With growth forecast at 4% p.a. over the next four years - the second fastest growth rate in Western Europe - UK E&M revenue for next year will see the UK become the leading market in Europe and by 2026 revenue is anticipated to generate £97bn, according to the Outlook.
Mary Shelton Rose, partner and UK technology, media and telecoms leader at PwC, said: “The UK entertainment and media market is forecast to emerge from the past few years of uncertainty to greater clarity about the underlying forces driving sustainable growth.
“A vision of what the dynamic E&M landscape will look like in 2026 is coming into focus - an industry that is more digital, more mobile, and more dependent on advertising in all its forms.”
Over time, the increasing availability of compelling E&M content, services, and experiences will attract a greater share of consumers’ attention (and advertisers’ investment). The UK is in a great position to benefit as a leading content creator and advanced digital adopters.
One of the strengths of the UK is the ready availability of high-speed internet access. The Outlook shows spending on internet access, both at home and on mobile is forecast to grow at a CAGR of 5%. Growth continues to be driven by mobile internet access which is forecast to overtake fixed broadband access next year and then beyond and by the end of the forecast period account for 53% of total internet access revenue.
With high levels of ecommerce and online shopping in the UK, businesses continue to deploy the majority of their advertising budgets online. Internet advertising revenue is forecast to grow to £26bn this year and by 6% p.a to 2026 which will equate to just over a third of overall E&M revenue. This will also be led by mobile, with mobile internet advertising accounting for two thirds of internet advertising revenue by the end of the forecast period.
Dan Bunyan, partner at PwC Strategy&, said: "The Outlook tells a story of evolving consumer behaviours and the advertising money that follows them. While consumers aren’t faced with Covid restrictions anymore, many of their consumption habits have remained - with online channels and digital spaces sustaining high attention and engagement. As such, new content and advertising money continues to follow.
“Digital platforms will be underpinned by improving infrastructure. Mobile operators continue to develop their 5G propositions and the majority of broadband connections are expected to be high speed by next year. With more consumers than ever online, growth will be driven by brands engaging with people where they are, to build awareness and influence purchasing decisions.
“However, with geo-political and economic headwinds (including rising inflation) on the horizon, revenue growth may slow in the near future if advertising performance is not sustained or consumption reduces. However, the sector has shown strong underlying resilience against previous challenges.”
The UK will continue to be the leading market for over-the-top (OTT) video in Western Europe and the third largest market globally after the US and China. Overall UK OTT video revenue is forecast to reach £3.6bn this year before growing at 6% p.a. over the forecast period.
Virtual reality and mobile augmented reality revenue will almost double during the forecast period. The UK will remain the largest VR market in Europe, Middle East and Asia and the growth for the sector is forecast to be driven primarily by video games content with the sector set to build on the success of the Meta Quest 2 headset. Advertising will drive revenue in the UK’s mobile AR market with branded filters becoming more of an important vehicle on photo and video-sharing apps.
Dan Bunyan, partner at PwC Strategy&, added: “OTT video has been one of the biggest beneficiaries of the shift to spending more time at home and the UK market is proving to be one of the largest markets globally for the biggest players. While we expect growth to fall back to a more modest rate, we expect some price increases in services to drive revenue in the forecast period since the pool of potential new subscribers gradually reduces. More OTT video providers venturing into live sport will also present new opportunities and options for consumers.
“Compared with other consumer devices in the UK, virtual reality remains a small segment, but it is making steady progress in terms of adoption levels. Virtual reality content is inherently tied to the VR headsets sold, and the market has faced the ‘chicken-and-egg’ problem in recent years. But the recent improvements to VR headset technology, lower-priced headsets and the release of games from high-profile developers will encourage more consumers to invest in VR over the forecast period and could see the metaverse experience expand.”
In summary:
- Growth in 2023 will see the UK become to the largest market in Europe overtaking Germany
- Digital consumption set to drive UK E&M revenue to almost £100bn by 2026 the largest in Europe
- Internet advertising spend forecast to make up over a third of total E&M revenue by 2026
- Virtual and augmented reality forecast to grow at a rate of 17% p.a.
- Spend on home and mobile internet will account for a fifth of entire E&M revenue by 2026.
