Power shifts: Altering the dynamics of the E&M industryFive-year projections of consumer and advertising spending data across 14 segments and 53 territories
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.
Mainland China entertainment and media rebounded strongly and its revenue in 2021 will be approximately US$358.6bn and reach roughly US$436.8bn by 2025. In the next five years, Mainland China’s compound annual growth rate (CAGR) of 5.1% will be higher than the global rate of 4.6%. Among them, Mainland China will lead the world in average revenue growth in segments such as Virtual Reality, OTT video, and Internet advertising.
Emerging macro trends and consumption habits arising from the pandemic have led to changes in consumer behaviours. These developments have become a major influence for the entertainment and media industry. Consumers are gaining more power as they now watch more content such as new movies, live webcasts and online concerts through OTT video platforms, diversify their consumption scenarios, and attract a large number of new audiences through user-generated content.
Mainland China’s Internet advertising market is the second largest in the world: it was worth US$74.8bn in 2020, more than any other market bar the US. The Mainland Chinese market is also worth more than the whole of Europe or the rest of the Asia Pacific markets combined. Total Mainland Chinese Internet advertising revenue is forecast to rise to US$117.5bn by 2025, increasing at a 9.4% CAGR.
With 481mn households with a fixed broadband connection in Mainland China, and 990mn mobile Internet subscribers (more than any other market in both cases), the potential audience of online consumers is huge. And according to the Chinese Government, the number of Internet users in the country increased by 85.4mn between March 2020 and the end of the year, with the COVID-19 pandemic forcing more people indoors and online. The pandemic has also changed consumers’ shopping habits, accelerating a shift towards digital and creating more online consumers.
The Mainland Chinese market has been shifting towards mobile for some years, by 2025 mobile Internet advertising revenue is expected to account for 65.6% of all Internet advertising revenue in the country. Display advertising makes up most of the mobile Internet advertising revenue at 73.7% in 2020, with paid search accounting for the other 26.3%. This is not expected to change significantly during the forecast period, but the proportion of mobile display advertising revenue made up by video will increase from 33.3% in 2020 to 49.7% in 2025.
Like a lot of countries around the world, Mainland China has tightened up its regulations for Internet advertising in recent years: in 2019 a ruling that requires online ads to be clearly marked as such is particularly relevant for the mobile market. This ruling is especially important for “influencers” on social media platforms like WeChat and Weibo.
Mainland China’s total OTT video revenue hit US$9.5bn in 2020, making it the second-largest market globally after the US. The government’s stringent COVID-19 lockdown at the start of 2020 led to a surge in screen time. OTT video has seen significant growth, to become co-champion of the living room screen along with IPTV. With over 260mn daily active smart TV devices (including boxes) nationwide, by the end of 2020 OTT was the fastest-growing platform for major advertisers.
Mainland China is improving its adoption of the Internet Protocol version 6 (IPv6) network, the software and hardware of the Internet TV network, which is expected to be updated soon on a much-larger scale. Along with the expansion of 5G, OTT is likely to benefit from the developments in technology and related services, like 8K, artificial intelligence (AI) and Internet of Things (IoT). Over the coming years, the revenue structure is anticipated to become more diverse and organic, driving revenue to increase at a 12.7% CAGR to US$17.3bn by 2025.
The short-form video market is booming in mainland China, with over 818mn users by the first half of 2020, according to the China Internet Network Information Center (CNNIC). As a result, short-form video content has become common on OTT screens, although the majority of users at this stage still spend more time on long-form videos like movies, TV dramas and live-streaming.
Mainland China has the most SVOD subscribers in the world, and premium services have been identified as a leading force in revenue growth, aside from advertising and value-added services. Paid subscribers can enjoy not only conventional entertainment experiences – like early access to or binge-watching some content aired exclusively to the platform, ad-free streaming, high-definition video and accelerated downloads – but also cross-industry benefits across the provider’s ecosystem covering areas such as online shopping, music-streaming and on-demand delivery platforms.
Success might still be determined by which online video provider can negotiate deals with the top foreign and domestic content-production companies or impactful intellectual properties, but the capacity to produce self-commissioned content has become extremely crucial to winning in the long run.
In 2020, Mainland China’s box-office revenue exceeded that of the US for the first time. Although it was an exceptional year in many respects, the Mainland Chinese market is likely to repeat the feat in 2021. Cinema ticket sales totalled US$2.9bn – down by more than two-thirds year on year – although by the final weeks of 2020 the market was generating only 8% less admission income than it had been during the equivalent period of 2019.
Notwithstanding a short-lived attempt to resume operations at the end of March, Mainland Chinese cinemas remained shut until July, at which point they almost fully reopened. Apart from a few closures resulting from localised COVID outbreaks, that was the case for the second half of 2020. There was even an 8.3% year-on-year increase in the number of screens, giving a total of 75,581. As the infection rate stays at an extremely low level, consumers have been returning to cinemas in great numbers. Indeed, ticket receipts on 12 February 2021, the first day of the Chinese New Year, were the highest ever recorded.
Mainland Chinese box-office takings are expected to recover at a 27.0% CAGR between 2020 and 2025. They will total US$1.8bn at the end of the forecast period – up 3.4% on 2019’s figure.
Mainland China is the largest video games and esports market globally. According to China’s Game Publishing Committee (GPC), the total number of video gamers in Mainland China had reached 657mn by the first half of 2020. Total video games and esports revenue reached US$31.5bn in 2020, and is forecast to increase at a 5.8% CAGR to reach US$41.7bn in 2025.
Social/casual gaming revenue contributed 73.2% of total video games revenue. The revenue of app-based games has been increasing and reached US$22.6bn in 2020, with 536mn mobile gamers nationwide by the end of the first half of the year, according to China Internet Network Information Center (CNNIC). The “free-to-play-plus-in-game-items” business model is still the most popular. With the rollout of 5G and the fast development of cloud gaming in Mainland China, and the scale of casual gamers, revenue from app-based social/casual games will increase even more rapidly in the coming years.
Mainland China is leading the esports boom globally, with an estimated 484mn enthusiasts. Total esports revenue hit US$361mn in 2020 and is expected to reach US$684mn in 2025, increasing at a 13.6% CAGR. Despite the COVID-19 pandemic having caused considerable disruption affecting all aspects of society, esports has witnessed increasing user engagement and traction during these unprecedented times.
Esports streaming was boosted by lockdown in the first half of 2020, with paid subscribers at leading platforms having increased 15–25% year-on-year. Soaring viewing figures and the influx of media rights deals have opened the door for a range of high-profile corporate sponsors. Total esports sponsorship revenue reached US$156mn in 2020.
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.
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.