For the entertainment and media industries, 2022 marked an important inflection point. Total global entertainment and media (E&M) revenue rose 5.4% in 2022, to US$2.32 trillion. That represents a sharp deceleration from the 10.6% growth rate in 2021, when economies and industries globally were starting to rebound from the upheaval caused by the pandemic.
In each of the next five years, the rate of growth will decline sequentially, so that by 2027 revenue will grow just 2.8% from 2026. That is slower than the 3.1% rate of overall economic growth that the International Monetary Fund (IMF) projects for that year, PwC revealed in its latest report.
The slowdown, caused in large measure by sluggish consumer spending, is pushing companies to reset expectations, refocus inward and seek ways to recharge growth. They are doing so by tapping into the many geographical and sectoral hotspots that offer opportunities and by harnessing emerging technology – in particular, by exploring the power of generative AI as an engine of productivity for the creative process.
According to the report, the causes of the slowdown are many. For some key sectors, the surge in revenue and attention that they experienced early in the pandemic ran out of steam. For example, the creation of podcasts, which was among the industry’s major success stories during the pandemic, fell by an estimated 80% between 2020 and 2022.
However, the main challenge – in 2022 and in the future – is consumer spending. Taxed by inflation, weary from the lingering effects of the pandemic, and facing the uncertainties of war and geopolitical instability, consumers are pulling back. Consumer spending historically has been the largest of the three broad categories PwC’s Outlook tracks. But consumer spending on E&M will grow at just a 2.4% CAGR between 2022 and 2027, when it will total US$903.2 billion.
As e-commerce and time spent on digital platforms grow, companies around the world will be spending significantly more in an effort to reach consumers at the point of purchase and at the point of decision. In 2025, advertising will surpass consumer spending as the largest category; internet ad spending, which grew 8.1% in 2022, is a powerful catalyst for growth. Between 2022 and 2027, global advertising revenue will rise from US$763.7 billion to US$952.6 billion, representing a 4.5% CAGR. This trajectory puts advertising on a path toward becoming the first of the three major E&M categories to reach US$1 trillion in annual revenue. Internet access, the third major category, will surpass consumer spending in 2026.
As E&M products become more digital and less analogue, the costs of production and distribution are declining. Meanwhile, in a world where content already abounds, competition among providers of digital content and services is increasing. According to PwC, these two trends led to another inflection point: people may be spending more time in digital entertainment and media environments, but it will not cost them more. As a result, consumer spending per capita on E&M will decrease as a share of overall spending, falling from 0.53% of average personal income in 2023 to 0.45% in 2027.
“As we look ahead, it is important to keep an eye on the big picture. In the coming years, there will be more inflection points beyond the continued rise of advertising and the growth of digital. A tipping point will be reached in 2025, when global 5G penetration will surpass that of 4G. But in a period of muted top-line growth, companies have to continue to reassess and refocus if they are to avoid further retrenchment. While participants in these markets have always had to be nimble and resilient to changes, the stakes are rising. As we look ahead, evolving consumer behaviour, a shifting regulatory environment and disruptions posed by new technologies will create new tensions and open up new possibilities,” the report says.
“Whatever pathways open up, the imperative will be to lean into innovative thinking. The entertainment and media industry has always been, at root, a creative endeavour. But now, that creativity must be extended into multiple dimensions, and must be harnessed to a purpose. In the coming years, armed with powerful technology, leaders will have to be more creative about how they create, distribute and monetise products and services. They will have to think hard about how to generate and measure returns on the substantial investments they are making. And they will have to be creative about how they pursue and generate growth,” it concluded.
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