Following up on the latest in the Entertainment and media world has been a passion from many years now having closely worked with the dynamics of the industry during my time with PwC and then as an independent deal professional having Media as my major interest. E&M worldwide has been a pretty stable sector in terms of growth (except in Covid time) inspite of some disruption in distribution through technology….which was expected but has never affected its growth figures. This year is perhaps the first time PwC has stated a degrowth from the estimates presented by them for 2022. The growth halved to 5.4% from the earlier figure of 10+% and is further expected to slide till the forecast period upto 2027. PwC is one of the few firms whose E&M estimates for the world and for many countries of the world are followed quite closely for they do give a view of how the world is moving in the macro as well as the individual markets which few other research firms cover.. therefore time to take notice!
To be clear E&M remains a substantial business worldwide with revenues touching US$2.32 trillion. Its a simple business with production,distribution and exhibition of content in all forms as its key part….though technology now has added a bit of complication with most parts now slowly becoming digital. The business historically and currently has been helmed by two key sources of revenue… Consumer Spending and Advertisement both which have consistently shown a growing trend year on year except perhaps in years of medical strife like the covid years or war. This is perhaps the first in the foreseeable past where the growth trajectory has been hit …and is likely to go down in the forecasted term. The reason as reported is the decline in the consumer spending which has been hit due to substantial inflation as an after effect of easy money policy during the covid years, global instability and the war in Ukraine taken together, though advertisement in percentage terms has risen. This decline is likely to continue for a few years…which then begs the question on the sustainability of the sector as a whole since the largest markets in the western hemisphere are affected. It also may be time to look at other markets like India which perhaps are not as large but the potential for growth could be huge. Further we have talked about the digital influx in the business for sometime and though it has taken sometime to take shape…now it is a reality. With AI on the horizon…would we really see a change in the business model which at its base remains rooted to…exceptional “Content”.
The figures can give a direction but rarely tell with certainty what has changed… Maybe now is the time to acknowledge the real change taking place both on the E&M world market place and in India. The E&M world market place first … the following is likely to be the trend-
1. With consumer spending in stress, the subscription funded content is likely to suffer whether it’s OTT, Live Events or Filmed entertainment. This may in turn affect the amount of investment in content.
2. Advertisement, the other major source of revenue though has shown growth and is likely to be relied upon more by content owners. Despite growth, the advertisement is likely to be stretched as an increasing part of the same is now being taken away by the search and social media giants leaving lesser dollars for actual entertainment content. With traditional TV advertisement almost flat, the dollars are being invested behind new genre’s like gaming as well as other digital products. Subscription giants like Netflix, Amazon, Disney Hotstar etc are now looking to employ strategies that include advertisement supported content as mainline activity. Therefore while there is growth in advertisement there is also more demand with entry of new content genres as well hence spreading the cheer more thinly…
3. Third key change is the emergence of Internet Access as a major area of interest with its use of AI in search, advertisement delivery and in future possibly for content production due to Generative AI technologies like Chat GPT. This is a future which is fast emerging though not fully measurable where the outcomes could be difficult to envisage…
Therefore we are in a period of change which may be difficult for the industry in general till one adjusts to a new normal…means more job contractions, lower value realisation, difficult distribution decisions …. though good content would always be in demand… only the means to monetise could be different. How would this be reflected in other markets..? Indonesia, China and India are some of the other markets which are large and with high growth. India being of particular interest is a decently developed market where revenues will touch USD 73.6 billion by 2027 according to the report with the CAGR growth of 9.7%, a shade lower than what was anticipated but among the highest growing. While it also may be affected with the general downtrend in consumer spending, its important to understand whether there is more broad based change taking place in this market. Print, Broadcast and Filmed Entertainment used to be the segment leaders within the total E&M market in India…,they still are large but now Internet access is the sector to consider as it is controls a substantial part of the total advertisement spend which supports the different genre’s therein. It will matter how much of the share of the advertisement pie will flow into the E&M sectors. Key conclusions…. therefore- ad sponsored content likely to have sway more than subscription based content in near future… not very different from the world. Broadcast market will continue to hold though at reduced growth and new digital areas like Gaming/Esports along with OTT will hold sway in the foreseeable future.
Perhaps, the E&M market is at its inflexion point with digital footprint now firmly established and increasing. Having said that, a successful business model is still to emerge as well as develop as measurement of content delivered digitally is still a work in progress and we now have threat of no protection of copyrights due to Generative AI technologies. Content and good Content is still king and will continue to be so…though distribution considered God is still deciding it’s way forward..!
Have a good read and excellent week ahead..
eye on media blog 