Web access drives entertainment spend
Increased Internet access will generate more consumer spend than any other media product or service in the next five years in the South African entertainment and media industry, says PricewaterhouseCooper's (PwC's) South African Entertainment and Media Outlook: 2014 to 2018.
According to the research house, the country's entertainment and media market is expected to grow by 10.2% compounded annually (CAGR) from 2014 - 2018, to a value of R190.4 billion. By far the largest segment will be the Internet. Combined revenue from Internet access and Internet advertising will account for an estimated R71.6 billon in 2018, or 37.6% of total revenue, says the report.
Vicki Myburgh, entertainment and media industries leader for PwC South Africa, says: "Growth in the South African entertainment and media industry is largely being driven by the Internet and by consumers' love of new technology, in particular mobile technology, such as smartphones and tablets, as well as applications powered by data analytics and cloud services. Technology is increasingly being driven by consumers' needs and expectations."
However, PwC associate director Charles Stuart warns online entertainment and content streaming is unlikely to create a serious disruption for traditional TV providers, as South African users are still largely constrained by the cost and dearth of bandwidth.
"There are certainly developments in this space. MTN has been talking about VOD [video-on-demand] services, as has Telkom. We've also seen the launch of two VOD services [Times Media's Vidi and Altech's Node] in as many weeks, but high data costs, especially mobile bandwidth, remain a big challenge."
Confirming local users' massive appetite for video content are the results of a new social media study - conducted by World Wide Worx and Fuseware - which shows YouTube has slotted into second place in terms of monthly active users. The video content platform has seen a surge of 53% among local users, boasting 7.2 million monthly active users in SA. Facebook remains the most popular social network platform, with 11.8 million local monthly active users.
"There is tremendous growth in the online entertainment sector, but it is coming off a very low base. Online entertainment is certainly a growing feature in the local Internet space, but it is not about to eat into television's multibillion-rand-a-year market," says Stuart.
According to the PwC study, television is the second-largest growth segment, with combined revenue from TV subscriptions and advertising projected to reach R39.6 billion in 2018. The study shows advertising accounted for 38% of revenue in the entertainment and media industry in 2013, although this share is expected to fall to 33% in 2018, largely due to Internet access increasing its market share significantly over the same period.
Aside from the Internet, the study predicts the fastest growth will be seen in video games and radio, which will grow at 9% and 8.2%, respectively. "Video games has made the greatest transition to digital, largely due to the popularity of mobile gaming, but also because of the increased potential for digital distribution of console games," adds Myburgh. The study projects that 27% of console revenues are forecast to be digital in 2018.