Yahoo News What Box Office and Streaming Video Will Look Like by 2027: PwC Expert Explains Forecast
Hollywood reset its streaming ambitions in 2022 with a focus on profitability instead of pure subscriber growth. And macroeconomic clouds have affected advertising trends in the media and entertainment space. Now, PwC’s annual closely watched “Global Entertainment & Media Outlook” is providing latest data and forecasts for these and other sectors.
Covering the 2023-27 period, it dives deeper into everything from cinema, “traditional TV” and streaming to music/radio/podcasts, video games/esports, print media and newer areas, such as NFTs and the metaverse.
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The Hollywood Reporter talked to PwC principal CJ Bangah about key big-picture takeaways, some of the more surprising forecasts for cinema, and what’s next for advertising and streaming.
Global cinema admissions dropped sharply in 2020 to 1.9 billion from just over 7.9 billion in the two preceding years. 2021 was also challenging, but we have seen an upwards trend since then. However, PwC forecasts that global theatrical admissions will reach 7.2 billion in 2027, noting that is “still at a lower level than before the pandemic.” I think I know the answer, but can you explain why global cinema revenue is forecast to exceed pre-pandemic levels in the coming years despite this?
What you are seeing is cinema is commanding a premium price point. Going to the theater used to cost five bucks, and then seven, and then nine, and now it’s getting closer to $20. Folks are kind of complaining about it a little bit. But that’s enabling the theaters to command the price corresponding to the investments that they have made, including in more comfortable seats, less packed theater, better food, dining and all those other things that we have seen that have just made it more attractive again. That is driving the revenue forecast.
What is the overall media and entertainment data showing for 2022 and the macroeconomic hit to advertising?
We are forecasting that global [total] advertising revenue is going to become the first category to reach $1 trillion in annual revenue by 2027 globally. So advertising is the lifeblood of this industry and it is absolutely the growth engine of this industry. You are seeing video game companies embrace advertising for the first time in a meaningful way, because of slowdowns in subscription spend. (PwC projects gaming advertising revenue to nearly double by 2027.) You are seeing cinema embrace advertising. It’s become an effective revenue stream for them as well. Obviously, you are seeing OTT embrace it. So we definitely have a strong growth story around advertising, even though the industry has had a decelerated growth rate, just given the broader economic pressures.
Beyond advertising, streaming video continues to be a core focus for entertainment and technology companies. Your latest PwC Outlook report forecasts global revenue here rising from $116.5 billion in 2022 to $133 billion in 2023 and $174.6 billion in 2027, for a compound annual growth rate of 8.4 percent. That will be led by 13.8 percent growth in advertising, followed by 7 percent growth in subscription revenue. The entire industry has shifted its focus from pure subscriber growth to profitability. Some argue that Netflix has basically won the streaming race, while others say there is room for more than one winner. But it seems that despite challenges PwC is not forecasting an end in the expansion of streaming video …
We are forecasting continued growth but declines in the growth rate. So in 2027, we think the U.S. is going to grow 4.3 percent, which is like a fifth of what we forecast in 2020, which was like 35 percent. So our underlying data forecasts see a world where the growth starts to decelerate, because there are only so many subscriptions consumers are going to pay for and there are only so many consumers that are going to want an OTT service.
But advertising is one element of the growth. Some of the more sophisticated digital advertising measurement solutions, the ability to look across a more precise customer journey, is going to unlock spend in ways that are hard to even call right now. I would not say that there’s not a ceiling to how much you can take from linear TV. The ceiling is how much can you connect the dots across the omni-channel experience and drive return on investment and impact in different ways than marketers have had to do in the past.
The legacy knowledge about how media budgets were allocated was: If I want to grow OTT, I have to take it from linear television. I would argue that is flawed. Today, data suggests 27-plus people can get involved in approving a purchasing decision. And we have a generation of consumers that doesn’t place the same value on historically strong brands. They follow their favorite person on a shortform video, social media application. It’s very different dynamics from what we are used to.
