China’s entertainment and media industry reaches turning point
Industry expected to recover gradually
Shanghai, 13 July 2023 – According to PwC’s “Global Entertainment and Media (E&M) Industry Outlook 2023 to 2027” China summary, it is estimated that the total revenue of China’s E&M industry will reach approximately US$479.9bn by 2027. At 6.1%, the compound annual growth rate (CAGR) will be higher than the average global rate of 3.5% over the next five years. Internet advertising, video games and esports are the main growth drivers for the E&M industry in China. Segments such as cinema and virtual reality (VR) will also grow steadily.
Cecilia Yau, PwC Mainland China and Hong Kong Media Leader, noted, “The year 2023 marked a key turning point for the E&M industry, and the industry is expected to see a gradual recovery to its pre-pandemic growth rate after 2023. A wide range of companies are now harnessing technology in particular, artificial intelligence (AI), to improve productivity and creativity. Products have become more digitalised, which reduces production and distribution costs. Digitalisation also stimulates innovation of business models and technological applications, thereby enhancing earnings growth, gaining traction with customers, as well as expanding markets through novel approaches.”
Cinema
Due to prolonged closure of movie theatres, box office revenue in 2022 decreased by 37% to US$4.54bn, accounting for only 17.93% of the global box office revenue. During Q1 2023, the number of moviegoers rebounded for the first time since 2019 with a Year-over-Year (YoY) growth of 9.4%. Forecasts show revenue from the box office will return to pre-pandemic levels in 2024. China is expected to surpass the U.S. between 2024 and 2025. Both countries will remain the world’s top two movie markets, with China expected to account for 27% of global box office revenue in 2027, above the 23% by the U.S, becoming the world's largest market.
China’s total cinema revenue is estimated to reach US$13.2bn by 2027, with a CAGR of 23.77% of film revenue over the next five years. The Chinese box office is still predominantly driven by domestic movies, with local films accounting for 85% of total revenue in 2022, a slight increase from 2021. During 2022, 4,700 new screens were added, and this growth is expected to continue throughout the forecasted period. China’s film production capacity also continues to improve, while the supply of films grows steadily, with gradually expanding international influence. Going forward, the market will return to stable growth and local films will gain further traction.
Internet advertising
The Chinese market saw a strong recovery in 2023. With higher visibility of domestic policies and regulations, the growth of China’s Internet advertising market will gradually stabilise in the coming years. It is estimated that by 2027, the size of China’s Internet advertising market will reach about US$146.4bn with a CAGR of 9%, benefiting from the enormous size and scope of the market. Among them, streaming in-and out-of-home Internet advertising is the fastest-growing segment, with a CAGR of 15%. Thanks to the rapid development of Internet technologies and the maturity of the value chain, innovation and expansion methods in Internet advertising have become more diverse, while data computing of short-video social platforms has led to more accurate advertising placement. These trends have helped drive the rapid growth of internet advertising. Further, “Generation Z” consumers, who have become the mainstream, tend to respond better to customised, personalised, and smart advertising. In this regard, Internet advertising has advantages over traditional advertising. Concurrently, the wide coverage of 5G network provides advertisers with a mature, stable, and enormous addressable mobile market.
With dependence on the Internet now being higher than ever, digitalisation has become a pivotal social development trend, providing further opportunities for Internet advertising. One notable trajectory will be mobile internet advertising spending, which will dominate the growth of Internet advertising in China. Total revenue share is estimated to increase to 84% of the national Internet advertising by 2027. The growth rate of mobile Internet advertising revenue is already higher than that of cable Internet advertising. Mobile internet advertising is expected to grow at a CAGR of 12% from 2022 to 2027, while the growth rate of cable Internet advertising is forecast at -2%. Video advertising is the fastest-growing segment, with the standout performing area of Internet advertising anticipated to be in the format of mobile video display, which is expected to post a CAGR of 13.7%.
Frank Cai, PwC Mainland China Media Leader, commented, “After the pandemic, people's lifestyles have changed, their reliance on the Internet has increased significantly, and digitalisation has become a social development trend, which will provide opportunities for the further development of Internet advertising. Further improvements in government regulatory policies will also soothe the uncertainty surrounding the operations of large technology companies. With the wide use of AI technology and major tech companies investing and developing tools like ChatGPT, AIGC, etc., the user experience and advertising effectiveness will be further improved and optimised.”
Over-the-top (OTT) video
With the evolution of technologies such as AI and 5G, China’s OTT video market is developing steadily. It is estimated that from 2022 to 2027, the CAGR will reach 7.41%, slightly lower than the global growth rate. By 2027, revenue is predicted to reach US$25.9bn. “Membership management” across interfaces has become a key trend in the development of the OTT large-screen service industry, with IoT-OTT large-screen integration greatly expanding use cases and providing users with precise content feeds, which makes it possible to turn towards intelligent household terminals. In addition, though the overall commercialisation of OTT video in China has maintained growth even the industry is yet saturated, OTT video revenue still has huge growth potential in the future. As membership competition among OTT platforms intensifies, high-quality long-form video content will become more crucial for the retention of existing paying members.
Video games and esports
China is the world’s largest video game and esports market. By the end of 2022, the total number of video game players in China had reached 664 million. Total revenue is expected to grow at a CAGR of 13.1% from 2022 to US$115.5bn by 2027. Social media/leisure-type game revenue is on course to be the major driver of total video game revenue in China, predicted to account for 91% of proceeds in 2027. In 2021, China replaced the U.S. to become the world’s largest video game market, and due to its rapid growth, the China market is set to generate approximately 49% more revenue than the U.S. by 2027. The debut of eight esports medal events at the upcoming 19th Asian Games Hangzhou 2022 in September 2023 will also bring a positive impact and impetus to the entire industry.
Chinese games are increasingly looking to overseas markets due to the reduction of domestic licenses, in pursuit of new profit channels. In the coming years, mainland China’s video game exports will continue to grow significantly and expand beyond the U.S., Japan, and South Korea, driven by the rapid growth of app-based games.
VR, metaverse and AIGC
In the Chinese market, policy support has incrementally contributed to burgeoning VR and metaverse industries in 2023. Specifically, as a new generation of consumer electronics, VR is embracing imminent large-scale commercialisation and is expected to drive a new tech boom. Naked-eye 3D, AIGC, and other emerging technologies will further enrich the production of VR/metaverse content and engage more users, creating a virtuous circle of industrial development. Currently, the AIGC industry ecosystem is seeing increasingly clearer architecture, however, downstream application providers are still trying to identify suitable business models.
Olivia Xie, PwC Mainland China Media Partner, commented, “Most of the China’s E&M industry players have recovered in 2023. The metaverse and VR have become focal points for the local industrial economy, which will continue to foster the application and further development of innovative technologies with policy support. Looking ahead, as AIGC and naked-eye 3D technologies would be generating more diverse contents, AI technology will be playing a more influential role in various fields.”
Note to editor:
About PwC’s “Global Entertainment & Media Outlook” China summary
PwC’s 24th annual edition of the Global Entertainment & Media Outlook is a comprehensive online source of global analysis for consumer and advertising spending. With like-for-like, five-year historical and five-year forecast data and commentary for 13 defined industry segments in 53 territories, the Outlook makes it easy to compare and contrast consumer and advertising spending across segments and territories.
The China summary captures the data and insights from Mainland China from the Outlook. In this press release and the summary, "China" refers to "Mainland China".
Chinese website: www.pwccn.com/emoutlook/zh
English website: www.pwccn.com/emoutlook
