GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK 2016 -2020: A WORLD OF DIFFERENCES - FACEBOOK'S CAROLYN EVERSON SIR MARTIN SORRELL OF WPP INDIA'S ...
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FACEBOOK’S CAROLYN EVERSON • SIR MARTIN SORRELL OF WPP • INDIA’S TRIPLE PLAY SPECIAL REPORT GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK 2016–2020: AWORLD OF DIFFERENCES
Global entertainment and media outlook 2016 –20
Learn more at www.pwc.com /outlook
How do you stand out
from the crowd in a
fragmented and
multi-speed world?
To capture attention and build value, companies need to understand how local and global
markets are impacted by the changing pace of the media industry. For 17 years, PwC’s
Global entertainment and media outlook has been providing expert commentary and
insights centred on the shifts in advertising and consumer spending. Regardless of how
you influence business decisions, the Outlook can help you understand industry trends
so you can capitalise on new opportunities.
The 2016–20 Outlook gives you even more data and insights than ever before including:
• Advertising and consumer spending data with expert commentary across 54 countries
• Access to 13 segments like T V advertising, Internet access, Book publishing and Music
• The ability to compare five-year historic and five-year forecast data
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice.You should not act upon the information contained
in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information
contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone
else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
© 2016 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity.
Please see www.pwc.com/structure for further details.171731
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editor’s letter
editor’s letter
Looking Ahead with Confidence 1
If you’re a senior executive in the spending and advertising revenues for his industry (page 58). Carolyn
entertainment and media industry, for 13 media industry segments, so Everson, vice president, global mar-
you are probably engaged in rear- that media companies can plan their keting solutions, at Facebook, covers
guard actions against your own growth in 54 major markets, from the future of the Internet (page 50).
past assumptions. Every sector has Argentina to Vietnam. Elsewhere, journalist Sarah Ellison
been struck by major technological Strategy+business is an award- compiles her fantasy-league media
change during the past decade — winning magazine, known for its conglomerate (page 38), researcher
newspapers and publishing by the ability to translate the complexities Erin Reilly describes a new way of
move to digital, video and audio of business into forward-looking understanding your fan base (page
by streaming, advertising by data articles by and for incisive thinkers 42), and Daniel Gross, editor of this
analytics, marketing by new media and enterprise leaders. In 2015, it special issue, unveils a mysterious
opportunities, interactive games by, celebrated its 20th anniversary. truth: how media journalists think
well, other interactive games, and ev- We open this special report (page 64).
erything by the smartphone and the with “A World of Differences” (page Finally, in “You’re a Media
ever-more-global Internet. But only 6). PwC experts Chris Lederer and Company. Now What?” (page 28),
now are these immense changes co- Megan Brownlow summarize the Deborah Bothun and John Sviokla
alescing enough for us to make sense Outlook’s latest findings and fore- lay out four strategic orientations —
of them. The challenge is not simply casts, and describe compelling each with its own promise and chal-
to react to disruption and change, opportunities offered by pockets lenges — that media companies can
but to choose a path that allows you of growth around the world. One adopt. For executives ready to ex-
to look ahead with confidence. of the largest is India. As journal- pand and clarify their own outlook,
That is the underlying premise ist Suvarchala Narayanan observes this special report provides a starting
of this special report: a joint effort (page 20), the country has three rap- point. And on page 2, you’ll see how
between two well-established sourc- idly growing media audiences: news- to stay in touch, so that we can look
es of strategic thinking, which have paper readers, smartphone-oriented ahead with confidence together.
combined to provide insight that we sophisticates, and the youth of the
Illustration by Lars Leetaru
believe is available nowhere else. country’s villages and small cities. Deborah Bothun
The Global Entertainment and We’ve included in-depth inter- Global Leader
Media Outlook, which PwC has views with two of the most prescient Entertainment and Media, PwC
produced for 17 years, is a compen- media executives active today. Sir
dium of data and perspective about Martin Sorrell, founder and chief Art Kleiner
this extraordinarily vibrant industry. executive of the advertising net- Editor-in-Chief
Each year, it estimates the consumer work WPP, considers the prospects strategy+business
strategy+business
www.strategy-business.com
strategy+business Published by PwC
EDITORIAL
Editor-in-Chief Special Report Editor Managing Editor Editor, Digital Deputy Managing Editor Assistant to the Editors
Art Kleiner Daniel Gross Elizabeth Johnson Melanie Rodier Sally Errico Natasha Andre
kleiner_art@ gross_daniel@ johnson_elizabeth@ rodier_melanie@ errico_sally@ andre_natasha@
strategy-business.com strategy-business.com strategy-business.com strategy-business.com strategy-business.com strategy-business.com
Global Entertainment Principal Art Director Designers Information Graphics Chief Copy Editor
and Media Leader Chris Lederer John Klotnia Laura Eitzen Linda Eckstein Victoria Beliveau
Deborah Bothun chris.lederer@pwc.com klotnia@optodesign.com eitzen@optodesign.com info@ info@
deborah.k.bothun@ strategy-business.com strategy-business.com
pwc.com Jennifer Thai
jennifer@
2 optodesign.com
PUBLISHING
Publisher and Business Business Operations Senior Marketing Production Director Outlook Marketing
Manager Manager Manager Catherine Fick Leader
Gretchen Hall Bevan Ruland Charity Delich Publishing Experts Inc. Pauline Orchard
Tel: +1 617 521 8808 Tel: +1 973 630 6924 Tel: +65 9359 4784 cfick@ Tel: +44 20 7804 9783
hall_gretchen@ ruland_bevan@ delich_charity@ publishingexperts.com pauline.orchard@
strategy-business.com strategy-business.com strategy-business.com uk.pwc.com
PwC PARTNER OUTLOOK ADVISORS
Global Entertainment Chris Lederer Phil Stokes Christopher A.H.
