UK entertainment & media sector to grow by £8bn over the next 4 years

Wednesday, June 6th, 2018
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UK entertainment and media sector to grow by £8bn over the next four years – PwC forecasts

  • Virtual reality the fastest growing segment predicted to be worth £1.2bn by 2022
  • UK will account for a third of all Western European internet advertising spend
  • UK now Europe’s Largest video games market
  • Podcast listeners in the UK to grow 29% year-on-year to 27m by 2022

The Entertainment and Media (E&M) sector will be worth £76bn by 2022, up from £68bn this year, according to PwC’s latest Global Entertainment & Media (E&M) Outlook 2018-2022.

Overall, the market will grow by £8bn over the next four years, making the UK the second largest market in Europe, the Middle East and Africa (EMEA), after Germany.

Commenting on the seemingly unstoppable growth in the E&M sector, Mark Maitland, UK head of Entertainment and Media at PwC, said: “The UK’s entertainment and media sector is forecast to grow at a healthy rate over the next four years with some of the largest and fastest growing markets in digital and technology, reflecting its location as a place for innovation.

“To stay ahead of the curve, entertainment and media companies must revisit how they envision their business generates revenues and how they build and retain trust. Given the pace and scale of change underway, speed is key.

“Consumers are rejecting the one-size fits all content experiences they were once fed. As a result, it’s vital for companies to use digital delivery, data analytics and AI to personalise and tailor their offerings to provide a unique experience.”

Biggest revenue generating segments

Consumer spending on internet access will bring in the most revenue over the forecast period rising from £13.7bn this year to £17bn by 2022, a 6% CAGR. Last year, for the first time, consumers spent more on mobile internet access than fixed broadband access. PwC now expects smartphone ownership in the UK to hit more than 70 million and, as a result, mobile internet access is forecast to account for more than half of overall internet access revenue in four years time.

Advertising revenue will account for a quarter of total E&M revenue by 2022, with digital spend continuing to dominate growth. Internet advertising spend will grow from £12bn in 2018 to £15bn by 2022, a 6.8% compound annual growth rate (CAGR). Mobile is forecast to become the dominant segment this year, accounting for half of all internet advertising. This year will also see digital billboard displays (digital out-of-home) overtake physical out of home (OOH) for the first time. Digital OOH spend will reach £517m in 2018 and increase to £689m by 2022, a 9% CAGR. Podcast advertising, included in PwC’s analysis for the first time, is forecast to grow at a 38% CAGR reaching £34m, up from £11m in 2018.

Mark Maitland commented: “Data consumption in the UK will grow by 22% year-on-year till 2022 and we expect the UK’s internet access revenue to overtake France in 2021 to become the biggest market in Western Europe.

“Growth will be driven by better connected homes and businesses and increased network coverage and capacity for mobile users, who are becoming more attracted to low-cost SIM only deals from operators.

“Mobile-first consumption is increasingly the new normal and this continues to define the direction of advertising revenues, as mobile platforms become important distribution channels for media – especially through video, which is one of the fastest growing sub-segments. Although, over the next four years, companies will be demanding greater assurances from content providers on where ads are placed online, especially in relation to inappropriate and offensive material which is pushing trust up their agenda and consumers will be seeking more transparency on how their data is being used.”

Fastest growing segments

The UK’s virtual reality sector remains the fastest growing E&M segment with 34% CAGR forecast over the next four years. With more than 7.8m VR headsets forecast to be cumulatively sold in the UK by 2022, PwC expects the virtual reality industry will be worth £1.2bn.

E-sports is also forecast for double-digit growth of 21% CAGR over the next four years with total revenue growing from £24m in 2018 to £48m.

Mark Maitland commented: “We expect the number of VR headsets used by UK consumers to reach almost eight million over the next four years. Growth will be driven by a second wave of hardware that is easier to use, better supported and ultimately priced for the masses entering the market over the forecast period. The UK’s VR industry will generate more revenue than any other country in Western Europe over this time.

“The UK’s e-sports market is forecast to be the second largest in Europe. Media rights continue to drive revenue with broadcasters keen to feature tournaments, although they face competition from online streaming for the rights to hold the most popular events.”

Trends/tipping points

  • Digital music streaming revenue will almost double from £779m forecast for 2018 to £1.4bn by 2022. In 2021, spend on streaming will overtake spend on tickets for live music events;
  • Digital game purchases for consoles is forecast to reach £721m by 2022 overtaking physical game purchases for consoles for the first time, which is seeing revenue fall at -5% CAGR;
  • Total video games revenue (£5.5bn) is set to overtake total spend on books (£4.9bn) in 2020;
  • UK consumers will remain the biggest spenders on over-the-top video (OTT), streaming services such as Netflix and Amazon Prime than any country in Europe- £1.9bn by 2022.

Mark Maitland concluded: “We see the UK’s entertainment and media sectors making a strong contribution to economic growth over the next four years. The main drivers of growth will be the technology and digital companies, which are redefining the competitive playing field to the point where the borders that once separated media, technology and telecoms are dissolving to create a third revolution of convergence.”

“What makes this different from earlier waves is the role of the ever-expanding group of supercompetitors at the same time as strengthening of specialised niche brands striving to engage and earn the spend of demanding consumers.”