The Irish Entertainment & Media (E&M) industry is forecast to grow at a rate of 3.4% CAGR (Compound Annual Growth Rate) until 2022, according to PwC’s latest Global Entertainment & Media Outlook report. This rate of growth is equivalent to revenues of €5.1 billion for the industry by 2022.
As per previous years, this growth is primarily fueled by increasing internet access and significant growth in internet advertising. The growth projection incorporates all Irish E&M industry sectors including internet and out-of-home advertising, internet access, TV subscriptions and licenses, radio, video games, filmed entertainment, newspaper, book and magazine publishing.
The €5.1bn that is forecast for the E&M industry consists of digital and non-digital growth of €2.64bn and €2.45bn respectively. It is expected that digital spend will outpace non-digital by 2020. The digital trend is gathering considerable momentum, with this tipping point now envisaged a year earlier than last year’s prediction of 2021.
Speaking at the Irish launch of the report, Amy Ball, Partner, PwC Ireland Entertainment & Media Practice, said: “Growth of 3.4% annually presents significant opportunities for the Irish E&M industry. This growth is primarily driven by growth over the period in internet access (6.7%), internet advertising (6.5%) and video games (5%). In particular, the rise of mobile internet advertising, tracking at 11% annually, will represent 42% of all internet advertising spend in Ireland by 2022. We see traditional newspaper publishing continuing to lose ground with a decline of 4% annually over the period.
“There are three imperatives affecting every company in the industry: convergence, connecting with consumers and the need to build trust. 'Convergence 3.0' is redefining the competitive playing field. Differing from earlier waves of convergence, it’s creating an ever-expanding group of “super competitors” and specialised, niche brands that are striving to secure the engagement and spending of increasingly demanding consumers.”
Globally, the Entertainment & Media industry is expected to grow at 4.4% CAGR in this period. This boost will see the industry’s global revenue reach US$2.4 trillion in 2022, up from US$1.9 trillion in 2017.
Growth in the Irish market lags behind the global forecast largely due to less protracted growth in digitally driven segments such as OTT (Over The Top) video (8.8% CAGR domestically compared to 10.1% globally) and video games and e-sports (5% CAGR v 7.3%). This is partially offset by higher domestic rates of growth in more traditional media forms such as books and music revenue in Ireland.
It is noteworthy that the global virtual reality (VR) market experienced a major breakthrough in 2017, with revenue growing by over 350% to US$3.9bn. We are now around two years into the general availability of a new wave of fully functional VR devices and services with these being in the early stages of being accepted by mainstream audiences.
While there is no data available yet on the penetration rates of this medium into the Irish market, there are clear first mover opportunities available to companies in this space. In markets such as the US, UK and China, VR has now emerged as a viable long-term platform for unique, immersive experiences, attracting serious investment from major media and technologies companies eager to seize a share of this fast-growing market.
As this wave of change plays out, the borders that once separated the entertainment and media, technology and telecom industries are dissolving. Large Internet access providers are expanding their business operations via integration with delivery platforms, while online giants are expanding their operations to include the provision of content. Traditional segment distinctions are blurring – between print and digital, video games and sports, wireless and fixed access, cable and online, social and traditional media.
In the process, business models are being reinvented so all companies can tap into new revenue streams and create relevance at scale. Some required capabilities include targeting fans and connecting more effectively with consumers to develop a membership mind-set. Amid these changes and ongoing advances in technology, the challenge to build and sustain consumer and public trust is growing more critical as the pace of change only accelerates.
Internet access continues to be the largest revenue stream within the Irish E&M segment, growing 38% to €1.46 billion by 2022. Ireland still has fixed broadband coverage gaps, penetration remains relatively low and services tend to be expensive by Western European standards. But the expansion of next-generation infrastructure and the improving economy are driving the take-up of high-speed fixed services and pushing revenue steadily upwards.
Network expansion and the launch of new packages and data bundles have contributed to rapid LTE (Long-Term Evolution i.e. a 4G mobile communications standard) take-up for all three mobile operators in the first three quarters of 2017. Ongoing migration to LTE and rising data usage should drive mobile Internet ARPU growth over the forecast period. According to ComReg, 4G smartphone data has increased at a rate of 56% per year since Q1 2015, unlike 3G which has remained relatively stable over the same period.
