Significant shifts are underway in how Africa’s entertainment and media companies compete and generate value, as the quality of the experience they deliver to consumers becomes their primary basis for strategic differentiation and revenue growth, a new survey reveals.
This has forced companies to embrace strategies and build their capabilities to engage with consumers for them to thrive in the increasingly competitive and crowded marketplace, according to the ‘Entertainment and media outlook: 2017 – 2021: An African perspective’ report released by PricewaterhouseCoopers (PwC) on Thursday.
The survey projects total entertainment and media revenue in South Africa to reach R177.9 billion by 2021, up from R132.7 billion in 2016. “Internet access remains the key growth driver and will account for R27 billion of this increase.
The fastest-growing sectors will be virtual reality (VR) and e-sports compounded annually at 72.6 per cent and 39.6 per cent, respectively. These segments are still new revenue lines and remain the smallest in terms of absolute revenue numbers, and though overall growth in revenue will hold up, it is expected to slow down by the end of 2021,” the report indicates.
The report is a comprehensive source of analyses and five-year forecasts of consumer and advertising spending across five countries, South Africa, Nigeria, Kenya, Ghana and Tanzania. It looked at 14 segments, including Internet, data consumption, television, cinema, video games, e-sports, virtual reality, newspaper publishing, magazine publishing, book publishing, business-to-business publishing, music, out-of-home, and radio.
“Companies that wish to capture value amid shifting consumer preferences and business model disruptions must focus on an increasingly prominent source of competitive advantage: the user experience. They must harness technology and data to attract, retain and engage users–and convert them into devoted fans,” said Vicki Myburgh, the entertainment and media industry leader at PwC Southern Africa. These imperatives assume a larger importance because, as we document in the report, the entertainment and media industry is confronting several challenges to continued top-line growth.
Digital spend will continue to drive the overall growth. Nearly 40 per cent of total spend will be derived from Internet access in revenue. South Africa’s mobile Internet penetration is forecast to rise to 77.8 per cent by the end of 2021 from 52.3 per cent in 2016. This increased Internet penetration will drive mobile Internet access revenues, which are projected to grow by a compound annual growth rate (CAGR) of 10.7 per cent to nearly R62 billion.
The report shows that South Africa’s total entertainment and media advertising revenue is expected to rise to R54.2 billion by 2021 from R45.3 billion in 2016, representing a 3.7 per cent CAGR. TV advertising remains dominant, but in terms of absolute growth it is Internet advertising that is almost an equal contributor, helped by a sizeable 12.9 per cent compound annual growth rate.
Myburgh said: “It is clear that something fundamental has changed in the entertainment and media industry. Entertainment and media companies that have become accustomed to competing and creating differentiation based, primarily on content and distribution, need to focus more intensely on the user experience. The marketplace has increasingly become more competitive, slower-growing and dependent on personal recommendations.”
The official added that thriving in this new world of intense competition and continual disruption will be challenging. “The opportunities are, however, immense. Across the industry, the resulting quest to create the most compelling, engaging and intuitive user experiences is now the primary objective for growth and investment strategies, with technology and data at the centre. Accordingly, companies will need to develop strategies to engage, grow and monetise their most valuable customers - their fans,” Myburgh said.
The entertainment and media industry registered $2.1 billion in 2016, up 13.6 per cent on 2015. Revenue is forecast to grow at an 8.5 per cent compound annual growth rate over the next five years to $3 billion in 2020, and totaling $3.2 billion in 2021.
Internet access is the most established industry within the Kenyan market, boasting the largest revenues and one of the highest growth rates to 2021, according to the report.
Tanzania’s total entertainment and media revenue stood at $504 million in 2016, but is set to more than double to $1.1 billion in 2021, indicating a 17.2 per cent compound annual growth rate over the coming five years. This is significant growth from 2012, where the industry stood at just $175 million.
Ghana’s entertainment and media industry recorded total revenue of just $214 million in 2012, but four consecutive years of year-on-year growth above 25 per cent have led it to growth of revenues to $685 million in 2016. This is forecast to more than double over the next five years, with revenues of $1 billion by 2019 and a total of $1.5 billion in 2021, thanks to a 16.5 per cent compound annual growth rate.