UK edition: Entertainment & Media Outlook 2019-2023

Getting personal: putting the me in Entertainment & Media

Five-year projections of consumer and advertising spending data across 14 segments and 53 territories

Entertainment & Media in the UK set for solid growth

In our 2019 Global Entertainment & Media (E&M) Outlook, we predict that total E&M revenues in the UK will rise at a compound annual growth rate (CAGR) of 3.5% to reach £80.5 billion in 2023.

The segments that will generate the most revenue will be internet advertising and internet access. Together, these contributed some 40% of total UK E&M revenue in 2018.

Virtual reality (VR), over-the-top (OTT) video and e-sports are predicted to be the fastest-growing segments in the UK media and entertainment industry over the next five years.

Internet Advertising

The UK remains the biggest internet advertising market in Europe, growing by 15% in 2018 to reach £13.3bn, accounting for 31% of total European revenue. Over the next five years, we project that internet advertising spend will continue to grow robustly at a 9.1% CAGR, driving revenue to £20.6bn in 2023.

The strength and maturity of internet advertising in the UK reflect factors including high levels of consumer connectivity, social media usage, digital platform penetration and mobile device adoption. In 2018, UK mobile internet advertising revenue overtook its wired equivalent for the first time, claiming 51.5% of spending—a share set to grow to 69.1% by 2023.

While the UK is widely regarded as one of the world’s most advanced programmatic internet advertising markets, recent regulatory changes have created a tougher environment for tracking and targeting ads. Over the next five years, video will become an ever more prominent element of the mobile ad display mix, and paid search—increasingly mobile-based—will continue to account for around half of all online ad spend in the UK.

Internet access

As broadband becomes increasingly accessible and affordable, UK spending on internet access will continue to grow strongly, rising at a 5% CAGR to reach £17.6bn in 2023. The UK currently ranks third in Western Europe in terms of internet access revenue, but is set to overtake France in 2022 to occupy second place behind Germany.

High-speed fixed and mobile internet penetration is projected to rise steadily, driven by improvements in coverage, with Average Revenue Per User (ARPU) rates benefiting from ‘more-for-more’ offers. Globally, mobile internet access revenue will grow faster than its fixed counterpart, with its share of total spending rising from 64% in 2018 to 70% in 2023. At the end of 2018, 3.1bn people—over 40% of the world's population—were subscribers to mobile internet access.

UK mobile operators have now started to launch 5G services, with plans to roll out fibre-to-the-premises (FTTP) in the foreseeable future. 5G and rising smartphone penetration will continue to drive the shift from fixed to mobile access. Also, OTT video will see continued growth through 2023 supported by increasing high-speed internet access.

Virtual Reality

The UK has the largest VR market in EMEA. And VR is predicted to be the UK’s fastest-growing E&M segment, with revenues growing at a 20% CAGR to reach £294m by 2023, from £118m in 2018. In line with global trends, VR gaming is the primary driver of VR revenue, and is projected to be worth £149m by 2023.

Sales of VR units in the UK are modest but growing, with 2 million units sold in 2018. This is expected to rise to 3.5 million in 2023, increasing at a 11.8% CAGR. The growth will be supported by the new stand-alone headsets such as the Oculus Go and HTC Vive Focus that began to appear in 2018.

To date, VR has enjoyed its strongest take-up in B2B applications such as workforce training. But now it is gaining traction in the consumer space, and 5G promises a further boost. VR technology is also being used increasingly outside the consumer sector, including in VR therapy treatments and surgical training in the NHS, and in manufacturing industries like aerospace and construction.

Over-the-top

Over-the-top (OTT) video revenue comprises consumer spending on video accessed via an over-the-top/streaming service. The UK remains the biggest OTT video market in Europe, with revenue projected to rise from £1.2bn in 2018 to £2bn in 2023, a 10.3% CAGR.

This strong growth—buoyed by a focus on international markets from major players like Netflix and Amazon—will see OTT video expand from 25% the size of UK TV subscription revenue in 2018 to 43.6% in 2023.

