PwC Global Entertainment & Media Outlook 2018 – 2022 · – Watch: TV, OTT, cinema – Play:...

www.pwc.com/outlook

PwC Global Entertainment & Media Outlook2018 – 2022

Global, Mainland China and Hong Kong findings

Global Entertainment & Media Outlook

Contents

2

3Perspectives:2018 Outlook report summary

13Key trends

28Local stories

31Closing thoughts & Key contacts

PwC


3

Trending now: convergence, connections and trust

Connections Trust

Convergence 3.0

2018E&M Outlook

Report summary


The mobile consumer

Need for new

sources of growth

Value shift to

platforms

Personalization

Ubiquitousconnectivity

4

Convergence 3.0: A handful of factors combine, creating the momentum behind this new wave of convergence

Perspectives report

Consumers and their devicesare always connected, always on

Mobile devices are becoming the primary means of accessing E&M content and services

Revenue streams that nourished companies in the past will not be flowing with the same force

Platforms rather than publishers are the primary beneficiaries of users’ growth in time and spending

Data analytics and technology that can support better decision-making are critical to success Convergence

3.0

Drivers of convergence


Convergence 3.0: Strategic efforts from participants of every size and geography give rise to supercompetitors

Perspectives report

Media convergence

Access convergence

Business model convergence

Geographic convergence

• Examples of supercompetitors: Alibaba, Amazon, Apple, Disney, Facebook, Google, Tencent, etc.

• A handful of global players that converge towards similar business models will….

• …unite content, commerce, advertising, communications and deep financial resources under a single corporate roof

• Each will try to secure exclusive control of every aspect of its own customer relationships, consumption and activity

Four types of convergence Convergence gives rise to supercompetitors

7

Global Entertainment & Media Outlook 6

Connections: With the rise of supercompetitors, more specialized brands need to build businesses of relevant scale

Perspectives report

Create a sense of identity and community with customers by delivering high-quality experience

Address fans’ interests and preferences in content and advertisements

Target content and experiences at high-value audiences that others find challenging to attract, and turn them into loyal fans

Aim at high-value,

hard-to-reachaudiences

Deliverbrand consistent

content andadvertising

Be apowerhouse

of qualityand engagement

Scale relevance: reach, intensity sufficient

to matter to users,advertisers,

Partners

Text

Building relevance at scale


Trust: Trust will be a vital determinant of the sector’s ability to forge connections and succeed in an age of convergence

Perspectives report

Is your content trustworthy?

Advertisers are raising questions about the quality, safety and appropriateness of the content they advertise against

Is your audience who you say it is?

Media and academic reports have suggested that many social media accounts are bots or have misrepresentative information

Are you taking proper care of the data?

E&M companies are assuming more responsibility for protecting customer information- what they like, look at, their interests, profiles, financial information, etc.

Are your investments paying off?

Direct measurement of audience engagement –whether an agency is delivering the promised audience to a client – has not been sufficiently answered

Is your company good for society?

The sheer size, reach and utility of today's media platforms cause them to be evaluated on their contributions to society

Five vital dimensions of trust


Growth rates remain steady even as the industry is being transformed

Source: PwC Global Entertainment & Media Outlook 2018-2022, www.pwc.com/outlook

Global, China & Hong Kong E&M CAGRs

Projected industry growth 2017—2022

7.2%China


4.4%Global


2.1%Hong Kong

2017: 3.0% 2017: 8.3%2017: 4.2%

A new wave of convergence


Consumer driven revenue remains the largest share through 2022 and consumers are willing to pay for access

Global summary and macro trends


0%5%

10%15%20%25%30%35%40%

Advertising Access ConsumerGlobal Asia Pacific* Mainland China

2022 E&M revenue share: primary categories 2017-2022 E&M CAGR: primary categories

0%

2%

4%

6%

8%

10%

Advertising Access ConsumerGlobal Asia Pacific* Mainland China

• Consumer revenue includes:– Read: books, magazines, newspapers– Listen: music, radio, podcasts– Watch: TV, OTT, cinema– Play: games, e-sports, virtual reality

