PwC: Streaming, BVOD, esports and Internet advertising highlight changing consumer behaviours

Latest PwC Media and Entertainment Outlook report shows the advertising winners and losers during 2020 and how changing consumer consumption is shaping up the landscape to 2025

Filmed entertainment and out-of-home were the worst hit sectors during the height of Australia’s Covid-19 pandemic in 2020, while the winners were Internet advertising, streaming and broadcast video on-demand and esports, the latest PwC Entertainment and Media Outlook report finds.

The 20th edition of PwC’s report found Australia’s overall entertainment and media industry declined by an unprecedented -3.6 per cent in 2020. Within this, filmed entertainment experienced a 41 per cent drop from $2.2 billion to $1.3 billion, while out-of-home saw a 39 per cent decrease in year-on-year revenue to $772 million.

The report also showed that to the end of December 2020, total Australian advertising spend contracted by 8 per cent to $15.bn, while consumer spend fell 1.9 per cent to $42.5bn.

The PwC findings noted an increase in readership across digital news as well as bigger audiences for free-to-air during Covid. This didn’t, however, result in improving revenue for much of the calendar year. Things began to readjust in November as the country came out of lockdown.

Supplementary research conducted by PwC also illustrated just how much Australia’s content appetite has changed during the pandemic. It’s this appetite ‘elasticity’ that’s determining how likely people are to try new products and services from content platforms, the consulting giant said.

The report identified four factors influencing this: How a consumer’s preferences and interests are shaped; what their connection is to the content they consume; how they have found content through specific referral; and how, when, where and why content is accessed.

PwC said streaming video on-demand (SVOD) revenues took off in 2020 and are on track to grow at a compound annual growth rate (CAGR) of 20.4 per cent through to 2025, reaching US$81.3 billion globally and $3.3bn in Australia. Significant growth came from both established players such as Netflix, Amazon and Stan, as well as newer entrants, Disney+, Binge and BritBox.  

Broadcast video on-demand (BVOD) also bucked the 2020 trend and recorded a 38.8 per cent increase in revenue last year. This is expected to grow at a CAGR of 32.7 per cent between now and 2025.

A third winning category was interactive games and esports. This sector chalked up $3.4 billion in revenue in Australia in 2020 and is expected to get to $4.9bn by 2025 with a CAGR of 7.5 per cent. The market for gaming content is also on track to be valued globally at US$79bn by 2025. Within this space, Twitch has become a leader, with users spending an average of three hours on the platform compared to Netflix users, who spend an average of two hours streaming per day.  

A further pocket of strength in 2020 was Internet advertising, which recorded 3.3 per cent growth to reach $9.3 billion with a CAGR of 2.6 per cent. The total Australian Internet access market was worth $30.1bn in 2020, reflecting a year-on-year growth rate of 1.14 per cent. It's expected to grow 5.5 per cent to $12.4bn by 2025.

Read more: IAB/PwC: Digital advertising continues double-digit growth trajectory

SMI: Aussie ad spend on track for growth this financial year

PwC also noted total Internet access revenue showed marginal growth in Australia in 2020 while demand for at-home connectivity rose, driven by a 38 per cent growth in download volumes.

Despite the challenges of 2020, PwC said 2021 is showing signs of a strong recovery for most even as the Covid-19 pandemic continues to shadow Australian consumers and advertisers. The firm is predicting consumer revenue will grow to $52.6bn in 2025, at a CAGR of 3.3 per cent. Against this, advertising revenue is set to grow to $19.6bn in the same period at a CAGR of 2.6 per cent.

“The pandemic triggered the sharpest contraction in Australian entertainment and media revenues in the history of the report,” PwC Australia partner and Australian Entertainment and Media Outlook editor, Justin Papps, commented. “While the contraction impacted the whole market, it was clear some sectors were hit harder than others. However, even with the Covid cloud still lingering, momentum was strong for the sector going into the first quarter of the 2021 calendar year.”  

PwC cited five major power shifts impacting the entertainment and media landscape between now and 2025. The overarching macro trend is sustained digital disruption, which is triggering several new consumer behaviours.

“This shift is then enabling significant power shifts into the hands of consumers, a shift of creative power to content originators, a shift based on location and the need for anywhere, anytime access and finally, regulatory shifts that put privacy and data monetisation under the microscope,” Papps explained.  

“Even with these shifts, the stability or resilience of the market overall should not be underestimated. The contraction of 2020 is giving way to a solid rebound this year, and a return to 2019 revenue levels within the next few years for most parts of the industry, if not sooner.”  

PwC Australia partner, Samantha Johnson, also pointed to the profound shift towards consumers paying for services and non-advertising supported platforms.  

“The shift in weighting from advertising revenues towards consumer generated revenues has accelerated, forcing a number of key players to rethink their business model, in a world where the expectation is that consumers can access an ad-free or personalised service, but they have to be prepared to pay for it,” she said. 

As a result, PwC Australia partner and technology, media and telecommunications consulting leader, Laurence Dell, advised advertisers and brands to rebalance media and creative strategies in order to achieve their required reach.  

“While targeting through digital and programmatic channels certainly played a role, the ability for a consumer to scroll past, skip or opt-out of an advertising message, coupled with the fact that large segments of the population are spending less time on advertising supported services, means creativity in execution and sound channel planning has never been more critical for brands seeking to attract and retain new customers,” he said.   

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