Among the sub-sectors of OTT video, UK subscription video on demand (SVOD) revenue will increase at an 11.4% CAGR to reach £1.3bn in 2023. As in many other Western markets, year-on-year SVOD growth will decelerate in the UK, from 15.2% in 2018 to 9.9% in 2023.

Transactional video on demand (TVOD) revenue, such as buying and renting films and box sets through services like Apple’s iTunes and Sky Store, accounts for a bigger share of OTT revenue in the UK (35% in 2018) than in most other markets. TVOD is expected to grow at a 8.2% CAGR to £647m in 2023.

Video games and esports

Video game and e-sports revenues in the UK are continuing to grow as the market transitions towards online/mobile gaming. Total UK spending on video games and esports was £4.2bn in 2018, a rise of 7.2% year-on-year. It will continue to grow at a CAGR of 5.3% to £5.4bn in 2023.

Video Games

Total UK video games revenue in 2018 was £4.2bn, a figure projected to grow at a 5.2% CAGR to £5.3bn in 2023. These figures make the UK Europe’s second-largest market behind Germany. The next few years will be characterised by the launch of new console hardware, new game streaming services, rising uptake of 4K UHD gaming, and developments in VR and AR.

E-sports

E-sports—while still relatively small—has been the fastest growing segment in this sector, with revenue of £22m in 2018, up from just £4m in 2014. Over the five years to 2023, revenue is projected to keep rising at a CAGR of 20.1%. The UK’s ability to host high-profile events such as ESL One in Birmingham reflects a growing core audience for e-sports.

Cinema

In 2018, cinema admissions in UK rose to 176 million—the highest since 1970—driving box office revenues up by 4.4%. This performance was especially notable as it was achieved in a FIFA World Cup year, and at a time when other European cinema markets were struggling. UK admissions are predicted to keep rising, reaching 184.6 million by 2023.

The UK’s cinemas are now fully digitised. By the end of 2018 the country had 4,330 digital screens, up from 4,130 in 2016. However there are still wide disparities in ticket prices. Prime sites in London’s West End charge over £40 for their most expensive seats, while the same films that can be seen for under £5 at other venues and at non-peak times.

Steady increases in UK cinema revenue are expected over the next five years, with a 2.6% CAGR projected to take the total to £1.8bn by 2023. Some 85% of this revenue is driven by the box office, which will grow at a 2.5% CAGR.

UK Traditional TV and home video

The UK’s subscription TV market was the largest in Western Europe until 2018, when it was overtaken by Germany. This was primarily due to cord-cutting in the UK, with many households moving away from traditional TV and supplementing more flexible “skinny” bundles with OTT video streaming services like Netflix and Amazon Prime Video.

Largely as a result, traditional TV and home video revenue in the UK now has negative growth expectations for the first time, and is expected to shrink at 1.9% compounded annually until 2023. Even satellite TV—which continued to dominate UK pay-TV in 2018, with 9.2 million subscriber households—will see subscriptions decline, falling at 0.5% compounded annually to 8.9 million in 2023.

Meanwhile, the UK’s cable TV market will continue to expand, albeit modestly, with subscriptions rising at a 0.1% CAGR to 3.9m cable households in 2023. The emphasis among cable providers will be on securing rights to attractive content and offering premium services like HD and 4K Ultra HD channels, as they seek to counter the threat from the OTT players.

 

 

 

 

Within this overall growth, five themes will come to the fore over the forecast period.

The ongoing move towards increasingly tailored and personalised media brings major implications for every E&M business across every segment. Whether the issue at hand involves business and revenue models, emerging technologies, or trust and regulation , companies must keep on top of current and future developments — and be sufficiently agile, ready to respond to them proactively and at pace.

Our data, analysis and perspectives offer insights into how E&M companies are adapting, investing and innovating to meet the need to get personal across five themes:

Personal space: shifting behaviours will reshape the E&M landscape

UK consumers are embracing the expanding opportunities to enjoy media experiences uniquely personalised to their own preferences, contexts, and schedules. To meet this need, companies are tailoring their offerings and business models to revolve around those personal preferences, using data and usage patterns to pitch their products not at audiences of millions, but at millions of individuals.

