UK entertainment and media firms are holding their nerve against a backdrop of economic turmoil, opting for digital investment over cuts.
While there is short-term uncertainty in the market, confidence and growth can be seen in the long-term direction of the entertainment and media (E&M) industry, according to a new report from PwC.
The big four firm forecasts the UK E&M industry to climb at a compound annual growth rate of four per cent over the next four years with revenues reaching £97bn by 2026.
This growth was reflected by the enhanced investor appetite over the year, with deal activity in the sector up 72 per cent in 2021 compared to the previous year, like Microsoft’s snap up of Activision Blizzard for a record $68bn.
“While investor confidence has slightly softened in the face of economic headwinds, we still expect high deal volumes in the years ahead,” Pwc’s Dan Bunyan said. “Platforms that can help brands discover and engage with customers in new environments will become increasingly valuable.”
Rising inflation is also a point of contention for content providers and advertising businesses, with the trend of consumers switching down subscriptions, coupled with rising production costs, expected to eat into margins.
However, Bunyan said: “While some advertising budgets may come under pressure in the current economic climate, it will also mean advertising will represent good value for those that continue to invest in their brand and use advertising to drive new sales”.
He explained it was up to media owners to make the case for marketing protection during an economic downturn. “While it’s always wise to be cost-conscious, there is good reason to retain a growth mindset even in the face of economic headwinds,” he added.
With consumers spending more time online, a habit they have stuck with post pandemic, the report shows how advertising spend will follow this trend. Internet advertising revenue is expected to grow at a CAGR of six per cent over the next four years with the lion’s share of revenue coming from mobile.
Video advertising will account for a significant portion too, almost £9bn by 2026 and by the end of the forecast period internet advertising will make up a third of the UK’s overall E&M revenue.