The FINANCIAL — The growing range of video streaming services available to viewers; demand for internet access and business spend on internet advertising will drive the UK’s entertainment and media sector to grow by £10bn over the next five years. According to PwC’s latest Global Entertainment & Media (E&M) Outlook 2019-2023 the UK sector will be worth £80bn by 2023, up from the £70bn projected for this year.
Overall, the UK’s E&M sector will grow at a pace of 3.5% per annum and will only be second to Germany in total revenue (within Western Europe).
Mark Maitland, UK head of Entertainment and Media at PwC, said:
“The industry is underpinned by consumer demand for new, high quality content, that is accessible and highly personalisable. Innovation from key industry players (in terms of platforms, technology and business models) continues to stimulate demand. The UK remains a leading market in terms of talent, reputation and innovation, and has seen significant levels of financial investment as a result. All of these factors combined mean that we expect the UK entertainment and media market to continue to grow ahead of the wider economy, at 3.5% p.a. over the next five years.”
Biggest market share
Internet advertising is forecast to account for a quarter of all E&M revenue by 2023, generating £20bn in revenue up from £15bn this year, growing at a 9% CAGR. Mobile will continue to drive this growth and by the end of 2023, revenue from mobile advertising will be more than double (£14bn) that of traditional internet advertising (£6.3bn) and account for nearly three quarters of all internet advertising.
Consumers in the UK are forecast to consume more internet data than any country in Western Europe over the next four years – over 173bn megabytes. It is no surprise then that spend on internet data access will rise from the £14.7bn forecast this year to £17.6bn by 2023. Mobile again dominates spend but fixed broadband is still holding up and is forecast to grow at 2% CAGR.
Mark Maitland commented:
“The UK’s internet advertising market remains the largest in Western Europe and will grow to represent almost a third of the total Western European market in the next four years. Our internet advertising market is already mature owing to high levels of consumer connectivity, the growing centrality of smartphones and an apps-based environment has driven mobile ad spend to be greater than total desktop ad spend in the UK
“The UK telecoms market is one of the largest in Western Europe, with intense competition in both the mobile and fixed sectors. Following the award of the first UK 5G spectrum in April last year operators are expected to launch services this year which will increase speeds for smartphone users. Across all devices video is the fastest-growing content type, increasing at a 22% CAGR. Video accounts for 84% of data consumption across devices in 2018, and this is expected to increase to 89% in 2023.”
Fastest growing segments
Virtual reality leads as the fastest growing sector for the third year running, with 20% CAGR forecast over the next four years. While VR gaming leads the way in revenue, VR video is the fastest growing sub-sector and will contribute to the industry as a whole being worth £294m by 2023.
Over-the-top (OTT) video is also forecast for double-digit growth (10.3%), with demand for video streaming services set to continue upwards. Leading this growth is subscription video on demand which is set to grow from over £900m this year to over £1.4bn in the next five years.
Mark Maitland commented:
“The UK has the largest VR market in EMEA, and VR is predicted to be the fastest-growing segment in the UK media and entertainment industry over the next five years. Sales of VR units in the UK are currently modest but growing, with 2m units in total sold in 2018. This is expected to rise to 3.5m units in 2023. Venue-based VR is growing in the UK, offering an alternative for those who do not want to purchase headsets.
“OTT video revenue in the UK will rise almost £1bn over the course of the forecast period and with double-digit growth projected year-on-year will keep the UK comfortably ahead of other Western European markets. The UK’s market is the fifth largest globally behind the US, China, Japan and Canada. Subscription video on demand continues to grow but year-on-year growth will decelerate by 2023 signifying growth may have peaked.”
Sub-sector Trends
Podcast advertising to grow at a double-digit rate of 34% CAGR to be worth £66m by 2023
Digital music streaming will grow at over just over 13% CAGR and revenue will hit over £1.5bn by 2023
E-Sports is forecast to grow at over 20% CAGR over the next five years reaching £55m by 2023
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