As Ireland’s economy improves, smaller declines from total print advertising revenue will help to reduce overall shrinkage in the next few years. While print circulation is set to drop at a rate of 5.7% over the period, digital circulation will grow at 10%, albeit it on a lower value base. Print advertising is also in decline at a rate of 7.5%, while digital advertising is forecast to grow by 4.3%.
Total Internet advertising revenue is set to rise at a 6.5% CAGR over the next five years to reach €581m in 2022, up from €424m in 2017, with digital advertising being cited as a top area for marketing spend in 2017 across all industries.
Mobile advertising will see particularly strong gains in Ireland. According to the Interactive Advertising Bureau (IAB), nearly one-quarter of smartphone users in Ireland spend over six hours a day on their phones, with a further 59% using their smartphone every 30 minutes.
According to the IAB, Irish Mobile Adspend represents over €1 for every €2 of total Digital AdSpend (which reached €491m in 2017). Mobile AdSpend reached €264m by end 2017, representing a growth rate of 14% over 2016.
As consumers spend more time browsing with their mobiles, advertisers will navigate their budgets towards mobile campaigns, driving growth and increasing mobile’s share of the total Internet advertising market.
Ireland’s video games market is expanding steadily, a trend set to continue over the next five years. While social/casual gaming revenue is expanding exponentially, the vast majority of Ireland’s video games revenue continues to come from traditional – that is, console and PC – games. Ireland is one of relatively few countries where social/casual gaming is not on track to overtake traditional gaming revenue during the forecast period.
Console gaming is at the core of the Irish video games market, and it alone makes up nearly half of all revenue. Sales of physical console games have held up relatively well in Ireland compared with regional markets but they finally slipped into decline in 2017. Improving Internet infrastructure and better online features in newer consoles are driving the digitisation of the market, trends which will continue thanks to new hardware releases such as the PS4 (the “Pro model”) and Nintendo’s new semi-portable model ‘Switch’.
The addition of 37,000 subscription TV households over the forecast period will represent growth at a 1.4% CAGR however this is offset by the 1.4% decline in public license fees over the period.
Despite OTT Video having the highest CAGR for Ireland (8.8%), the segment weighs relatively little vis-à-vis its value. OTT video revenue reached €69m in 2017 and is set to continue rising as viewership shifts from traditional TV programming to online video, particularly among younger demographics.
Growth at an 8.8% CAGR will produce OTT video revenue of €105m in 2022, when Subscription Video on Demand (SVOD) services will account for 90% of the total.
Irish magazines are predicting reasonable growth despite the global outlook which considers the industry to be decline. This Irish growth is due primarily to digital advertising in trade magazines (1.2% CAGR in Ireland versus -0.8% Globally).
Similarly, the book publishing industry is set to exceed the global growth rate (2.4% CAGR v 1.5% globally). Indeed, Ireland shows the highest CAGR of any country in Western Europe, with total books revenue expected to grow to €258m. In 2018, for the first time ever, books from Irish publishers will be accepted by one of the world’s most-prestigious literary awards, the Man Booker Prize. The publishing industry has also benefited from the decline in the value of Sterling following Brexit, which has made books cheaper.
Amy Ball concluded: “As business models and capabilities change, it’s clear that data and analytics will play a pivotal role in E&M. Today, many companies still lack the data and analytics capabilities they need to deliver content, advertising and other experiences to the right users at the right time and in the right context – although this is clearly a high-priority investment area for many. AI will have a pervasive impact on all types of companies involved in E&M.”
“To succeed in the future that’s taking shape, companies must revisit every aspect of what they do and how they do it. This means going ‘above and beyond’ in how they envision their business, generate revenues, create and organise their capabilities and build and retain trust. And given the pace and scale of change under way, speed is vital. For many companies, the models, assets, practices and capabilities that support their businesses today will simply not be enough in the future.”
Notes to the editor
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About the Global Entertainment & Media Outlook
PwC’s 19th annual edition of the Global Entertainment & Media Outlook is a comprehensive online source of global analysis for consumer and advertising spending. With like-for-like, five-year historical and five-year forecast data and commentary for 15 defined industry segments in 53 territories, the Outlook makes it easy to compare and contrast consumer and advertising spending across segments and territories. Find out more at www.pwc.com/outlook.
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