GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK 2016 -2020: A WORLD OF DIFFERENCES - FACEBOOK'S CAROLYN EVERSON SIR MARTIN SORRELL OF WPP INDIA'S ...

 
GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK 2016 -2020: A WORLD OF DIFFERENCES - FACEBOOK'S CAROLYN EVERSON SIR MARTIN SORRELL OF WPP INDIA'S ...
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 -2020: A WORLD OF DIFFERENCES - FACEBOOK'S CAROLYN EVERSON SIR MARTIN SORRELL OF WPP INDIA'S ...
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
GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK 2016 -2020: A WORLD OF DIFFERENCES - FACEBOOK'S CAROLYN EVERSON SIR MARTIN SORRELL OF WPP INDIA'S ...
comment
                                                                                                                                                          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
GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK 2016 -2020: A WORLD OF DIFFERENCES - FACEBOOK'S CAROLYN EVERSON SIR MARTIN SORRELL OF WPP INDIA'S ...
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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                    strategy+business (ISSN 1083-706X) is published by certain member firms of the PwC network. © 2016 PwC. All rights reserved. PwC refers to the
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GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK 2016 -2020: A WORLD OF DIFFERENCES - FACEBOOK'S CAROLYN EVERSON SIR MARTIN SORRELL OF WPP INDIA'S ...
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
GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK 2016 -2020: A WORLD OF DIFFERENCES - FACEBOOK'S CAROLYN EVERSON SIR MARTIN SORRELL OF WPP INDIA'S ...
country contacts

                              Global Entertainment and Media Outlook Country Contacts

                              Global                        Czech Republic                  Ireland                        New Zealand
                              Deborah Bothun                Tomas Basta                     Amy Ball                       Keren Blakey
                              deborah.k.bothun@pwc.com      tomas.basta@cz.pwc.com          amy.ball@ie.pwc.com            keren.j.blakey@nz.pwc.com

                              Argentina                     Denmark                         Israel                         Nigeria
                              Ariel Vidan                   Leif Ulbaek Jensen              Amir Gleit                     Osere Alakhume
     4                        ariel.vidan@ar.pwc.com        leif.ulbaek.jensen@dk.pwc.com   amir.gleit@il.pwc.com          osere.alakhume@ng.pwc.com

                              Australia                     Egypt                           Italy                          Norway
                              David Wiadrowski              Jayant Bhargava                 Andrea Samaja                  Eivind Nilsen
                              david.wiadrowski@au.pwc.com   jayant.bhargava@                andrea.samaja@it.pwc.com       eivind.nilsen@pwc.com
                                                            strategyand.ae.pwc.com

                              Austria                                                       Japan                          Pakistan
                              Hannes Orthofer               Finland
                                                                                            Yoshihisa Chiyoda              Syed Shabbar Zaidi
                              hannes.orthofer@at.pwc.com    Harri Valkonen                  yoshihisa.chiyoda@jp.pwc.com   s.m.shabbar.zaidi@pk.pwc.com
                                                            harri.valkonen@fi.pwc.com

                              Belgium                                                       Kenya                          Peru
                              Kurt Cappoen                  France
                                                                                            Anthony Murage                 Bernardo Duce
                              kurt.cappoen@be.pwc.com       Richard Béjot                   anthony.murage@ke.pwc.com      bernardo.duce@pe.pwc.com
                                                            richard.bejot@fr.pwc.com

                              Brazil                                                        Korea                          Philippines
                              Estela Vieira                 Germany
                                                                                            Bumtak Lee                     Anna Marie Ordonez
                              estela.vieira@br.pwc.com      Werner Ballhaus                 bumtak.lee@kr.pwc.com          anna.marie.g.ordonez@
                                                            werner.ballhaus@de.pwc.com
                                                                                                                           ph.pwc.com

                              Canada                                                        Malaysia
                              Darren Henderson              Greece                                                         Poland
                                                                                            Irvin Menezes
                              darren.henderson@ca.pwc.com   Panagiotis Zisis                irvin.menezes@my.pwc.com       Maciej Korzeniowski
                                                            panagiotis.zisis@gr.pwc.com
                                                                                                                           maciej.korzeniowski@pl.pwc.com
                              Chile                                                         Mexico
                              Andrew De La Mare             Hungary                                                        Portugal
                                                                                            Fernando Gutiérrez
name to come bold type here

                              andrew.delamare@cl.pwc.com    Peter Sere                      fernando.gutierrez@            Goncalo Mendes
                                                            peter.sere@hu.pwc.com           mx.pwc.com                     goncalo.saraiva.mendes@
                              China & Hong Kong                                                                            pt.pwc.com

