TV advertising spend in the UK is expected to decline by 3% this year amid “tightened budgets”.
That is according to PwC’s latest Global Entertainment & Media (E&M) Outlook 2023-2027, which forecasts the UK is forecast to maintain its position as the leading entertainment and media market in Europe over the next four years.
E&M revenue will reach £85bn this year, with a compound annual growth rate of 4% over the next for years to generate revenue of £100bn overall by 2027. The next largest E&M market in Europe is Germany, with £83bn in revenue expected this year, though it is only expected to grow to £91bn by 2027.
Overall advertising revenue in the UK is anticipated to be £35.7bn in 2023, with the lion’s share (£27.5bn) belonging to internet advertising.
PwC expects TV advertising’s 3% decline this year to be offset by a 2024 recovery of 4% growth.
“2022 was a challenging year for the UK entertainment and media industry as the economy struggled to return to normality,” said PwC partner and UK tech, media, and telecoms leader Mary Shelton Rose. “In the midst of continued change and disruption, the industry reassessed its strategies and refocused on core operations.”
Despite overall expected gains to E&M revenue through 2027, PwC noted the rate of growth is “expected to fluctuate” year-to-year given variable economic conditions and “sluggish consumer spending”.
Revenue is expected to be generated significantly by improvements in internet access, especially mobile interact access. 2023 was described as a “tipping point” for access according to PwC, wherein mobile internet is expected to overtake broadband as the biggest contributor to total internet access revenue. Mobile internet access is expected to account for 55% of total internet access revenue by 2027.
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“The internet advertising sector remains highly dynamic,” noted PwC Strategy& partner Dan Bunyan. “We continue to see spend moving into new channels (e.g. retail media, gaming), new data sets (e.g. cookieless solutions, contextual data), as brands reassess the most fruitful ways to engage consumers online. This spending growth is underpinned by continued product innovation in the sector, as well as M&A activity to enable vendors to deliver these services.”
Additional revenue growth is anticipated within the data services industry, which is linked to greater consumption of streaming services, social video platforms, and broadcast video on demand (BVOD) services, which are expected to together account for 36% of all data consumption in 2027.
PwC also expects subscription video-on-demand (SVOD) revenue to grow from £3.6bn in 2023 to £4.7bn by 2027.
The fastest-growing segment over the next four years, however, is anticipated to be the virtual reality (VR) market. Total UK VR revenue is set to increase from £1.3bn in 2023 to £2bn in 2027 as installed VR headsets in the UK are forecast to grow from 1.7 million to 4.2 million, stimulated by the success of Meta’s Quest 2 headset and, potentially, Apple’s entrant into the market, the Vision Pro.
PwC expressed additional optimism about two sectors—out-of-home (OOH) and cinema—that are currently still slowly recovering from pandemic-era lockdowns. The company expects box office revenues to exceed pre-pandemic levels by 2025, with a compound annual growth rate of 7%. The OOH market is meanwhile anticipated return to pre-pandemic levels in 2024 and grow at a 5% compound annual growth rate.
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Bunyan and Shelton Rose both noted generative AI is likely to drive further revenue growth within the E&M sector, with the former pointing to the fast integration of AI into search engines Bing and Google as a recent significant development. “Further adoption and calibration of generative AI tools across the digital marketing ecosystem is likely to drive further competitive innovation,” he said.
Shelton Rose added: “For years, the overarching story in E&M has been a technology-inspired shift to digital and mobile. But this year, very quickly, a new force is coming into focus: generative AI. Going forward, leaders must evaluate and embrace the potential power of AI holistically as an enabler for productivity and creativity.”
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