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Entertainment & media outlook: an African perspective2018–2022

PlayListenWatchReadAccess

Internet accessInternet access BooksBooks CinemaCinema MusicMusic eSportseSports

B2BB2B

MagazinesMagazines

NewspapersNewspapers

OOHOOH

Television and videoTelevision and video RadioRadio Video gamesVideo games

Virtual realityVirtual reality

Consumer/end-user & advertising spending

5 year historic & 5 year forecast data

5 Countries 14 segments


Data consumption

Data consumption

E&M Outlook, 2018 - 2022 An African perspective

PodcastApps

PwC

Global Entertainment & Media Outlook

3

Perspectives: 2018 Outlook report summaryTrending now: convergence, connections and trust


So what’s trending now? Convergence, connections and trust

4

Perspectives report

• The media system is experiencing a third wave of convergence. Call it Convergence 3.0. Companies that hail from different starting points are aiming at business models that revolve around comprehensive direct-to-consumer relationships

• As they transform, E&M players are building up and leveraging their connections with users, partners and other stakeholders to develop new revenue streams

• The growing power of technology and importance of data is pushing trust to an even more central focus. Strong capabilities to build trust with users, improve value exchange and drive transparency while ensuring safeguards and protection are vital differentiators for E&M businesses

Global Entertainment & Media Outlook perspectives



Convergence 3.0: Strategic efforts from participants of every size and geography give rise to supercompetitors

Perspectives report

Media convergence

Access convergence

Business model convergence

Geographic convergence

• Examples of supercompetitors: Alibaba, Amazon, Apple, Disney, Facebook, Google, Tencent, etc.

• A handful of global players that converge towards similar business models will….

• …unite content, commerce, advertising, communications and deep financial resources under a single corporate roof

• Each will try to secure exclusive control of every aspect of its own customer relationships, consumption and activity

Four types of convergence Convergence gives rise to supercompetitors

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Trust: Trust will be a vital determinant of the sector’s ability to forge connections and succeed in an age of convergence

Perspectives report

Is your content trustworthy?

Advertisers are raising questions about the quality, safety and appropriateness of the content they advertise against

Is your audience who you say it is?

Media and academic reports have suggested that many social media accounts are bots or have misrepresentative information

Are you taking proper care of the data?

E&M companies are assuming more responsibility for protecting customer information- what they like, look at, their interests, profiles, financial information, etc.

Are your investments paying off?

Direct measurement of audience engagement – whether an agency is delivering the promised audience to a client – has not been sufficiently answered

Is your company good for society?

The sheer size, reach and utility of today's media platforms cause them to be evaluated on their contributions to society

Five vital dimensions of trust

PwC


7

Overview: E&M summary and macro trends


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The mobile story continues…

E&M summary and macro trends

6.5% 11.6%21.5% 14.2% 18.3%CAGR

Mobile Internet

penetration

R177bn$9.9bn

$2.9bn

$1.5bn$1.2bn


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Looking across territories, there are relatively few markets that are both large and fast growingQuadrant of total E&M revenue (excluding Internet access)


The effect of Internet access revenue is more apparent in the fastest growing E&M territories

• India and Indonesia are the fastest growing markets

• No market in Western Europe or North America will exceed 3.0% CAGR growth through 2022

• The distribution of markets is indicative of the increasing difficulty of finding lucrative investment opportunities in the maturing global media market

• The challenge in emerging markets remains monetizing the content that the access is delivering

Key takeaways

0% 2% 4% 6% 8% 10% 12%

0

1

10

100

1,000 595

35

9

75

3

2

23

8

1

8

2

1

8

31

17

27

244

42

19

41

3

0 0

CAGR 2017-22 (%)

Tota

l E&

M r

evenue 2

022 (

US

$bn

)


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Finally, music and box office revenue are examples of the dizzying array of divergences at the segment and territory levels


• Recorded music is projected to rise at a robust 6.1% CAGR globally and streaming at 18.2% CAGR, but three of its sub-component will see significant declines

• Overall growth is driven by significant increase in streaming revenue

• Global box office revenue rose 4.3% year-on-year in 2017, but fell in several markets

• South Africa managed to reflect marginal growth in 2017, which from a Hollywood perspective, was far from a vintage year for releases

Streaming

Ringtones/ringbacks

Physical

Digital download

-60% -40% -20% 0% 20% 40%

28%

-27%

-34%

-18%

18%

-6%

-10%

-24%

South Africa Global

Gl

C

South Af...