and Media Leader Megan Brownlow James DePonte Vollmer
Deborah Bothun
PwC GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK TEAM
Pauline Orchard Caroline Calkins Sally Potts Matt Lieberman Ovum, a provider of business intelligence and strategic
Christina Jackson Gary Rosen Neil Kothari Natali Dobbs services to the global telecoms and media markets
(which is a trading division of Informa Telecoms and
Media Ltd).
www.ovum.com
PwC
Head of Clients and Head of Asia Pacific Head of Europe Middle Head of Strategy&, Head of Global Public Communications
Markets, PwC Americas Advisory East Africa Advisory PwC’s strategy Thought Leadership Review
Robert Swaak Miles Everson Ashley Unwin consulting business John Sviokla Ann-Denise Grech
Les Moeller Julie Weidemann
Head of Global Natasha Andre
Consulting Thought
Leadership
Ivan de Souza
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20
essay
contents
technology
Global E&M Outlook
6 A World of Differences 50 Thought Leader
Entertainment and media companies Interview:
can tap into many pockets of growth
and opportunity. Our intensive
Carolyn Everson
38 analysis of five shifts roiling the
industry can help you identify them.
Facebook’s top marketing execu-
tive describes the social network’s
ambitious efforts to forge enduring
by Chris Lederer
and meaningful relationships — with
and Megan Brownlow
employees, industry partners, and
everyone on Earth.
by Deborah Bothun 3
20 India’s Triple Play and Emmanuelle Rivet
What do feature phones, regional
newspapers, and smartphones have
in common? They’re all vehicles
58 Thought Leader
for the country’s remarkable move Interview:
to digital broadband. Sir Martin Sorrell
by Suvarchala Narayanan WPP’s CEO explains how the global
agency is deploying its resources
50 28 You’re a Media Company.
to connect effectively with clients
and consumers across industry and
geographic borders.
Now What?
Four strategies that work in this
by Deborah Bothun and Daniel Gross
dynamic new world.
by Deborah Bothun and John Sviokla 64 Story Time
Why are we so interested in media
about media?
38 Fantasy-League Media by Daniel Gross
If you could draft an all-star team of
entertainment and media assets and Cover illustration by James Yang
capabilities, who would you pick?
by Sarah Ellison
6 42 Fan Favorites
In order to build engagement
and loyalty in a climate of intense
competition and distraction,
media companies have to understand
their customers, viewers, and
readers as fans.
by Erin Reilly
58
special report 2016
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4
country contacts
Use of data in this publication
Saudi Arabia United Kingdom Articles in this publication are drawn from data in the Global
Entertainment and Media Outlook 2016–2020, a comprehensive source
Jayant Bhargava Phil Stokes of consumer and advertising spend data available via subscription at
jayant.bhargava@ phil.stokes@uk.pwc.com www.pwc.com/outlook. PwC continually seeks to update the online
strategyand.ae.pwc.com Outlook data; therefore, please note that the data in the articles in this
publication may not be aligned with the data found online. The Global
United States Entertainment and Media Outlook 2016–2020 is the most up-to-date
Singapore Deborah Bothun source of consumer and advertising spend data.
Charlotte Hsu deborah.k.bothun@pwc.com 5
charlotte.hsu@sg.pwc.com This document is provided by PwC for general guidance only and does
not constitute the provision of legal advice, accounting services, invest-
Venezuela ment advice, or professional consulting of any kind. The information
South Africa Manuel Pereyra
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5
6
s+b special report
strategy+business special report 2016
Entertainment and media companies can
tap into many pockets of growth and opportunity.
Our intensive analysis of five shifts roiling
the industry can help you identify them.
A WORLD OF
s+b special report
DIFFERENCES
BY CHRIS LEDERER A ND MEGA N BROW NLOW
Entertainment and media (E&M) companies are making
7
great strides in pivoting to serve digital consumers around
the world. However, at first glance, the outlook for E&M
companies worldwide still may seem troubling. Declining
pricing power, disinflation, and the trend toward free media
and sharing all make it fundamentally challenging to grow
organically. Despite growing 5.5 percent last year, this
US$1.7 trillion global industry is likely to have difficulty
Illustration by Guy Billout
keeping up with the economy as a whole. The Global
Entertainment and Media Outlook 2016–2020 projects that
E&M will rise at a compound annual growth rate (CAGR) of
4.4 percent in nominal terms through 2020 — lagging behind
overall economic growth (see Exhibit 1, next page).
Chris Lederer Megan Brownlow
chris.lederer@pwc.com megan.brownlow@pwc.com
advises senior management in focuses on market diligence
the media industry on issues and strategy for the
of strategy and growth for entertainment and media
Strategy&, PwC’s strategy sector at PwC. She is a
consulting business. He is a principal with PwC Australia,
principal with PwC US based based in Sydney.
in New York. He has published
previously in Harvard Business
Review and with Harvard
Business Publishing.
But a closer examination brings a different pic- and Nigeria, will also produce comparatively higher
ture into focus. E&M is a dynamic, diverse industry E&M growth rates (see Exhibit 2 ). But that’s just the
with steady and sustainable growth. Although the beginning of the story.
s+b special report
strong aggregate growth is not shared equally by all At a global level, one of the most significant shifts
participants, impressive growth and opportunities can evident is a reordering of the industry’s sectors (see Ex-
be found in many areas of the industry. Drastic slow-
downs in some areas and stagnation in others coexist
with spectacular expansion in “hot” countries, regions, Exhibit 2: A World of Differences
In many developing markets, E&M spending is growing more rapidly than
and sectors. Which is to say: This global media land- the economy at large.
scape is multi-shifting.
