Positive trajectory in sight for Entertainment and Media industry – PwC

The Entertainment and Media (E&M) industry is a considerable economic driver in many African countries, and just like the rest of the world.

However, according to PwC’s latest analysis of the industry’s performance in key African economies, a more positive trajectory is finally in sight. 

This year, the focus of the Africa Entertainment and Media Outlook 2022-2026 report is on the fault lines.

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The report assesses evolving consumer behaviours — and the advertising spend that follows those behaviours. As business models shift to meet consumers where they spend their time (and money), several fault lines are opening up. 

The year before

In 2021, South Africa, Nigeria and Kenya saw strong growth in entertainment and media revenue. Industries that were more severely impacted in 2020 (during Covid-19), such as cinema, live music and B2B trade shows, made strong comebacks, although revenues remained below pre-pandemic levels.

Segments such as video games and OTT (streaming TV) video rose to new heights after thriving under lockdown conditions, while other sectors proved to be largely ‘pandemic-proof’, with podcast advertising, albeit off a low base, showing resilient revenue growth of 30.4% in 2020 in South Africa, and 41.8% in Nigeria.

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Alinah Motaung, PwC Africa Entertainment and Media Leader, says what is clear from PwC’s latest report is that the pandemic accelerated changes in consumer behaviour and digital adoption in ways that will affect future growth trajectories. 

“Some of the sectors that saw immense gains during Covid-19 might not be able to sustain that growth, while others are set to continue to build from their higher bases. Some formerly niche sectors, such as gaming, will barrel their way into prominence, as other formerly dominant sectors such as traditional TV, newspapers and consumer magazines are at risk of seeing their positions erode.”

Advertising, internet connectivity and consumption

Advertising, which was harder hit by the pandemic, experienced the largest rebound in 2021. 

Elenor Jensen, PwC South Africa Entertainment and Media Partner, said: “From an advertising perspective, it is the internet advertising segment that we expect to see the largest gains in advertising revenue terms across the five-year forecast period to 2026. This is a trend seen across South Africa, Nigeria, Kenya, and at a global level, and is due to consumers and advertisers prioritising digital.”

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The report also highlights the continued rapid growth of data consumption globally, and African markets are no exception, with both South Africa and Nigeria seeing faster growth in 2021 than the global average. Mobile phones are the most popular format globally and across Africa for data consumption, ahead of the ‘portable devices’ category, which includes laptops and tablets and ‘other devices’ category, which counts data consumed via devices such as smart TVs and games consoles.

Key highlights in the report include:

• South Africa’s E&M market exceeded pre-COVID levels (2019) in 2021, with a total industry spend of R163bn (15.4% annual growth).

• Annual growth rates for the E&M market in Nigeria remain below pre-COVID levels, but a significant recovery is expected over the coming years: E&M revenue in Nigeria is expected to more than double by 2026.

• Kenya has seen continued growth since 2017, with E&M revenue reaching new heights in 2021 (12.6% annual growth rate).
  
• Cinema’s post-COVID-19 recovery is well underway, with box office revenue in South Africa set to surpass 2019 levels in 2023, when it will hit R1.3bn.

• In Nigeria, music streaming is set to be the fastest-rising revenue component across the country’s music market by 2026. Over the next five years, digital music streaming revenue will increase at a 23.7% CAGR.
  
• 79.7% of E&M revenue gained in South Africa through to 2026 is expected from internet advertising and internet access.

• OTT video streaming revenue is set to rise rapidly over the next five years, with revenue growth to 2026 expected to outpace increases in TV subscription revenue across all three markets. But this is from a relatively small base, meaning that revenue itself will remain comparatively low.

The next new thing

Looking ahead, PwC expects future E&M growth to be seen in the development of the metaverse and the use of non-fungible tokens (NFTs). Meta stated that the metaverse could contribute around US$40bn to the economies of Sub-Saharan markets like Nigeria and Kenya. In South Africa, more than 16% of consumers have participated in a ‘virtual world’ in the last 12 months. Africarare’s Ubuntuland, Africa’s first metaverse, launched in 2021. 

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Motaung says the E&M industry will strive to maintain its balance in a landscape riven by fault lines and fractures. “Despite this, the overall growth path is both clear and strong. The vast E&M complex is growing more rapidly than the global economy as a whole, and with each passing year, more people are spending more of their time, attention and money on the complex and increasingly immersive E&M experiences that are available to them. In essence, the industry is becoming more digital, more mobile, more pitched at media that attract the young, more evenly distributed around the globe and more dependent on advertising in all its forms.”