PwC outlook: High cost of living made last year tough for entertainment and media industry

A man putting cash into his pants pocket. Picture: Karen Sandison/Independent Newspapers.

A man putting cash into his pants pocket. Picture: Karen Sandison/Independent Newspapers.

Published Nov 8, 2023

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Last year was a challenging year for Africa’s entertainment and media (E&M) industry as steep cost-of-living increases caused consumers in South Africa, Kenya and Nigeria to re-evaluate discretionary spending on E&M products and services.

Despite this, PwC’s latest Africa Entertainment & Media Outlook 2023-2027 report indicated that strong growth was expected across multiple segments, with all markets ahead of pre-Covid revenue levels.

Alinah Motaung, the PwC Africa entertainment and media leader, said that as the global economy struggled to return to normality, the E&M ecosystem faced setbacks.

“Falling stock markets, rising interest rates and the tapering of pandemic-era growth trends have led to slower rates of expansion as compared to the rebound growth experienced in 2021. The slowdown, caused in large measure by sluggish consumer spending, is pushing companies to reset expectations, refocus inward and seek ways to recharge growth,” Motaung said.

In the face of the challenges, overall revenue rose last year. The firm’s latest Outlook observed how despite continued change and disruption, the industry reassessed its strategies, refocused on core operations and revised some key assumptions.

Charles Stuart, the PwC South Africa entertainment and media partner, said growth in South Africa’s E&M market stabilised last year; however, the growth was expected to outpace the global average.

“Nigeria is expected to experience the strongest growth in E&M revenue, with revenue expected to more than double from 2022 to 2027. While newspapers, consumer magazines and books are forecast to continue to decline in South Africa and Nigeria, Kenya is forecast to achieve growth across all segments,” Stuart said.

Growth in South Africa’s E&M market stabilised to 8.8% last year, down from 15.4% in 2021 when the market was rebounding after the end of the Covid-19 pandemic. Growth continued to be healthy and would outpace the global average over each year of the forecast period.

Total revenue would increase from R176.7bn last year to R231.2bn in 2027, at a 5.5% compound growth annual rate (CAGR). The market would see strong growth in over-the-top (OTT) and cinema, but the largest revenue gains would come from growth in the Internet access segment, as new users took out subscriptions to mobile and fixed broadband services, and existing customers upgrade their packages.

Stuart said of the three markets covered, Nigeria would have the most impressive growth story, with the country set to see E&M revenue growth at a 16.5% CAGR to 2027.

Kenya’s E&M market saw revenue growth of 9.8% last year to total US$2.3bn. Unlike South Africa and Nigeria, all E&M segments were set to rise to 2027, with revenue reaching US$3.2bn in that year. Internet advertising and OTT video would be the fastest-rising segments in Kenya.

OTT revenue would more than double from US$6.0m in 2022 to US$14.2m in 2027.

Like South Africa and Nigeria, Kenya’s internet access segment would see the largest increase in revenue. By the end of the forecast period, mobile internet penetration would stand at 58.0% in Kenya, and mobile would take an 83.9% share of internet access revenue.

Last year, advertising became a key factor that forced industry leaders to reassess and reinvent how they operated. Competition for consumers’ attention, and the revenue that follows, was heightening, thanks in part to a steady stream of new entrants.

Motaung said streaming services were continuing to apply pressure to traditional TV services, with many forgoing them and paying for services that instead provided an abundance of on-demand video content.

The music streaming market continued its march across South Africa, Nigeria and Kenya, with strong growth being experienced in music streaming subscription revenue. Stuart said Spotify had grown a sizeable foothold in South Africa.

“South African users have streamed more than 1.2bn hours of music since Spotify launched in 2018. The service has also benefited more local artists, however South African musicians have struggled to generate a significant income from music streaming."

Gen AI has infiltrated almost every industry since it took the world by storm in 2022. Parts of the E&M industry have reacted to gen AI with concern, however some regulations have been established to regulate its use in the industry.

The roll-out of fast and reliable 5G networks was progressing in Africa, but efforts were being hampered by multiple factors including regulation, affordability, geography and investment.

5G smartphones accounted for 19.3% of global connections last year, compared to 3.1%, 2.1% and 1.2% in South Africa, Kenya and Nigeria respectively.

Motaung said that despite the low uptake of 5G, African markets were mobile-first, with fixed broadband penetration levels below the global average.

Stuart said establishing robust internet connectivity in Africa’s key growing economies would underpin and facilitate the growth moving forward, with opportunities for consumers and advertisers across music and video streaming, gaming and the metaverse all reliant on fast and reliable Internet access.

Motaung said international and domestic players alike were investing in local content and services to attract audiences and keep them engaged in an increasingly crowded landscape.

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