Digital ad revenue is expected to rise as print continues to suffer

The global entertainment and media industry (E&M) is expected to grow to $3.4-trillion by 2028, which means greater revenue streams in advertising, streaming and emerging markets. For South Africa, this means a hike in digital advertising revenue from R26.3-billion in 2023 to R38.1-billion within the next four years, but for print media the signs are not good.

Two reports by PwC – the Global Entertainment & Media Outlook 2024–2028 and the country-specific Africa Entertainment & Media Outlook 2023–2027 – reveal how economic headwinds and technological disruptions are likely to affect the E&M sectors in years to come.

Global outlook

The first report notes that total global revenue rose 5% to $2.8-trillion in 2023, which is easily outpacing overall economic growth. Over the next five years, the E&M sector, which will grow at a muted 3.9% compound annual growth rate, reaching $3.4-trillion in revenue by 2028, will face significant challenges and opportunities.

Challenges include the impact of digital ecosystems on traditional linear value chains, the plateauing of the content boom driven by streaming services and generative AI, which is fuelling the overall uncertainty.

Despite these headwinds, by 2028, the E&M industry is expected to see an additional $597-billion in revenue, which calls for companies to undergo a fundamental reinvention of their business models, requiring new thinking about how a company ­creates, delivers and captures value to survive and succeed.

PwC’s global outlook identifies four major areas of opportunity:

Advertising: Although consumer spending and connectivity remain crucial, advertising has emerged as the most significant revenue driver for the E&M industry. Projected to surpass $1-trillion by 2026, advertising revenues are expected to grow at a 6.7% compound annual growth rate all the way to 2028, fuelled by the increasing value that companies place on reaching consumers across various digital platforms.

To capitalise on this, E&M companies must enhance their advertising capabilities by leveraging data for more sophisticated targeting, integrating product discovery with purchase and navigating global privacy regulations.

Internet advertising continues to thrive and a 9.5% compound annual growth rate is projected until 2028.

Key areas of growth in internet advertising include retail and other display adverts, connected television advertising (video ads that are delivered via a streaming service during a viewer’s movie, TV show or other video content, and viewed on an actual television set), and shoppable TV (buying something directly from a TV screen using a remote control).

As consumer attention shifts towards short-form content, E&M companies must adapt their advertising strategies to include influencer marketing, experiential promotions and innovative technologies.

Rethinking business models: Though streaming services have seen significant growth, the industry is facing challenges in sustaining high subscription rates and revenue growth. As the market becomes saturated, companies are exploring new revenue streams, such as advertising-based models and content partnerships.

Global over-the-top subscriptions are expected to reach 2.1 billion by 2028, but average revenue per subscription is projected to remain relatively stable.

To address this, leading streaming platforms are introducing ad-supported tiers and investing in premium content to attract both subscribers and advertisers.

Content: Because consumers are reluctant to subscribe to multiple streaming services, a trend towards bundling is emerging in developed markets as major players combine their platforms to offer more comprehensive packages. Disney and Warner Bros Discovery have partnered to create a bundle including Disney+, Hulu and Max.

Gaming: Video games revenue is on track to surpass $300-billion by 2028. Although traditional revenue sources like game purchases and subscriptions remain significant, advertising is emerging as a major contributor. Social or casual gaming and in-app game advertising are both experiencing substantial growth, and the latter is expected to outpace the former in terms of revenue growth.

Asia Pacific is the dominant region in the gaming market, accounting for nearly half of global revenue. Countries like Indonesia and Japan are experiencing particularly strong growth, driven by factors such as government support, cultural influences and technological innovation.

There are significant regional variations in growth potential. The US remains the largest market, but Indonesia, India and China are experiencing rapid growth. Smaller markets like Nigeria and Turkey also offer attractive opportunities.

Beyond these trends, the resurgence of in-person experiences such as live music and cinema has been a notable development.

The success of events like the Taylor Swift and Beyoncé tours, along with the opening of the Sphere music and entertainment venue in Las Vegas, demonstrate the increasing demand for immersive, tech-enhanced experiences. The growing popularity of live events highlights the importance of physical experiences in the E&M landscape.

Africa focus

The second report, which focuses on South Africa, Kenya and Nigeria, highlights the impact of high living costs on discretionary spending, leading to a reassessment of E&M spending. Despite challenges, the industry is expected to outpace global growth rates, with South Africa and Nigeria showing significant growth.

Streaming services like Disney+ and Netflix have gained traction, whereas traditional TV advertising revenue contracted by 3.3% in 2022.

Digital advertising is expected to dominate, accounting for 63.6% of ad spend in South Africa by 2027. This is predominantly because of a decline in terrestrial television advertising, which the report expects to be temporary, with the segment rebounding in 2024 and forecast to increase at an overall 1.2% compound annual growth rate by 2027.

Digital advertising has accounted for more than half of all ad spend since 2020. This trend is mirrored globally, as digital advertising is expected to reach 71.8% of total ad spend by 2027.

South Africa’s E&M annual market growth slowed to 8.8% in 2022, down from 15.4% in 2021. Despite this deceleration, the total industry revenue is expected to increase from R231.2-billion in 2022 to R276.7-billion by 2027, representing a compound annual growth rate of 5.5%. The most significant revenue gains will come from the internet access segment.

In contrast, print newspapers, consumer magazines and books are expected to decline, reflecting a shift towards digital alternatives. The Digital News Report 2024 by Oxford and the Reuters Institute found that 90% of South Africans now access news content online, compared with just 30% who still read traditional print media. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.

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