Each year, PwC’s team of entertainment and media experts generates unbiased in-depth forecasts for 12 industry segments. The South African entertainment and media outlook: 2012-2016 combines deep knowledge of the local market with a truly global perspective – a powerful tool for understanding critical business issues.
The Outlook reflects the collective wisdom of PWC’s team of professionals, who work with entertainment and media companies around the world. It is a unique resource for the industry, offering a five-year outlook for consumer spending and advertising revenues in South Africa and globally, along with insights into the technology, government, political and business trends driving those forecasts.
Here are some high level insights from the report.
Internet access spending and advertising
- Fibre network rollouts and the extension of the broadband infrastructure into underserved areas will drive broadband subscriptions and fuel broadband spending.
- Increased competition and penetration is resulting in lower prices, but this is expected to be partly offset by rising prices for premium services.
- Smartphone penetration growth and faster mobile access speeds will drive growth in the mobile Internet access market.
- The wired broadband access market is expected to grow at higher rates than the mobile access market over the forecast period in contrast to the trend of the past few years.
- Growing traffic on social networking sites and increased time spent online is attracting advertising and fuelling growth in banner/display advertising.
- Growth in tablet penetration and increased use of smart mobile devices will propel mobile advertising.
- Total Internet access and advertising spending is expected to grow at a 20.3% compound annual rate from R17.9 billion in 2011 to R45.0 billion in 2016.
- Digital terrestrial television is expected to be launched later in 2012, eventually freeing up spectrum for both mobile as well as for the launch of additional television channels.
- The competition in the paid television market is expected to increase over the forecast period.
- The increased penetration of smartphones and tablets is expected to fuel growth in the mobile subscription market.
- It remains to be seen whether mobile television will result in significant revenues in the television sector.
- Total television spending is expected to grow at a 10.3% compound annual rate, from R23.1 billion in 2011 to R37.6 billion in 2016.
- Government initiatives and experienced local production crews continue to bolster the local film industry.
- Growth in the number of films shot in South Africa is expected to have a positive impact on box office spending.
- Substantial progress has been made with three-dimensional (3D) films, driven by the digitisation of cinemas and the availability of 3D films.
- Conversion to a digital format will significantly reduce the cost of producing films and also enable more 3D content to be screened, enhancing the appeal of going to the movies.
- Video-on-demand has been successful in other countries and we expect it will also be successful in South Africa.
- The filmed entertainment market in South Africa will increase at a projected 4.2% compound annual growth rate from 2011 to reach R3.6 billion in 2016.
- Radio remains an important medium in South Africa, reaching over 88% of the population in a typical week.
- Listeners’ options have been expanded through the introduction of digital radio and online radio. However, these technologies are not expected to add significant revenues in the forecast period.
- Advertising revenues increased by 7.4% in 2011. This was lower than the 13.3% gain experienced in 2010, which was boosted by the FIFA World Cup.
- Needletime levies are expected to have a significant impact on the radio broadcasting industry.
- Ukhozi FM, a Zulu-language station remains the country’s most popular station with over seven million listeners per week, while 94.7 Highveld Stereo continued to attract the most advertising in 2011.
- Total radio spending is expected to grow at a 6.5% compound annual growth rate from R3.7 billion in 2011 to R5.0 billion in 2016.
- The shift from physical to digital spending is continuing due to increased broadband, smartphone and tablet penetration.
- South Africa has very few licensed digital services compared to other countries.
- Recorded music currently dominates the music market, but it is expected to share the market with live music equally by 2016.
- Artists are relying more on concerts, with 360 deals allowing them to jointly participate in concert and recorded music revenues.
- Social media is playing a growing role in marketing tours and concerts.
- Live Nation and the FIFA World Cup in 2010 have helped showcase South Africa as an attractive destination for major international artists.
- Total spending on music is expected to decrease at a forecast 0.8% compound annual rate to R2.0 billion in 2016.
Consumer magazine publishing
- Stronger than expected economic growth, the launch of a number of new titles, growth in readership and rising circulation have resulted in higher than expected growth in 2011.
- Growing penetration of tablets and the launch of paid mobile apps will cut into print circulation by 2015-16 and stimulate the digital market.
- Unlike print advertising, digital advertising is expected to grow at higher rates than the growth expectations for the economy in the forecast period.
- Magazines are increasing their online presence by interacting with readers on their websites, through blogs and through social media.
- South Africa is experiencing an increasing print readership and a developing digital market, in contrast to the trend in more developed countries, which are experiencing erosion in print unit circulation as readers shift from print to online for information.
