Seizing growth opportunities in a dynamic ecosystem

In 2023, the entertainment and media (E&M) industry recovered its balance. In the face of economic headwinds and technological disruptions, total global revenue rose 5% to US$2.8 trillion in 2023—easily outpacing overall economic growth. Over the next five years, the E&M complex will grow at a more muted 3.9% CAGR; in 2028, total revenues will top US$3.4 trillion.

In aggregate, the industry’s ship seems to be sailing through calm seas on an even keel. But the surface is continually roiled by cresting waves and deep troughs, with dangerous shoals and reefs lurking everywhere. Disruption, presenting opportunities and risks, continues to break over the sector. Linear value chains are disaggregating as we move into a world dominated by digital ecosystems. The content boom driven by rapid streaming growth has come to a halt. Generative AI is promising to deliver efficiency and productivity gains while powering new ways of doing business across and between multiple industries. It all adds up to widespread uncertainty. In PwC’s 27th Annual CEO Survey, 57% of E&M CEOs, compared with 45% of all CEOs, said their current business path would no longer be viable in ten years.

The good news? In 2028, an additional US$597 billion in revenues will be available to E&M industry participants, compared with 2023. And the key to taking a share of these growing revenue pools will rely on business model reinvention (BMR), which has evolved from a strategic option into an existential imperative. BMR goes beyond tinkering around the edges to boost margins by a few basis points or seek incremental growth. Rather, the necessity is to reimagine how your company creates, delivers and captures value. This involves fundamental changes to how businesses make money, serve customers, and address the geographic and business sectors that are growing most rapidly.

PwC’s Global E&M Outlook 2024–2028 provides a compass for leaders as they navigate the coming years. It serves as a comprehensive global guide to which segments and markets will grow, which will founder, and which are in danger of sinking. As companies reinvent their business models, they have to understand precisely where—in which regions and in which subsectors—new pools of revenues will form. We’ve identified four major areas of opportunity.

It’s increasingly challenging to drive revenue growth by selling E&M products directly to users. Of the three major categories—consumer spending, connectivity, and advertising—consumer spending is both the smallest and slowest growing. The connectivity category, what people pay for fixed and mobile services, topped US$1.1 trillion in 2023. Growing only modestly through 2028—as people remain willing to spend more to ensure they have access to all that the E&M industry has to offer—it will continue to be the largest category. (Note: Reported and forecast data for connectivity are higher this year than in previous versions of the Outlook. The definition has been expanded from an imputed share of service revenues to include all service revenues as reported by the largest industry players.) But the real growth story, the biggest opportunity, lies in what companies are willing to pay to reach consumers, whether they are on phones, playing games, on the road, or on e-commerce sites. Advertising, which surpassed consumer spending in 2023, is projected to top US$1 trillion in 2026, and will grow at a 6.7% CAGR through 2028—when ad spending will be nearly double the 2020 total.

With advertising accounting for 55% of total E&M industry growth over the coming five years, it is poised to become a more important part of companies’ business models—even for those that had previously avoided ad revenues. For strategic reasons, all participants in the E&M industry need to become more proficient at selling ads—and more effective at making them generate value for all participants in the ecosystem. Changes to the way businesses approach the ad business will be seen in three key areas: The monetisation of data will fuel more sophisticated advertising models. There will be closer connections between the discovery of products and services and their purchase and consumption. And companies will have to understand how global privacy regulations impact growth.

Despite headwinds including limited ad budgets, discussion of regulation, and continuing geopolitical and economic uncertainties, internet advertising grew 10.1% in 2023, adding US$52.5 billion in new revenues. After rising at a 9.5% CAGR through 2028, internet advertising will account for 77.1% of total ad spending. And of the ten Outlook components projected to exhibit the fastest growth over the forecast period, most fall under the umbrella of internet advertising. The fastest-growing is retail/other display internet advertising revenue, which consists mostly of non-video display ads on retailers’ apps and websites. This pool is growing especially fast in more mature e-commerce markets like the US, where it will rise at a CAGR of 21.6% to US$31.7 billion in 2028, from US$11.9 billion in 2023.

This broad advance of ad revenues underlines the wider opportunities for other E&M players. Addressable, measurable ads delivered on TV screens will become a vital contributor to the revenues of direct-to-consumer online video providers. Online connected TV (CTV) ads, which are served during video programming, are projected to double, from US$20.5 billion in 2023 to US$41.2 billion in 2028. Retail media players are increasingly experimenting with ‘shoppable TV’ advertising, which makes it possible for consumers to buy products direct from ads on television and on videos—an opportunity underlined by US retailer Walmart’s purchase of smart TV manufacturer Vizio in February 2024. As more consumer attention migrates away from traditional television to user-generated, short-form content, advertisers may need to follow this migration with approaches that go beyond the 30-second or 15-second spot. These may include relying more on influencers, offering experiential promotions, and tapping into new technologies that enable creative messaging.

