UK entertainment and media market to be worth £64bn by 2018
According to PwC’s latest Global Entertainment & Media Outlook 2014-2018, the UK entertainment and media (E&M) market is expected to grow by 3.1% compounded annually (CAGR) from 2013 – 2018 to a value of £64bn in 2018. In 2013, the UK had the second largest E&M market in EMEA at £58.6bn, behind Germany, and it will maintain this position to 2018.
Total E&M spend on digital (excluding spend on Internet access) is forecast to grow at a 10.9% compound annual growth rate between 2013 and 2018 and account for 34% of the UK’s entertainment and media spending growth – more than one in every three pounds.
The fastest growing areas will be internet advertising, internet access, out of home advertising, video games and TV advertising.
Phil Stokes, entertainment and media lead partner at PwC, said: “This growth is being driven by the internet and by consumers’ love of new technology, particularly mobile technology and applications powered by analytics and the cloud; they demand excellence in customer experience – a social experience as well as a personal one.”
There is limited scope for growth in the UK’s fixed broadband market, because of its maturity. The number of subscribers is expected to increase at a compound annual growth rate of 2.3% to reach 25.4m by 2018, equal to 84.6% of households.
The UK mobile internet market is very competitive. The ongoing competition for 4G customers means that the number of mobile internet subscribers will grow at a compound annual growth rate of 8.5% to nearly 58m in 2018, equal to 88.8% of the UK’s population. Mobile access revenue in the UK will overtake fixed broadband access revenue in 2016.
The number of apps downloaded in the UK every year will increase by 21.6% compound annually from 5.8bn in 2013 to 15.5bn in 2018, aided by the increasing availability of affordable smartphones and tablets.
50% of the UK population will own a tablet by 2018, an increase from 14% of the population in 2013. 73% of the UK population will own a smartphone in 2018; this is up from 60% in 2013.
The UK is Europe’s largest internet advertising market and became the world’s third highest grossing internet advertising market in 2012, overtaking Japan to be behind only the US and China. The UK’s internet advertising market was worth £6.1bn in 2013 and will increase to £9.6bn in 2018, a compound annual growth rate of 9.3%.
Phil continued: “London is widely considered the digital advertising capital of Europe, and linguistic similarities mean that the UK tends to be the first port of call for US publishers and ad tech players entering the European market. All of this adds up to a vibrant, and still growing, internet advertising sector.”
Paid search still dominates the sector in the UK and will continue to do so, with revenues set to reach over £4bn in 2018, a compound annual growth rate of 7.5%.
Phil said: “The fact that the English language is the most used online language is also likely to be a factor in the strength of the UK’s paid search internet advertising market.”
Video internet advertising is the fastest growing, with revenue nearly tripling between 2013 and 2018, to reach an expected £717m, a compound annual growth rate of 23.9%. But this will still only make it the fifth-largest segment of internet advertising, with just 7% of total revenue.
Internet advertising earned more from mobile than from classifieds for the first time in 2013, and will also overtake desktop display in 2014. From just 1% of the total internet advertising revenue in 2009, mobile advertising is forecast to account for 23% in 2018, when it will pull in £2.2bn, making it comfortably the UK’s number two internet advertising category.
Phil added: “Mobile internet advertising revenue is expected to outstrip consumer magazine advertising revenue very rapidly, reaching £2.2bn in 2018, compared with £750m for magazines. Social networks and messaging services, which themselves are intrinsically mobile, will contribute much of this growth in the future.”
Out of home advertising (OOH)
The UK’s OOH advertising market will grow by 5.2% compound annually to reach £1.3bn in 2018 and will overtake France next year to become Europe’s largest single OOH advertising market and growing faster than the global average. Digital OOH will overtake physical OOH advertising in 2014.
The market for video games in the UK is expected to reach £4.1bn in 2018, growing by a compound average growth rate of 5.1%.
By 2018, total console games revenue will be £2.1bn, 51% of total video games revenue, having grown at a compound annual growth rate of 4.3%.
Digital console games will overtake online games revenue in 2014, and mobile games revenue in 2017.
PC games revenue is forecast to fall from £227m in 2013 to £211m in 2018, a compound annual growth rate of -1.4%.
Online gaming will continue to grow in the UK, at a compound annual growth rate of 5.7%, reaching revenues of £719m by 2018, up from £545m in 2013.
UK’s mobile games revenue has seen continued and uninterrupted growth over the past few years. In 2013, mobile games revenue was £613m, and is expected to increase at a compound annual growth rate of 6.9% to reach £857m in 2018.
TV advertising in the UK was worth £3.7bn in 2013. Revenues are forecast to grow by a compound annual growth rate of 3.5% to reach £4.3bn in 2018.
The filmed entertainment sector in the UK will be worth £4.6bn by 2018, up from £3.9bn in 2013, a compound annual growth rate of 3.4%. The UK accounted for 7% of total global filmed entertainment revenues in 2013.
After two decades of generally strong and steady rises, UK box office revenue rose by 3.1% in 2013 to generate revenues of £1.2bn and will increase at a compound annual growth rate of 2.8% to reach revenues of £1.4bn in 2018.
The UK is one of the most receptive markets in the world for e-books. In 2013, e-books accounted for 18% of all book revenue, across consumer, educational and professional books and this proportion will rise to 41% by 2018. Consumer e-books are forecast to overtake print copies in 2018.
PwC’s Outlook for the E&M sector finds that digital success is not just about technology, it’s about applying a digital mind-set to build the right behaviours.
Phil concluded: “Forget audience fragmentation. From a consumer’s angle, it’s about ubiquity – a consistent feel across multiple devices. Building this relationship offers a global opportunity as the economy moves from the delivery of products and services to the delivery of outcomes and experiences.
“The entertainment and media industry is at the forefront of the digital revolution, because so many of its products and services can already be delivered in digital form. It may not be long before digital revenues from print, film, publishing and music overtake physical revenues in some markets. Media companies don’t need a digital strategy anymore; they need a business strategy, and a business model, which is fit for the digital age.”