Percentage-point difference in growth rates of E&M spending and GDP, 2016
In fact, for the majority of the countries we looked Venezuela
at — 36 out of 54 — E&M spending is growing more Argentina
Indonesia
rapidly than GDP, often by a factor of more than Brazil
Egypt
50 percent. Venezuela tops the list; E&M spending Russia
Nigeria
growth there is likely to outpace GDP growth by more Pakistan
South Africa
than 14 percentage points in 2016. Many of the most Peru
MENA*
populous E&M markets, including Brazil, Pakistan, Colombia
8 Chile
Vietnam
Turkey
India
Exhibit 1:
Exhibit Global E&M
1:Growing Spending vs. GDP
but Slowing UAE
Over the next five years, growth in spending on entertainment and media Greece
Over the next five years, growth in spending on entertainment and media China
will lag overall economic growth.
will lag overall economic growth. Kenya
Saudi Arabia
10% Growth Rates Mexico
10% Annual Growth Rates
New Zealand
Thailand
8% Taiwan
8%
Italy
Exhibit 1: Global E&M and GDP growth
Canada Exhibit 2: EMC Outpacing GDP Growth
6% GDP Singapore
6% GDP
(nominal, PPP)
(nominal, PPP) Philippines Exhibit 3: Sector and Biz model
strategy+business special report 2016
U.S. Exhibit 4: Bubble chart
4% Czech Republic
4% E&M
E&M Norway Exhibit 5: Ten youngest and ten oldest markets
(nominal)
(nominal) France
2% Switzerland
Exhibit 6: Media stock index
2%
Australia Exhibit 7: Recorded music
Japan
0 Exhibit 8: Music and video streaming
0 0 2 4 6 8 10 12 14 16
2012 2013 2014 2015 2016 2017 2018 2019 2020
Exhibit 9: Heat map
2012 2013 2014 2015 2016 2017 2018 2019 2020
PROJ. *MENA (Middle East and North Africa) = Algeria, Bahrain, Jordan, Kuwait, Lebanon, Morocco, Oman,
PROJ. and Qatar. Saudi Arabia, UAE, and Egypt are broken out separately.
Source: Ovum, IMF Source: Global Entertainment and Media Outlook 2016–2020, PwC, Ovum
Source: Global Entertainment and Media Outlook 2016–2020, PwC, OvumFOR THE MAJORITY OF COUNTRIES
WE LOOKED AT, E&M SPENDING IS
GROWING MORE RAPIDLY THAN GDP.
hibit 3). On the left of the exhibit, we’ve aggregated video and new e-commerce offerings, for example —
segments into five broad groups: Internet, video enter- to jump directly into new markets and segments.
tainment, publishing, music, and video games. As the We expect the transitions we’ve described to con-
features
s+b
chart shows, revenue across E&M is steadily shifting tinue, as powerful macroeconomic, technological, and
special
from publishing businesses to video and Internet busi- social trends work to change the face of many indus-
titlereport
nesses — in particular those that provide over-the-top tries, not just E&M. But the obvious changes under
(OTT) services and monetize consumer data. When way throughout E&M mask a series of counterintui-
of the article
we break down global spending by business model tive shifts that are apparent only to those deeply im-
on the right of the exhibit, direct consumer spend- mersed in the industry. Each year, in putting together
ing models remain strong, while spending on Internet the Global Entertainment and Media Outlook, we
access, including mobile data, will rival advertising. and our colleagues collect and aggregate an immense
This development creates more fertile ground for new amount of data, gain insight through discussions with
entrants and traditional players alike — think OTT colleagues and industry leaders, test hypotheses, and
Exhibit 3: A Decade of Divergence
Differential growth rates for sectors and business models are reshaping the E&M industry.
Global Spending by Sector, US$ Billions Global Spending by Business Model, US$ Billions 9
$1,000 $1,000
Internet Consumer Spending
CAGR 2015–20: CAGR 2015–20:
7.8% 2.6%
$800 $800
Advertising
Spending
Video Entertainment 4.9%
$600 $600
3.6%
Publishing
1.1% Internet Access
$400 $400 6.8%
$200 Music $200
2.3%
Video Games
$0 4.8% $0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
PROJ. PROJ.
Note: Internet includes Internet access, search, and online classified Note: Consumer spending includes subscription revenues (from TV and
advertising. Video entertainment includes TV/video, TV advertising, radio), ticket sales, and product purchases (books, video games, etc.).
and cinema. Publishing includes magazines, newspapers, Advertising spending includes advertising revenue from TV, publishing,
business-to-business, and books. Music includes radio, Internet advertising, and out-of-home advertising. Internet access
music and radio. includes Internet subscription fees.
Source: Global Entertainment and Media Outlook 2016–2020, PwC, Ovum Source: Global Entertainment and Media Outlook 2016–2020, PwC, OvumExhibit 4: Youth Movement
Across countries, there is a strong correlation between the relative size of the under-35 population and growth in E&M spending.
Percentage of Population below Age 35
80%
Kenya Nigeria
Venezuela
Peru
UAE
70% South Africa Philippines Pakistan
CANADA Saudi Arabia
Malaysia INDIA
Poland MEXICO
60% Israel Colombia INDONESIA
U.K. Argentina Egypt
FRANCE BRAZIL Turkey GLOBAL
Vietnam
Norway AVERAGE
Denmark U.S. Chile 54.4%
s+b special report
50% New Zealand CHINA
Hungary
AUSTRALIA
Finland
RUSSIA
Switzerland Singapore
Belgium Thailand
40%
Romania
GERMANY
Taiwan
KEY
Sweden
30% JAPAN SOUTH KOREA Circle size represents Global Region
Czech Republic agreggated E&M spending
Austria NORTH AMERICA
Portugal 2015–20
Ireland ASIA-PACIFIC
Greece $100 billion
20% ITALY WESTERN EUROPE
Hong Kong $500 billion
SPAIN $1 trillion CENTRAL AND
Netherlands EASTERN EUROPE
10% BOLD = countries spending LATIN AMERICA
GLOBAL over US$20 billion in 2020 AFRICA/MIDDLE EAST
AVERAGE
E&M Spending Growth, CAGR 2015–20 4.4%
0% 2% 4% 6% 8% 10% 12% 14%
Source: Global Entertainment and Media Outlook 2016–2020, PwC, Ovum
10
formulate strategies. This process enables us to pin- ment and cutting the cord on cable TV obscures a
point shifts that few others can see — and the ones larger trend. We’ve all seen the speed at which younger
we’ve identified this year promise a host of opportu- consumers adopt new consumption behaviors and their
nities across the E&M sector. They should serve as a startling ability to multitask in different media. These
serious call to action for many of the industry’s incum- same attributes allow them to lead the way in setting
bent leaders, which can take control of their future. trends and driving consumption in E&M markets
The biggest of these shifts are occurring in five di- around the world. Companies may find it easier and
mensions of the global E&M landscape: demography, more comforting to pitch their products and services at
competition, consumption, geography, and business putatively more affluent older people. But our data sug-
strategy+business special report 2016
models. Simultaneous and interrelated, they influence gests that in many countries in many parts of the world,
and play off one another. We’ll look at each shift in turn. the young will propel E&M growth through 2020.
