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Perspectives from the Global
Entertainment and Media Outlook
2017–2021
Curtain up!
User experience takes center stage
www.pwc.com/outlook
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Perspectives from the Global Entertainment and Media Outlook 2017–2021 Curtain up! User experience takes center stage
Global entertainment and
media outlook country contacts
Global Denmark Japan
Deborah Bothun Leif Ulbaek Jensen Yoshihisa Chiyoda
deborah.k.bothun@pwc.com leif.ulbaek.jensen@dk.pwc.com yoshihisa.chiyoda@jp.pwc.com
Argentina Egypt Kenya
Ariel Vidan Jayant Bhargava Anthony Murage
ariel.vidan@ar.pwc.com jayant.bhargava@strategyand.ae.pwc.com anthony.murage@pwc.com
Australia Finland Korea
Megan Brownlow Harri Valkonen Bumtak Lee
megan.brownlow@pwc.com KDUULYDONRQHQ#ğSZFFRP bumtak.lee@kr.pwc.com
Austria France Malaysia
Hannes Orthofer Richard Béjot Irvin Menezes
hannes.orthofer@at.pwc.com richard.bejot@fr.pwc.com irvin.menezes@my.pwc.com
Belgium Germany Mexico
Kurt Cappoen Werner Ballhaus Luis Roberto Martinez
kurt.cappoen@be.pwc.com werner.ballhaus@de.pwc.com luis.roberto.martinez@mx.pwc.com
Brazil Greece Middle East/North Africa
Estela Vieira Panagiotis Zisis Jayant Bhargava
estela.vieira@br.pwc.com panagiotis.zisis@gr.pwc.com jayant.bhargava@strategyand.ae.pwc.com
Canada Hungary Netherlands
John Simcoe Peter Sere Ennèl van Eeden
john.b.simcoe@pwc.com peter.sere@hu.pwc.com ennel.van.eeden@nl.pwc.com
Chile India New Zealand
Ariel Waltuch Frank D’Souza Keren Blakey
ariel.waltuch@strategyand.cl.pwc.com frank.dsouza@in.pwc.com keren.j.blakey@nz.pwc.com
China & Hong Kong Indonesia Nigeria
Wilson Chow Mohammad Chowdhury Osere Alakhume
wilson.wy.chow@cn.pwc.com mohammad.chowdhury@id.pwc.com osere.alakhume@ng.pwc.com
Colombia Ireland Norway
Jorge Mario Añez Amy Ball Eivind Nilsen
jorge.anez@co.pwc.com amy.ball@ie.pwc.com eivind.nilsen@pwc.com
Czech Republic Israel Pakistan
Tomas Basta Amir Gleit Syed Shabbar Zaidi
tomas.basta@cz.pwc.com amir.gleit@il.pwc.com s.m.shabbar.zaidi@pk.pwc.com
Italy Peru
Diogo Ferreira Bernardo Duce
diogo.ferreira@it.pwc.com bernardo.duce@pe.pwc.com
Philippines Thailand
Mary Jade Roxas Tina Hammond
jade.roxas@ph.pwc.com tina.ann.hammond@th.pwc.com
Poland Turkey
Pawel Wesolowski Murat Colakoglu
pawel.wesolowski@pl.pwc.com murat.colakoglu@tr.pwc.com
Portugal UAE
Goncalo Mendes Jayant Bhargava
goncalo.saraiva.mendes@pt.pwc.com jayant.bhargava@strategyand.ae.pwc.com
Romania United Kingdom
Florin Deaconescu Phil Stokes
ĠRULQGHDFRQHVFX#URSZFFRP phil.stokes@pwc.com
Russia United States
Yury Pukha Deborah Bothun
yury.pukha@ru.pwc.com deborah.k.bothun@pwc.com
Saudi Arabia Stefanie Kane
Jayant Bhargava stefanie.kane@pwc.com
jayant.bhargava@strategyand.ae.pwc.com
Christopher Vollmer
Singapore christopher.vollmer@pwc.com
Charlotte Hsu
Venezuela
charlotte.hsu@sg.pwc.com
Manuel Pereyra
South Africa manuel.pereyra@ve.pwc.com
Vicky Myburgh
Vietnam
vicky.myburgh@za.pwc.com
Ong Tiong Hooi
Spain tiong.hooi.ong@vn.pwc.com
Jorge Planes Trillo
jorge.planes.trillo@es.pwc.com
Sweden
Nicklas Kullberg
nicklas.kullberg@se.pwc.com
Switzerland
Patrick Balkanyi
patrick.balkanyi@ch.pwc.com
Taiwan
Damian Gilhawley
damian.gilhawley@tw.pwc.comAbout this report
Each year we take a deep dive into the And these imperatives assume a larger
ğQGLQJVRIRXU*OREDOHQWHUWDLQPHQW importance because, as we document,
and media outlook. Whether you’re a the E&M industry is confronting several
newcomer to the Outlook or a longtime challenges to continued top-line growth.
