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Internet will drive media revenue

South Africa’s entertainment and media sector is expected to grow from R126 billion last year to R173 billion by 2020, with the internet set to be the key driver, according to a PwC report.

The local internet access market is set to rise from R39.4 billion last year to R68.5 billion in 2020, as fixed and mobile broadband become essential utilities.

The PwC report predicts growth will be seen in the video game market, filmed entertainment and television segments.

PwC Southern Africa entertainment and media industry leader Vicki Myburgh said: “As internet revenues continue to rise, the forecast for newspaper and magazine circulation is on the decline as consumers migrate from print to free online alternatives, and aren’t as yet moving to paid digital formats in great numbers.”

Something that is concerning for publishers is that digital advertising is under added threat because of competition from Facebook and Google.

Smartphone connections in South Africa are forecast to grow by about 160% from 24.8 million last year to 64.6 million in 2020, leading to a penetration rate of 60% that will fuel mobile internet access revenue growth.

Totally, online advertising spend grew 23.6% last year to reach R3.8 billion. By 2020, this figure will rise to R8.2 billion.

Paid search comprised 62% of internet advertising revenue last year.

South Africa has the largest TV market in Africa and continues to grow strongly with pay TV subscription revenues expected to expand to reach R25.2 billion in 2020.

Pay TV penetration will reach 42% by 2020, as the country adds an extra 2.1 million households to the market over the forecast period.

Online TV advertising revenues remain in their infancy and will account for just 0.1% of TV advertising revenues in 2020.

The video game market is expected to reach R3.7 billion by 2020, up from R2.8 billion last year.

By contrast, the newspaper market in South Africa is expected to be R1 billion smaller than last year. In 2015, total newspaper revenue was worth R9.1 billion, but this figure will drop to R8.1 billion in 2020.

“Circulation figures are also forecast to start declining, as price rises are unable to compensate for the declining numbers of copies sold,” PwC said.

“South Africa’s consumer magazine market is also forecast to see a decline in later years. A growing number of South Africans are accessing magazine content and websites via their smart devices, but the boom in smartphone and tablet ownership will be the biggest driver for digital magazine revenue growth over the forecast period,” the report added.

Physical music revenue continues on a downward trajectory, but digital music streaming revenue is forecast to rise from R74 million in 2015 to R437 million in 2020.

South Africa’s total entertainment and media advertising revenue is expected to rise from R43 billion in 2015 to R53 billion in 2020, with only newspaper advertising revenue forecast to take a downward turn.

“TV advertising continues to dominate the market, but internet advertising is combining scale with a great pace of expansion, and will become the second largest contributor to revenue by 2020,” the report stated.

Turning to Nigeria, PwC said the country had one of the fastest-growing markets in the entertainment and media industry, and put the value of it at $3.8 billion (R52.3 billion).

“Internet advertising will see the fastest growth over the forecast period, and will come predominantly in formats designed for cellphones, in keeping with the prevailing method of internet access in the country,” the PwC report said of Nigeria.

Kenya’s total entertainment and media industry was worth $2.2 billion in 2015 and was expected to be worth $3.3 billion by 2020.

PwC said that, in the entertainment and media sector, content remained king. A key trend that PwC identified was the ability of consumers to design and curate their own media diet. PwC said that today’s entertainment and media market included technology companies racing to become hybrid content companies.

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