UK entertainment and media sector to grow by £8 billion by 2022

19 June 2018 Authored by Consultancy.uk

The UK’s entertainment and media sector is looking set to maintain its healthy growth levels through 2022, with a new report predicting it will grow to a size of £76 billion by then. Virtual reality is once more noted as a key driver for this, while an increasing use of streaming services means the internet is seen as a key space for advertising spending, more so than ever before.

In 2017, UK data from the annual Entertainment & Media Outlook report forecast that the UK entertainment and media sector will be worth of £72 billion by 2021. In the extensive analysis, the UK's media sector was projected to boom on the back of the nation’s thriving virtual reality (VR) scene, which was anticipated to reach a value of £801 million – with the number of headsets in use in Britain set to surpass 16 million – in the same year, at a growth rate of 76% year on year, making it the fastest growing and largest VR industry across Europe, the Middle East & Africa,.

One year on, PwC has released its annual update, predicting that Britain’s entertainment and media sector is still sitting on a meteoric growth trajectory, in spite of Brexit anxieties currently plaguing the rest of the economy. The sector will be worth £76 billion by 2022, growing at a compounded annual rate of 3.2%, or £8 billion, according to the Big Four firm’s research, while it will hit a value of £68 billion by the end of this year. This will see the UK hold the position of the second largest such market in Europe, the Middle East and Africa (EMEA), after Germany. Once again, this expansion is likely to be pushed forward by the most rapidly enlarging segment of VR, at 35% year-on-year growth, alongside the burgeoning e-sports arena, rising at a rate of 21% year-on-year until 2022.

VR growth in 10 key markets

By the end of the period of analysis, the paper forecasts that VR will have boomed to a value of £1.2 billion in the UK alone. Globally, VR sales broke through the $1 billion threshold in 2016, and due to its multiple applications in the long term, the technology has continued on its rapid accent in both in the consumer and enterprise market – however in the short term VR has remained most commercially active within the video game market. Revenues from VR apps, gaming and video, which stood at $3.9 billion in 2017, are expected to soar more than fivefold by 2022 across the key markets of US, Japan, China, South Korea, France, Germany, Russia, Italy, Spain and the UK.

Building on last year’s results, meanwhile, the UK is set to maintain its position as the largest video games market in Europe. On top of an e-sports segment which will be worth £48 million by 2022, driven by rising demand for easy access downloads. PwC predicts that for the first time, digital game purchases for consoles will overtake physical game purchases.

Global digital music downloading revenue vs. digital music streaming revenue

While the gaming industry may still be playing catch-up with the music industry in this respect, with MP3 downloads long having outstripped sales for physical copies of the latest albums, the music market already seems to be showing the next key trend it will have to emulate: streaming. On a global basis, streaming now brings in over $10 billion in revenue to the music industry, compared to downloads, which have seen revenue fall steadily from around $5 billion in 2013. In line with this, digital music streaming in the UK is expected to almost double in revenue from £779 million in 2018 to £1.4 billion by 2022, while spending on streaming is also set to overtake spending on tickets for live music events – in part thanks to UK consumers scaling back on big spending as wages continue to stagnate – despite a recent report suggesting that such ‘experience spending’ was set to drive economic growth in the UK.

On demand

Come 2022, the UK is also expected to maintain its position as the biggest spenders in Europe on subscription and video on demand (VOD) services such as Netflix/Amazon Prime. This will be further driven by Amazon’s recent acquisition of a package of highly coveted Premier League broadcasting rights – making it the first VOD supplier to broadcast games from English football’s lucrative top flight. As Millennials continue to tune out from traditional media channels for their sports viewing, such a move will likely push VOD demand to new heights in UK in particular.

Global Internet advertising vs. broadcast TV advertising revenue

Linking into all of these areas of heightened demand, Britain’s consumer spend on internet access (mobile phone data and broadband) will bring in the lion’s share of revenue over the forecast period. The media and entertainment sector stands to see revenue relating to this hit £17 billion by 2022, with the UK overtaking France as the biggest spenders in Europe on internet access.

As a result of the booming engagement in the medium, a colossal realignment in advertising priorities is presently taking place. Between 2017 and 2022, internet advertising expenditure is set to rise by a compound annual growth rate (CAGR) by 8.7%, compared to 2.3% in broadcast TV ad revenues. While this traditional revenue stream is expected to hover at around $170 billion over the next four years, this will see internet advertising spending peak at close to $350 billion – with the UK accounting for a third of all such spending in Western Europe.

Commenting on how firms might build on the encouraging growth in the entertainment and media sector, Mark Maitland, PwC’s UK Head of Entertainment and Media at PwC, said, “The UK’s entertainment and media sector is forecast to grow at a healthy rate over the next four years with some of the largest and fastest growing markets in digital and technology, reflecting its location as a place for innovation. Consumers are rejecting the one-size fits all content experiences they were once fed. As a result, it’s vital for companies to use digital delivery, data analytics and AI to personalise and tailor their offerings to provide a unique experience.”

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