- As broadband penetration increases, consumers tend to migrate to lower-priced and free digital alternatives, which are expected to depress the newspaper advertising market.
- The Protection of State Information Bill (POSIB) is still pending approval in spite of significant public objection. The impact of the proposed legislation on media remains to be seen.
- Local and foreign newspapers are moving content behind paywalls, mostly pursuing a ‘freemium’ model.
- Publishers face the challenge of determining the optimal revenue model, as consumers have historically viewed digital content as an inferior or free product.
- The total newspaper market is projected to grow at a compound annual rate of 5.1%, reaching R14.6 billion by 2016.
Consumer and educational book publishing
- New electronic readers and tablets are proving to be very popular and will drive spending on electronic books, cutting into print sales.
- The shift from higher-priced printed books to lower-priced electronic books will have an adverse impact on overall spending.
- Despite the availability of e-readers, the market has been slow to take off in South Africa due to high prices and bandwidth constraints.
- The consumer book market is limited in South Africa because of relatively high illiteracy, low incomes, and few books published in African languages.
- Growth in the number of people in the key demographic segment for consumer books and continued economic expansion will sustain the consumer book market.
- Total spending on consumer and educational book publishing is expected to grow at a 1.5% compound annual rate from R3.8 billion in 2011 to R4.1 billion in 2016.
- Improved economic conditions will stimulate the business-to-business publishing market.
- There is a major shift in the market from physical platforms to digital platforms, accompanied by shifts in spending from physical to digital.
- Smartphones and tablets drive the potentially permanent migration from physical to digital for formats such as print directories and magazines.
- Within the digital market, mobile usage is the main driver of spending as smartphones provide features not available in the printed formats.
- The total spending on business-to-business publishing is projected to grow at a 4.4% compound annual growth rate from R4.6 billion in 2011 to R5.7 billion in 2016.
- Out-of-home advertising reaches approximately 85% of the adult population in South Africa.
- Growth of digital billboards and digital networks will continue to invigorate the market.
- Innovative and spectacular out-of-home displays provide advertisers with exciting new ways to reach customers.
- The expansion of captive video networks will also fuel growth because out-of-home can reach people in areas inaccessible to most other media. Mobile ad spending is increasing as advertisers seek media to reach people away from home while they are travelling or shopping.
- As the measurement of out-of-home advertising improves, we expect advertisers to increase their spending in this media category.
- Total out-of-home advertising spending is forecast to grow at a 9.3% compound annual rate from R1.4 billion in 2011 to R2.1 billion in 2016.
- Smartphones and tablets, aided by an intuitive touch interface and improved graphic capabilities are fast becoming the device of choice for casual game players.
- Increased broadband penetration and the growing digital distribution of content will drive growth in the online game market.
- The growth of microtransactions, together with an increase in social gaming, is providing a boom for the industry and is challenging traditional subscription revenue models.
- The PC games market continues to be challenged as consumers turn their attention to newer technologies.
- Piracy of PC games, which is prevalent in the industry in South Africa, continues to hamper the growth in this segment.
- Online gaming and advertising on social network sites like Facebook is growing rapidly and attracting users who were not traditionally interested in gaming.
- Total spending on video games is projected to grow at a 6.4% compound annual growth rate from R1.3 billion in 2011 to R1.8 billion in 2016.
- Despite troubled economic times, sport has continued to thrive, with major events being more popular than ever. The 2012 London Olympics staged recently as well as the 2014 FIFA World Cup to be hosted in Brazil, will boost revenues over the forecast period. Lowertier events will have to work harder to attract supporters.
- Closer convergence is occurring between the sport and entertainment industries, as both sectors continue to rise to the challenges of new digital technologies.
- Sponsorships and media rights emerge as the main engines of growth, with gate revenues under pressure. There will need to be much more focus on developing sophisticated measurement techniques to demonstrate the returns on this investment.
- Sponsorship is the largest contributor to PSL revenue, with Absa as the PSL’s title sponsor. Vodacom recently concluded its revised sponsorship of Orlando Pirates and Kaizer Chiefs, amounting to R1 billion over five years.
- Understanding how the media habits of sport consumers are changing is important for all commercial stakeholders in sport – broadcasters and content buyers, sports federations, clubs, sponsors and brands.
- Total spending on sports is projected to grow at a compound annual growth rate of 6.5% over the forecast period, from R11.2 billion in 2011 to R15.3 billion in 2016.