subscriber to our data, you should regard
7ROHDUQPRUHDERXWKRZWKHğQGLQJVLQ
this document as an annual report for
this report can apply to your business,
businesses that invest and operate in
or how your company can subscribe to
the entertainment and media (E&M)
the full body of Outlook research, please
industry and in related sectors, such
connect directly with your local PwC
as technology, communications, retail,
team. Alternatively, you can reach out to
and e-commerce.
either of us, and we’ll put you in touch
As you read through this report, we’re with our local leaders in your geography.
Deborah Bothun FRQğGHQW\RXZLOOFRPHDZD\ZLWK We look forward to hearing from and
actionable business insights based on working with you.
the trends we’re identifying and charting
DFURVVWKHGHğQHGVHJPHQWVDQG
FRXQWULHVRXUUHVHDUFKFRYHUV7KH Best regards,
authors of this report connect the dots
Deborah Bothun
between the business challenges our
Global Entertainment & Media Leader
clients face today, whether they are
deborah.k.bothun@pwc.com
coping with value-chain disruption or
mapping an M&A strategy, and the highly Brad Silver
detailed segment and country data that Global Technology, Media, and
emerges from the research. Telecommunications Leader
brad.silver@pwc.com
The intensive debate, discussion, and
Brad Silver analysis we engage in each year yields
important insights. For 2017, we see
an important set of takeaways that
should inform and shape your strategy.
Companies that wish to capture value
amid shifting consumer preferences and
business model disruptions must focus
on an increasingly prominent source of
competitive advantage: user experience.
They must harness technology and data
to attract, retain, and engage users —
and convert them into devoted fans.Contents
0HWKRGRORJ\DQGGHğQLWLRQV
&RQWULEXWRUV
&XUWDLQXS
Outlook perspective
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As distribution splinters, adaptation is the name of the game
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Across E&M, companies chart a direct-to-consumer path
7HFKQRORJLFDOFKDQJH
Driving incremental growth through innovation
32 Content strategy
$GDSWLQJWRSHQHWUDWHWHFKQRORJLFDODQGFXOWXUDOğOWHUV
35 Deals
Strong tailwinds
5HJXODWLRQ
Market contrasts, net neutrality, and privacy
Index0HWKRGRORJ\DQGGHğQLWLRQV
Historical data collection Forecasting methods 'HğQLWLRQV
All forecasts have been built starting All forecasts are prepared as part of Do you want access to consumer
with the collection of historical data a collaborative, integrated process and advertising spending data at
from a variety of sources. A baseline of involving both quantitative and the click of a button? The Global
accurate and comprehensive historical qualitative analysis. The forecasts are the entertainment and media outlook is
GDWDLVFROOHFWHGLQWKHğUVWLQVWDQFH result of a rigorous process of scoping, a comprehensive source of global
from publicly available information, market mapping, data collection, DQDO\VHVDQGğYH\HDUIRUHFDVWVRI
including from trade association and statistical modeling, and validation. consumer and advertising spending
government agencies. When this data DFURVVFRXQWULHVIRUVHJPHQWV
Note: The only source of all consumer
is used directly, these sources are cited
and advertising spend data is the Global Books
accordingly. In addition, interviews
entertainment and media outlook; Business-to-business
with relevant associations, regulators
however, all the data, charts, and Cinema
and leading players have been held
graphs (unless stated otherwise) in this Data consumption
to gather insights and estimates not
publication are taken from the Global E-sports
available in the public domain. When
entertainment and media outlook. Internet access
this information is collected, it is used
Internet advertising
as part of calculations, and the sources
Internet video
are proprietary.
Magazines
Music
Newspaper
Out-of-home advertising
Radio
Traditional TV and home video
TV advertising
Video games
Virtual reality
To access the full segment
GHğQLWLRQVIRUWKH2XWORRNSOHDVH
visit www.pwc.com/outlook
6 Global entertainment and media outlook 2017 –2021Contributors
Kristina Bennin
Wilson Chow
James DePonte
Karel Garside
Stefanie Kane
Art Kleiner
Matt Lieberman
Pauline Orchard
Sally Potts
Emmanuelle Rivet
Phil Stokes
Many other professionals from
the PwC entertainment and media
practice, across 54 countries,
reviewed and added local expertise
to this publication.
