Increased Internet access will generate more consumer spend than any other media product or service in the next five years in the South African entertainment and media industry, according to a report issued by PwC.
South Africa’s entertainment and media market is expected to grow by 10,2% compounded annually (CAGR) from 2014 – 2018 to a value of R190,4-billion. By far the largest segment will be the Internet. Combined revenues from Internet access and Internet advertising will account for an estimated R71,6-billion in 2018, accounting for 37,6% of total revenues, according to PwC’s South African Entertainment and Media Outlook: 2014-2018.
Vicki Myburgh, Entertainment & Media Industries Leader for PwC South Africa, says: “Growth in the South African entertainment and media industry is largely being driven by the Internet and by consumers’ love of new technology, in particular mobile technology, such as smartphones and tablets, as well as applications powered by data analytics and cloud services. Technology is increasingly being driven by consumers’ needs and expectations.”
The fifth edition of PwC’s ‘South African Entertainment and Media Outlook’ presents annual historical data for 2009-2013 and provides annual forecasts for 2014-2018 in 12 entertainment and media segments.
The Outlook includes detailed information for South Africa, Nigeria and Kenya in each of the 12 industry segments.
Aside from the Internet, The Outlook predicts that the fastest growth will be seen in video games and radio, which will enjoy growth rates at 9% and 8,2% respectively. “Video games has made the greatest transition to digital, largely due to the popularity of mobile gaming, but also because of the increased potential for digital distribution of console games,” adds Myburgh. The study projects that 27% of console revenues are forecast to be digital in 2018.
The slowest growing segment in the E&M industry will be the music industry, according to the survey. South Africa’s music market was worth R2,13-billion in 2013, down from the 2009 figure of R2,41-billion. Annual revenue is forecast to grow marginally by a CAGR of 0,5% to remain relatively flat at R2,18-billion in 2018.
“Continued growth in broadband and smartphone penetration is accelerating the shift to digital music. Digital music is cheaper, offers instant access and is more portable – these are all major advantages,” adds Myburgh.
Television is the second-largest segment, with combined revenues from TV subscriptions and advertising projected to reach R39,6-billion in 2018. A growing middle class with more disposable income will lead to a rise in pay-TV households. This, alongside regular increases in the licence fee and the perennial popularity of television as a mass medium for advertisers will account for growth.
The study shows that advertising accounted for 38% of revenue in the E&M industry in 2013, although this share is expected to fall to 33% in 2018, largely due to internet access increasing its market share significantly over the same period.
Despite its share decreasing, revenue generated through advertising will still increase by R18-billion between 2013 and 2018, with the fastest-growing segment – Internet advertising – showing a double-digit CAGR as a result of the substantial increase in Internet access over the period.
The strongest drivers of growth in the sports segment will come from sponsorships and media rights. South Africa will see total sports revenues of an estimated R20,5-billion in 2018, up from R14,8-billion, and rising at a CAGR of 6,7%. Gate revenues are predicted to reach R5,1-billion in 2018, up from R4,3-billion in 2013. However, the 2018 figure will be well short of the exceptional year of 2010 when South Africa hosted the FIFA World Cup.
End-user spending, consisting of spending by consumers and other end-users on products and services produced by the entertainment and media industry, will rise at 12% CAGR over the next five years from R72,8-billion in 2013 to reach an estimated R128,1-billion. This will largely be driven by 2,7% increase in consumer spend on Internet access. Excluding spend on Internet access, consumer growth would only come in at 4,6% CAGR to 2018.
Although there is a significant change in the way consumers spend their money, digital revenues in other segments remain relatively small. Nevertheless digital is on the rise both in terms of consumers and advertising revenues. Digital consumer revenue is expected to overtake non-digital consumer revenue in 2016 and account for 55,3% of the market in 2018, assisted by substantial increases in the number of mobile Internet subscribers.
The study also shows that revenue in the film industry is expected to grow by a 7,1% CAGR over the next five years to reach R3,4 billion in 2018. Electronic home video is also catching on rapidly in the film segment. Myburgh says:
“Consumers are gradually shifting their viewing patterns in filmed entertainment, spurred on by a reduction in bricks and mortar stores stocking physical video.”
Far less digital take-up is being seen in the magazine, newspaper and book segments, with digital revenues for each forecast to be under 7% of the total, even in 2018. Although consumers may be browsing newspapers and magazine-style websites online, monetising these consumers presents much more difficulty for E&M businesses.