Companies in the entertainment and media space face the prospect of anemic revenue growth — or declines — over the next five years, with mature segments like film, pay TV and television advertising under pressure and digital content expanding at a slowing rate.
That’s according to PwC’s 2017 Global Entertainment and Media Outlook forecast, released Tuesday.
Worldwide, PwC expects E&M revenue to rise from $1.8 trillion in 2016 to $2.2 trillion in 2021, representing a compound annual growth rate of 4.2% – down from the 4.4% CAGR the consulting firm forecast last year. For the U.S., revenue is projected to grow more slowly: increasing from $635 billion in 2016 to $759 billion by 2021, a CAGR of 3.6%.
While PwC is relatively bullish on nascent areas like virtual reality and eSports, those are only just starting to take off. As a whole, entertainment and media “is approaching an industry plateau,” the firm said in announcing the 2017 forecast.
“These companies are facing significant pressures on growth,” even setting aside macro-level challenges like geopolitical turmoil, regulatory changes and technology disruption, said Mark McCaffrey, head of PwC’s U.S. Technology, Media, and Telecommunications practice. The firm’s recommendation, he said, is for E&M companies to develop “sustainable relationships” with consumers and invest in user experience to stand out in the market.
The movie biz will struggle over the next five years, PwC predicts. U.S. box office revenue will grow at a 1.2% CAGR, increasing from $10.6 billion in 2016 to $11.2 billion in 2021, as exhibitors see intensifying competition for consumer share of wallet.
On the home-video front, the picture is bleaker. Physical disc sales and rental revenue will drop from $8.1 billion in 2016 to $4.0 billion by 2021 (-13.4% CAGR), while digital rentals will decline at a -1.8% CAGR, per PwC’s forecasts. Electronic sell-through revenue is expected to increase at a 6.6% CAGR over that time period, growing from $3.5 billion to $4.9 billion.
Internet subscription VOD services, led by Netflix, Amazon Prime Video and Hulu, are projected to grow at a healthy 11.3% CAGR, with segment revenue rising from $8.2 billion in 2016 to $14.0 billion in 2021 in the U.S. Meanwhile, pay TV — facing cord-cutting headwinds — will see revenue remain flat over that time period, generating $100.9 billion in 2016 and $101.1 billion in 2021.
Two of the fastest-growing entertainment and media segments are VR and eSports, but they will remain comparatively tiny, according to the PwC report. By 2021, the firm projects 68 million VR headsets will be in use in the U.S. by 2021. VR content revenue will increase from $421 million in 2016 to $5.0 billion in 2021, a CAGR of 64% over the five-year time frame. Meanwhile, eSports is forecast to reach $299 million in 2021, nearly tripling from $108 million in 2016.
Internet advertising is another booming area, growing in the U.S. from $72.5 billion in 2016 to $116.2 billion in 2021 (a CAGR of 9.9%). And specifically, mobile advertising is set to explode: It accounted for 50.5% of total U.S. internet advertising revenue in 2016, and will represent 74.4% in five years, PwC estimates.
The music industry, thanks to the continued growth of digital streaming, is forecast to increase at a 5.6% CAGR — growing from $17.2 billion in 2016 to $22.6 billion in 2021 in the U.S. Digital music streaming grew 99% year-over-year in 2016 to total $3 billion, PwC noted, and competition for new subscribers by players like Spotify, Apple Music, Pandora and others will be fierce in 2017.
PwC’s 18th annual Global Entertainment and Media Outlook report is available at pwc.com/us/outlook. The firm’s forecast models are based on an analysis of the dynamics of each segment in different regions and on the factors that affect those dynamics; it says it obtains historical information primarily from “confidential and proprietary sources.”
Other media and entertainment industry segment forecasts from the report (estimates for the U.S.):
- TV advertising revenue is expected to grow from $70.6 billion in 2016 to $75.2 billion in 2021 (1.3% CAGR)
- Video game revenue was $21.0 billion in 2016 and is forecast to hit $28.5 billion in 2021 (6.3% CAGR)
- Internet access revenue expected to rise from $140.3 billion in 2016 to $189.8 billion in 2021 (6.2% CAGR)
- Book publishing revenue is expected to go from $36.6 billion in 2016 to $38.3 billion in 2021 (1% CAGR)
- Magazine revenue is expected to go from $30.2 billion in 2016 to $30.5 billion in 2021 (0.2% CAGR)
- Newspaper revenue is expected to decline from $29.6 billion in 2016 to $23.9 billion in 2021 (-4.1% CAGR)
- Radio revenue is expected to rise from $22 billion in 2016 to $24.1 billion in 2021 (1.9% CAGR)
- Out-of-home advertising revenue is expected to rise from $9.2 billion in 2016 to $11 billion by 2021 (3.7% CAGR)