PwC's Entertainment & Media Outlook Forecasts U.S. Industry Spending to Reach $720 Billion by 2020

"Today's entertainment and media reality is one of companies intensely competing for dollars with the increasing proliferation of free online media alternatives. This global multi-speed media landscape has created unprecedented challenges for companies in the battle for customers and value," said Deborah Bothun, PwC's Global and U.S. Entertainment & Media Leader. "The acceleration of digital and technology innovation is expected to continue to force companies to innovate and reimagine the industry as we know it."

Globally, E&M worldwide revenues are expected to rise at a compound annual growth rate (CAGR) of 4.4 percent over the next five years, from $1.7 trillion in 2015 to $2.1 trillion in 2020.

Key U.S. Entertainment & Media Highlights
Internet advertising in the U.S. remains the largest in the world with $59.6 billion in revenue for 2015, and a projected revenue of $93.5 billion by 2020 (9.4 percent CAGR). While China's forecast (14 percent CAGR) is higher, the U.S. should remain the largest market by some distance in revenue terms. By 2017, Internet advertising ($75.3 billion) is poised to overtake broadcast TV advertising for the first time in the U.S. However, broadcast TV advertising has responded fairly robustly to digital disruption and is expected to remain healthy with a projected 2.8 percent CAGR and $70.4 billion by 2017.

Mobile advertising continues to be one of the big growth stories, making up 34.7 percent of total Internet ad revenue at $20.7 billion in 2015 and projected to rise to 49.4 percent by 2020. But the rise in mobile video Internet ad revenue will be the most remarkable, from $3.5 billion in 2015 to $13.3 billion in 2020 (30.3 percent CAGR). PwC expects the planned rollout of 5G networks will further accelerate the shift towards mobile consumption of video.

"Consumers are engaging with media increasingly on their mobile phones, and even at work. These mobile behaviors are challenging the traditional value of attention and the ability to monetize advertising dollars. There's no one perfect metric to inform advertisers of the value they get when you consider the shifting consumer behaviors," said PwC's Bothun. "However, the market will be hindered by consumer resistance to a poor ad experience and potential widespread adoption of ad-blocking technology."

As for Cinema, China is expected to overtake the U.S. in box office revenue in 2017, marking this as the first time the U.S. has not held the leading position in an E&M segment. By 2020, China box office revenues are expected to reach $15.1 billion versus $11.0 billion in the U.S. "Studios are facing increasing international competition with foreign governments – the challenge will be how to tap into this opportunity given strict market conditions," continued PwC's Bothun.

TV and video is expected to rise from $121.4 billion to $124.2 billion in 2020 (0.5 percent CAGR). The continued growth of video on demand (VOD) and over-the-top (OTT) services is putting pressure on the "theatrical window" period traditionally enjoyed by cinemas. In fact, electronic home video sales ($11.2 billion, 9 percent CAGR) eclipsed box office sales ($10.3 billion, 1.2 percent CAGR) in 2015 – two years earlier than last year's Outlook projected.

Internet access revenue is expected to rise to $181.7 billion over the forecast period (7.2 percent CAGR). Internet users are increasing the time they spend with digital media – especially rich media such as video, which is expected to rise to 85.5 percent of total data traffic by 2020. Considerable investments are being made to improve infrastructure speed and quality to enable both the traditional use of Internet access as well as streaming online television, videos, video games, and other media consumption. The need to profitably grow, reach a large audience at scale, and engage users online is creating a very attractive M&A environment.

Video games revenue is expected to rise from $17.0 billion to $20.3 billion by 2020 (3.6 percent CAGR). Despite the high price, the quality of the experience on virtual reality devices (for games, interactive entertainment and VR video) is expected to draw more consumers into trying them, setting the stage for the real sales drive in 2017 and 2018. In contrast, VR on mobile devices will likely go mainstream in 2016 with cheap headsets that can be slotted into a phone.

Newspaper publishing is expected to decline at a -2.9 percent CAGR in the years to 2020. In a world where social networks are Internet on-ramps for many consumers, publishers are recognizing they are no longer destinations, but suppliers of content. Further industry consolidation can be expected as publishers search for efficiencies to create new consumer touchpoints and respond to digital competition.

Live experiences remain a key differentiator in a digital world. With consumers now having an astonishing array of choice delivered to their hands via the content available on a smartphone, an increasing premium is placed upon the live experience, including the rapid growth of eSports tournaments.

Additional Industry Segments

• Business-to-business is expected to rise from $85.6 billion to $99.8 billion in 2020 (3.1 percent CAGR)
• Book publishing revenue is expected to rise from $37.8 billion to $43.7 billion in 2020 (2.9 percent CAGR)
• Magazine publishing revenue is expected to grow from $30.5 billion to $30.7 billion in 2020 (0.1 percent CAGR)
• Out-of-home advertising is expected to rise from $8.8 billion to $10.9 billion by 2020 (4.3 percent CAGR)
• Radio is expected to rise from $21.4 billion to $23.1 billion in 2020 (1.6 percent CAGR)
• Music revenue is expected to increase from $15.2 billion to $18.0 billion in 2020 (3.5 percent CAGR)
• TV advertising revenue is expected to rise from $69.9 billion to $81.7 billion in 2020 (3.2 percent CAGR)

"For content providers across the entertainment and media industry, the message is clear: seamless delivery and a focus on the consumer experience is the formula for growth in today's evolved E&M business landscape," said Bothun. "With a clearer picture of what's ahead, savvy companies will be best positioned to embrace change and choose a path that allows them to look ahead with confidence."

About the Outlook
PwC's Global Entertainment and Media Outlook 2016-2020, the 17^th annual edition, contains in-depth analysis and historical and forecast data for advertising and consumer/end-user spending in 13 major industry segments across 54 countries. Find out more at www.pwc.com/us/outlook.

Methodology
Historical information is obtained principally from confidential and proprietary sources. PwC analyzes recent trends in industry performance and identifies factors underlying those trends. Models are then developed to quantify the impact of each factor on industry spending. Forecasts are also based on an analysis of the dynamics of each segment in each region and on the factors that affect those dynamics.

About PwC US
At PwC US, our purpose is to build trust in society and solve important problems. We're a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

© 2016 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

Learn more about PwC's Entertainment, Media and Communications practice by visiting: @PwC_Entcomm, LinkedIn, Facebook, Instagram, Snapchat, YouTube and Google+. Follow the conversation online using #PwCOutlook.

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SOURCE PwC

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