Contributors 7Introduction 8 Global entertainment and media outlook 2017 –2021
Introduction 9
Curtain up!
by Deborah Bothun and
Christopher Vollmer
Executive summary
It’s a cliché to note that something fundamental
has changed in the global entertainment and media
(E&M) industry. But the reality is that something
VLJQLğFDQWhas changed. E&M companies have been
accustomed to competing and creating differentiation
primarily based on two dimensions: content and
distribution. Now they must focus more intensely on
a third: user experience.
To thrive in a marketplace that is increasingly
competitive, slower-growing, and dependent on
personal recommendations, companies must develop
strategies that engage, grow, and monetize their most
valuable customers — i.e., their fans. To do so, they
must combine excellent content with breadth and
depth of distribution, and then bring it all together in
an innovative user experience, in which the content
1
is discoverable easily on an array of screens and at an
attractive price. Simply capturing the natural growth
in consumers and their uptake of services and content
ZLWKH[LVWLQJDSSURDFKHVLVQRORQJHUVXIğFLHQW
Across the industry, the resulting quest to create
the most compelling, engaging, and intuitive user
experiences is now the primary objective for growth
and investment strategies — and technology and data
lie at their center. Pursuing these strategies will help
companies thrive in an era of complexity and slowing
top-line growth from the traditional revenue streams
that have nourished the E&M industry to date.
10 Global entertainment and media outlook 2017 –2021A new focus on the user interests; and (2) capitalize on those themselves with audiences that are
emerging technologies that delight more engaged, are more committed,
Historically, the debate in the E&M users in new ways, deliver superior user and spend more per capita. Today’s
industry has revolved around the experiences, and enhance productivity fans will also recruit tomorrow’s. And
relative importance of content versus (see Exhibit 1). companies that “super-serve” fans
distribution, and the strategic value via new and deeper experiences will
of combining the two. We’ve seen this move faster to unlock opportunities
play out in vertical integration, industry Fan-centric businesses for revenue expansion. Embracing a
consolidation, and, to dust off a phrase In a Summer 2017 strategy+business fan-centric approach requires making
from the recent past, digital convergence article, “How to Make Entertainment transformational changes throughout
strategies. More always equaled better, and Media Businesses ‘Fan’-tastic,” the enterprise. Ultimately, the four most
DQGVL]HLWVHOIEHFDPHWKHGHğQLQJ Christopher Vollmer described why E&M important priorities for business leaders
competitive advantage. businesses built around fans command to consider are:
Rapid changes in technology, user multiple strategic advantages in today’s
ō Know who the fans are. Companies
behavior, and business models, however, hypercompetitive landscape. The
must be able to distinguish their fans
have created a gap between how steady march of digital technology has
from casual users, understand what
consumers want to experience and pay ushered in a more direct-to-consumer
drives fandom for their brands, and
for entertainment and media and how environment characterized by greater
analyze the relative value of different
companies produce and distribute their choice and user control. With an ever-
audience or user segments. This creates
offerings. To bridge this gap, companies greater supply of media, there is simply
an imperative to build deeper user
should pursue two related strategies: (1) too much competition to allow E&M
insights and better targeting
focus their efforts on building businesses businesses to survive on experiences
capabilities. To do this, E&M companies
and brands anchored by active, higher- that disproportionately cater to casual
must strengthen capabilities in data
value communities of fans, who are “eyeballs,” infrequent users, and other
analytics, measurement, and
united by shared passions, values, and lower-value audiences. By contrast,
management. They can then more
EXVLQHVVHVWKDWDUHIDQFHQWULFZLOOğQG
readily analyze what converts users
into higher-value fans. These insights
can help executives concentrate
Exhibit 1: Move over, content. Move over, distribution. User experience resources on the initiatives that matter
is king
most for driving overall company
JURZWKDQGSURğWDELOLW\
Examples:
ō Increase business agility and
Accessibility ĠH[LELOLW\Today’s fast-moving, tech-
Affordability Artificial intelligence and experience-driven market is
Authenticity Augmented reality compelling E&M companies to optimize
En
Convenience Blockchain their operations in new ways.
t
ablin
Cool
er wish lis
Chatbots Organizations need to be wired so they
Customization KDYHWKHĠH[LELOLW\WRUHVSRQGIDVWHUWR
Digital assistants
g technolog
Discoverability
User Face recognition new user preferences, new business
Entertainment
Fun, funny experience Machine learning models, and new technologies. Teams
nsum
Participation
Robotics must be more multidisciplinary in their
Sensors / IoT approaches — bringing together
Personalization
Co
Virtual reality expertise across content, product,
ies
Privacy
Voice interfaces
Security technology, distribution, and sales more
4DX
Simplicity smoothly than ever before. For many
Spontaneity E&M businesses, this means
transforming organization structure,
teaming models, and company culture.