As shown by our mapping of 54 countries’ popula-
Shift 1. Demography: Youth Will Be Served tion percentage under 35 against their projected E&M
A great deal is made — in the U.S. in particular — of spending growth rates, there’s an almost perfect correla-
the financial struggles of millennials. But the cultural tion between markets with more youthful populations
trope of 20-somethings living in their parents’ base- and those with higher E&M growth (see Exhibit 4 ).THE OPPORTUNITY FOR MEDIA COMPANIES IS
TO UNDERSTAND THE YOUNG AND BE ABLE TO
PREDICT, FOR EXAMPLE, WHEN THEY WILL PIVOT
FROM MUSIC DOWNLOADS TO STREAMING.
Why? Here’s our hypothesis. Younger people consume of legacy media — in other words, in these markets,
more media than older people, and are more open to a large base of consumers comfortable with traditional
adopting digital behaviors — and therefore more open media will make it possible to sustain profitability for
features
s+b
to digital spending. Although some analog segments re- some time, whereas pushing new technology too hard
special
main robust, digital media is where aggregate growth will risk alienating the considerable number of older
titlereport
is strongest globally. In addition, many of the most consumers. In Japan, for example, the average daily
youthful markets have rapidly growing middle classes newspaper circulation is 45.6 million, a number that
of the article
whose discretionary spending power is on the rise — has declined by only 6.3 percent in the past four years.
and E&M spending is usually discretionary. The op- There’s no immediate rush for Japanese newspaper
portunity for media companies is to understand how companies to go all-digital.
the young spend on digital content, and to be able to In younger markets, by contrast, there will be a
predict, for example, when they will pivot from paying significant incentive for providers to shift completely
for music downloads to streaming music services. to digital media, or to offer bundles, the better to tar-
Of course, E&M providers entering new markets get the large number of youthful consumers with less
or seeking to accelerate growth in existing ones should ingrained habits and preferences. India’s growing mid-
take into account a country’s demographics along with dle class has supported print newspaper growth. But
its wealth or rate of economic growth. A number of the ranks of Indian social media users surged by 26
11
lower-growth, relatively older markets, such as the U.S., percent in 2015, to 134 million. That suggests more
remain fundamentally important because of their size digital reading is imminent. (See “India’s Triple Play,” by
and absolute growth. In older, less digitized markets, it Suvarchala Narayanan, page 20.)
may make sense to focus more on managing the decline Our analysis of total E&M revenue growth in the
world’s 10 youngest and oldest markets in demographic
terms further underscores the vital importance of youth
Exhibit 5: Age Matters (see Exhibit 5 ). On average, E&M spending in the 10
Between 2015 and 2020, E&M spending will grow far more rapidly in the
world’s youngest markets than in the oldest ones. youngest markets is growing three times as rapidly as
in the 10 oldest markets. In Pakistan, where around 70
E&M CAGR, 2015–20 8.0% percent of the population is under 35, E&M spending is
projected to grow at a 10 percent CAGR through 2020;
by contrast, Germany and Japan — two much wealth-
ier countries with among the lowest proportions of peo-
2.5% ple under 35 — sport a meager E&M CAGR of about
10 YOUNGEST 10 OLDEST 2 percent. Put another way, growth in E&M spending
markets markets is more influenced by the age of a country’s population
Source: Global Entertainment and Media Outlook 2016–2020, PwC, Ovum than by its comparative wealth. So youth will be served.MUCH OF THE E&M INDUSTRY IS GROWING
MORE GLOBAL, BUT CULTURES AND TASTES IN
CONTENT REMAIN STEADFASTLY LOCAL.
Exhibit 6: Content Struggles In a world in which Netflix can launch its stream-
In 2015, stocks of media companies encountered significant headwinds. ing services in 130 new countries in a single day, it’s
easy to assume that content is becoming more globally
s+b special report
S&P 500 Media Industry Group Index
550 homogeneous. But the reality is that content is being
525
redefined by forces of globalization and localization si-
multaneously. In the global coffee market, a homoge-
500
nizing force such as Starbucks, now present in 70 coun-
475
tries around the world, can thrive alongside local chains
450 and coffee shops. The same holds true in E&M. Net-
425 flix, for example, has said that locally produced content
400
2015 weekly prices
is its future.
