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Analysis: E&M revenues rebounding strongly

July 12, 2021

The global entertainment & media (E&M) industry has regained its momentum, with revenues outpacing the economy as a whole, according to advisory firm PwC’s Global Entertainment & Media Outlook 2021-2025.

The $2+ trillion (€1.6tn) industry is on track to grow 6.5 per cent in 2021 and 6.7 per cent in 2022, fuelled by strong demand for digital content and advertising. The renewed growth follows a challenging 2020, when in-person entertainment plummeted, including a 71 per cent decline in movie theatre box office revenues.

Other findings in this year’s Outlook include:

  • The 3.8 per cent decline in global E&M revenue, from $2.1 trillion in 2019 to $2 trillion in 2020, was the biggest year-on-year drop in the Outlook’s 22 years. But there were bright spots in a number of E&M segments created by shifting consumer demand.
  • From 2021 to 2025, PwC projects global E&M revenue to grow at a healthy compound annual growth rate (CAGR) of 5 per cent, taking industry revenues to $2.6 trillion in in 2025.
  • Traditional TV/home video remains the largest E&M consumer segment ($219 billion) but will continue to shrink (-1.2 per cent CAGR) over the next five years.
  • Video streaming boomed in 2020 and its growth trajectory will continue. SVoD is projected to grow at a CAGR of 10.6 per cent to 2025, making it an $81.3 billion industry. Meanwhile, cinema revenues are projected to rebound in 2021 as lockdowns ease but will not recover to pre-pandemic levels until at least 2024.
  • Video game and eSports revenues continue their rapid ascent, reaching $147.7 billion in 2020, with a 5.7 per cent CAGR projected to expand the segment to become an almost $200 billion business ($194.4 billion) by 2025.
  • Virtual reality (VR) is the fastest-growing E&M segment, albeit from a small base. Its revenues surged by 31.7 per cent in 2020 to $1.8 billion and are projected to sustain a CAGR of 30 per cent+ over the next five years to reach $6.9 billion business in 2025.
  • Music is poised for robust growth following a massive 74.4 per cent slump in live music revenues in 2020. PwC expects total music revenues to grow at a 12.8 per cent CAGR over the next five years, fuelled by digital streaming, which will expand to become a $29.3 billion business by 2025, along with a return to live performances.
  • Spending on Internet advertising rose by 9 per cent to $336 billion in 2020, overtaking non-Internet ad spending for the first time, and is projected for strong growth of 7.7 per cent CAGR over the next five years.
  • Internet access accounted for 34 per cent of E&M spending in 2020 and will increase at a 4.9 per cent CAGR, from 2020’s $694 billion to $880 billion in 2025. Mobile Internet access will drive market growth, with revenues rising at a 6.1 per cent CAGR from $449 billion in 2020 to $605 billion in 2025, underpinned by the spread of 5G, advances in handset technology, and premium content bundles.

“The pandemic slowed the entertainment and media industry last year, but it also accelerated and amplified power shifts that were already transforming the industry,” advises Werner Ballhaus, Global Entertainment & Media Industry Leader Partner, PwC Germany. “Whether it’s box office revenues shifting to streaming platforms, content moving to mobile devices, or the increasingly complex relationships among content creators, producers and distributors, the dynamics and power within the industry continue to shift. Our Outlook shows that the hunger for content, continued advances in technology and new business models and ways of creating value will drive the industry’s growth for the next five years and beyond.”

Generational shift: youth will be served

Not surprisingly, many younger consumers have little awareness of, or interest in, traditional media. On the other hand, media platforms designed for young consumers or that enable lightly-produced, authentic content have boomed. Gaming is central to the youth movement and is becoming a significant driver of data consumption – in fact it is on pace to be the fastest-growing content category in that regard, accounting for 6.1 per cent of total data consumption globally by 2025, up from 4.7 per cent in 2020.

Regulatory shifts: pushback on platforms

The regulatory scrutiny of big tech is yet another shift impacting E&M. Antitrust pressures have increased with calls to break up big tech platforms along with government proposals for new media regulations. Changes to current regulatory regimes are inevitable and it’s vital that E&M players incorporate regulatory risks in their planning processes.

“Even in the areas that offer the most compelling top-line growth – like video streaming – the nature of competition is likely to change dramatically over the coming years,” predicts Ballhaus. “And all the while, the social, political, and regulatory context in which all companies operate continues to evolve in unpredictable ways. All of which means that sitting still, relying on the strategies that created value and locked up market share in the past, will not be the most effective posture going forward.”

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