• Access revenue includes:– Mobile Internet, fixed broadband revenue

• Advertising revenue includes:– B2B, Internet advertising– OOH, TV advertising

* Asia Pacific excluding Mainland China, Japan and Korea


Digital revenue will continue to make up more and more of the industry’s income, accounting for more than 50% in 2018

Digital revenue as % of total revenue

Global summary and macro trends


30%35%40%45%50%55%60%65%70%

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Dig

ital r

even

ue a

s %

of t

otal

re

venu

e

Global Mainland China

Projected revenue for China in 2022: US$224bn, 65% of total revenue

Projected revenue for Global in 2022: US$1,366bn, 57% of total revenue

• By 2020, total global data consumption through smartphones overtakes fixed broadband data consumption

Digital revenue % in 2022:

India: 34%Indonesia: 43%Vietnam: 63%Thailand: 53%


The global E&M market topped $2tr USD in 2017

E&M market share by segment: Global, Asia Pacific*

Segment overview: Global summary


In 2017, Global total E&M spend of US$2T

Asia Pacific’s* 6.8% CAGR 2017-2022 exceeds Global

CAGR of 4.4% and reaching USD179bn by 2022

By 2022, the total Global E&M market will add

US$486bn-5 0 5 10 15

NewspaperMagazines

Traditional TV and home videoBooks

TV advertisingBusiness-to-business

Music, radio and podcastsOut-of-home advertising

CinemaInternet access

Video games and e-sportsInternet advertising

OTT

2017-2022 CAGRGlobal Asia Pacific*



Mainland China outperforms Global in various segments. OTT of Mainland China and Hong Kong exhibit highest growth

Segment overview: Hong Kong summary


• OTT continues to drive the growth in the E&M market

• Internet advertising tops revenue across advertising segments

• Cinema in Mainland China still show strong growth potential

Key takeaways

E&M segment CAGR 2017-2022: Global, Mainland China, Hong Kong

-5 0 5 10 15 20

NewspaperMagazines

Traditional TV and home videoBooks

TV advertisingBusiness-to-business

Music, radio and podcastsOut-of-home advertising

CinemaInternet access

Video games and e-sportsInternet advertising

OTT

2017-2022 CAGRMainland China Global Hong Kong


Key trends


1. OTT Video


1 China – US$2,443mn, 16.3% CAGR

2 Japan – US$2,401mn, 10.1% CAGR

3 South Korea – US$547mn, 21.5% CAGR

4 Australia – US$465mn, 12.2% CAGR

5 India – US$297mn, 22.6% CAGR

6 Taiwan – US$214mn, 15.5% CAGR

OTT Video revenue in 2017

15

OTT video global revenue of $36bn USD in 2017 is projected to grow at 10.1% CAGR

Segment overview: OTT video

• The growth of the OTT video sector has been supported by improving broadband coverage and a wide range of OTT video launches

• Growth will continue in the forecast period with more launches and platforms worldwide

Regional revenue and growth: total global 2017 revenue $36bn USD


• Asia Pacific leads growth due to faster broadband connections and increasing OTT video service offerings mostly focused on local content

• China CAGR of +16.3% will outpace global growth 2017-2022

NAEMEA

APAC

LA

China

6%

8%

10%

12%

14%

16%

18%

10% 15% 20% 25% 30% 35%

2017

-202

2 C

AG

R

2017 Growth

Size proportional to revenue


The OTT video market is being propelled by consumer content demand, lower prices and portability preferences

Segment overview: OTT video


• Despite strong growth, OTT will account for 26% of the global TV subscription market by 2022• Japan, New Zealand and Singapore have the highest OTT share of OTT and Pay-TV revenue.

