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Power shifts: Altering the dynamics of the E&M industry

Now in its 22nd year, PwC’s Outlook turns its focus this year to the power shifts taking place in entertainment and media, as the industry rebounds from 2020 and consumer habits propelled by the pandemic continue to transform sectors and business models. As in previous years, we’ve taken a deep dive into our wealth of data, forecasts and analyses, to uncover new perspectives and insights that will help you shape your strategies for years ahead.

• More than a year into the most globally disruptive event of most consumers’ lifetimes, COVID-19 remains the unavoidable force driving the dynamics of the media and entertainment industry. Although uncertainty persists due to varied vaccination rates and the risk of resurgent waves of infection from new variants of the disease, we forecast that the combination of vaccines and more developed virus control systems should support a tentative return to normal for most developed nations in the second half of the year. For the media and entertainment industry, consumers’ desire to once again enjoy live music and cinema will be tempered by caution and ongoing venue capacity limitations. Habits accrued during long periods of lockdown and restrictions will remain embedded, and trends already developing prior to the pandemic – namely a growing shift towards digital products and online sales – accelerated by years. And while sectors like cinema, live music, and trade shows suffered unprecedented setbacks, the persistent growth of digitisation softened the blow for the broader industry.
• Total global entertainment and media (E&M) revenue fell -3.8% year on year in 2020, by far the most significant drop in revenue — US$81.0bn, or more than the value of 2020’s entire music, radio and podcasts segment — in the history of the Global Entertainment and Media Outlook. As more global regions emerge from lockdown and see increasing rates of vaccination, a forecast year-on-year rise of 6.5% in 2021 and a further 6.7% rise in 2022 will help drive total global E&M revenue to increase at a 5.0% five-year CAGR. However, this seemingly healthy growth comes from a greatly depressed base year — extending the CAGR period to six years provides a less optimistic picture with a rate of just 3.5%.
• Around the world, pandemic lockdowns made home entertainment effectively the only choice, with internet access an essential. In total, 1.1bn households had fixed broadband in 2020; a further 4.6bn smartphone connections put unprecedented pressure on networks. Total data consumption increased 30% during the year and consequently set off a new, higher forecast growth trend. Increasing connectivity and speed laid the groundwork for E&M bright spots in 2020, as OTT video, video games and internet advertising showed above-average rises.
• In terms of consumer spending, traditional TV and home video takes the largest share of total revenue, although it will contract at a -1.2% CAGR to 2025. Newspapers and consumer magazine revenue will also contact over the next five years, and VR earns distinction as the fastest-growing segment. In the advertising category, newspapers and consumer magazines will be the only segment to decline to 2025, with revenue set to fall at -1.4% CAGR. In contrast, cinema will be the fastest-rising segment in the advertising category, although this is mostly driven by the rebound in 2021 coming from a very low base in 2020. The same is true of the B2B segment, where advertising growth will be at a 21.1 CAGR over the forecast period, supported by recovery in trade shows.
• Lockdown measures had significant impact on many E&M segments, most notably cinema, which saw a 70.4% collapse in revenues. Although research shows that consumers still prefer the experience of going to theatres, the pandemic forced movie providers to turn to premium video on demand (PVOD) to fulfill their launch schedules, and this interest in PVOD has raised longer-term questions around the relationship between cinemas and content producers. Successful PVOD releases demonstrated how PVOD can be a bundled increment to the ongoing direct-to-consumer trend, and that content providers with this capability can capture a larger share of a title’s consumer revenue.
• Restrictions on mass gatherings hit the live E&M sector hard, shuttering conference centres, arenas and stadiums for much of 2020. Live music was the most affected by the pandemic, with revenue falling by -74.4%. As a result, the sector was forced to adapt with creative solutions, such as drive-in concerts at former outdoor cinemas or large car parks. However, these formats are viewed as a stopgap, and many operators turned to virtual experiences as an alternative. Gaming provides a ready-made marketplace for such events, and in May 2020, Minecraft staged an entire festival on its platform, demonstrating an opportunity to sell more music and merchandise through games platforms and making the most of this burgeoning sector.

2021 Outlook perspectives report

As a result of pandemic-induced economic disruption and consumer behaviour shifts, E&M revenues in 2020 experienced the sharpest contraction in the history of our research. These twin forces also accelerated progress toward industry tipping points by several years. In 2021, those tipping points have morphed and coalesced into power shifts that are rapidly reshaping the industry.

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Understanding where consumers and advertisers are spending their money in the entertainment and media industry can help inform many important business decisions.

PwC’s Global Entertainment & Media Outlook provides a single comparable source of consumer and advertiser spending data and analysis. Updated annually, the intuitive online tool allows you to easily browse, compare and contrast spending and growth rates.