PwC Predicts Global E&M Revenues

According to a five-year outlook recently released by PwC (PricewaterhouseCoopers), global entertainment and media revenues are expected to rise from $1.7 trillion in 2015 to $2.1 trillion in 2020.
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New York, NY (June 13, 2016)—According to a five-year outlook recently released by PwC (PricewaterhouseCoopers), global entertainment and media revenues are expected to rise from $1.7 trillion in 2015 to $2.1 trillion in 2020.

According to PwC, the compound annual growth rate (CAGR) of 4.4 percent in nominal terms represents a slowdown from last year’s 5.5 percent growth in industry revenues, and will lag behind overall global economic growth through 2020. The outlook forecasts U.S. E&M spending to reach $720 billion by 2020, from $603 billion in 2015.

PwC’s annual Global Entertainment and Media Outlook 2016-2020 is an in-depth five-year prediction of global consumer spending and advertising revenues directly related to entertainment and media (E&M) content. The company has been studying 13 entertainment and media segments across 54 countries for the past 17 years.

E&M spending is reportedly growing more rapidly than GDP (gross domestic product) in 36 of the 54 countries. Top of the list is Venezuela, where E&M spending growth is projected to outpace GDP growth by more than 14 percentage points in 2016. “Many of the most populous entertainment and media markets—including Brazil, Pakistan and Nigeria—will also produce comparatively higher entertainment and media growth rates,” according to the report.

PwC predicts that U.S. total music revenue, including concert receipts, recorded music sales and digital streams, and satellite radio, will grow at 3.5 percent CAGR to just over $18 billion over the forecast period. Over $4 billion of that will be streaming revenue, which is expected to grow at a rate of 21.6 percent and drive overall growth at an accelerated rate compared to previous years.

The outlook notes that digital recorded music revenue exceeded physical for the first time in 2015 and music streaming is taking a rapidly-rising share of overall global recorded music revenue. “However, digital downloads are under growing pressure from streaming, as consumers shift away from owning music and towards paying to access it through providers such as Spotify and Apple Music. Driven by digital growth, total global music revenue will rise at a 2.1 percent CAGR to $47.7 billion in 2020.”

According to the outlook’s estimate, live music revenue will increase 4.7 percent to $9.3 billion in the U.S. through 2020. New strategies and revenue streams have emerged as a result of an increasing dependence on live music. “[A]rtists are now more dependent on earnings from live music performance than ever before. This shift from recorded music to live has changed the economics of the industry, with record companies extending their revenue streams to include live performance, and concert promoters expanding into artist management. Total live music revenue will rise at a 3 percent CAGR through 2020.”

Traditional radio broadcasting, growing at a modest 2.1 percent, continues to be challenged by digital streaming services, the outlook finds, and in-car listening is under threat from new interactive dashboard technologies from Apple, Google and others. “[T]raditional radio broadcasters must have a strong mobile Internet presence or face losing out to digital streamers,” according to the report.

As for filmed entertainment, China is opening an estimated 15 new screens every day and will overtake the U.S. in 2017 in box office revenue, according to PwC. By 2020, box office revenues in China are expected to reach $15.1 billion, versus $11 billion in the U.S.

Revenue from TV and video is expected to rise only a very modest 0.5 percent CAGR to $124.2 billion in 2020. However, two years earlier than last year's outlook projected, electronic home video sales eclipsed box office sales in 2015, $11.2 billion (9 percent CAGR) versus $10.3 billion (1.2 percent CAGR).

The outlook predicts internet access revenue will rise to $181.7 billion (7.2 percent CAGR) through 2020. “Internet users are increasing the time they spend with digital media—especially rich media such as video, which is expected to rise to 85.5 percent of total data traffic by 2020,” it states.

“Considerable investments are being made to improve infrastructure speed and quality to enable both the traditional use of Internet access as well as streaming online television, videos, video games, and other media consumption. The need to profitably grow, reach a large audience at scale, and engage users online is creating a very attractive M&A [mergers and acquisitions] environment,” observes PwC.

The first high-end consumer virtual reality headsets are now coming onto the market, making 2016 VR’s breakthrough year, says PwC. “While they’ll initially be the preserve of serious gamers, the quality of the experience such devices offer will set the scene for a wider consumer sales drive in 2017 and 2018. However, the content-based business models for VR devices will take longer to develop—and significant revenues in this space will not arrive until 2018 and beyond.” The outlook expects VR on mobile devices with cheap headsets will go mainstream during 2016.

The report identifies five key “simultaneous and interrelated” shifts playing out currently and over coming years:

Age appears to have a major influence on growth, irrespective of a country’s wealth, it states. “[O]n average, entertainment and media spending in the 10 youngest markets is growing three times as rapidly as in the 10 oldest markets.”

Content is still king, “But the reality is that content is being redefined by forces of globalization and localization simultaneously—and that while much of the industry is growing more global, content tastes and cultures remain steadfastly local.”

While consumers may now “design and curate their own media diet,” says PwC, “[W]e believe the bulk of digital OTT mass-market services will gradually be reabsorbed into aggregated offerings that will echo the traditional analogue-style bundle, but that will be more flexibly priced and available on a full range of devices. When this happens, the competitive battle may move up a notch, as cable, technology, and telecom players fight over gaining access to distribution.”

In terms of geography, “[B]eyond zeroing in on the fastest-growing markets, such as Indonesia, India and Peru, entertainment and media companies must continue to focus on those that are generating the greatest absolute dollar growth—such as the U.S. and China.”

The fifth and final shift is the transformation of M&E business models: “Today’s entertainment and media market includes technology companies racing to become hybrid content companies, and traditional publishers evolving the other way to emerge as hybrid technology companies.”

PricewaterhouseCoopers
www.pwc.com