Pakistan, Vietnam and India have the lowest OTT penetration• OTT revenues rise with mobile access, connections

26%

74%

Global

OTT videoPay TV subscription

17%

83%

Mainland China

25%

75%

Asia Pacific (excluding Mainland China)

Mobile Internet penetration by 2022: 69% 79% 60%

OTT video sharing of TV subscription market by 2022


2. Internet advertising


Internet advertising is growing rapidly in Asia Pacific and is projected to reach US$123bn by 2022


• Indonesia and India are expected to have a rapid growth through 2022, with 20.2% and 16.2% CAGR respectively.

Internet revenue in 2017 and growth in Asia Pacific

Segment overview: Internet advertising

Indonesia, USD1,480mn

India, USD958mn

Japan, USD12.1bnSouth Korea,

USD5.4bn

Mainland China, USD46bn

0%

5%

10%

15%

20%

25%

0% 10% 20% 30% 40% 50%

2017

-202

2 C

AG

R

2017 Growth



Data consumption will be driven by mobile platform



2017

64%

23%8%

29%

64%

36%

77%92%

71%

36%

0%10%20%30%40%50%60%70%80%90%

100%

MainlandChina

India Indonesia Japan SouthKorea

Fixed broadband Mobile

2022

54%

9% 5%25%

57%

46%

91% 95%75%

43%

0%10%20%30%40%50%60%70%80%90%

100%

MainlandChina

India Indonesia Japan SouthKorea

Fixed broadband Mobile

4% 1%3%

10%

3%

73%

6%Communications

Games

Music

Other digitalcontentSocial networking

Video

Digital activities 2017

Data consumption by platform: Fixed broadband vs. Mobile


Mobile internet advertising will dominate Internet advertising


• Mobile internet advertising continue to grow rapidly in Asia Pacific, with Indonesia and India having the fastest growth in the region


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Rev

enue

$bn

USD

India Indonesia Japan South Korea

Mobile internet advertising revenue in 2022

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Rev

enue

$bn

USD

Mainland China

Mainland China: US$57.7bn, 20.1% CAGR Japan: US$8.5bn, 8.7% CAGR

South Korea: US$2.9bn, 6.1% CAGR

Indonesia: US$2.5bn, 25.8% CAGR

India: US$0.8bn, 21.7% CAGR


3. New growth engines for Global E&M market

e-Sports Virtual reality

*VR & e-Sports data are available for the following 10 key markets: USA, Japan, China, South Korea, UK, France, Germany, Russia, Italy, Spain

Projected industry growth 2017—2022:

20.6%

Projected industry growth 2017—2022:

40.4%

Global Entertainment & Media Outlook 22Source: PwC Global Entertainment & Media Outlook 2018-2022, www.pwc.com/outlook

The US, China, Japan and South Korea dominate the video games market and will represent 59% market share by 2022

Top 10 video game countries by revenue 2022ChinaUSJapanSouth KoreaUK

GermanyFranceRussiaItalyIndia

Countries on both listsIndia Russia

Top 10 countries with highestCAGR 2017-2022IndiaTurkeyPakistanUAEIndonesia

ThailandArgentinaSaudi ArabiaRussiaRomania

Top 10 countries by revenue 2017

Video game top countries by 2022 revenue and growth 2017-2022

Top 10 countries by CAGR 2017-2022

Countries on both lists

Segment overview: video games and e-Sports


e-Sports revenue is growing rapidly in Global


• The e-sports revenue is increasing gradually in Asia Pacific• Specially for China and South Korea, they are expected to have a rapid growth through 2022 and

dominate in Asia Market.

e-Sports revenue for key countries and their CAGR

0

100

200

300

400

500

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Rev

enue

$m

nU

SD

China US Japan South Korea


China: US$338mn, 23.7% CAGR

South Korea: US$306mn, 14.4% CAGR

Japan: US$42mn, 31.2% CAGR

US: US$467mn, 20.5% CAGR


e-Sports total global revenues of USD $1.6bn in 2022.Sponsorship remains largest by revenue in 2022


