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Five major shifts affecting the entertainment and media industry
The COVID-19 pandemic brought forward consumer’s digital consumption habits and dramatically curtailed in-person entertainment.
Habits formed in 2020 are continuing to affect the entertainment and media industry, with power shifting on multiple fronts.
While many industries won’t find immediate recovery, opportunity abounds for companies that adapt fast enough to make the most of a market where power is constantly shifting.
With 20 years of insights under its belt, PwC’s annual Australian Entertainment & Media Outlook has certainly seen some change. Last year, the meaning of change was taken up a notch as lockdowns upended consumer behaviour. As this year’s Outlook shows, a lot of those changes have settled in to stay.
The future of the sector is still being largely shaped by the changes in consumer behaviour that have emerged in the previous year, namely an acceleration of digital disruption arriving years before its predicted peak. More than a year on from the pandemic’s beginning, these tipping points have coalesced into a series of power shifts that are reshaping media and entertainment segments, and the industry as a whole.
A shifting landscape
The main shift, of course, is that due to lockdowns and the shutdown of many in-person venues, consumers have moved their consumption to digital services. While cinema box office sales plummeted and live music shut down, the availability, breadth and catalogue of content options increased in on-demand streaming and gaming/esports.
With an explosion in options of what to watch, read, listen to and play, consumers are now firmly in control of how they spend their time and money. Advertisers, partly relying on traditional platforms such as free-to-air TV, radio and newspapers are presented with a challenge. Moreover, content isn’t just being consumed by customers, it is being created. The democratisation of content occurring across TikTok, Twitch, and YouTube has both changed the way entertainment hours are spent, and closed the gap between creators and fans.
Power shifts affecting the media and entertainment industry
Advances in technology (such as 5G) have further fueled the reign of mobile entertainment. Key media consumption locations — the lounge room, bedroom and in transit — are no longer device-controlled as options for entertainment grow in availability and quality. Consumers expect to be able to access any type of media, anytime and anywhere.
As a result of these shifts, product and service offerings, customer engagement strategies, business models and the relative strength of participants are changing, and on the way altering the way profits are created, reconfiguring the industry.
Key highlights
While the outlook for revenue at an industry level remains robust, the impact on industry segments have varied. Some findings from the Outlook:
Interactive games & eSports — Total interactive games and esports revenue in Australia reached AU$3.41 billion in 2020, and is expected to increase to AU$4.9 billion in 2025 at a healthy 7.5 percent compound annual growth rate (CAGR) between 2019 and 2025. This is slightly higher than the global forecast of 7.1 percent CAGR for the same period. More people are choosing to play games on smartphones with the switch from 4G to 5G and in-game microtransactions continue to fuel growth (at almost a third of total game/esport revenue in Australia). Gaming in general spiked during the pandemic as live sports events were postponed or cancelled.
Television — One of the few winners of COVID-19 related change was the streaming services such as Netflix, Stan, Binge and Disney+, all of which saw significant growth. CAGR for Subscription Video on Demand (SVOD) is expected to grow at 20.4 percent between 2019 and 2025, higher than the global forecast of 13.5 percent CAGR for the 2020-2025 period. Premium ‘box’ services, such as Foxtel and Fetch, however face a decline by -7.1 percent over the same period as consumers go ‘cord free’ with streaming services. Free-to-air (FTA) TV, buoyed by an initial bump in audience numbers during COVID-19 was then detrimentally impacted by the contraction of advertising marketing budgets. The market is expected to return to growth in 2021. While linear TV will continue to decline towards 2025, Broadcast Video on Demand (BVOD) will continue to somewhat offset this loss with a CAGR of 32.7 percent to 2025.
Cinema — Box office revenue in Australia fell by two-thirds year-on-year in 2020 as cinemas were forced to close their doors. Globally, revenue fell from US$40.7bn in 2019 to US$11.8bn in 2020 — and is likely not to recover to pre-pandemic levels until 2024. Streaming providers, however, provided further competition, and with innovation such as ‘direct to platform’ models that see new releases hit smaller screens, bypassing cinemas entirely, the appeal of in-person viewing will need to be a focus for cinemas as people are allowed back.
Books, audiobooks and podcasts — The printed book market saw modest growth in 2020, and it is expected that the Australian book market as a whole will see a modest growth of 1.1 percent CAGR between 2019-2025, and a similar 1.5 percent CAGR globally (printed and electronic).* Audiobooks, while still an emerging market in Australia, are seeing revenue growth and increased competition among major players. In a similar vein, the podcast market is growing steadily, with 25 percent of the Australian population listening monthly.1 The same behavioural shifts leading to increased podcast consumption are benefitting the audiobook sector as a logical extension of the immersive experience.
Music — The suspension of live music led to the music industry in Australia to lose 90 percent of its revenue in 2020. As the whole industry recovers, it's expected to climb at a 3.3 percent CAGR between 2019-2025 (3.0 percent CAGR globally).* It will continue to be supported by major streaming services Spotify and Apple Music. The Australian digital music market grew 8.3 percent during the COVID-19 pandemic, but while enjoying positive growth, it was still slower than in previous years. Global music-streaming revenue is set to rise at an 8.4 percent CAGR to US$29.3bn in 2025.
Challenging times
These are just some of the segments that the Australian Entertainment & Media Outlook: 2021-2025 looks at, so we encourage you to download the report to find out our predictions for newspapers, magazines, and internet advertising, to name a few. For those looking for a global comparison, the Global Entertainment & Media Outlook is also available.
*Note global figures have been adjusted from this year’s Global Outlook to be equivalent to Australia as each looks at different time periods (2020-2025 vs 2019-2025).
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References
- https://www.edisonresearch.com/the-infinite-dial-2021-australia/
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