PwC: Media Companies Must Focus on User Experience

In its latest five-year outlook, PwC states that companies angling for a bigger slice of global entertainment and media revenues—set to rise from $1.8 trillion in 2016 to $2.2 trillion in 2021—must “focus more intensely” on user experiences.

PwC’s 18th annual Global Entertainment and Media Outlook 2017-2021 says that revenues will rise at a compound annual growth rate of 4.2 percent in the period, down from the 4.4 percent forecast last year. Of the $2.2 trillion total, the U.S. will account for $759 billion, with a CAGR of 3.6 percent.

PwC says that while the sector’s revenues are growing, “an industry plateau” is approaching as traditional, mature segments decline, growth slows in digital and the next wave, including eSports and VR, is just beginning to pick up speed.

“E&M companies are operating amidst a wave of geopolitical turbulence, regulatory changes and technological disruption,” said Mark McCaffrey, PwC’s U.S. Technology, Media, and Telecommunications Leader.  “Even if the macro context is set aside, these companies are facing significant pressures on growth. In order to thrive in the marketplace, PwC suggests that these companies understand and develop sustainable relationships with consumers to advance their UX [user experience]. Pursuing a growth and investment strategy to enhance and differentiate the UX will help them flourish in an era where a changing value chain is slowing top-line growth from the traditional revenue streams that have nourished the E&M industry to date. Essentially, we’ve entered The Age of the Consumer. It’s no longer sufficient to be ‘consumer-centric,’ one must be ‘consumer-obsessed.’”

The areas with the biggest potential to improve user experiences are AR and VR, AI, Internet of Things (IoT), data analytics, cloud, 3D printing, access rather than ownership, and cybersecurity.

“The next era of differentiation in E&M is being defined and propelled by consumers’ increased demand for live, immersive, sharable experiences,” said Deborah Bothun, PwC’s Global Entertainment & Media Leader. “Consumers want to get closer, more engaged and better connected with the stories they love—both in the physical and digital worlds. At the same time, companies can start to empower those experiences through a number of emerging technologies. Perhaps big data and artificial intelligence will create the most dramatic change, redefining how the industry can connect with all stakeholders and drive growth. We’re already seeing a number of ways that AI is being used to personalize, customize and curate entertainment content and experiences at scale.”

In terms of VR, PwC says that 68 million headsets will be in use in the U.S. by 2021, with a CAGR of 69.2 percent. “VR truly started to reach consumers in 2016 and has no legacy issues or false starts to look back on,” PwC said. “The downside is a highly immature market with underdeveloped business models, flaky hardware, and lots of experimental or low-quality content. 2017 should at least see major advances in “inside out” movement tracking and lower cost headsets. It’s worth noting VR’s close relationship with the gaming market, yet many news and content organizations are pinning their hopes on VR to reinvigorate programming and recapture audiences lost to the internet.”

The eSports market is forecast to reach $299 million in 2021, reflecting a 22.6 percent CAGR.

Internet video is expected to have a 9.6 percent CAGR in the U.S., reaching $18.8 billion in revenues in 2021. Almost 75 percent of this will be from SVOD. Traditional TV and home video revenues, meanwhile, are expected to drop slightly from $109 billion in 2016 to $105 billion in 2021. TV advertising revenue is expected to grow from $70.6 billion in 2016 to $75.2 billion in 2021.