• Sponsorship remains the largest sub-segment through 2022 with media rights approaching a tipping point

• e-Sports represents another face-off in growing convergence of TV and Internet companies vying for content exclusivity

• Media rights revenue in e-Sports is still comparatively small

• As the scramble for attractive intellectual property intensifies, an increase at a 30% CAGR is anticipated to 2022

Sub-segment e-Sports revenue 2022: Global, $1.6bn

0

100

200

300

400

500

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Rev

enue

$m

n U

SD

Media rights Sponsorship Streaming advertisingConsumer contribution Consumer ticket sales



Current development in e-Sports in Hong Kong and Asia

Segment overview: e-Sports

AsiaHong KongHong KongAccording to the latestfinancial budget, the HKSARgovernment will allocateHK$100 million to Cyberportto boost the local e-Sportsand game developmentsector through building acompetition venue dedicatedto e-Sports.

e-Sports will be ademonstration sports at theAsian Games in Jakarta thisAugust 2018. In 2022Hangzhou Asian Games, e-Sports will become theofficial medal event.

2017 LOL World

ChampionshipBeijing,

Mainland China

WESGHaikou City,

Mainland China

Dota 2 Asia Championships

2018Shanghai,

Mainland China

ZOTAC Cup Master 2018Hong Kong

Recent and upcoming e-Sports tournaments in Asia:


Virtual reality global revenue of $3.9bn USD in 2017 is projected to grow at 40.4% CAGR

Segment overview: virtual reality

Revenue and growth: total global 2017 revenue $3.9bn USD

S P C Gl b l E t t i t & M di O tl k 2018 2022 / tl k

USA, USD1,451mn

South Korea, USD279mn

UK, USD349mn

Japan, USD407mn Mainland China, USD728mn

30%

35%

40%

45%

50%

55%

0% 200% 400% 600% 800% 1000% 1200%

2017

-202

2 C

AG

R

2017 Growth



With VR entering a long-term growth phase, firms turn to opportunities in VR apps and venue-based experiencesSub-segment revenue 2017: Global, $3.9bn USD


• After two plus years in the market, the new raft of consumer VR headsets have reached a steady growth curve

• Video and gaming will continue to be the dominant formats driving total VR revenue to $21bn USD by 2022. Social VR apps will be key to popularising VR.

• Advertising revenues will play a significant role in revenue through 2022

App5%

Gaming57%

Video38%

Segment overview: virtual reality

PwC


Local stories



Traditional market is still dominating in HK market while Internet advertising is growing rapidly in Asia Pacific

Local stories: Traditional advertising

29

28%

15%

16%

20%

21%

2017

Print

TV

Internet advertising

Out-of-home

Others

21%

14%

23%

19%

23%

2022Hong Kong


• In Hong Kong, traditional advertising through print still contribute a significant portion of advertising revenue when compared to other segment, however, internet advertising will experience significant growth in the coming years.

Asia Pacific*

21%

38%

25%

6%10% Print

TV


Out-of-home

Others

15%

38%31%

6%9%



Internet advertising will continue to dominate the market and reaching 69% of market share in 2022

Local stories: Traditional advertising

30Source: PwC Global Entertainment & Media Outlook 2018-2022, www.pwc.com/outlook

6%17%

59%

8%8%

2017

Print

TV


Out-of-home

Others

3%12%

69%

8%7%

2022China

• China’s Internet advertising market was the second-largest market globally in 2017, after the US, with total revenue of US$45.7bn

• Over the next five years revenue will increase at an 11.8% CAGR, reaching US$80.0bn in 2022


31

Your PwC contacts

Cecilia YauHong Kong Entertainment & Media [email protected]

Wilson ChowGlobal Technology, Media and Telecommunications [email protected]

Thank you

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

© 2018 PricewaterhouseCoopers Limited. All rights reserved. PwC refers to the Hong Kong member firm, 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.

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