The local entertainment and media industry has reached the “end of the digital beginning” with companies in the space accepting digital as the new normal.
This is according to the third annual “South African Entertainment and Media Outlook” by professional services firm, PricewaterhouseCoopers (PwC). The study uses five-year historical data and forecasts how the sector may grow and change over the next five years.
According to the study, digital spending in the South African media and entertainment industry will increase at an approximate 21% compound annual rate over the next five years.
“Although comprising 20.4% of overall spending in 2011, digital channels will generate 52% of the total increase in spending during the next five years,” says PwC. Digital spend is also expected to comprise 32.6% of the total entertainment and media market in SA.
Entertainment and media industries leader for PwC Southern Africa, Vicky Myburgh, says the key drivers are improved broadband penetration, the expansion of the Internet market, and the growth of consumer spend on digital products.
“We believe that the industry is at the end of the beginning of its digital journey. Entertainment and media companies have made a commitment to the delivery of digital entertainment and are now in the process of making the necessary changes to their products and organisations.”
Myburgh adds that recently companies in the entertainment and media space have started using much clearer and more focused language when it comes to digital strategies. “There was a huge amount of uncertainty over the last few years, but increasingly the 'fog' is starting to lift. There's certainly a much higher level of comfort with digital - it's being seen more like business as usual.”
According to Myburgh, the study confirms that digital products and delivery present the greatest growth opportunities for growth in the immediate future.
“The core challenge for entertainment and media companies lies in how to remain relevant to their consumers and business customers in a way that differentiates them from their competitors. There are long-term structural and organisational changes that are needed right across the industry.”
Consumer shifts
From a consumer perspective, Myburgh says there has been a noticeable shift in baseline habits around content consumption from traditional to digital.
Another key trend picked up on the consumer side is the decreasing tolerance of infrastructure and rights barriers to accessing content. This is particularly problematic for sectors such as music, where consumers have had to essentially be 're-educated' to pay for content they had become accustomed to downloading for free.
With recent statistics showing that on average, one in five minutes spent online are spent on social media, Myburgh says the space offers an extremely rich source of data that is still relatively untapped.
In the advertising space, Myburgh says South African advertisers are still grappling with how to effectively advertise in the social media space and to harness the targeting opportunities the social networks present.
While the effectiveness of advertising on platforms such as Facebook has been publicly questioned, Myburgh believes the problem lies not in the platforms themselves but with the advertisers who are yet to effectively innovate in the space - especially in terms of developing accurate measurement tools.
Smart devices
According to the study, both globally and in SA, the past year has seen the sales of tablets and smart devices reach record levels despite the economic climate - underlining the growing revenue opportunities in the digital space.
The Internet is expected to be the fastest growing sector within the next five years, with a projected 20.3% compound annual increase. “Broadband and mobile access growth coupled with double-digit increases in Internet advertising will drive this market,” says PwC.
“Television is expected to be the next fastest-growing segment, with a projected 10.3% compound annual increase. Out-of-home advertising will be next at 9.3% compounded annually, driven by an increase in the penetration of digital screens, which provide more potential in terms of revenue as the same site can accommodate multiple advertisers.”
Myburgh says, while there has been a focus on the degree of digital penetration (and this will still be important in the South African context for a while to come), it is becoming more important to focus on how companies are grabbing the digital opportunities and running with them.
“As the landscape becomes clearer, it's increasingly evident that old and new media, or analogue and digital formats, are not mutually exclusive. The key in areas from pricing to delivery models and from collaboration to consumer privacy are flexibility and inclusivity.
“By embracing digital as the engine of their business, companies can position themselves to meet consumers' changing demands through any channel and format - and more effectively and more profitably than ever before,” concludes Myburgh.
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