21st edition of the PwC Entertainment and Media Outlook report details where consumer and brand spend is occurring, the dominance of Internet-based services and the macro headwinds from now to 2026
Australia’s media and entertainment sector experienced record growth over the past year to hit $45.6 billion in consumer spending in 2021, the highest annual increase recorded by PwC over the last 21 years.
The 21st annual edition of the PwC Entertainment and Media Outlook 2022 report found consumer spending across the sector bucked early pandemic declines to increase by 6.23 per cent year-on-year to $45.6 billion in 2021. Of this, $31.59bn was spent on Internet access, a figure that includes $4.37bn in spend on subscription TV, $3.62bn on games and $2bn on books.
By the end of this year, annual household spending into the entertainment and media sector is expected to increase by approximately $510 per year compared to 2019.
Advertising dollars in media and entertainment followed suit, increasing by 20.2 per cent to hit $19.67 billion in 2021. PwC noted a particular spike in the second half of 2021 as brands looked to capitalise on more positive market sentiment. In total, this brought the value of Australia’s media and entertainment industry to $65.3bn.
Ad spend growth is expected to continue accelerating this year, lifting 8.33 per cent to $21.46bn in 2022. PwC attributed this growth to early year gains from election spending, the return of categories such as travel, and ongoing digital-led growth.
“This growth is expected to however slow in the forecast period, flattening in 2025 and 2026, ultimately resulting in a compound annual growth rate [CAGR] of 4.4 per cent, and a total of $24.4 billion to 2026,” the report stated.
Overall, PwC forecasts the sector will reach total value of $79.9bn by 2026. Within this, consumer spending is expected to be worth $55.5bn, putting an extra $7.2bn on the table in the coming three years.
Internet-based advertising remained the largest contributor in the mix, according to PwC’s report, growing 35 per cent year-on-year to $13bn. This was followed by subscription TV and gaming, with the latter two also expected to see significant continued growth through forecast period.
More traditional Internet advertising subsegments nevertheless continued gaining ground, with search up 36 per cent to $5.7bn and display advertising up 57 per cent to $2.75bn. Broadcast video on-demand (BVOD) spending also increased by 56.8 per cent, supporting growth in the free-to-air TV segment, PwC said. Music and podcasting, radio streaming advertising and digital advertising in news media and magazines also chalked up growth in 2021.
PwC Australia director and Australian Entertainment and Media Outlook editor, Dan Robins said that though the darkest period of the pandemic is behind us, its effect on disruption, both as challenges and opportunity creation, remain.
It’s worth noting initial pandemic uncertainty in 2020 led to a -7.1 per cent contraction in total advertising spend. However, as 2021 progressed, PwC said spending accelerated to hit $19.7bn, reflecting a year-on-year uplift of 17 per cent compared to pre-Covid 2019.
“Where the initial wave of the pandemic may have been characterised by households reigning in spend, coupled with the inability to visit in-person entertainment, the second wave into 2021 saw consumers turn to entertainment and media to help alleviate the boredom of extended lockdowns with a more confident approach to spending,” Robins commented. “Moreover, as in-person events return, this spending is likely to extend alongside habits around subscriptions, gaming and access to content likely to stick.
“It was broadly believed consumers were stockpiling savings and consumer spending may have been down, given in-person events are still only steadily returning and crowds returning through late 2021 and into 2022, this is certainly not the case. Digitised entertainment and media has entwined itself in our daily lives, and people are consuming content across more devices, at all times of the day, in all types of places.”
PwC’s latest report included forecasts for the retailer media sector, estimated to be worth $850 million in 2021. Retail media is expected to grow at a 20.3 per cent CAGR to hit $2.1 billion by 2026.
The report highlighted the retail media space includes both retailers turning focus on their capabilities, as well as the rise of Amazon and other ecommerce players locally. In the US, 2021 Forrester figures showed Amazon accounting for 71 per cent of total spending, or US$31.2bn.
PwC detailed seven influential forces that have impacted media and entertainment growth in 2021 and 2022. The first was the rise in the subscription economy, and the consulting group noted Australians now manage 6.5 premium subscriptions from the more than 100 available across VOD, audio, news and lifestyle content, gaming and other sources of entertainment.
Social gaming is another, and spending stood at 26 per cent in 2021 and will only continue to grow. According to PwC, gaming will account for close to 30 per cent of consumer spending (excluding access) in 2026.
Reconverging channels was another macro trend PwC pointed out, noting media businesses are increasingly representing their media as ‘Total’ TV, audio or publishing. This is allowing media buyers to slowly gain ability to deliver across offline and online environments. There’s also a blurring of the line between advertising and media.
“The rapid rise of ecommerce, spurred by the ongoing pandemic, has further raised the importance of tying advertising investment to purchases,” PwC stated. “In-ad shopping reduces friction between advertising and purchase than previous click-throughs, while offering greater measurement of an ad’s effectiveness.”
New advertising models across streaming services such as Netflix and Disney+ is also shaking up the advertising landscape.
At the same time, PwC said the return to and ‘premiumisation’ of in-person and live entertainment will increasingly compete against home-based channels to gain share of the consumer wallet.
Finally, PwC said companies are investing in creating new metaverse experiences and NFTs, which it suggested could give creators even more rights and assets, reshaping the industry.
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