Source: PwC
Introduction 11ō Monetize the total fan relationship.
Exhibit 2: Companies are leveraging emerging technologies to enhance
Fans want to do more with their favorite
the user experience
E&M brands than just watch. And fans
DUHE\GHğQLWLRQIDQDWLFV 7KH\DUHWKH
users who cannot get enough of the Worldwide tech company developing
A U.S.-based VR startup is planning
to open a VR multiplex immersing
brands they love. Following fan passions next mobile OS with AI-powered features AI/ consumers in a personalized
to streamline consumer experience. automation AR/VR
creates a natural pathway to identifying entertainment experience.
new revenue opportunities. By super- Global telecom company Social networking
serving fans and extending the brands invests in entertainment
Cyber- company released
operating system to deliver Cloud
and franchises associated with a personalized entertain-
security anti-harassment capabilities
passionate fans into new areas, E&M ment experience across Technologies
to enhance user safety.
companies can create additional all devices. transforming
revenue opportunities in core offerings E&M
Multinational E&M The sharing economy
across multiple business models, conglomerate has created
3D
printing
Access, not shifts consumer behavior
ownership
including advertising, subscriptions, a patent-pending from owning assets.
and transactions. 3D printer.
Big data/ Multinational tech company is
ō Adopt a user-/fan-centric focus. E-commerce company is investing Internet
of Things data providing real-time sports statistics
in an IoT voice-led operating system to analytics
Leading E&M companies will develop enable smart devices. and point-by-point analysis.
the capabilities to compete and win in
an increasingly direct-to-consumer Source: Business Insider, Forbes, Variety, International Data Corp., Tech News World, CNBC,
landscape. This means moving from PwC
playing solely in a wholesale world,
where other players in the value chain
often manage the end-user relationship, and retain them. That ultimately creates potential to improve user experience
to operating in a more retail-like further opportunities for value creation. (see Exhibit 2).
environment, where companies deliver
In the U.S. and China, a few large A caveat is necessary in any discussion
end-to-end experiences directly to
FRPSDQLHVŌ1HWĠL[7HQFHQW%DLGXŌ of investments in technology and
users, consumers, and fans. Capabilities
have successfully embraced emerging data. It is increasingly challenging to
in areas such as user interface design,
technologies to achieve these goals. In measure with great precision the E&M
customer acquisition and retention,
their Summer 2017 strategy+business industry revenue and value generated
personalization, customer service, and
article, “AI Is Already Entertaining You,” by the collection, mining, and use of
even billing will therefore become more
'HERUDK%RWKXQDQG'DYLG/DQFHğHOG data. If companies can deploy data to
critical to E&M success moving forward.
explored how technology, media, and sell more subscriptions, capabilities
telecommunications companies are using in this area will show up in revenue
DUWLğFLDOLQWHOOLJHQFH $, VROXWLRQVWR totals immediately. But, of course, there
Improve user experience through
increase productivity, enhance creativity, are ways to monetize data that aren’t
emerging technologies
and innovate in ways that address captured by traditional methods of E&M
For E&M companies, a great user
consumers’ desires and challenges. spend measurement — for instance, data
experience (UX) and advances in data
Although we’re still in the early days can be used to enhance e-commerce,
and digital technology — along with
of machine learning and autonomous build brand loyalty, and increase
great content — provide the makings of
systems, many of the executives Bothun engagement. These factors are implicitly
a virtuous circle. Increasing engagement
DQG/DQFHğHOGLQWHUYLHZHGUHFRJQL]H included in valuations of companies, but
and attention can lead to the capture
that AI is not just another IT investment not necessarily in the traditional revenue
of more data and more understanding
— it is becoming part of the technology measurement buckets.
about what crucial customers want. And
stack and touches all parts of the
that understanding enables companies
business. AI is a key component of seven
WRIXUWKHUUHğQHWDUJHWDQGHQJDJH
of the eight emerging technologies PwC
their core audiences in ways that delight
KDVLGHQWLğHGDVKDYLQJWKHELJJHVW
12 Global entertainment and media outlook 2017 –2021A slowdown Barring a step change in technology,
experiences, or platforms, the growth
in global growth rate of the E&M industry will be below
Across segments, and at any stage of the growth rate of global GDP. Simply
the economic cycle, it is clear that put, based on the traditional revenue
connecting with consumers as fans streams that have driven growth
and focusing on the user experience historically, E&M is losing market share
can be powerful levers for growth and in the global economy (see Exhibit 3).
