Slow growth for film market while SVOD continues to boom: PwC report
The screen industry can expect slow growth in the filmed entertainment market over the next five years, and SVOD revenue will continue to skyrocket amid a grim outlook for free-to-air television, PwC’s annual media forecast has found.
The PwC’s Australian Entertainment and Media Outlook 2017-2021, released yesterday, suggests a continued rush of advertising and consumer dollars away from traditional media into the digital space.
Total consumer and advertising spending slowed significantly to 2.1 per cent in 2016 (compared to 6.4 per cent in 2015), which the report argued was a reflection a subdued economy and pressures on advertising-supported business models.
In the world of film, theatrical revenue is expected to marginally offset continued decline in home entertainment returns over the next five years. The total market is expected to see a compound annual growth rate (CAGR) of 0.7 per cent, which will shift revenues from $2.55 billion in 2016 to $2.63 billion in 2021.
While box office spend is expected to advance at a 4 per cent CAGR – or from $1.26 billion to $1.54 billion by 2021 – home entertainment revenues (which includes DVDs, as well as transactional VOD services) are expected to decline at 3.8 per cent CAGR over the same period, dropping to $974 million by 2021.
Cinema advertising is also expected to show a slight growth, or a 3.5 per cent CAGR, hitting $124 million by 2021.
The report notes that cinema businesses are adopting new platforms in order to increase audiences watching on smaller screens.
“The power of franchises and co-productions may provide lucrative opportunities for large box office returns in the industry,” the report states. “The emergence of Generation Z, a video obsessed group, provides the industry with strong incentives to focus on content made for online channels.”
While the free-to-air (FTA) advertising market is expected to continue a steady decline – dropping at a 4.5 per cent CAGR, or from $3.7 billion to $2.9 billion by 2021 – its online advertising revenue is expected to grow.
“Australian FTA broadcasters are now faced with greater competition from other providers of video content but multi-screen viewing and video-on-demand services (‘catch up’) provide them with opportunities to push more content through non-linear (digital) channels and compete for fast-growing online advertising revenue,” said the report.
While traditional TV advertising is expected to dominate in the near term, online advertising revenue will triple from 2.1 per cent to 7.4 per cent in 2021.
In the world of subscription television, things are brighter with an expected 3.8 per cent CAGR towards 2021.
A significant portion of that growth rate is attributed to SVOD services, which judged on their own have an expected CAGR of 16.4 per cent. That would see total revenues from services like Stan and Netflix lift from $541 million in 2016 to $894 million by 2021.
According to PwC Australia entertainment and media industry leader Megan Brownlow, “new entrants such as Netflix and Amazon Prime are helping educate Australian viewers that it is okay to pay for content.”
While premium box delivered services like Foxtel and Fetch are predicted to have only a 1.3 per cent CAGR, this portion of the market will still represent over three quarters of total consumer spend. Advertising revenue is also expected to grow for subscription television services at 2.9 per cent CAGR.
In digital advertising, online video was the fastest growing area, now representing a third of display expenditure. It is expected to continue to achieve a CAGR of 23.8 percent over the next five years.
Overall, the report predicts traditional media players will need to make ‘frenemies’, or collaborate and partner with rivals to weather the storms ahead.
“Across Australia’s media and entertainment industry we continue to see a strong divergence in traditional and digital media spend. The story has been the same for a number of years now,” said Brownlow.
“Instead of entrenching the dichotomy between traditional and digital players, this trend is forcing companies to take a different approach and has led to blurring of business functions, business models and of industries.”
“Old-school thinking will need to change as collaborating with rivals becomes the norm. Negotiation is cheaper and more effective than combat. The way to grow in this environment is to identify gaps in the customer experience and collaborate or partner with a competitor or technology provider to address this gap,” she said.
The report suggest one such ‘blurring’ is already occurring in the area of virtual reality filmmaking, with IMAX’s announcement it is developing a VR camera with Google a “new impetus" to industry.
“With an installed base of approximately five million headsets, plus 84 million Google Cardboard sets (designed to hold mobile phones), VR is becoming part of expanding consumer choices, whether it’s in a theatre or for in-home entertainment.”