What areas have been impacted most?
PwC’s Global Entertainment & Media Outlook 2020-2024 report confirms a sharp 6.7% decline in growth for the UK sector this year compared with 2019.
The slump is driven by a collapse in the cinema box office, which will be overtaken by subscription video-on-demand (SVOD) this year as a result of social distancing.
This is unlikely to be a one-off phenomena, with PwC expecting further SVOD gains through to 2024.
The situation is mirrored by smartphone data use versus fixed-line broadband, with the former set to consolidate its lead as the go-to for internet access.
Are there any bright spots?
Looking further ahead the outlook is brighter, with the UK entertainment and media sector projected to grow by £15bn over the next five years.
Citing the industry’s strong fundamental growth trajectory, PwC forecasts growth of 6.72% in 2021.
Revenue growth as a whole is expected to run at a compound annual growth rate of 2.83% to be worth £79.8bn by 2024.
Over-the-top (OTT) video has been a natural beneficiary of changed circumstances, with revenues jumping 18.6% in 2020 to £1.6bn and predicted to rise to £2.3bn by 2024.
Video games are set to reap the benefits too courtesy of a burgeoning esports market, with the sectors growing at 9% and 15% respectively in 2020 and the video games market alone on course to be worth £6.8bn by 2024.
Cinemas have begun to show signs of recovery as people resume elements of normal life, fuelling a rebound in revenue that could see the market push 2019 levels by 2024 with revenues of £1.3bn.
Out-of-home advertising is also expected to bounce back, aided by a strong digital market, and should recover by 2022.
Live music is also adapting, with innovations such as this year’s Wireless Festival, which saw Melody VR deliver virtual performances to more than 130,000 people. It is now expected to return to 2019 revenues by 2023.
Explaining these shifts, PwC’s head of entertainment and media for the UK, Mark Maitland, said he expects ”lockdown habits” to become engrained in the long-term.
He predicts that the pandemic will accelerate existing digital disruption trends, stating: ”Industries that are forecast to claw back their lost revenue are ones being driven by or have embraced technology as a way to connect with consumers.”
Analysis
Tom Jarvis, founder of digital marketing agency Wilderness said the coming recovery seems "hard to fathom"
He said: "This industry relies on both in-person attendance at cinema and events and also the production of these same things. We’ve had most of a year without either. No events, no films to attend - and none being made - an impact that’s not really being discussed, but that we’ll be feeling this winter.
"TV and streaming are compensatory, but are they really enough to compensate for a complete recovery? Recalled production likely means not."
He said there are three assumptions at play.
"The first is the idea that we’re now on a steady trajectory of reopening. If there are any more lockdowns, these figures won’t apply. Looking at the rest of Europe, a steady continual reopening looks unlikely.
"The second assumption is that in 2021, we’ll see a financial ‘return to normal’. But of course we’ll be dealing with an absolutely enormous recession. Once there is a vaccine, or widespread regular testing, whichever route gets us back to ‘freedom of behaviour’, those who have disposable income will be making tough choices: a holiday or Glastonbury? A meal out or a cinema trip?"
The projected bounce for the cinema feels like the hardest to fathom, he said.
"The suggestion is that cinema will be back to almost 2019 levels by 2024. That’s a long time to wait. With the average Brit just making 2.6 visits to the cinema a year, it doesn’t take a huge reduction to make a big impact.
"The third assumption is that once the ‘vaccine/covid ending’ switch is flicked, behaviours will flip back too. Quite aside from the financial impact, covid will have also permanently changed some behaviours and motivations."
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