SURğWDELOLW\7KHVHFDSDELOLWLHVDVVXPH Why is this happening? This slowdown
a particularly high importance when stems from a set of challenges that
top-line growth begins to ebb in a DUHVSHFLğFWR( 0EXVLQHVVHVDVZHOO
sector or industry. Which is precisely as larger factors that are affecting
the challenge many participants in the many industries.
E&M industry are facing. In our annual
review of the Global entertainment
and media outlook data, we look at Are consumers maxed out on
DFRPSRVLWHRIDOOFRXQWULHVDQG media?
17 segments included in the study Because so many of our conversations
Based on the
to arrive at a global market forecast. with CEOs and board members traditional revenue
Few businesses have global strategies currently start off with questions about
that neatly match all of these markets. overarching geopolitical, regulatory, streams that have
Still, we use this approach to take the
temperature of how the overall industry
and technological uncertainties, we’re powered growth to
FRQğGHQWWKDWVRPHRIWKHSURMHFWHG
is faring from year to year. Over the decline in growth stems from these date, E&M is losing
QH[WğYH\HDUVZHłUHSURMHFWLQJWKDW
annual growth in the E&M industry will
risks. (See “A trio of macro challenges,”
page 18.) However, even if we hold the
market share in the
DYHUDJHSHUFHQWGRZQIURPWKH macro risk steady, the E&M industry is global economy.
SHUFHQW&$*5ZHIRUHFDVWODVW\HDU
Exhibit 3: Global E&M revenue as a share of global GDP
E&M revenue will fall as a share of global GDP over the next five years
2016 2017 2018
2.54% 2.53% 2.52% 2019
2.48% 2020
2.44% 2021
2.39%
Source: Global entertainment and media outlook 2017−2021, PwC, Ovum
Introduction 13IDFLQJVLJQLğFDQWSUHVVXUHVRQJURZWK instead of mass-media purchases, their
That’s because it appears we may have overall spending may not grow as rapidly
arrived at a tipping point. In many of as in the past.
the largest markets, and hence in the
The same truism that holds for most
industry as a whole, E&M businesses
consumer markets holds true for the
are approaching or have reached a form
E&M industry: As markets mature,
of saturation. It may be that there are
they grow more slowly (see Exhibit 4).
limits to the willingness and ability
The most rapid growth rates will be
of people to consume and pay for the
seen in less-developed markets and
expanding array of media products
economies, where E&M spending on a
and services. But it could also be that
per capita basis is generally quite low
as digital media markets mature, and
(see Exhibit 5).
as user experiences improve, consumer
and advertising spending is becoming There are no real outliers or exceptions
PRUHHIğFLHQW$VFRQVXPHUVSXUFKDVH WRWKLVUXOH$V([KLELW FDOOLWDVHHVDZ
streaming subscriptions instead of chart) shows, the top left quadrant is
buying music downloads, and as populated by mature markets in North
advertisers make targeted online buys America and Europe, and wealthier
Exhibit 4: A world of differences
Scale vs. growth in global E&M markets
Global E&M
growth = 4.2%
730
U.S.
China
Japan
Total E&M revenue 2021 (US$ billions)
U.K.
Germany
France South Korea
Canada India
45 Italy Brazil
40 Australia
35 Average market
Spain size = $41 billion
30
25 Mexico Russia
Netherlands Indonesia
20 Switzerland
Sweden Turkey
Thailand
15 Norway
Belgium
Malaysia
10 Denmark U.A.E. Philippines
N.Z.
5 Finland Egypt
Israel Peru Pakistan Nigeria
0 Romania
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13%
CAGR 2016–21
Source: Global entertainment and media outlook 2017−2021, PwC, Ovum
14 Global entertainment and media outlook 2017 –2021Exhibit 5: Markets with low per capita spending will grow most quickly E(*/);))2,8,68,9,4:9(*5;4:8? E#0@,5-);))2,8,68,9,4:9:5:(2 8,
total audience measurement, U.S. adults
Exhibit 6: Internet video, Internet ads, gaming, and access are the
now spend 10 hours and 39 minutes
engines powering global E&M growth
a day consuming media, including an
CAGR minus GDP growth by segment, 2016–21 average of 4 hours and 31 minutes spent
watching live television. Because the U.S.
