PwC annual outlook says media landscape showing ‘green shoots’

The Australian entertainment and media landscape has been dramatically altered by the pandemic, with a seismic shift in consumer behaviour.

The five-year forecast for Streaming Video on Demand Services is for the industry to grow more than 20 per cent, with the likes of Kayo, Binge and Netflix having significantly boosted subscriber numbers last year. Picture: David Caird

The Australian entertainment and media landscape has been dramatically altered by the pandemic, with the disruption throughout 2020 leading to a seismic shift in consumer behaviour, forcing various platforms to rethink how to remain competitive in the market.

PwC’s annual Australian Entertainment and Media Outlook, to be released on Monday, finds that while extended lockdowns last year gave audiences the time to sample the greater range of options available to them – namely, a surge in subscription video streaming services, heightened offerings from digital news services, and an explosion in podcasts – the industry’s advertising revenues experienced their sharpest contraction in the 20-year history of the report.

But the revenue slumps were not consistent across the board – among the “green shoots” were digital news subscriptions, which were up 23.5 per cent in 2020.

The overall value of the entertainment and media industry in Australia fell by 3.6 per cent in 2020, although some sectors were far harder hit than others, while others actually increased their share of the market.

“The economic disruption was such that even as some sectors saw an increase in readers (digital news) or audience (free-to-air TV), the revenue was hard to come by for much of the calendar year, until a late surge in November and December as the country emerged out of lockdown,” the PwC report says.

The overall value of the entertainment and media industry in Australia fell by 3.6 per cent in 2020, although some sectors were far harder hit than others. Picture: Matt Taylor

“Momentum was strong going into the first quarter of the 2021 calendar year, although the shadow of Covid-19 had by no means been lifted from the entertainment and media sector.”

Overall, total advertising spend across the industry softened by 8 per cent to $15.4bn in 2020, and consumer spend on the industry dropped by 1.9 per cent to $42.5bn, according to the report.

The hardest hit sectors were cinema, with a 41 per cent fall in revenue from $2.2bn to $1.3bn, and the Out-of-Home advertising sector, which plummeted 39 per cent from $1.3bn to $772m.

The total free-to-air advertising market declined by 9.8 per cent in 2020 due to a significant contraction in marketing budgets, the report found.

Within this number, linear TV revenue declined 12.1 per cent to $3.1bn. In contrast, digital news subscriptions were up 23.5 per cent in 2020, while Broadcast Video on Demand (BVOD) – which includes 7Plus, 9Now and 10 Play – grew 38.8 per cent, albeit off a low base.

 

The five-year forecast for Streaming Video on Demand Services (SVOD) – is for the industry to grow more than 20 per cent, with the likes of Kayo, Binge and Netflix having significantly boosted subscriber numbers last year.

For newspapers, while audiences – and digital subscriptions – increased, advertising revenues fell by 5.5 per cent.

“The value of news media as a reliable and trusted source of information and insight was heightened in 2020,” the report says.

“Notwithstanding an increase in audience during the height of the pandemic, news media also felt the impact of the market-wide downturn on advertising revenue as readers increased their use of digital services to access their news.”

Justin Papps, PwC partner and editor of the report, told The Australian that despite the challenges confronted by the industry in 2020, some valuable lessons were learned, and there are “green shoots” across the media and landscape in 2021, notwithstanding the renewed lockdowns in NSW and Victoria.

The hardest hit sectors were cinema, with a 41 per cent fall in revenue from $2.2bn to $1.3bn, and the Out-of-Home advertising sector, which plummeted 39 per cent from $1.3bn to $772m. Picture: NCA NewsWire

“Consumers are very much in the box seat – as a result of Covid, they’ve realised the range of choices available to them,” he said.

“But content is still king. The thing with SVOD is that people can sign up and cancel quite quickly so the challenge for SVOD providers is how to keep people on their platform for longer.

“Those SVOD providers that have good pipelines through studios have a strong advantage, although the push to live sport – which was traditionally the domain of linear television – is adding competitiveness in the sector.”

Mr Papps said the sector will need to adapt to the changed habits of consumers that were developed during lockdowns.

“Covid brought forward a range of new consumer behaviours. Which of those behaviours stick and which were transient is what will define the next 12 months,” Mr Papps said.

“There is no part of this market that hasn’t tried something different in the past 12 months – not just to survive but to thrive in an environment where consumers are taking more control and they (media platforms) have had to fight harder for attention.”