The streaming world, the subject of so much attention in recent years, neatly encapsulates the industry’s broader challenge. Usage and consumer uptake of the core offering is continuing to increase—albeit at a lower rate than in recent years—but companies are having greater difficulty getting people to pay more for digital goods and services. As the number and range of streaming services proliferate, a form of market saturation has begun to kick in. Global subscriptions to over-the-top (OTT) video services will rise to 2.1 billion in 2028 from 1.6 billion in 2023—representing a 5.0% CAGR. But global average revenue per OTT video subscription will barely budge, rising from US$65.21 in 2023 to US$67.66 in 2028.

This plateauing effect is already pushing leading streamers to reshape their business models and find new revenue streams beyond subscriptions. The big three Western global players in the streaming sector—Disney+, Netflix and Amazon Prime Video—all rolled out ad-funded ‘hybrid tier’ offerings, in which consumers agree to view ads in return for paying a lower subscription fee. In an expanding number of markets worldwide, many smaller or regional players are following suit. The introduction of an ad-based variant is often accompanied by other measures to boost revenues, ranging from cracking down on sharing of passwords to investing in ‘appointment viewing’ content, such as live sports, to attract both subscribers and advertisers.

As subscription revenue growth levels off, global advertising VOD (AVOD) revenue will continue to grow at double-digit rates through 2028—for a five-year CAGR of 14.1%. By 2028, advertising will account for about 28% of global streaming revenues, up from 20% in 2023.

The business model reinvention underway in the OTT space also includes a wave of consolidation and rationalisation initiatives. Disney+ Hotstar in India was created in 2020, after Disney acquired Star India’s parent company, 21st Century Fox. After several challenging years, in February 2024, Disney’s Star India struck a US$8.5 billion merger with Viacom18, a unit of the conglomerate Reliance Industries, which owns the larger Jio OTT platform. India’s fragmented OTT market—which will be the world’s fastest growing in the next five years, with total revenue hitting US$4.3 billion in 2028—is ripe for consolidation, with around 101 million paid subscribers and 58 OTT platforms, about half of which are regional players operating in local languages. Speculation about deals is being fuelled by the increasing involvement of international E&M companies in India. To name one example, Warner Bros. Discovery opened its GCC (Global Capability Center) in Hyderabad in September 2023.

In developed markets, by contrast, a different form of consolidation is taking place: the return of the bundle. With customers reluctant to endlessly expand their subscription purchases, major players are slowly reconstituting a version of the cable offering. In the US, Disney and Warner Bros. Discovery have teamed up to offer a Disney+-Hulu-Max bundle, and Disney, WBD and Fox Corp. are launching a live sports bundle called Venu Sports. Comcast is offering its TV and broadband customers a service called StreamSaver, bundling Peacock, Netflix and Apple TV+. And in a complete reversal, we are starting to see early indications that IP owners/creators are migrating back to potential licensing deals with streaming competitors to generate incremental margin.

The global obsession with gaming continues to produce rising revenues, even as some companies that expanded rapidly in the covid era have reduced employment. Global video games revenue—which includes esports, still a very small component—reached US$227.6 billion in 2023, up 4.6%. It’s among the fastest-growing large sectors in the E&M universe, with revenue on track to top US$300 billion in 2028—more than double its level in 2019. Although the pace of annual growth will decline as the segment matures, in 2028, gaming will account 9% of the entire E&M industry.

Historically, revenues from video gaming have been dominated by subscriptions and purchases of games. But advertising is gaining prominence. Of the two main revenue sources, app-based social/casual gaming revenue (US$82.9 billion) was narrowly ahead of in-app games advertising revenue (US$72.4 billion). By 2028, the latter will rise at a 15.4% CAGR globally to US$147.9 billion in 2028, while the former will grow at just a 5.15% CAGR, to US$106.6 billion. By 2028, social/casual gaming will account for more than three-quarters of the overall global video games and esports market.

Gaming is a global business. But the culture of gaming—and the business models that support it—varies significantly from country to country. The biggest region globally for total video games and esports revenue is Asia Pacific. (The Asian Games, held in Hangzhou in the fall of 2023, included esports as an official medal event for the first time.) In 2023, video gaming in the region generated revenues of some US$109.6 billion, 48.1% of the segment’s global total. By 2028, the region will account for US$181.8 billion in gaming revenues, or 54.4% of the total.

The leading region is not a monolith. Within Asia Pacific, total video games and esports revenue in Indonesia is projected to rise at a CAGR of 16.0% through 2028, which makes it the third-fastest-growing video games market (tied with Pakistan). The Indonesian Government is strongly supporting the industry’s development in the country, working to help it resolve challenges in areas such as funding, talent, infrastructure and regulation. In Japan, where video gaming is hugely popular across all age groups, gaming benefits from its close association with the traditional Japanese anime content that’s gaining a growing global audience.

As the gaming sector grows, investments in new products, new technologies and new business models will increase. Nintendo is likely to release the next generation of its popular Switch console in 2025. To appeal to younger demographics, companies are focusing on more compelling collaborative, social game play. And in February 2024, Disney and Epic announced a deal to work together to create an ecosystem that would envelop Fortnite and the worlds of Pixar, Marvel and Star Wars.

