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UK entertainment and media industry forecast to return to growth and be the biggest market in Western Europe by 2025

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The UK’s entertainment and media industry is forecast to return to growth this year and continue to grow over the next four years driven by sectors liberated from Covid restrictions according to PwC’s latest Global Entertainment & Media (E&M) Outlook. By 2025, the UK is set to overtake Germany as the biggest E&M market in Western Europe by revenue.

After the Covid pandemic caused total UK E&M revenue to fall 5% in 2020, PwC forecasts growth will rebound 9% this year and over the forecast period at a compound annual growth rate (CAGR) of 5% outpacing the expected growth in E&M revenues at a global level. By 2025, the UK’s E&M sector is expected to be worth £88bn with only the US, China and Japan worth more globally.

Mark Maitland, UK head of Entertainment and Media at PwC, comments: “UK consumers’ rapid migration to digital behaviours in the pandemic has now become embedded in their day-to-day lives, helping to sustain overall growth across E&M for the coming five years. As companies race to meet consumers’ evolving needs with new products, services, and experiences, the E&M industry will become more pervasive, more immersive and more diverse”

Maitland adds:  “Some sectors have found interesting ways to navigate the effects of the pandemic –notable examples include B2B events moving to online/virtual and now increasingly hybrid formats. However, sectors such as live music have struggled to go virtual, as it’s so difficult to replicate the in-person experience online. So there’s pent-up demand in those sectors ready to be released as lockdown ends.”

Revenue recovery

These forecasts have been made against the background of an improving economic outlook. However, the UK recovery could yet be impacted by further lockdowns, so E&M forecasts may continue to evolve. We anticipate a number of disrupted sectors will see a strong growth trajectory in 2021 and 2022 e.g. Cinema, B2B Events, Live Music, and Out of Home as lockdown restrictions are eased.

Changing consumer behaviours, adoption of digital platforms and new distribution channels have led to a number of structural changes in some sectors. These will take time to recover and/or may not return to pre-pandemic levels. Total cinema revenue isn’t forecast to return to pre-pandemic levels, and B2B Events will not return to previous levels for a number of years.

Power shifts

The UK’s position as an early and heavy adopter of digital solutions has accentuated some key trends such as consumer spend on over-the-top (OTT) video streaming. Its forecast spend on OTT video will grow 14% in 2021, outpacing global growth and set to rise at a CAGR of almost 8% to 2025. Internet advertising has also benefited from the nation’s high level of digital maturity, use of online/social platforms and ecommerce activity.

Internet advertising outperformed expectations in the pandemic, growing overall by 5% in 2020 (with display advertising increasing by 11%) as non-digital advertising saw double digit declines. This divergence reflects how digital gained share during the pandemic as consumers moved quickly to online platforms for content, commerce, entertainment and games. Digital advertising is forecast to continue to forge ahead, rising at a CAGR of almost 8% over the next four years, twice as fast as non digital.

Dan Bunyan, Director at PwC Strategy&, says: “The UK reflects a number of the macro and global revenue shifts taking place. However the UK E&M sector is also experiencing a number of its own distinctive trends. In 2020, the pandemic accelerated changes in consumer behaviour that have brought forward digital disruption tipping points by several years.”

He adds: “These shifts are playing out almost everywhere in the entertainment and media sector. Whether it’s box office revenues shifting to streaming platforms, rising eCommerce helping to boost digital advertising, creators of user-generated content tapping into new audiences or brands looking to find potential customers across new entertainment platforms and games, there is one common driver: changes in customer behaviour, propelled by habits gained in the pandemic, in many cases, look set to continue well beyond it.”

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