After the rebound comes the correction. In 2021, as the world began to emerge from the depths of the covid-19 pandemic, total global entertainment and media (E&M) revenue leapt by 10.6%. In 2022, new concerns, ranging from the uncertainties of war to a squeeze on consumers’ finances, took hold, and the industry’s revenue growth decelerated sharply to 5.4% (a rate that’s still healthy and impressive by historical standards). Over the coming five years, a colder reality will continue to bite, with global E&M revenue growth slowing sequentially, year-on-year; in 2027, industry revenue will rise just 2.8% from 2026.
The main brake on growth? Consumer spending. Beset by inflation, grappling with disruptions and the consequences of geopolitical tensions, consumers are pulling back. The consumer spending category of E&M will grow at a CAGR of only 2.4% between 2022 and 2027, triggering a major tipping point. Though consumer spending has historically been the largest of the three categories of E&M spending tracked in PwC’s Global Entertainment & Media Outlook, it’ll be overtaken in 2025 by advertising, which, fuelled by buoyant digital advertising, is expected to rise at a five-year CAGR of 4.5%. By 2027, consumer spending will slip behind internet access spending and become the smallest of the three main categories.
It isn’t hard to see why the industry’s revenue balance is shifting. Consumers’ spending on E&M products and services is declining as a share of their wallet. But e-commerce and time spent on digital platforms continue to grow. As a result, companies are looking to reach consumers not just at the point of purchase but at the point of decision—hence the strong growth in digital advertising dollars. However, even as digital advertising grows, it’s also getting spread more broadly: the share of global digital advertising claimed by the Meta–Alphabet duopoly is estimated to have slipped below 50% in 2022—as revenue from ad-supported video on demand is projected to nearly double over the next five years.
The streaming industry’s decision to embrace advertising is just one aspect of a renewed focus on restoring capital discipline and margins that spans E&M sectors. Advertising, a hotspot for growth, is central to this push, with the global ad revenue pot approaching US$1 trillion a year by 2027. But there are also several other enticing pools of revenue. Take video games, now coming into their own as a medium for creativity, with total revenue set to rise at a 7.9% CAGR to US$312 billion in 2027. Or live and in-person events, a rare bright spot for consumer spending, with a projected five-year CAGR of 9.6%. Or—looking at growth from a geographic perspective—the Asia market, powered by China’s advertising and consumer spending revenue expanding at a 6.1% CAGR over the forecast period (more than twice the rate of the US).
Across and beyond such segmented and geographic hotspots, opportunities for growth in E&M are being created by the convergence of new and existing technologies. As the metaverse’s hype cycle tails off, it’s regaining strength as a richer, more immersive environment for gaming, entertainment, work and commerce. But the metaverse has already been supplanted in the headlines by generative AI, with OpenAI’s ChatGPT rocketing to 100 million users in just two months. (It took Twitter more than five years to reach that milestone.) Generative AI’s applications in E&M range from automating routine tasks to dramatically accelerating content production to personalising and targeting ads more efficiently at scale.
As new technology uptake and experimentation continue, rising interest rates and the renewed focus on capital discipline have contributed to a dip in E&M mergers and acquisitions. Efficiency and scale are now the main motivations for deals. The US$43 billion Warner Bros.–Discovery merger, completed in April 2022, has been followed by efforts to restructure, reposition and refocus. In February 2023, the Competition Commission of India conditionally approved the US$10 billion merger between Zee Entertainment and Sony Pictures Entertainment. And there’s one megadeal still pending: Microsoft’s proposed US$68.7 billion acquisition of Activision Blizzard. At the time of writing, competition regulators in the EU have cleared the transaction, while their counterparts in the UK and the US are still blocking it, at least for now.
Regulation is a recurring theme: the combination of tightening data privacy rules in many jurisdictions and the imminent death of the tracking cookie by 2024 have intensified the search for ways to offer consumers personalised and targeted advertising and content while allowing them to remain anonymous. Much of this activity has focused on setting up clean rooms: secure data-storage and processing environments where users’ personally identifiable information is effectively anonymised. Meanwhile, the EU’s General Data Protection Regulation (GDPR) continues to influence data privacy regimes worldwide, with the US readying its own version, the American Data Privacy and Protection Act. Efforts to regulate—and self-regulate—will only take on greater importance as the E&M industry grows ever more reliant on digital products and services.
More tipping points loom, like global 5G penetration surpassing that of 4G in 2025. Meanwhile, themes such as regulation, personalisation, AI and virtual reality will remain central to E&M experiences. But whatever pathways to growth open up, it will be imperative for E&M players to identify a clear purpose and then innovate to deliver on it—which is really how things have always played out in this most creative of industries.