Fr

US

Austr...

-7% -2% 3% 8% 13% 18% 23%

4%

22%

2%

-1%

-2%

-5%

Recorded music select sub-segments revenueCAGR 2017-2022

Box officeYear over year growth 2016-17

PwC


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Segment review: Spotlight on South AfricaKey insights on selected segments


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The South African E&M industry is growing at a pace close to its historical rates - even amid significant disruption….

2013 2014 2015 2016 2017 2018 2019 2020 2021 20220

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

92 430 98 298110 881 121 073 129 361 139 211 149 112 158 976 168 462 177 523

Re

ve

nu

e (

R b

illio

ns

)

… and an array of different trends at the segment levels, an accumulation of near-infinite micro stories

+6.5%

South African E&M revenue and nominal growth forecast for next 5 years

Historical Forecast

Note: All figures are reported in nominal terms reflecting actual spending transactions and therefore include the effects of inflation

Segment overview: South Africa


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The South African E&M market topped R129 billion in 2017 with Internet access dominating revenue share2017 E&M market share by segment (%): Global, South Africa

Internet access

B2B

OOH

TV advertising

Internet advertising

VR

Video games

E-sports

Cinema

Traditional TV and home video

Music

Radio

Newspaper

Magazines

Books

0% 5% 10% 15% 20% 25% 30% 35% 40%South Africa

Global

CAGR 29%

• Internet access will grow at 10.7% CAGR, adding 11 million new Internet subscribers over next 5 years

• Fastest growth in the play space

• Traditional TV and home video will experience moderate growth as OTT video continues to supplement vs replace

• Internet advertising at a CAGR of 13% will emerge as the largest advertising segment in 2022

Key takeaways


CAGR 55%CAGR 15%


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And final pieces fall into place for a mobile-first world, with the symbolic tipping point occurring in 2017

2013 2014 2015 2016 2017 2018 2019 2020 2021 20220

500

1,000

1,500

2,000

2,500

3,000

3,500

Fixed broadband data consumption Smartphone data consumption

22.5%

2017--22 CAGR

40.4%

2017--22 CAGR

Fixed broadbanddata consumption

Smartphonedata consumption

In 2017, data consumption through smartphones overtook fixed broadband data consumption

South Africa fixed broadband vs. smartphone data consumption (GB millions)

Smartphone data consumption overtakes fixed



15

Smartphones the device of choice…and necessity…



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Digital revenue will continue to make up more and more of the industry’s income, moving past 50% in 2020South Africa digital revenue as % of total revenue

SA digital revenue % (historic) SA digital revenue (projected data)

30%

2013 32%

201437%

2015 41%

2016 45%2017 47%

2018 49.5%

2019 52%2020 54%

202156%

2022

Digital % of total is accelerating vs. last

year’s forecasts



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Digital driving towards domination



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Segment overview: music

Music revenue of R2.3 billion in 2017 is projected to grow at 7.7% CAGR to reach R3.3 billion


19

Segment overview: cinema

Cinema revenue of R1.8 billion in 2017 is projected to grow at 3.9% CAGR to reach R2.1 billion

20.8m

19.9m

21m


20

Segment overview: traditional TV and home video

TV revenue of R32.2 billion in 2017 is projected to grow at 4.8% CAGR to reach R40.8 billion


21

Segment overview: Internet advertising

Internet advertising’s 13.0% CAGR will see it surpass TV advertising spend in 2022

PwC


22

Convergence 3.0What does it take to succeed?

PwC


23

Perspectives: 2018 Outlook report summaryTrending now: convergence, connections and trust

Questions?


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