                              Wilson Chow                   India                           Middle East/
                                                                                                                                                            strategy+business special report, summer 2016

                              wilson.wy.chow@cn.pwc.com     Frank D’Souza                   North Africa                   Romania
                                                            frank.dsouza@in.pwc.com
                                                                                            Jayant Bhargava                Florin Deaconescu
                              Colombia                                                      jayant.bhargava@               florin.deaconescu@ro.pwc.com
                                                                                            strategyand.ae.pwc.com
                              Jorge Mario Añez              Indonesia
                              jorge.anez@co.pwc.com         Mohammad                                                       Russia
                                                            Chowdhury                       Netherlands                    Yury Pukha
                                                            mohammad.chowdhury@             Ennel van Eeden                yury.pukha@ru.pwc.com
                                                            id.pwc.com                      ennel.van.eeden@nl.pwc.com

     4
GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK 2016 -2020: A WORLD OF DIFFERENCES - FACEBOOK'S CAROLYN EVERSON SIR MARTIN SORRELL OF WPP INDIA'S ...
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
                                                             provided herein should not be used as a substitute for consultation with
                                                             professional tax, accounting, legal, or other competent advisors. Before
Vicky Myburgh                    manuel.pereyra@ve.pwc.com
                                                             making any decision or taking any action, you should consult a profes-
vicky.myburgh@za.pwc.com
                                                             sional advisor who has been provided with all pertinent facts relevant to
                                                             your particular situation.
                                 Vietnam
Spain                            Ong Tiong Hooi              The information is provided as is, with no assurance or guarantee of
Jorge Planes Trillo              tiong.hooi.ong@vn.pwc.com   completeness, accuracy, or timeliness of the information and without
jorge.planes.trillo@es.pwc.com                               warranty of any kind, express or implied, including but not limited to
                                                             warranties of performance, merchantability, and fitness for a particular
                                                             purpose. Content from the articles in this publication must not be
Sweden                                                       excerpted, used, or presented in any portion that would render it mis-
                                                             leading in any manner or that fails to provide sufficient context.
Nicklas Kullberg
nicklas.kullberg@se.pwc.com

                                                             Permission to cite
Switzerland
Patrick Balkanyi                                             No part of this publication may be excerpted, reproduced, stored in a
patrick.balkanyi@ch.pwc.com                                  retrieval system, or distributed or transmitted in any form or by any
                                                             means — including electronic, mechanical, photocopying, recording, or
                                                             scanning — without the prior written permission of PwC.
Taiwan                                                       Requests should be submitted in writing to Gary Rosen at
Damian Gilhawley                                             gary.rosen@us.pwc.com outlining the excerpts you wish to use, along
damian.gilhawley@tw.pwc.com                                  with a draft copy of the full report that the excerpts will appear in. Provi-
                                                             sion of this information is necessary for every citation request to enable
                                                             PwC to assess the context in which the excerpts are being presented.
Thailand
                                                                                                                                             name to come bold type here
                                                             Without limiting the foregoing, excerpts from the publication may be
Tina Hammond                                                 used only for background market illustration, should not be the sole
tina.ann.hammond@th.pwc.com
                                                             source of 2016–2020 information, and must not form the majority of
                                                             sourced information.
Turkey
Murat Colakoglu
murat.colakoglu@tr.pwc.com

UAE
Jayant Bhargava
jayant.bhargava@
strategyand.ae.pwc.com

                                                                                                                                                   5
GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK 2016 -2020: A WORLD OF DIFFERENCES - FACEBOOK'S CAROLYN EVERSON SIR MARTIN SORRELL OF WPP INDIA'S ...
6
                                            s+b special report

strategy+business special report 2016
GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK 2016 -2020: A WORLD OF DIFFERENCES - FACEBOOK'S CAROLYN EVERSON SIR MARTIN SORRELL OF WPP INDIA'S ...
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).
GLOBAL ENTERTAINMENT AND MEDIA OUTLOOK 2016 -2020: A WORLD OF DIFFERENCES - FACEBOOK'S CAROLYN EVERSON SIR MARTIN SORRELL OF WPP INDIA'S ...
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, Ovum
FOR 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, Ovum
Exhibit 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%
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                     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
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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
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                     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
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succeed in domestic markets largely because of their                          which will overtake the U.S. in 2017 as the world’s larg-

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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 2015
Exhibit 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
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                     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 service
IN 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 must
REGIONAL 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
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                     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 moves
Exhibit 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

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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

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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
                                                 TRI
PLE
 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

                                                        21
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