J F M A M J J A S O N D
Much of the E&M industry is growing more glob-
Source: S&P Capital IQ al, but cultures and tastes in content remain steadfastly
local. The international opening weekend of Batman
v Superman: Dawn of Justice (in March 2016) grossed
Shift 2. Competition: Content Is Still King $254 million globally on 40,000 screens in 66 markets
In 2015, the stocks of many of the world’s largest tra- outside the U.S., the fifth most successful international
12
ditional media conglomerates, especially those based in opening in history. But the year’s biggest opening in
the U.S. and Europe, suffered in comparison to both China thus far, the Hong Kong–produced fantasy com-
technology-driven platforms such as Netflix and com- edy The Mermaid, grossed $120 million on its opening
munications platforms such as Verizon. Declines in weekend in February 2016.
media stocks were especially significant in the summer Content-based business models across the world are
(see Exhibit 6 ). being transformed to support this coexistence of global
Content was deemed to have taken a backseat to and local content offers. South Africa–based Naspers
technology and communications. The symptoms: slow- has an impressive portfolio including pay-TV operations
ing ad markets for traditional, content-producing me- that serve 48 African countries, and Nation Media
dia; big ratings declines for cable and broadcast tele- is the biggest media house in East Africa, having ex-
strategy+business special report 2016
vision; the currency drag from a strong dollar; and a panded from its origins in Kenya to build major opera-
slowdown in TV affiliate fees. As a result, it might seem tions in Uganda and Tanzania. Such companies thrive
that the mantra from the 1990s, “content is king,” had by blending international reach and local focus. A host
become outdated. But in fact, in an important yet wide- of global television formats are produced domestically,
ly overlooked shift, we believe that content will reign in local languages with local talent. More than 100
supreme as platforms seek to differentiate and expand international variations of the British-created quiz
internationally. show Who Wants to Be a Millionaire? have been pro-duced since the original U.K. version debuted in in India, the world’s most prolific producer of movies;
1998. Talent shows, dating shows, and cooking shows in Nigeria, where Nollywood produces about 1,000
have also proven to have universal appeal, but they films a year (more than U.S. studios do); and in China,
features
s+b
succeed in domestic markets largely because of their which will overtake the U.S. in 2017 as the world’s larg-
special
local characteristics. est market for box office revenue.
titlereport
The dichotomy of global and local may be seen These factors carry implications for media compa-
most clearly in those markets that combine well-devel- nies’ strategies. In particular, it’s important not to as-
of the article
oped digital distribution infrastructure and platforms sume that past patterns in spending on “global” content
with strong local content industries. The preference in mature markets are a valid guide to future spend-
for local content over “global” (often code for U.S.-pro- ing in emerging markets, which often have their own,
duced ) content is evident even in a mature, developed, even more deeply held tastes in content and cultures, on
English-speaking country such as Australia, where lo- top of a variety of native languages. As companies tai-
cally produced sports, reality shows, news, and drama lor their decisions about market entry, they also need to
offerings, such as Shaun Micallef’s political satire Mad consider the mix of global versus local brands they will
as Hell, rank as the 10 most-watched television pro- deploy in order to build audiences.
grams every year. Local tastes are even more prevalent A particularly striking example of counterintui-
tive trends driven by local content demand can be seen
13
in physical recorded music revenues in 2015. Global
Exhibit 7: Local Tastes Dominate spending on physical recorded music — mainly CDs
Consumers in three European countries bucked the trend of sharply and vinyl —Exhibit
fell in1: 2015
declining sales of physical recorded music.
GlobalbyE&M6.3andpercent. Yet spending
GDP growth
on physical music
Exhibit formats in the U.K.
2: EMC Outpacing was almost flat,
GDP Growth
2015 Spending on Physical Recorded Music which is quiteExhibit
an 3: Sector and Biz
achievement model
considering the down-
ward trend. Exhibit
And in 4: Bubble chart Norway, the spending
Italy and
+30.5% Exhibit 5: Ten youngest and ten oldest markets
growth was remarkable: 22.7 percent and 30.5 percent,
Exhibit 6: Media stock index
respectively (see Exhibit 7 ).
Exhibit 7: Recorded music
+22.7%
What happened? In and
Exhibit 8: Music each
videomarket,
streamingthe impact
of global music streaming
Exhibit 9: Heat map was offset by specific local
tastes. In the U.K., Adele’s new blockbuster album,
25, which was not made available for streaming, was
U.K. almost single-handedly responsible for the strength of
Worldwide Norway Italy –0.5%
physical music; the legions of fans among Adele’s coun-
–6.3% trymen and -women were willing to pay for CDs. In
Italy, a strong domestic repertoire, led by the 13th stu-
Source: Global Entertainment and Media Outlook 2016–2020, PwC, Ovum dio album of singer–songwriter Jovanotti, Lorenzo 2015Exhibit 8: A Stream Runs Through It now to curate their own playlists — through apps, You-
Revenues for streaming services are growing rapidly. Tube, streaming services, social media, and OTT offer-
ings. Broadly speaking, many pundits have proclaimed
s+b special report
US$ Millions
$40,000 4.0%
the end of the bundle — the set of offerings that radio
Digital music streaming revenue stations, cable and record companies, or even news-
$35,000 3.5%
Electronic home video papers and magazines have traditionally sold together.
OTT/streaming — SVOD revenue
$30,000 3.0% And indeed, the rise of subscription content streaming
Share of global
$25,000
consumer revenue
2.5%
services has been a major feature of the E&M land-
(right scale)
scape in recent years (see Exhibit 8 ). Global subscription
$20,000 2.0%
spending on Netflix and other OTT subscription-
$15,000 1.5% video-on-demand (SVOD) services grew by 33.8 per-
$10,000 1.0%
cent in 2014 and 32.3 percent in 2015 — that’s 77 per-
cent in two years. The launch of Apple Music provided
$5,000 0.5%
a major boost to digital music streaming revenue, and
$0 0% other streaming companies, such as Tidal, Beatport,
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
PROJ.
