By Joe Tan
“The pandemic slowed the entertainment and media industry last year, but it also accelerated and amplified power shifts that were already transforming the industry. Whether it’s box office revenues shifting to streaming platforms, content moving to mobile devices, or the increasing complex relationships among content creators, producers and distributors, the dynamics and power within the industry continue to shift,” declared Werner Ballhaus, Global Entertainment & Media Industry Leader Partner, PwC Germany.
“Our Global Entertainment & Media, Outlook 2021-2025 report 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.”
Over the course of a challenging 2020, the entertainment and media industry suffered a 3.8% decline in revenue from $2.1 trillion in 2019 to $2 trillion in 2020, the report revealed. Movie theatre box-office revenues fell 71% in the same year.
However, consumers’ migration to digital consumption has helped offset sharp revenue losses across the broader global entertainment and media sector.
Notably, Disney+ released Mulan as a premium digital product; Warner Bros. similarly made Wonder Woman 1984 available on the HBO Max streaming service the same day the film hit the big screen last December. And OTT player, Netflix, attracted 37 million net additional subscribers, pushing its subscriber base past 200 million.
Apart from content, connectivity is another key element when it comes to driving growth in the online video space. It was reported that some ISPs (internet service providers) saw a 60% spike in data usage during Covid-19 lockdowns … and a 30% increase in data consumed.
While smartphone connections are projected to continue their global growth, an increasing number of consumers invested in fixed broadband Internet connections during the year, taking the total to 1.1 billion households. This further spurred the move to 5G technology, from desirable to essential for developed and developing nations in the world.
“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,” Ballhaus warned. “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.”
Indeed, the E&M industry needs to proceed with caution.
The pandemic has wrecked many traditional business models in the last 18 months and new power shifts are at play … from micro to macro shifts, business to regulatory shifts by way of governments attempting to reign in the power of the ‘big tech’ platforms. The notable forces impacting the media landscape include digitalisation, globalisation, changing consumer habits and demographics — and all these factors are being compounded by the Covid pandemic
According to the PwC report, the shifts are well grounded in changes in consumer behaviour that appeared as a result of the pandemic, some of which will endure and accelerate. Overlaid on these shifts, continuing advances in technology and in the delivery and distribution of content are creating new tensions and altering the complex dynamics and relationships between consumers and providers, between creators and producers, between producers and distributors, between advertisers and publishers, between governments and companies, between the giant global platforms and everybody else.
The authors of the report noted that there are some common threads amid these power shifts.
“First, it’s vital to meet consumers where they are now and where they will be in the future. Increasingly, that means online, on mobile devices, at home, and at the time and place of their own choosing.
“Second, because we live in an age of near-constant discontinuities, we can’t assume that existing trends will continue indefinitely into the future. The music industry, which many analysts believed had been left behind by the digital era, is enjoying a renaissance, spurred by strong growth in digital streaming and a strong rebound in live performances.
“Internet advertising, thought to be entering a period of slower growth, has been buoyed by the rapid global adoption of e-commerce. And although the largest platforms have enjoyed a spectacular run of growth off ever-larger bases, the forces of regulation appear to be awakening.
“These disjunctions and shifts, which create risk and open up new vistas, are precisely what makes these industries so fascinating to follow. And they make it even more important to understand, at a granular level, just how these dynamics are playing out in different territories and sectors,” they stated.
The PwC report also projected that the E&M industry is expected to rebound strongly in the post-pandemic era, with a 6.5% rise expected this year and a further 6.7% forecast in 2022 as more countries emerge from the many lockdowns.
The report, in its 22nd edition, further projected a “healthy” five-year CAGR (compound annual growth rate) of 5% from 2020-2025, taking revenues to US$2.6 trillion in 2025.
In a post-pandemic era, the growth trajectory in streaming services will continue. The authors projected streaming video-on-demand (SVoD) will grow at a CAGR of 10.6% to 2025, making it a $81.3 billion industry. However, the intensity of the competition in this space is described as being at an all-time high, as the stacking of multiple over-the-top (OTT) services has induced consumers to be choosy, and to reconsider the maximum number of subscriptions they are willing to take on.
The report also suggested that the industry would move into a new phase of streaming growth – one that is more measured, more focused on improving the viewing experience of consumers, and also more intent on retaining and creating value from the immense subscriber bases that have materialised. While content remains king, a strategy for achieving both goals –better experience and higher retention – is to commission large amounts of material that is recorded and viewed at consumers’ convenience.
Indeed, when it comes to convenience, the online video space has welcomed and witnessed the rise of ByteDance’s global short-form and self-generated video platform TikTok, and its Chinese incarnation, Douyin. The PwC report pointed out that, as of late-2020, TikTok and Douyin had built up – in just four years – a combined global base of more than 1.29 billion monthly active users in 141 countries.
One of the key reasons behind TikTok’s popularity is that it marries both social and video elements. Not only does it allow users to create and personalise their own videos, it also offers them instant gratification, the opportunity to go viral, and a chance to connect with those who share similar interests.
The video-sharing platform is particularly popular among younger consumers who have less interest in traditional media. The report cited an example — a mere 10.4 million viewers tuned in to the Academy Awards; that’s a fraction of the 80 million viewers that influencer Addison Rae has garnered on TikTok.
That said, the report highlighted that traditional TV and home video will remain the largest entertainment consumer segment at $219 billion, but will continue to shrink at 1.2% CAGR over the next five years.
In summary, the industry is reaching a tipping point and walking the tight rope calls for a granular sense of what’s affecting the media industry.
Question: In order to grow in the post-pandemic era, are you prepared to face up to the power shifts, proceed with caution and meet consumers where they are spending their time?
Call for action … please email your views to maven@editecintl.com