-10% 0 10% 20% is the largest revenue market for both
E&M overall and per capita spending,
Internet video 6.0% it is hard to see how its consumers will
continue to boost their consumption and
Internet advertising 4.3% spending at levels above GDP growth
Four major unless there is a major change in “must
2.7% growth drivers
Video games have” technologies and brands. One
example of such a technology step
Internet access 0.5% change could come with the adoption
of autonomous vehicles — which would
Cinema -1.2% VLJQLğFDQWO\DGGWRWKHQXPEHURI
available screens and screen time for
Out-of-home ads -1.7% consumers.
Music -2.0%
Emerging areas
TV advertising -2.8% There’s another possible explanation
for the apparent slowdown in growth.
B2B -2.9% CAGR %
The universe of what is considered
E&M 4.2% E&M spending is clearly expanding, in
Radio -3.4% GDP 5.6% an ever-proliferating range of venues,
platforms, devices, arenas, and consumer
Traditional TV & video -4.2% products. But many of these areas, which
KDYHVLJQLğFDQWJURZWKSRWHQWLDODUH
Books -4.5% not captured directly in the 17 segments
that we follow. Many companies are
Magazines -6.0% channeling portions of their advertising
budgets to e-commerce sites, but those
Newspapers -8.3% totals are not aggregated. The tallies
RIFLQHPDER[RIğFHGRQRWLQFOXGHWKH
-10% 0 10% 20% growing revenues movie theater owners
realize from using their properties to
GDP CAGR %
stream sporting and music events. Live
Note: E-sports and VR have been excluded from this chart because their very high growth events have great appeal. Live music,
rates (from very low bases) would distort the scale. The data consumption segment is not
included here because it is a usage-based metric.
a $25.6 billion business, is projected
Source: Global entertainment and media outlook 2017−2021, PwC, Ovum to grow at a 3 percent CAGR through
2021. And we haven’t traditionally
broken out live theater, which is
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in 2016 alone were $1.4 billion.
16 Global entertainment and media outlook 2017 –2021Pockets of divergence Exhibit 7: Global divergences
Not all markets or segments are slowing
or in decline. Pockets of divergence and
potential market growth opportunities
109% growth in U.S. paid
surfaced in several areas of our
music subscriptions in 2016 10.1% India: the highest
research (see Exhibit 7). E&M growth excluding access
(2016–21 CAGR)
Cinema. *OREDOER[RIğFHVSHQGLQJ
may be under pressure. But we were
struck by the varying amounts of
ad-based revenue as a proportion of
cinema revenue — from essentially
QRWKLQJLQ-DSDQWRSHUFHQWLQ Cinema advertising % of total cinema
South Africa. Cinema is a medium
that commands consumers’ absolute
South Africa 40%
attention — in most cultures, engaging U.K. 13%
with a second screen (e.g., checking U.S. 8%
email or Facebook on a smartphone
during a movie) is frowned upon. These Russia 2%
factors make cinemas an especially Canada 2%
good place for targeting younger Japan 0%
demographics. Although there might
be resistance in certain countries to
viewing ads, we believe there is ample Music streaming revenue, 2016 growth
room in many developed countries to Global 65%
use the largest screens available as a
vehicle for targeted campaigns. U.S. 99%
Music in Japan. Thanks to enduring
consumer preferences, Japan’s physical Music unit sales, 2016–21 CAGR
music unit sales will withstand the -21%
GLIğFXOWJOREDOFOLPDWHIDUEHWWHUWKDQ Japan
-8%
other countries. Indeed, with projected
unit sales of 88 million in 2021, Japan -15% U.S.
Digital
will have the highest such sales in the -12% Physical
world and be one of the few markets that
see only single-digit declines. Japan is
Source: Global entertainment and media outlook 2017−2021, PwC, Ovum
the one remaining country in the world
where Tower Records has a physical
we cover. This paradox actually makes more of their rising incomes in non-
presence. Total music revenue per capita
sense. The low level of Internet access digital traditional print and broadcast
LQ-DSDQZLOOEHLQQHDUO\ğYH
in India means the country’s growing physical media, shielding segments
times the global average of $9.
number of middle-class consumers such as television from the digital
E&M in India. E&M revenues will have comparatively limited access to competition they face in other markets.
grow rapidly despite the fact that India digital content and experiences. As a
LVWKHOHDVWGLJLWL]HGRIWKHPDUNHWV result, Indian consumers are investing
Introduction 17A trio of macro Exhibit 8: Global economic uncertainty is the top threat identified
challenges by CEOs
As E&M companies face a host of
challenges particular to their own
industries, they are also confronting
big-picture forces that affect all
companies operating in today’s
global context. 72%
Economic and geopolitical risks.
