major digital tipping-points are occurring or in prospect across all segments…
…and in geographies worldwide
“In many of the largest markets, and hence in the industry as a whole, entertainment and media businesses are approaching or have reached a form of saturation,” said Bothun. “This effectively puts us on an industry plateau—one where some traditional, mature segments are in slow growth or decline, the Internet and digital E&M content are growing but at a slowing rate, and the next wave of content and entertainment is in areas such as e-sports and virtual reality that are just beginning to ramp up.”
According to PwC, there are immense opportunities for navigating and thriving within the challenges of a mature market, technological change and regulatory uncertainty. Not all markets or segments are slowing or in decline. Moreover, not all growth opportunities are captured in E&M revenue spend categories. The data, analysis and perspectives in the Global entertainment and media outlook provide compelling insights into how companies are adapting, investing, experimenting, and innovating to succeed in this new world, says the firm.