Just as the growth potential in video gaming varies by region and country, the same divergence of opportunity applies across different E&M markets more generally. The matrix below charts country-by-country E&M revenue against its projected growth rates. (It’s important to note that this chart excludes connectivity revenue, which we feel would blur the picture.) The biggest pools of revenue growth lie in two principal areas: regions that are already big and growing relatively rapidly, and those that are relatively small and growing extremely quickly. And for many major players, low per capita spending power in some markets poses a challenge.

The US, representing more than one-third of global spending in 2023, remains the world’s biggest E&M market for the combined advertising and consumer spending markets by a wide margin. But this scale brings with it maturity and hence relatively slower growth, which is projected to run at a 4.3% CAGR through 2028—behind the global rate of 4.6%.

Among the larger markets showing rapid growth, the clear stand-outs are Indonesia and India, followed by China, at a 7.1% CAGR. By 2028, China’s advertising and consumer spending revenues (US$362.5 billion) will be less than half of those in the US (US$808.4 billion). Each of these territories has its own distinctive market dynamics. India will be the world’s fastest-growing OTT video-streaming market over the forecast period, serving its vast, diverse and widely dispersed population—many of whom are obsessed with sports content in general, and cricket in particular: Reliance’s JioCinema app attracted a record 32 million viewers for the 2023 Indian Premier League (IPL) final between Chennai Super Kings and Gujarat Titans. And China’s continued strong growth means it’s steadily closing the gap on the US in terms of market size, although tight government regulation can make investing there more complex than in other territories.

Among the relatively small markets that show extremely rapid growth, Nigeria (10.1% CAGR through 2028) leads the way. It has a predominantly young population of 220 million consumers, and is widely acknowledged as Africa’s leading E&M hub, home to the world-renowned Nollywood movie industry, which produces around 2,500 films annually. Growth in Turkey’s E&M industry (9.5% CAGR through 2028) is bolstered by widespread use of social media.

E&M is a realm in which real-life, in-person, increasingly tech-enabled experiences—music performances, theatre, cinema, sports and more—matter a great deal. And in the wake of the covid pandemic, IRL (in real life) events have been enjoying something of a revival. Live music revenues rose by 26.0% in 2023, and accounted for more than half of the overall music market. The growth in live music was skewed towards large events such as the tours by Taylor Swift, Beyoncé, Coldplay and Elton John. The opening of the Sphere in Las Vegas in September 2023 highlighted the ways in which live experiences are getting an immersive tech upgrade. Alongside a strong showing from live music, cinema also performed well globally in 2023, with a 30.4% year-on-year increase in spending at the box office. The ‘Barbenheimer’ combo of Oppenheimer and Barbie grossed a total of US$2.4 billion. Together, movie box office and live music ticket sales represented well over one-third—38.6%—of 2023’s net increase in consumer spending on E&M worldwide. Global cinema revenues are poised to surpass their pre-pandemic, 2019 levels in 2026.

Having exploded onto the scene in the past couple of years, generative AI (GenAI) brings major implications—including both opportunities and challenges—for companies across E&M. The US cut of PwC’s most recent CEO Survey shows that nearly half of US CEOs see GenAI boosting profits this year, with 61% expecting it to improve the quality of their products and services.

Thus far, much of the discussion surrounding AI in E&M has focused on reducing and controlling costs—rather than driving new revenue streams. GenAI-driven text generation tools can translate concepts into stories and generate credible human dialogue, turn text into visuals and storyboards, and create animated 3D models from 2D videos or static images. GenAI can also add value in post-production by making editing quicker and easier. In Japan, anime and comic producers are using AI to streamline and accelerate their production processes. In Indonesia, too, GenAI is being deployed as a productivity engine for creative processes.

The need to control the use of AI tools and AI-generated content—and to avoid undercutting creators’ rights and payments—were key factors in the 2023 Hollywood writers’ strike, and in the subsequent deal struck with the Writers Guild of America. Going forward, the speed at which high-quality content can be produced will continue to increase as the related costs decline.

The open question remains precisely how GenAI will translate into higher revenues and help companies accelerate their pursuit of revenue pools. One high-potential area lies in the highest-growth sector: advertising. GenAI is increasingly being integrated into content creation and advertising tools. Here its application has tended to focus initially on extracting small pieces of information and generating summaries in subsectors such as sports media.

To date, many of the applications of GenAI have focused on speed, efficiency and reducing costs. As we look ahead, in a dynamic that the forecast doesn’t quite capture yet, industry participants will have to focus on how this powerful technology can lead to greater value creation. GenAI offers users a powerful flywheel for experimenting, iterating, and scaling new solutions and processes. In advertising, GenAI can be used to quickly develop creative approaches for different contexts—and then to iterate and refine rapidly in response to consumer attention and uptake. If GenAI can be harnessed to offer new experiences, and create new revenue streams, the growth potential is even greater.

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