The Australian filmed entertainment sector can expect virtually zero growth in the next five years, with incremental increases in box office takings, cinema advertising and transactional VOD offset by plummeting DVD and Blu-ray sales and rentals.
Meanwhile the SVOD market, which soared by 31 per cent last year, is projected to expand, albeit at a slower rate, as new entrants including Disney+ and Warner Media’s streaming service challenge the incumbent players.
That’s according to PwC’s 18th annual Australian Entertainment & Media Outlook 2019-2023, which predicts consumer spending and advertising revenues will rise at a compound annual growth rate (CAGR) of 4.2 per cent over the next five years, from $55.811 billion last year to $68.421 billion. The main drivers will be Internet advertising and interactive games and esports.
The combination of a slowing economy, stagnant wages growth and higher household debt will continue to challenge the sector, according to Justin Papps, PwC Australia partner and Outlook editor.
“The value proposition from all players in the sector has to be really strong to persuade consumers to open their wallets,” Papps tells IF. “Raising prices is not a lever which Australian media and entertainment companies can continue to use.”
PwC’s research shows the average household subscribes to 1.6 SVOD services- typically Netflix and one other- and Papps questions how many of the growing number of platforms will be viable.
“The majority of consumers are taking a ‘Netflix and _______’ approach to spending their SVOD dollars,” the report says. “Less clear is who will win the coming battles for the second SVOD service: will Stan, Foxtel Now, Kayo or Amazon Prime give way to Disney+ or Apple TV?”
It predicts SVOD revenues will reach $4.6 billion in 2023, up from $4 billion in 2018. Foxtel’s revenues are expected to tumble from $2.6 billion last year to $1.94 billion in 2023, while streaming services jump from $1.41 billion to $2.68 billion.
Filmed entertainment is tipped to flatline at $2.3 billion over that period. Over the next five years box office revenues are forecast to expand from $1.245 billion to $1.530 billion, with annual ticket sales climbing from 90 million to 109 million, and cinema advertising rising from $133 million to $153 million.
However the outlook for independent films remains tough, as the report quotes Screen Australia CEO Graeme Mason as saying: “All indie content is now fighting for a decreasing pot of attention and space and money.”
Transactional VOD is projected to grow from $378 million to $462 million while physical rental falls from $25 million to just $2 million and physical sell-through plunges from $521 million to $161 million.
The free-to-air broadcasters’ advertising revenues are expected to slip marginally to $3.4 billion but broadcast VOD revenues will shoot up by 27 per cent to $441 million as platforms continue to expand their offerings from catch-up to back catalogue and original content.
The report says: “As video subscription platforms increasingly become the dominant platform for professionally produced drama, FTA networks will need to lean more heavily on traditional ratings drivers of live sports, news and reality television.”
The interactive games market is set to be the fastest growing segment in consumer spending, forecast to rise at a CAGR of 15.6 per cent to $7.1 billion, driven by the roll-out of the NBN, the rapid adoption of 5G and esports.