Deezer, Earbits, Pandora, Spotify, and Rhapsody — to
Source: Global Entertainment and Media Outlook 2016–2020, PwC, Ovum name but a few — arguably saw a boost due to the en-
14
hanced awareness Apple Music created among consum-
CC, accounted for the rebound in physical music. And ers. Partly as a result, global music streaming spending
in Norway, where the popular electronic dance music rose by 41.8 percent in 2015, to $4.07 billion.
scene promotes record-spinning DJs as rock stars, vi- But the bundle isn’t dead, not by a long shot.
nyl sales accounted for 24 percent of all physical mu- The rapid growth in on-demand streaming revenues
sic revenue, a high proportion compared with vinyl’s 2 is starting from a very low base, and even today on-
percent share of music revenue globally. Faced with an demand streaming accounts for little more than 2 per-
array of choices, consumers decide at the local — and cent of global consumer E&M revenue. Meanwhile,
indeed personal — level what to purchase. And that video and cable incumbents, which were initially slow
leads to wildly different outcomes, even in markets that off the mark, are fighting back with gusto by offer-
strategy+business special report 2016
might appear superficially similar. ing their content on an integrated omnichannel basis,
on TV, laptop, tablet, and smartphone. In numerous
Shift 3. Consumption: The Joy of Bundles markets, many consumers — including cord cutters
The ability to design and curate your own media diet — still love the convenience of having their content
has been one of the most powerful trends to emerge in aggregated in one place, rather than needing to root
the industry. Whether in the U.S. or Uzbekistan, con- it out across a bunch of disconnected services. In the
sumers have never had a greater ability than they do U.K., Sky’s Now TV stand-alone streaming serviceIN 2017, WHEN CHINA OVERTAKES
THE U.S. IN BOX OFFICE REVENUE, IT WILL BE
THE FIRST TIME THE U.S. HAS NOT HELD
THE LEADING POSITION IN AN E&M SEGMENT.
had more than 700,000 subscribers in early 2015. But We also see bundles popping up, or reappearing,
Sky also offers those who subscribe to their main ser- in other sectors. In Europe, newspaper publishers are
vice a new multidevice streaming capability. enabling custom bundles by mashing content onto
features
s+b
As such services gain traction, it’s clear that some new digital platforms. Blendle, based in Utrecht, the
special
consumers may opt for a set of “pure” à la carte offer- Netherlands, launched an English-language version in
titlereport
ings to keep costs down. And fewer will pay a premium March 2016 with 20 high-caliber publishing partners
price for a mundane collection of channels that they can including the New York Times and the Economist. This
of the article
watch only on television. But the traditional bundlers are experiment, which leverages micropayments, may prove
adapting rapidly, and they have substantial advantages attractive to digital consumers used to paying small
and large customer bases. As a result, we believe the bulk amounts for apps, songs, and mobile games.
of digital OTT mass-market services will gradually be
reabsorbed into aggregated offerings that will echo the Shift 4. Geography: Growth Markets
traditional analog-style bundle, but that will be more Generally, companies have had one set of expectations
flexibly priced and available on a full range of devices. about developed markets (slow growth, low regulation,
These offerings will have features such as intelligent in- easier to access) and another about developing markets
tegration, which permits a consumer to watch part of a (rapid growth, high regulation, more difficult to ac-
movie on one device and then finish it on another. cess). The result was that a company might have one
15
When this happens, the competitive battle may strategy for developed markets, and another, some-
move up a notch from the OTT service level to the what generic strategy for developing markets. But the
realm of service aggregators, which range from giants dynamics are shifting rapidly. In 2017, for example,
such as Apple, Google, and Verizon to small entrants when China overtakes the U.S. in box office revenue,
such as WeShow and Aggrega. The big battles will it will mark the first time the U.S. has not held the
no longer be fought mainly over networks, cable leading position in an E&M segment. China is also
channels, and upstarts gaining access to content. well advanced in segments such as digital advertis-
The new battles will be among cable incumbents, ing. In 2016, three countries — China, the U.K., and
technology giants, and telecommunications compa- Denmark — will become the first to reach the tipping
nies, fighting over gaining access to distribution. The point at which total digital advertising revenues sur-
heightened importance of ownership of broadcast pass their non-digital equivalent.
spectrum will make spectrum auctions such as the Disruption is pushing markets to develop in differ-
one currently under way in the U.S. potentially piv- ent ways. The divergences are being driven by several
otal. Whoever buys and owns spectrum may be bet- factors. One is the differential growth rates among sec-
ter placed to enter and win the race to offer stream- tors. The table in Exhibit 9 (page 17) demonstrates that
ing bundles. As bandwidth comes up for grabs, so too beyond zeroing in on the fastest-growing markets, such
will the role of aggregator. as Indonesia, India, and Peru, E&M companies mustREGIONAL INCONSISTENCY IN REGULATION AFFECTS
BUSINESS MODELS, THE SHAPE OF THE MARKET, AND
THE REVENUE OUTLOOK IN DIFFERENT TERRITORIES.
focus on those that are generating the greatest absolute access affects business models, the shape of the market,
dollar growth — namely, the U.S. and China. In ad- and the revenue outlook in different territories. Ger-
dition, in every country, different sectors are driving man publisher Axel Springer quit the Russian market
s+b special report
growth to different degrees. The result of these diver- in 2015 owing to foreign ownership limits. But other
gences is that “opportunity” economies — even with- countries are improving the regulatory environment for
in the same region — can display significantly varied E&M companies. In Nigeria, which in 2014 created an
growth patterns. online copyright registration system, the government is
In addition to understanding the where and how working to enact legislation to protect publishers more
of growth by country, companies must grasp the im- effectively against copyright infringement. Malaysia’s
portance of a third factor: regulation. In the E&M con- government has blocked tariffs on books in order to
text, regulatory interventions include blocking entry of promote reading and literacy.
international companies, requiring a certain percent- The fundamental and ingrained differences be-
age of airtime to be dedicated to local market content, tween markets represent a key factor that E&M compa-
mandating government review and approval of content nies must take into account when planning their global
before content can be aired, and imposing different tax strategies. And it’s clear that despite globalization, such
structures for local and international companies. And differences won’t go away anytime soon. The chal-
once again, the conventional E&M wisdom is often un- lenge for E&M companies is how to navigate around or
16
dermined by the facts on the ground. Simply put, some through the barriers and thus gain access to these mar-
of the most heavily regulated markets are also those kets’ expanding consumer opportunities and growing
with the most growth. revenues. One option is creating new, tailored business
In China, companies may face significant obstacles models and local joint ventures or partnerships, and
due to regulation. The websites of U.S. companies such then localizing content and advertising experiences to
as Facebook, Google, and Netflix are blocked, and the comply with local regulations on such issues as decency
number of foreign films shown annually is limited. and public health, as well as to suit local tastes.