The result is an emerging world of media that’s more personal than ever before: constructed by individuals for their own enjoyment and gratification, and accessed through personal devices. It’s also an increasingly mobile world—soon to be augmented by superfast 5G networks—where empowered UK consumers are moving from passive to active consumption, controlling their own media consumption via an expanding range of smart devices and over-the-top (OTT) streaming video and music services. Total OTT revenues in the UK will rise at a CAGR of [10.3%] between 2018 and 2023, to reach [£2bn].

Trust and regulation will remain pivotal, as personal data hygiene becomes key

With consumers moving to the centre of their own world of media experiences, their personal data—from the keywords they search to music they stream to the products they buy—is taking a central role. In the digitised E&M world, billions of small transactions and activities can be captured and tracked as a matter of routine. So, as we consume content, the companies providing it can learn what we like and then offer it to us. All of this means maintaining personal data hygiene is becoming even more important to the smooth operation and wellbeing of the E&M ecosystem. For companies, this imperative goes beyond regulatory compliance—which is a base requirement—and extends to building trust by behaving ethically, transparently and responsibly with customers’ data.

Technology innovation - as E&M truly enters the AI age

Smart use of data algorithms and artificial intelligence (AI) will increasingly permeate entertainment & media, as companies use AI’s understanding of people’s individual tastes and consumption to really zero in on what they want. As a result, content services will know what people want before they do, and enable them to discover the content they find most compelling without even having to look for it. And when people do need to search, the rising availability of voice search capabilities will make the experience ever more convenient and intuitive. The combination of AI with super-fast 5G communications will be especially powerful, helping to fuel rapid growth in segments such as virtual reality (VR), which is set to finally reach critical mass. VR revenues in the UK are projected to grow at a CAGR of 20% between 2018 and 2023, powered by the next generation of portable standalone VR headsets.

Business model innovation will support the pivot to personal

As media and e-commerce experiences become more personal, gratification for consumers is becoming more instant and immediate. In response, content creators and distributors are devising new ways to appeal to consumers as individuals, and marketers are seeking out ways to meet consumers at the point of consumption and point them instantaneously toward purchase. Examples include the rise of shoppable online advertising—often promoted by online “influencers”—and voice commerce, bolstered by rapid take-up of smart speakers. Looking ahead, the next leap forward in personalisation of OTT services could be integration with ecommerce. There’s long been an aspiration that a consumer would be able to watch a movie, and buy the watch that the actor is wearing there and then. Today’s technologies now make this feasible.

New approaches will emerge for framing and developing offerings

How do companies envision, develop and sell media products? With the advance to personalised, active E&M experiences, and the corresponding rapid changes in how people consume and pay for content services, traditional approaches are being rapidly rethought and superseded. One effect is a marked shift towards paid-for E&M offerings with unlimited usage—the “all-you-can-eat” model—not just in the form of online subscriptions and paywalls, but also in physical media, such as cinema bundles covering multiple movie visits. As companies across the E&M industry move to respond to new, more active consumption habits, some segments will ignite especially strong growth: take eSports and video games, whose revenue will rise at a buoyant [5.3%] CAGR in the UK over the five-year forecast period—with video games buoyed up by innovations in software, consoles and digital platforms, together with the rising potential for subscription streaming services like Google Stadia.

Our Global findings: putting the me in E&M

At a global level, PwC’s Global Entertainment & Media Outlook 2019–2023 paints a picture of a world of increasingly personalized, active E&M experiences. These new dynamics bring profound implications for companies across all segments, platforms and content types. But, as the Outlook shows, local factors mean the ultimate impacts can vary between different geographical markets.

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Contact us

Mark Maitland

Media and Entertainment Leader, PwC United Kingdom

Tel: +44 (0)7788 870900

Daniel Bunyan

Director, PwC United Kingdom

Tel: +44 (0)7734 958765

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