You mentioned that there is a ceiling for how many streaming services people are willing to pay for at the same time. For a while the consensus seemed to be that people are happy to pay for several, three to five, streamers, then inflation rose. Some recent studies argued that Americans are spending more than ever on subscription streaming, but other research suggests they are using fewer services. Any latest insight?
We used to publish this series called Videoquake where we surveyed U.S. consumers. You are completely right, it was three, it was five, then it was seven. This is absolutely an area where I think what consumers say in the research, and what they actually do with their choices is a bit different. So we don’t have a specific forecast on how many subscriptions consumers are willing to pay for. We have seen that in a constrained economic environment they’re paying a little more attention to how many they have, and they are canceling the ones that they don’t watch. But we are starting to see more positive economic signals, including the Fed declining to raise interest rates. So I don’t have a really clean answer beyond: People will say one thing, but do another. And we are not seeing a massive shedding of subscriptions.
Has the content appeal of streaming services contributed to this?
The OTT providers have all done a good job of kind of having different things that they are bringing to bear, and all you need is that one show that somebody loves — and then for them to forget about canceling their subscription until that one show comes back again.
There has been much talk about hopes and plans for more bundling of streaming services as of late. Is there any insight you can add on that topic, and who is trying to lead these bundling efforts?
We have been talking about bundling for years in our Entertainment & Media Outlook. We talked about bundling as the new way to differentiate. We are starting to see the telcos, because they all sold off their media business, offering now to either augment or give away for free a subscription to an entertainment platform. They don’t own the entertainment or media asset, but they are saying, “Hey, we’ll pay for your subscription to one of these providers.”
We are also seeing the streaming providers and the big tech companies trying to bring together video plus gaming. We are seeing all these kinds of interesting partnerships. [People can have] their own stack that brings together fitness, news, video games, TV. So, everyone’s trying to figure out the right model. I don’t think there’s a clear front-runner here.
I think the market dynamic in terms of profitable growth, which obviously came much more into focus over the last couple of years, is going to be the dynamic here as well. Where do I go acquire a company and then bundle that way, versus where do I partner, where do I revenue share, or do I have a different model that really makes the mechanics work?
Let’s talk about film! I noticed in the PwC Outlook report that total global cinema revenue, made up of box office and cinema advertising, is “on target to reach pre-pandemic levels by 2025, when it’s forecast to be worth $46.5 billion.” For the latter part of the forecast period, you predict “further growth, with revenue expected to be at $52.1 billion in 2027. Box office revenue will make up $48.4 billion of the total, and the rest will come from cinema advertising.” How different is this forecast from previous PwC predictions?
It’s absolutely more optimistic. Two years ago, our Entertainment & Media Outlook was saying we don’t know if we are going to return to pre-pandemic revenue levels in the time horizon forecast. And then last year, we got a little more optimistic. This year, we got a little bit more optimistic. This continues to be driven by the big titles and helped out by video game publishers embracing cinema in new ways and having really big hits that are video game-related.
I honestly think part of it is also that cinema is still really cost-effective. I know folks complain about the price of concessions and things like that. But overall, it’s a really cost-effective way for people to come together and connect as a community. We have seen consumers across segments really be interested in live experiences. And the cinema actually is kind of a digital experience, but it still feels like a live experience. And that sense of wonder and joy that comes from it I really think is what’s contributing to the forecast optimism.
I know you are usually not allowed to mention specific companies, but you mentioned video game-based films as a success story …
Yeah. We have the big superhero movies, and those are doing really well. And then we have a new tranche of healthy middle competitors, including some video game-affiliated content, some content that’s really relevant to a global audience. We also have overseas studios starting to do really well with some of their films. So it’s a nice balance of really great product. And when I say product, I’m talking about the films that are being produced and I’m talking about the theater experience. The premium theatergoing experience, the amazing sound that’s right behind you in your seat.
So you have got a great product at a super reasonable price, particularly compared to paying for a concert or going to a music festival or some other things. It’s just creating an environment where we are seeing consumers go back, and we think that’s going to continue to be the case in the future.
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