Fault Lines and Fractures: Innovation and Growth in a New Competitive LandscapeFive-year projections of consumer and advertising spending data across 14 segments and 52 territories
Our 23rd annual Global Entertainment & Media Outlook offers an in-depth look at how different forces, fault lines and fractures will affect 14 E&M segments across 52 territories over the next five years. Explore our findings to uncover key perspectives and insights that will help shape your strategies for the future.
The total revenue of China’s entertainment and media industry is projected to reach approximately US$526.9bn by 2026. At 5.7%, the compound annual growth rate (CAGR) will be higher than the global rate of 4.6% over the next five years. China’s average growth rate will lead the world in subdivisions including Virtual reality (VR), Internet advertising, Video gaming, and Esports.
The year 2022 is full of uncertainty, as factors such as the COVID-19 pandemic and supply chain changes continue to impact consumer behavior and the development of the entertainment and media industry. But amid all the uncertainties, the overall trends of the market and the forces driving growth have become clearer. The global landscape of the entertainment and media industry is being reshaped, consumption patterns could change dramatically, while the metaverse may trigger a new wave of digitalisation.
Mainland China has the second-largest Internet advertising market in the world behind the US. Revenue totalled US$100.0bn in 2021, more than the rest of the Asia Pacific markets combined. Total revenue in the mainland Chinese Internet advertising market is expected to increase at a 13.1% CAGR to reach US$185.3bn in 2026. This rate of growth is higher than both the regional and global average CAGR.
Due to its large, well-connected population, the addressable market in mainland China is huge. Fixed broadband penetration was 119.4% in 2021 and mobile Internet penetration reached 71.2%. The COVID-19 pandemic has also resulted in huge growth in the number of people accessing the Internet over the last few years.
Mobile leads the market in mainland China, accounting for 67.7% of total revenue in 2021. This is expected to rise to 80.9% by the end of the forecast period. Mobile ad revenue will grow at a faster rate than that of the wired sector, with an increase at a 17.2% CAGR expected, compared with an increase at a 1.8% for wired. Total revenue in the mobile sector was US$67.7bn in 2021, compared with US$32.3bn for wired.
The Mainland Chinese government has announced new rules that affect the way firms interact with users and data security, which impacts how the local players do business. As a result of the measures, the big tech firms have seen their Internet advertising revenue growth slow.
China is expected to play a huge role in the development of the metaverse market. In November 2021, the Metaverse Industry Committee was set up under the purview of the China Mobile and Communications Association to guide the sustainable development of the industry. Despite the restrictions on cryptocurrencies, the government is promoting the metaverse to attract talent, investment and to foster economic growth.
Mainland China’s total over-the-top video (OTT) revenue hit US$11.4bn in 2021, remaining as the second-largest market globally after the US. The government’s COVID-19 containment measures 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. Although Mainland China resumed normal life quickly, the popularity of annual subscriptions and direct-to-video, as well as local lockdowns from time to time under the government’s dynamic zero-COVID-19 policy, have kept Chinese users adapting to the surging streaming demand. Leading Internet TV content/platform providers in 2021 shifted their focus away from mobile devices towards smart TVs, driven by its robust growing momentum, both in revenue and subscriptions.
Mainland China issued time-specific milestones to accelerate the deployment and application of the IPv6 network nationwide, which will speed up the upgrade of the software and hardware of Internet TV network at a much-larger scale in the coming years. 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). With nearly 300mn active smart TV devices (including set-top boxes) nationwide by the end of 2021, OTT is also one of the fastest-growing advertising platforms. Over the coming years, the revenue structure is anticipated to become more diverse and organic, reaching US$16.2bn by 2026, increasing at a 7.3% CAGR.
The short-form video market is booming in Mainland China, with over 888mn users by the first half of 2021, according to the China Internet Network Information Center (CNNIC). As a result, short-form video apps rolled out their TV versions to bring short videos to the big screens in the living room. But the majority of users at this stage still spend more time on long-form videos like movies, TV dramas and live-streaming.
