TORONTO – User experience has surpassed content and distribution in the pursuit of entertainment and media revenues, says a new PwC report.
Global Entertainment and Media Outlook 2017-2021 projects that Canadian entertainment and media revenues will rise at a compound annual growth rate (CAGR) of 2.8% in nominal terms over the coming five years, from US$42.98 billion in 2016 to US$49.40 billion in 2021. This growth rate represents a slowdown from last year's 3.5% growth in industry revenues, and will lag behind overall global economic growth during the next five years. Total data consumed in Canada will grow by CAGR 18.1% and reach 27trn MB by 2021.
These trends reveal that the entertainment and media industry is facing increased disruption due to the shift in consumer behaviour towards online entertainment, particularly over the past few years.
"As Canadian content creators develop their digital strategies, they are being compelled to prioritize the user experience in order to compete with online options," said John Simcoe, PwC Canada’s national entertainment and media outlook leader, in the report’s news release. "User experience is becoming a key business driver that will differentiate what will thrive in the long term as opposed to be a one hit wonder in this sector."
Internet video (SVoD), Internet advertising, and Out of Home (OOH) advertising top the list with steady and sustainable growth in Canada, continues the report. Canada has an advanced Internet advertising market, valued at US$4.4B in 2016. Widespread Internet access has boosted online advertising spending, and fixed-line broadband household penetration rate stood at 96.4% in 2016.
Canada has been an early adopter of Internet video, with Netflix launching in 2010 and domestic operators launching OTT platforms to counter the threat of cord-cutting. With growth of 7.1% CAGR over the forecast period, Internet video will produce revenues of US$1.6B in 2021. Over 70% of this revenue will be attributable to subscription-based VoD, with transactional sites such as Apple's iTunes accounting for the remainder.
Canada's total OOH revenue in 2016 came to US$572M, up from US$436M in 2012. Growth is set to continue at a 5.1% CAGR over the next five years, reaching US$732M by 2021, adds the report. Canada's OOH market has benefitted from steady economic growth in recent years, and this is expected to continue through to 2021. OOH advertising is a particularly strong proposition in Canada, given over 80% of the population lives in cities – Toronto, Montreal and Vancouver alone house one-third of the country.
The report also includes what it describes as the following major digital tipping-points:
– Internet advertising now generates more revenue than TV advertising globally. In 2016 an important tipping point was reached in the global advertising industry, with revenue from Internet advertising exceeding that generated by TV advertising for the first time. That lead, thanks to the rapid growth of mobile ad revenues in particular, is set to increase significantly in the next five years.
– Internet video revenues will overtake physical home video in 2017. The Internet video segment has expanded rapidly in recent years, and will overtake the physical home video market for the first time in 2017. Internet video revenues are projected to grow at a CAGR of 11.6% to reach US$36.7B in 2021, while the terminally declining market for DVDs and Blu rays will have fallen to US$13.9B.
– Global newspaper circulation revenue overtook global advertising revenue in 2016. While newspaper circulation revenue has been on a downward trajectory since 2015, publishers have had the useful lever of cover price rises to partly offset the rapid fall in units.
– In 2016, total digital recorded music revenue overtook physical – and streamed music overtook downloads. The digital recorded music segment was worth US$10.7B in 2016, surpassing that for physical recorded music, at US$8.5B, for the first time. Music streaming services grew apace during 2016, pushing global digital revenues up by US$1.8B year-on-year, or 20.3%, as the physical segment declined 9.6%.
– Virtual reality video revenue will exceed interactive application/gaming revenue in 2019. The consumer virtual reality (VR) content market will grow at a CAGR of 77.0% over the forecast period to be worth US$15.1B by 2021. Of this, US$8.0B will be spending on VR video (rising at a CAGR of 91.2%), surpassing interactive experiences and games in 2019.
– Smartphone traffic will exceed fixed broadband data traffic in 2020. Although mobile usage is a key driver of growth in overall data traffic, fixed broadband will continue to account for the majority of data traffic in the 19 markets for which we have developed detailed forecasts. Many consumers still prefer to access data-heavy content – notably high-quality video – via fixed broadband rather than their mobile device.
– Global physical OOH revenue will slip into decline in 2019. Global growth in physical OOH revenue has been trending downwards for some time as an ever-growing share of advertising spending is diverted to digital out-of-home (DOOH).
PwC’s global entertainment and media outlook 2017-2021 provides a single comparable source of five-year forecast and five-year historic consumer and advertiser spending data and analysis, for 17 entertainment and media segments, across 54 countries.
