South Africa’s media landscape: what will 2020 hold?

A new PwC report has laid out predictions for the South African media and entertainment landscape by 2020.

Entertainment and media (E&M) companies saw double digit growth of 10.6% in the country in 2015, according to the 2016 Entertainment and Media Outlook report. However, it predicts a compound annual growth rate of 6.6% to 2020 — still edging out the USA and Western Europe’s growth levels.

PwC cited two reasons for the slower rate of growth.

“First, with mobile internet penetration in particular now being more mature — at 44.8% in 2015, from just 14.6% in 2011 — internet access revenue growth will slow. Second, less positive macroeconomic news for South Africa will have a concomitant hit on those sectors most closely dependent on a sound economy, particularly business-to-business revenues,” it explained.

The report found that E&M companies could expect to earn revenues of R173.3-billion in 2020, compared to R125.7-billion in 2015.

Despite internet access growth slowing, it will still be the biggest contributor to E&M spend, with revenue set to increase from R39.4-billion in 2015 to R68.5-billion in 2020. Mobile internet access is expected to make up roughly 90% of the 2020 spend (R61.6-billion).

Pay TV isn’t going anywhere in the SA media landscape, despite internet access being much more prevalent

Despite some claims that pay TV’s days are numbered, the medium is still expected to increase its revenue through to 2020 in South Africa.

The report found that pay TV’s growth was “fuelled by both organic growth and the upselling of consumers to premium packages”.

What about print media then?

The PwC report noted that, while newspaper and magazine circulation continued to decline as a result of consumers moving to free internet-based alternatives, there wasn’t a large-scale move to paid digital outlets yet.

Advertising to continue upwards tick, but…

The advertising sector in general is slated to increase in revenue too, from R43.4-billion last year to R53-billion in 2020.

The report found that TV advertising would continue to dominate the sector. However, internet advertising “is combining scale with a great pace of expansion, and will become the second-largest contributor to revenue by 2020”, being the fastest growing E&M segment as well.

It noted that almost two-thirds of online ad spend was devoted to paid search, but social media is expected to play a part in driving future growth.

The report found that online advertising also had its significant challenges

The Entertainment and Media Outlook report also shed light on the threat of ad blocking and its possible ramifications.

“Although ad blocking [above picture via AdBlock Plus – ed] remains a concern, it is also an opportunity to improve the format, design and content of ads so as to discourage future adoption of ad blocking. Native advertising, for example, blends into the style and content of the site and has been shown to generate higher consumer engagement than traditional display ads.”

The report singled out the success of programmatic advertising globally, saying that over half of all digital ads were being traded automatically. This, PwC said, opened the door for “better targeting of premium ads”.

Digital subscriptions and the internet

Internet access is a massive driver of entertainment and media content and this is expected to grow.

“Nearly 40% of total E&M revenue will be accounted for by internet access in 2020,” the report noted.

The report also labelled digital subscriptions as the “best model for consumer growth” across sectors, specifically pointing to the success of services such as Netflix and Apple Music.

Music, video and gaming subscriptions have also been singled out as big movers in the Entertainment and Media Outlook report

“Subscription video-on-demand (SVOD) revenue from the likes of Netflix saw year-on-year growth of 106.3% to R46 million, and further growth of 53.7% CAGR is predicted to 2020,” the report said of subscription-based video services.

“The launch of Apple Music provided a major boost to digital music streaming revenue, both in terms of the company’s uptake and the wider sub-segment, with all streamers thought to have seen a boost due to the enhanced awareness that Apple’s launch seemed to create among consumers. Another year-on-year rise above 100%, to R74-million, was the result.”

Even subscription services such as PlayStation Plus and Xbox Live were cited as examples by the PwC report.

“Within video games, too, online/microtransaction revenue is boosted by the healthy recurring payments of the subscription models espoused by the likes of Playstation Plus, Xbox Live and Steam.”

Speaking of video games…

Between the ever-increasing prize money and Supersport’s coverage, the past year has seen eSports take huge strides in South Africa.

The report found that internet access was having a “positive, and at times transformative” effect on several consumer sectors, including the “rapidly developing” eSports sector.

In fact, the rise of eSports and gaming as a whole pushed SA online and microtransaction PC game revenue up 15.1% last year, PwC reported.

Competitive gaming has seen a boost around the world – South Africa is no exception

“The continued rise of eSports had positive repercussions too: 2015’s iteration of The International, a hugely popular tournament for the game Defense of the Ancients 2 (Dota 2), saw players contributing more than US$16-million to the prize pot through the purchase of an interactive compendium of in-game items and characters,” the report added.

“The allure of such tournaments is a major reason why Dota 2 developer Valve is thought to make more than US$18 million from the game each month. The lure of games such as this in turn helped to push South African online/microtransaction PC games revenue up by 15.1% in 2015.”

Interestingly enough, physical game sales aren’t expected to dip as severely as in other markets, but the report found that it would account for 22% of the local market by 2020 (from 51.9% in 2011).