With the most subscription video on demand (SVOD) subscribers in the world, subscription VOD revenue in China reached US$10.8bn in 2021, rising from US$9.6bn the year before, and accounting for 94.9% of total OTT revenue. Leading online video platforms experienced a robust increase in both the number of subscribers and the user time during the pandemic, but retaining subscribers, keeping the growth momentum and improving the profitability became the focus of 2021.
One of the leading platforms’ advertising revenue was nearly double its subscription revenue, attributable to the distinct advantage to be gained from original-copyrighted reality shows in particular. Over the forecast period, the leading platforms will invest more into self-commissioned content to be able to survive the challenge from the increasingly competitive long-form video market.
China is now the largest global cinema market in terms of box office, admissions and number of screens. Its position was strengthened during the COVID-19 pandemic. China accounted for 35.2% of global box office during 2021. There were periods when cinemas in China were responsible for over 80% of global revenue, particularly during the early phase of the pandemic when China was one of a few open economies. For example, in spring 2021, when movie theatres elsewhere were closed because of COVID-19, Chinese venues remained open and were doing strong business.
Box office in China rose very sharply in 2021 and ended the year at around US$7.3bn, more than double the figure for 2020. Revenue and admissions had dropped steeply during 2020. When COVID-19 hit China, cinemas in the territory were closed for over five months between January and July 2020. There were only 548mn cinema visits during the year, down from 1.8bn in pre-pandemic 2019. Spectators returned in significant numbers in 2021 in spite of ongoing capacity restrictions, which meant venues were only allowed to be 75% full. Attendances were back up at 1.3bn, still below 2019 levels but a significant rebound.
It is clear that the production sector in China is now robust enough to cater to the demands of the growing Chinese audience. In 2019, 1,037 feature films were produced in China, and although that number almost halved to 650 features in a COVID-19-affected 2020, production rates will continue to grow. New sources of public funding as well as tax breaks for production have become available.
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 666mn by the end of 2021. Total video games and esports revenue reached US$55.5bn, and is forecast to increase at a 11.3% CAGR to reach US$94.6bn in 2026.
The gaming regulator – the National Press and Publication Administration (NPPA) – oversees the entire video games market through the ISBN (publishing licence number) system. Since August 2021 the NPPA has suspended new game approvals, to be in line with the government’s new policy that limits online video games playing to three hours a week for those aged under age 18. Fewer than 700 games of domestic origin and 76 imported games were approved. The drop in domestic licences has led to a surge of Chinese gaming companies expanding abroad for a new channel to monetise.
Total PC games revenue was US$8.7bn in 2021. Hardcore gamers remain loyal to the main titles, with in-game purchases and game time both on the rise. Due to increasing R&D costs, PC games accounted for only 2.0% of the total video games licensed by the authorities in 2021.
Social/casual gaming revenue contributed 81.5% of total video games and esports consumer revenue in 2021. Browser-based games continued to decline in 2021, with revenue dropping -11.4% year-on-year to US$161mn. By contrast, the revenue of app-based games has been increasing and reached US$26.6bn in 2021. The “free-to-play-plus-in-game-items” and “in-app ads” (IAA) business models are still the most popular, and in-app advertising will account for 83.7% of the revenue added to the social/casual sector over the next five years.
Mainland China is leading the esports boom globally, with an estimated 489mn enthusiasts. Total esports revenue hit almost US$474mn in 2021 and is expected to reach just under US$900mn in 2026, increasing at a 13.7% CAGR. Over the forecast period, despite the likelihood the segment will become more popular when esports debuts as a medal sport at the 2022 Asian Games in Hangzhou, the impact of the gaming clampdown among teens will become profound.
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 increased 27.8% year-on-year, hitting US$224mn in 2021. Sponsors of all kinds – from food and beverages, financial services, cosmetics, the Internet and electronics industries – have increased their investment and explored new formats.
Disruptions in public health, supply chains and geopolitics made 2021 a year of uncertainty. But amid all the skepticism, there is greater clarity about the overall trends of the market and the forces driving growth, and a better understanding of the fault lines and fractures that are altering the entertainment and media landscape.
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.