Yet China remains one of the most robust markets for
E&M growth in terms of absolute dollars. The more Shift 5. Business Models: Transforming with Trust
restrictive environments tend to limit what media com- In 2013, Netflix CEO Reed Hastings (now) famously
strategy+business special report 2016
panies can broadcast and publish, and also limit who said he wanted to build Netflix into a company that ac-
owns them, with a common focus on maintaining in- tually resembled a premium cable network. This was a
digenous ownership and control. This often takes the technology company racing to become a new kind of
form of governments funding local content or enacting hybrid content company. Meanwhile, traditional pub-
regulations to prevent “excessive” outside cultural influ- lisher Time Inc. is emerging as a hybrid technology
ence and protect local artists. company. In March 2016, it acquired the data-driven
Regional inconsistency in regulation and market marketing specialist Viant Technology. Such movesExhibit 9: Hot Spots TOP 10 rank in category
In every country, a different mix of factors is propelling growth. BOTTOM 10 rank in category
COMPOUND ANNUAL GROWTH RATES 2015–20
COUNTRY E&M VIDEO VIDEO E&M SPENDING 2015
SPENDING INTERNET GAMES ENTERTAINMENT MUSIC PUBLISHING US$ MILLIONS
Indonesia 13% 21% 8% 15% 4% 4% $12,672
Nigeria 11% 15% 12% 4% 7% 2% $4,311
India 10% 14% 11% 12% 7% 4% $25,126
Egypt 10% 15% 7% 13% 11% 1% $2,859
Vietnam 10% 13% 5% 12% 2% 3% $3,103
Pakistan 10% 14% 5% 9% 9% 2% $3,066
China 9% 12% 7% 9% 6% 1% $168,826
MENA 9% 14% 4% 7% 7% 0% $10,180
Kenya 8% 9% 14% 10% 7% 4% $2,254
Argentina 8% 9% 9% 10% 9% 4% $11,645
Peru 8% 12% 9% 8% 9% 2% $3,944
Philippines 8% 12% 7% 9% 5% 2% $5,675
Venezuela 8% 12% 6% 6% 11% 3% $5,135
Colombia 7% 10% 10% 7% 8% 2% $5,264
South Africa 7% 13% 6% 6% 5% 1% $9,567
UAE 7% 10% 9% 5% 4% -1% $3,785
features
s+b
Chile 7% 10% 7% 5% 5% 3% $4,340
Turkey 7% 10% 8% 6% 6% 2% $11,533
special
Brazil 6% 10% 11% 5% 4% 2% $35,657
titlereport
Russia 6% 10% 6% 6% 0% 2% $15,380
Saudi Arabia 5% 6% 8% 14% 6% -1% $7,472
Mexico 5% 7% 4% 4% 6% 3% $21,616
of the article
Singapore 5% 9% 5% 3% 2% 2% $5,148
Thailand 5% 8% 7% 6% 5% 2% $9,005
Australia 5% 8% 3% 4% 0% 1% $29,856
Taiwan 5% 8% 2% 1% 5% 2% $13,685
Romania 5% 9% 7% 2% 1% 2% $2,171
Sweden 5% 11% 4% 3% 5% -1% $12,767
New Zealand 4% 10% 5% 3% 1% 1% $4,784
South Korea 4% 6% 6% 2% 6% 0% $51,107
Czech Republic 4% 7% 6% 2% 0% 2% $4,351
Malaysia 4% 8% 6% 3% 4% 2% $7,321
Israel 4% 7% 4% 2% 0% 0% $5,110
Ireland 4% 9% 5% 2% 4% -1% $4,476
U.S. 4% 8% 4% 1% 2% 2% $602,973
$32,751
17
Italy 3% 6% 4% 3% 1% -1%
Poland 3% 7% 6% 2% 0% 1% $9,196
Canada 3% 7% 4% 1% 2% 2% $40,329
Netherlands 3% 7% 5% 2% 2% 0% $16,402
U.K. 3% 6% 3% 2% 1% 1% $89,428
Norway 3% 7% 2% 2% 3% -1% $10,023
France 3% 6% 2% 2% 0% 1% $63,493
Spain 3% 4% 3% 4% 4% 0% $24,215
Greece 3% 6% 5% 2% 4% -1% $4,056
Denmark 3% 7% 4% 1% 2% -1% $8,304
Hong Kong 3% 5% 6% 1% 4% 0% $8,797
Portugal 3% 4% 6% 3% 0% -1% $6,738
Hungary 3% 4% 7% 3% 2% 1% $2,564
Finland 3% 7% 3% 1% 1% 0% $6,413
Switzerland 3% 6% 4% 3% 2% -1% $16,055
Austria 2% 7% 3% 3% 1% -1% $10,655
Belgium 2% 5% 2% 2% 2% 0% $11,242
Japan 2% 3% 5% 3% -3% -1% $148,961
Germany 2% 4% 3% 2% 2% 0% $85,712
GLOBAL 4.4% 7.8% 4.8% 3.6% 2.3% 1.1% $1.7 TRILLION
Note: Internet includes Internet access, search, and online classified advertising. Video *MENA (Middle East and North Africa) = Algeria, Bahrain, Source: Global Entertainment and Media
entertainment includes TV/video, TV advertising, and cinema. Publishing includes magazines, Jordan, Kuwait, Lebanon, Morocco, Oman, and Qatar. Outlook 2016–2020, PwC, Ovum
newspapers, business-to-business, and books. Music includes music and radio. Saudi Arabia, UAE, and Egypt are broken out separately.E&M COMPANIES THAT COMBINE TECHNOLOGY
WITH INDUSTRY-CENTRIC ASSETS —
SUCH AS RELATIONSHIPS, CUSTOMERS, AND
KNOWLEDGE — WILL THRIVE AND EVOLVE.
