PwC: ‘robust’ long-term growth for entertainment and media

The UK entertainment and media industry is forecast to reach £97bn by 2026.

PwC has reported the UK entertainment and media industry to grow by a compound annual growth rate of 4% over the next four years.

The UK Entertainment and Media Outlook (E&M) 2022-26: Trusting the digital path ahead described companies in this space as “holding their nerve” despite the worsening macroeconomic outlook as they place trust in digital investment strategies.

The report also predicted long-term confidence and growth for the UK entertainment and media industry although there is short-term uncertainty in the market.

This was at the same time as a “record number of deals” from investors that took place last year, a 72% year-on-year increase per PwC’s Global M&A Industry Trends data.

Dan Bunyan, PwC strategy and partner, said: “While investor confidence has slightly softened in the face of economic headwinds, we still expect high deal volumes in the years ahead. Platforms that can help brands discover and engage with customers in new environments will become increasingly valuable.

“Investors will remain keen to support companies that can help facilitate ‘buy and build’ strategies to bring together complementary specialist capabilities to serve brands and content owners in a more compelling way.”

Internet advertising revenue was expected to make up a third of the UK’s overall entertainment and media industry revenue in four years’ time, with growth in advertising revenue on course to hit a compound annual growth rate of 6% over the next four years, with most of this coming from mobile. Meanwhile, PwC anticipated video advertising would account for almost £9bn of adspend by 2026.

The effect of inflation and challenges outside the economic outlook

This study also confirmed consumers are spending more time online, a habit that started during the pandemic and has persisted, with advertising spend set to follow this trend.

A separate PwC report from July 2022 found more than a fifth of UK consumers (22%) were planning to spend less over the next year on digital TV and streaming subscriptions, while 20% wanted to spend less on satellite TV subscriptions and the same on mobile phone contracts, and 34% intended to spend less on the cinema.

More than three-quarters of consumers in the survey had already cut back on spending in response to the growing cost-of-living crisis. All of this presents a challenge to the entertainment and media sector as rising inflation is set to impact both content providers and advertising businesses.

Inflation resulting in reduced consumer demand could have “a knock-on impact” on marketing effectiveness in the short-term, which may “soften” ad prices in some channels, the report stated.

PwC also isolated three “stand-out” challenges for UK entertainment and media companies  outside of the short-term economic outlook: the need to build trust through ESG-led commitments, recruitment and retention of talent; and preparation for the post-cookie world.