According to the 2016 CEO Pulse 55%
study from PwC’s Global Crisis Centre, 49% 47% 47%
economic and geopolitical uncertainties
are among the top two threats for
companies today (see Exhibit 8). The
growth forecasts for the E&M industry
KDYHEHHQORZHUHGLQSDUWWRUHĠHFWWKH
broad-based economic and political Global Increased Exchange- Geopolitical Speed of
uncertainty that has stemmed from the economic regulation rate uncertainty technological
U.K.’s Brexit plans and from national uncertainty volatility change
elections in which populist and anti-
Source: PwC CEO Pulse 2016
globalization themes have emerged
— whether it is in the U.S., France, or
the Netherlands. Despite its promise,
Exhibit 9: Catalysts of change
Latin America, and particularly
Brazil, remains hampered by issues of
governance. China’s growth remains
Increased The competitive
VWHDG\DOWKRXJKQRWZLWKRXWVLJQLğFDQW
comfort with advantage of
challenges: economic imbalances technology technology
continue to grow, leadership has slowed
market reforms, and economic trade-
offs are becoming more acute.
There’s always a base level of
uncertainty inherent in the global
economy. But the severity of issues such
as slow growth, currency policy, civil
unrest, and geopolitical tensions have
LQWHQVLğHGFRQFHUQV
Globalization Multiplier effect
of technology of technology
Cheaper access
to technology
Source: PwC
18 Global entertainment and media outlook 2017 –2021Speed of technological change.
Exhibit 10: Data protection regulations are evolving in the United States Technological advancements are
and abroad appearing rapidly and simultaneously
Data privacy and security are top of mind today for policymakers and across many industries (see Exhibit
regulators in the U.S. and abroad: 9). The E&M industry is facing
DVLJQLğFDQWOHYHORIXQFHUWDLQW\
concerning the speed of change in
DUHDVVXFKDV$,*QHWZRUNV,3Y
protocols, virtual reality (VR), and the
E.U. Internet of Things (IoT). At the same
time, uncertainty also surrounds the
U.S. speed of monetization and the viability
APEC
of new business models enabled by
these new technologies. The concerns
Latin
America FUHDWHGE\WKHFRQĠXHQFHRIWKHVH
disruptions may have a chilling effect
on investments. Alternatively, they
could be largely offset by an increased
FCC broadband Countries are General Data More countries level of spending on related consumer
privacy rules repealed. developing data Protection becoming
protection laws — Regulation goes into compliant with categories such as e-commerce, or
FTC will be primary
U.S. authority for but these vary from effect May 2018 — APEC’s by faster Internet speeds and more
country to country. data usage differs cross-border data
privacy for broadband;
from U.S. regulations. privacy rules
powerful devices that are fundamental
enforcement actions Some laws, such as to improving the user experience.
refocused on Argentina's on data E-privacy regulation (CBPR) system.
consumer harm. protection, mirror in final negotiations Rules to better
E.U. data protection for electronic enable trade as
Regulatory risks. CEOs in all
The Trump LQGXVWULHVLGHQWLğHGLQFUHDVHG
administration is rules. communications, CBPR provides a
committed to ISPs, OTTs, others. single data-transfer regulation as the second-most
Significant consent framework for
strengthening
requirements. companies. common threat. And within the E&M
cybersecurity.
industry, regulatory challenges are
evident in every major region. Beyond
Stakeholder-generated codes of conduct/best practices and the need for the changes to be expected with a new
interoperable global standards are emerging as key policy themes, as regulators administration in the U.S., around the
do not want to stifle innovation in industries such as the IoT, autonomous vehicles, world we are seeing that issues of data
commercial drones, artificial intelligence, and other emerging technologies.
privacy and security are capturing
the attention of policymakers and
Source: PwC regulators. Stronger regulations
in these areas could make it more
GLIğFXOWWRWUDFNGDWDDERXWSHUVRQDO
preferences, thereby making it harder
to improve the user experience
(see Exhibit 10).