highlight another noteworthy shift. In many areas, the not build, they buy or access through partnering. Enter
growth of technology and digitization acts as a power- the new “super” agency.
ful centrifugal force — breaking up existing relation- In September 2014, the advertising holding com-
s+b special report
ships; pushing large, generalist entities to give way to pany WPP injected $25 million and the ad server plat-
smaller specialists; and allowing smaller, nimble com- form from its programmatic media arm Xaxis into ad
petitors to beat out incumbents. But the reality is that technology provider AppNexus, in return for a signifi-
the historic shifts now under way are forging the cre- cant stake in the business. (See “Thought Leader In-
ation of new business models, and perhaps even new terview: Sir Martin Sorrell,” by Deborah Bothun and
industries. Those that are able to integrate the capabili- Daniel Gross, page 58.) Announcing the deal, WPP,
ties and approaches that create value for customers will whose Kantar unit represents one of the largest con-
continue to thrive. sumer retail data sets available, said the move continued
Let’s take advertising as an example. The rise of its strategy of investing in fast-growing sectors such as
large integrated data sets, smart analytics, and new vi- ad technology and programmatic media buying. Oth-
sualization and delivery platforms — combined with er savvy, forward-looking agencies also have large and
the growth of programmatic advertising and the ad- valuable data assets, and are working to evolve them to
vent of native content — would seem to significantly world-class levels. For instance, Publicis bought Sapi-
undermine the role of the traditional agency and me- ent, which includes SapientNitro and Razorfish, thus
18
dia company. This view is reinforced by a migration of enabling the company to build a portfolio of leading
advertising revenue away from companies whose core technology and digital assets.
product is “the big idea” and toward those, like Google As these players in the advertising value chain de-
and Facebook, whose differentiator is their algorithmic velop their data strategies, the new linchpin for com-
buying platform. At the same time, multichannel net- petitive advantage could be bundling in content mar-
works, social media, and content marketing businesses keting (or, as some say, “brand to demand”) at scale.
are seeking to grab a slice of the advertising pie. This next-generation marketing strategy offers promise
But what if all these changes are creating an op- not just to the agencies, but to content creators as well.
portunity for incumbent agencies to reorient themselves In Australia, the three biggest newspaper publishers
to become invaluable to markets? One might argue that — News Corp, Fairfax, and APN News and Media —
strategy+business special report 2016
the established agency holding companies are uniquely have all set up or bought a content marketing business
well positioned to bring together programmatic capa- in the last couple of years. These organizations may be
bilities, analytics, data aggregation, and native content. very well suited to capture this opportunity because of
And in fact, they’re already doing it. The biggest hold- the trust equity that lives in the brands, especially when
ing companies are scaling world-class programmatic ca- it comes to assuring consumers who have privacy con-
pabilities, while also developing software to buy digital cerns. Globally, revenues from the creation and provi-
advertising faster and more efficiently. What they can- sion of content marketing grew 13.3 percent in 2014,to reach $26.47 billion, according to PQ Media. E&M To do this, they’ll need to ensure that their capa-
companies that embrace technology and combine it bilities are both up to the job individually and aligned
with industry-centric assets — such as relationships, such that they add up to more than the sum of their
features
s+b
customers, and knowledge — will thrive and evolve. parts. Strong brands must be underpinned by the best
special
talent, which must be empowered by low-friction digi-
titlereport
Navigating Multispeed Markets tized processes that enable them to glean and use deep
As the five shifts that we’ve described play out, so will consumer insight from data. Companies that combine
of the article
changes in the E&M landscape. This industry is learn- these attributes and establish positions in high-growth
ing from experience and becoming nimble; more and markets will be the most likely to succeed. +
more, it will position itself to seize the opportunities
that appear. The E&M industry is getting used to the
new normal — a multispeed marketplace that expects
and plans for disruption.
Why do we say this? From the vantage point of to-
day, it might seem that any strategy for the next five
years will be rendered not just obsolete but irrelevant
by 2018, let alone by 2021. Just think about how E&M
19
companies’ five-year pro forma plans from 2011 look
today in light of the disruption we’ve seen.
Even so, E&M companies are learning, acting,
and, in many parts of the world, thriving. Each of the
shifts we’ve highlighted can help companies plan and Resources
do business better. The power of youth, the primacy of
localized content, the resilience of a new kind of bundle, Edward H. Baker, “The Surprising Endurance of the Boob Tube,”
s+b, Sept. 9, 2015: Author Michael Wolff’s argument about why television
the deepening of developing markets, the potential for maintains its audience.
new business models: All are taking place against the Christopher A.H. Vollmer and Matt Egol, “Five Rules for Strategic Part-
backdrop of steadily growing industry-wide revenues. nerships in a Digital World,” s+b, Dec. 22, 2014: For leading companies
For E&M companies with the right strategies and in E&M, the future depends on the capabilities and insights they can tap
by working with others.
insights, the opportunities are legion. And the shifts play
We will be continuing the conversation around the Global Entertainment
to the strengths of companies with big market positions,
and Media Outlook 2016–2020 at major industry conferences, on our
capital they can invest, strong brands, and strength in websites, and in future articles. Topics could include deeper dives into
understanding local tastes and preferences. If they make measurement, mobile, and privacy, as well as country-specific conver-
sations. Go to www.pwc.com/outlook to get access to more Outlook
the right calls, incumbents can position themselves to information and subscription options.
capitalize on the next phase of change and drive growth.20
s+b special report
INDIA’S
strategy+business special report 2016
TRIPLE
PLAY
s+b special report
What do feature phones, regional newspapers, and
smartphones have in common? They’re all vehicles for
the country’s remarkable move to digital broadband.
by Suvarchala Narayanan
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