PwC outlook 2021 - Forecasts on ad spend recovery in Australia

Chris Pash
By Chris Pash | 19 July 2021

Advertising revenue in Australia is expected to grow to $19.6 billion by 2025, at an annual compound growth rate of 2.6%, according to the latest forecasts by PwC.

Ad spend fell by 8% to $15.4 billion in the year to December 2020, says the 20th edition of PwC Australia’s Australian  Entertainment and Media Outlook.

However, the contraction of last year is giving way to a solid rebound in 2021. 

Justin Papps, PwC partner and Australian Entertainment and Media Outlook Editor, sees a return to 2019 revenue levels for most parts of the industry within the next few years, if not sooner.

The pandemic triggered the sharpest contraction in Australian entertainment and media revenues in the history of the PwC’s media outlook report.

“While the contraction impacted the whole market, it was clear that some sectors were hit harder than others,” he says.

“However, even with the COVID cloud still lingering, momentum was strong for the sector going into the first quarter of the 2021 calendar year.”

The hardest hit sectors of 2020 were filmed entertainment with a 41% fall to $1.3 billion, and out-of-home (OOH) down 39% to $772 million. 

Some saw an increase in readership, such as digital news, or an increase in audience, such as free-to-air television (FTA). 

However, revenue was lean for much of the year, until a late surge in November and December as the country emerged from restrictions. 

One of the few winners was digital advertising, which increased 3.3% to $9.3 billion in 2020. 

Streaming services did well with Streaming Video on Demand (SVOD) increasing both subscribers and users. Broadcast Video On demand (BVOD) services increased both audience and advertising revenues, from a lower base. 

Justin Papps sees five major power shifts impacting the entertainment and media landscape to varying degrees. 

“The overarching shift is undoubtedly sustained digital disruption,” he says. 

“This shift is then enabling significant power shifts into the hands of consumers, a shift of creative power to content originators, a shift based on location and the need for anywhere, anytime access and finally, regulatory shifts that put privacy and data monetisation under the microscope.

“Even with these shifts, the stability or resilience of the market overall should not be underestimated.”

As consumers stayed home and in-person venues shut, use of digital services soared.

Cinema box office revenues fell 67.4% in 2020. This contrasted by increased availability, sector breadth and catalogue depth of the SVOD players, increased BVOD usage, and the sustained growth of the gaming and esports sector. 

Established players such as Netflix, Amazon and Stan expanded content libraries. 

Binge and BritBox also entered the market, and relative newcomers such as Disney+ used the opportunity to try different business models, including Premium Video on Demand (PVOD) for new release movies. 

There was significant growth in audiences watching live streams of esports events and the market for gaming content is on track to be valued globally at $US79 billion ($A102 billion) by 2025.

Twitch has become a leader in entertainment platforms with users spending an average of three hours on the platform, compared to Netflix users who only spend an average of two hours streaming per day. 

PwC Australia Partner Samantha Johnson says one of the most profound impacts from digital disruption has been the increased use and prevalence of non-advertising supported platforms. 

“The shift in weighting from advertising revenues towards consumer generated revenues has accelerated, forcing a number of key players to rethink their business model, in a world where the expectation is that consumers can access an ad-free or personalised service, but they have to be prepared to pay for it,” she says. 

With consumers more firmly in control of how they spend their time and money, especially during the pandemic, traditional platforms that advertisers buy to reach audiences at scale, including television, newspapers and OOH, all had significant competition for their share of consumers’ attention. 

The range of competing media platforms and channels also added to the complexity of delivering a consistent message over time. 

Laurence Dell, PwC Australia Partner and Technology, Media and Telecommunications Consulting Leade, says advertisers and brands seeking to get in front of their consumers had to rebalance media and creative strategies in order to achieve required reach.

“While targeting through digital and programmatic channels certainly played a role, the ability for a consumer to scroll past, skip or opt-out of an advertising message, coupled with the fact that large segments of the population are spending less time on advertising supported services, means that creativity in execution and sound channel planning has never been more critical for brands seeking to attract and retain new customers,” says Dell.

Total internet access revenue showed marginal growth in Australia in 2020 while demand for at-home connectivity rose, driven by a 38% growth in download volumes.

The total Australian internet access market was worth $30.1 billion in 2020, an annual growth of 1.14%.

The increase in technology - specifically 5G - means that the technology-enabled quality of the viewing, listening, reading or gaming experience is able to meet the higher expectations and demands of contemporary consumers.

The delivery of high definition content is expected to be delivered with zero lag and glitch-free - whether people are on the bus or in their lounge room.

“The key media consumption locations - the lounge room, the bedroom and in transit - are changing dramatically, as the era of specific devices having control over a specific location is over," says Dell

"The lounge room - once the domain of linear television and appointment viewing - now offers consumers the additional options of streaming, broadcast and premium video on demand, as well as gaming, largely thanks to the growth in connected televisions and a much simpler user interface." 

Outlook for revenue

PwC says the powerful shift to digital consumption will provide a strong boost to global growth for the next several years.

The entertainment and media industries will grow more pervasive, more immersive and more diverse.

Papps: “As we emerge from the pandemic, industry players who take stock of the shifting environment, and evolve their strategies and business models to embrace the new consumer behaviours, will come out on top.”

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