Introduction 19Exhibit 11: Are you paying more today for video content
than you were one year ago?
Yes 42% No Traditional pay-TV subscribers:
58% òSkew 35+ (69%)
òOldest group in survey
òReport highest household income
Pay-TV of all four groups
subscribers
Cord trimmers:
òUnder 35
51% 49% òOver one-third are 18 to 34 years old
òMany have adopted skinny bundles
to lower cost
Cord trimmers
Cord cutters:
òSkew younger than 35
32% òLower-than-average disposable income
68% Cord nevers:
òYoungest group in survey
ò68% are younger than 35
The baby boomers are Cord cutters
òNever subscribed to pay-TV
aging out of their prime 40%
òPrefer to cherry-pick content
òLowest household income
consumption years, 60%
and the generations
Cord nevers
that replace them may
not exhibit the same 42%
propensity to spend 58%
on E&M.
Total
Yes No
Source: “Videoquake 4.0: Binge, stream, repeat — How video is changing forever,”
PwC Consumer Intelligence Series, 2016
Shifts in generational the past 10 years, PwC’s Consumer
Intelligence Series has captured
preferences the changing consumer behavior of
There’s another long-term challenge to millennials (those born between 1981
top-line growth. The baby boomers are and 1998) and generation Z (born 1998
aging out of their prime consumption to now) across a number of topics. And
years, and the generations that it’s clear that the impact of technology
replace them may not exhibit the same and digital media has changed the way
propensity to spend on E&M. Over younger generations experience and
20 Global entertainment and media outlook 2017 –2021Generational Exhibit 12: U.S. household spending by generation (US$)
spending habits $0 $20,000 $40,000 $60,000
Millennials, who are now the largest
Housing
cohort in the U.S. workforce, have Greatest generation
(1928 or earlier) Eating out
less money to spend than their
elders. And they spend their scarce Entertainment
money differently. Two out of three Silent generation Clothing
(1929 to 1945)
millennials rent their home. They have Food at home
the fewest vehicles per household All other spending
Baby boomers
(1.5) of any generation, except those (1946 to 1964)
born before 1929. Although they
spend the largest share of their budget Generation X
(more than 6 percent) eating out. And (1965 to 1980)
PLOOHQQLDOVVSHQGVLJQLğFDQWO\OHVV
on entertainment ($2,186 annually) Millennials
than baby boomers ($3,286) and (1981 to now)
Generation X ($3,231).
$0 $20,000 $40,000 $60,000
If millennials stick to their current
spending habits as they age and earn Source: U.S. Department of Labor, Nov. 2016 (based on analysis of generational data from
the Bureau of Labor Statistics)
PRUHLWZLOOKDYHDVLJQLğFDQWLPSDFW
on these industries.
purchase content. They stream songs Of course, millennials will probably Conclusion
or watch videos on YouTube instead eventually marry, have children, and Thriving in a world of slower growth,
of buying albums; they consume free purchase homes in greater numbers. But intense competition for attention, and
news on Facebook or Snapchat instead it seems unlikely they will adopt their continual disruption will be challenging.
of spending hundreds of dollars for elders’ habits when it comes to media But the opportunities inherent in this
home delivery of newspapers. Rather consumption and spending. world are immense. Our data, analysis,
than subscribing to expensive pay-TV and perspective offers compelling
Barring a step change in “must
bundles, they source their video through LQVLJKWVLQWRKRZ( 0FRPSDQLHVDUH
have” technology (e.g., autonomous
a combination of over-the-top services adapting, investing, experimenting, and
YHKLFOHV SURğWDEOHJURZWKLQWKH( 0
(see Exhibit 11). According to a recent innovating. As we move forward, we
industry will increasingly come from
study, millennials account for 43 percent know the Outlook will continue to be a
capturing market share, rather than
of the U.S. cordless population — those valuable source of nuanced information
from market expansion.
who have never had cable, satellite, or and vital perspective on segments and
ğEHURSWLFFDEOHVHUYLFHDQGWKRVHZKR geographic markets. Several of our
have cut the cord. Thirty percent of U.S. PwC colleagues have explored the 2017
millennials are now cordless, compared 2XWORRNğQGLQJVZLWKLQWKHFRQWH[W
with just 16 percent of baby boomers, of their specialization and geographic
according to GfK MRI’s January 2017 markets. The chapters that follow
“Survey of the American Consumer.” take you deeper into the analysis and
their insights into industry trends and
challenges across business models, value
chains, technological change, content
strategy, deals, and regulation.
Introduction 21You can also read
