Consumer habits can take a lifetime to learn but just a lockdown to lose. The entertainment and media world in 2020 has become more remote, more virtual, more streamed, more personal and for now at least more centred on the home than anyone anticipated at the start of the year. The annual Global Entertainment and Media Outlook from PwC records a decline of $120 billion in sector revenue but forecasts a recovery in 2021 and a return to growth with an accelerated transition to digital media.
The pandemic has accelerated and amplified ongoing shifts in consumer behaviour, pulling forward digital disruption and forging industry tipping points that wouldn’t have been reached for many years.
Amid a global recession, 2020 will see the sharpest fall in global entertainment and media revenue in the 21-year history of this research, with a decline of 5.6% from 2019. That is more than $120 billion.
While the shockwaves from 2020 will continue to ripple through the global economy, media experiences have become ever more central to our lives. PwC forecasts that entertainment and media spending will recover by 6.4% in 2021 and at a compound annual growth rate of 2.8% through to 2024.
Online video subscription revenue will overtake cinema box office in 2020 and is projected to surge away in the coming five years, reaching more than twice the size of box office in 2024.
With people staying at home, global online video revenue rose by 26.0% in 2020. It will keep rising strongly in the coming years, almost doubling in size from $46.4 billion in 2019 to $86.8 billion in 2024.
Werner Ballhaus, the global entertainment and media industry leader at PwC said that the coronavirus pandemic had accelerated the transition to digital. “While there will still be challenges for entertainment and media companies as we move beyond the pandemic, the digital migration that it has pulled forward will also generate opportunities in all segments, not only those that have benefited from its impacts to date.”
In the United Kingdom, PwC forecasts entertainment and media will fall by 6.7% in 2020 compared to 2019. The market will recover in 2021 and over five years is forecast to grow at a 2.83% compound annual growth rate to be worth £79.8 billion by 2024.
Online video has seen revenue surge by 18.6% in 2020 to £1.7 billion. Growth will continue at a compound annual growth rate of 10.5% to £2.3 billion by 2024, dominated by online video subscription services.
The video games industry in the United Kingdom is forecast for 9.4% growth in 2020, amounting to £5.3 billion, and the sector will be worth £6.8 billion by 2024.
With people using video streaming for everything from meeting friends to consulting their doctors, online access, notably mobile acccess, became an even more vital part of staying connected and everyday life. Mobile access spending is estimated to have risen by 4.7% in 2020 to £7.8 billion, overtaking that for fixed access and projected to continue to rise at 7.3% a year.
The media industry of 2020 is much better placed to cope with a disruptive event such as this pandemic than it was at the beginning of the century. There is less reliance on print, there are more subscriptions rather than ad-funded models, streaming is mainstream, and many media companies are more ‘digitally’ enabled to facilitate remote working and continue content creation and distribution.
“Parts of the media sector have been hit very hard by the Covid-19 pandemic, particularly in-person activities or those reliant on advertising revenue,” said Mark Maitland, the head of entertainment and media for PwC in the United Kingdom. “This will drive a 7% decline in sector revenues in 2020, but in recent months we have already seen improving performance, and as such, we expect the sector revenues to return to 2019 levels in 2021.”
“Some parts of the sector, such as gaming and OTT video have been beneficiaries during the pandemic, and we expect these to continue to prosper with many ‘lockdown habits’ continuing far beyond lockdown,” he continued. “For sectors adversely affected by the pandemic, this has brought forward some of the digital disruption prophesied to come years later and it has reinforced the digitisation of the industry. This is reflected in industries that are forecast to claw back their lost revenue are ones being driven by or have embraced technology as a way to connect with consumers.”
The annual report suggests that changing consumer behaviours will clearly disrupt some business models but will also open up new opportunities for capturing growth.
During the crisis, consumers have sought out entertainment and media content that is easy to access and easy to use at home. They are likely to hold on to some of their newly acquired habits, spending more time at home, with less international travel, fewer live events, and more playing games or socialising online with friends and family. Entertainment and media businesses that can cater to these enduring shifts in consumer behaviour by providing them with convenient and accessible content are likely to continue to prosper.
Companies can tap into unmet demand arising in the ‘new normal’ by exposing consumers to new types of digital media tailored to the unique needs of individuals.
As consumers have more and more content to choose from and become more and more demanding about the content they want to consume, players that cater to this need through unique content and sophisticated recommendation engines are going to capture a bigger share of wallet.
While consumers will try out new products and services, they will also cut expenses where possible and expect higher-quality content for which they are reluctant to pay a premium. This means providers have to re-price regular products to match demand and supply in such a way as to capture the full elasticity of demand.
Global Entertainment and Media Outlook 2020-2024 is published by PwC. It provides like-for-like, five-year historical and five-year forecast data and commentary for 14 defined industry segments in 53 territories.