PwC released its ‘Entertainment and media outlook: 2017 – 2021: An African Perspective‘. The report is a must-read for anyone operating in the continent’s entertainment and media industry (E&M) today.
The Outlook offers both detailed analysis and five-year forecasts of consumer and advertising spending across five countries (South Africa, Nigeria, Kenya, Ghana and Tanzania) and 14 segments: Internet, data consumption, television, cinema, video games, e-sports, virtual reality, newspaper publishing, magazine publishing, book publishing, business-to-business publishing, music, out-of-home, and radio.
The report also highlights industry shifts, its challenges and the strategies needed to stay ahead, in particular, the increasing importance of user experience.
“Significant shifts are underway in how Africa’s E&M companies compete and generate value, as the quality of the experience they deliver to consumers becomes their primary basis for strategic differentiation and revenue growth. To thrive in a marketplace that is increasingly competitive and crowded, companies are focusing on implementing strategies and building capabilities to engage with consumers,” the report states.
See below for an overview of how the industry is expected to perform.
Industry Size
By 2021 total E&M revenue in South Africa is expected to reach R177.9 billion, up from R132.7 billion in 2016. Internet access remains the key growth driver and will account for R27 billion of this increase.
Sectors To Watch For
The fastest growing sectors will be virtual reality (VR) and e-sports compounded annually at 72.6% and 39.6%, although these segments are still new revenue lines and remain the smallest in terms of absolute revenue numbers.
Digital Spend
Digital spend will continue to drive the overall growth. Nearly 40% of total spend will be derived from Internet access in revenue. South Africa’s mobile Internet penetration is forecast to rise to 77.8% by the end of 2021 from 52.3% in 2016.
This increased Internet penetration will drive mobile Internet access revenues, which are projected to grow by a compound annual growth rate (CAGR) of 10.7% to nearly R62 billion.
Industry Advertising Revenue
The report shows that South Africa’s total entertainment and media advertising revenue is expected to rise to R54.2 billion by 2021 from R45.3 billion in 2016, representing a 3.7% CAGR. TV advertising remains dominant, but in terms of absolute growth it is Internet advertising that is almost an equal contributor, helped by a sizeable 12.9% CAGR.
See below for a breakdown by market segment.
Music
South Africa’s music industry is on a growth curve with live music being a key driver. Live music revenue is expected to rise from R1.2 billion in 2016 to R1.7 billion in 2021, a CAGR of 7.4% over the forecast period.
It is notable that only one digital subcomponent is seeing a significant decline in the entire Outlook – digital music downloading revenue, which is forecast to see a -15.7% CAGR, as consumers shift from ownership to access. Digital music streaming revenue is forecast to rise at a CAGR of 34.5% to 2021, reaching R518 million in that year. This growth rate is only beaten by new revenue lines from VR and e-sports.
TV
South Africa continues to remain the largest TV market on the African continent, with total revenues of R40.9 billion in 2016. The total TV market is estimated to be worth R51.2 billion by 2021. At this time, end-user spending (Pay-TV subscriptions, physical and Internet home video and license fees) will account for 56.7% of the total TV market.
Video Games
The video game market is also performing well and revenue is forecast to grow at a CAGR of 15.4% to reach R5.4 billion in 2021, up from R2.6 billion in 2016. The primary growth driver in the video games market is social/casual gaming revenue, which will be worth R3.7 billion by 2021. Furthermore, the console and PC markets are experiencing a significant shift towards digital and online/micro transaction revenue, which will exceed physical sales for the first time in 2020.
The growing interest in gaming is helping to fuel the rapid growth in the related segment of VR and e-sports. As a segment that only reached consumers in 2016, almost the entire VR market is new. According to the Outlook, the consumer VR content market will be worth R455 million by 2021. Of this, R282 million will be spending on VR video.
Cinema
The South African cinema sector currently presents a mixed picture. Overall revenue, including box office and cinema advertising, is expected to reach R2.2 billion in 2021, up from R1.9 billion in 2016. South Africa continues to be an attractive destination for international filmmakers. Although some short-term economic and political issues are impacting the film sector, it is expected in the long term to continue to expand.
Newspapers, Books And Magazines
Among the largely non-digital segments, magazines and newspaper revenue are set to continue their decline. Total newspaper revenue in the South African newspaper market has been unpredictable.
The market showed growth in 2013, declined in 2014 and bounced back marginally in 2015, contracting at a slower rate. In 2016, total newspaper revenue was worth R8.9 billion, but this figure is forecast to drop to R7.4 billion in 2021. Marginal growth is expected for the book publishing industry over the next five years. The educational book market will contract by a -0.1% CAGR. On the contrary, professional titles and consumer books will exhibit some growth as e-book revenues continue to grow.
