The Resilient Entertainment and Media Industry: Navigating Disruption and Driving Growth

Despite facing economic headwinds, technological disruption, and increased competition, the global entertainment and media (E&M) industry demonstrated remarkable resilience in 2023, with total revenues rising 5% to .8 trillion. This growth outpaced the overall 3.2% global economic expansion, underscoring the industry's ability to adapt and thrive in the face of challenges.

Powering the Future of Entertainment and Media

Gaming: The Fastest-Growing Sector

The gaming industry continues to be a standout performer, with global revenue hitting 6.3 billion in 2023, a 4.3% increase. This growth trajectory is expected to continue, with gaming revenue projected to reach 1.4 billion by 2028, representing a compound annual growth rate (CAGR) of 8.2%. This is nearly double the CAGR of 3.9% for the broader E&M industry.Asia Pacific remains the largest regional market for gaming, accounting for 48.1% of the global total in 2023. By 2028, the region's share is expected to rise to 54.4%, or 1.8 billion. This growth is driven by a combination of factors, including a young, tech-savvy population, rising disposable incomes, and a thriving esports ecosystem.Despite the industry's impressive performance, gaming companies have not been immune to the broader economic challenges. Layoffs and cost-cutting measures have been observed, as companies strive to maintain profitability in the face of rising costs and shifting consumer preferences. However, the industry's long-term growth prospects remain strong, with new revenue streams, such as in-game advertising and cloud gaming, poised to drive further expansion.

Streaming Services: Adapting to Changing Dynamics

The streaming industry has experienced a period of rapid growth, with global subscriptions to over-the-top (OTT) video services expected to rise from 1.6 billion in 2023 to 2.1 billion by 2028, a CAGR of 5%. However, the industry is facing increased competition and challenges in getting consumers to pay more for digital content.To address this, leading streaming platforms are reshaping their business models, introducing ad-based variants, cracking down on password sharing, and investing in live sports and other "appointment viewing" content to attract both subscribers and advertisers. By 2028, advertising is projected to account for 28% of global streaming revenues, up from 20% in 2023.The streaming industry is also undergoing a wave of consolidation, with players seeking to create bundled offerings and leverage economies of scale. In developed markets, this trend is exemplified by the return of the "bundle," as major players like Disney and Warner Bros. Discovery team up to offer comprehensive entertainment packages.

Advertising: The Driving Force of Growth

Advertising has emerged as the real growth story in the E&M industry, with global advertising revenue expected to grow at a 6.7% CAGR through 2028, outpacing the growth in connectivity (2.9%) and consumer spending (2.2%).The rise of internet advertising, which is projected to account for 77.1% of total ad spending by 2028, is a key driver of this growth. Addressable, measurable ads delivered on connected TV (CTV) platforms are also expected to double, from .5 billion in 2023 to .2 billion in 2028.As consumer attention shifts away from traditional television to user-generated and short-form content, advertisers are exploring new approaches, such as leveraging influencers, offering experiential promotions, and tapping into emerging technologies like generative AI to enable more creative and engaging messaging.

Generative AI: A Transformative Force

The emergence of generative AI (GenAI) has significant implications for the E&M industry, with the potential to revolutionize content creation, advertising, and more. While much of the initial focus has been on using GenAI to improve efficiency and reduce costs, the industry is now exploring how this powerful technology can lead to greater value creation.GenAI can be used to quickly develop and iterate on creative approaches for advertising, enabling companies to respond more effectively to consumer attention and uptake. Additionally, GenAI can be integrated into content creation tools, streamlining and accelerating production processes across various media, from anime and comics to live-action entertainment.The industry is also grappling with the challenges posed by GenAI, such as the need to control its use and ensure the rights and payments of creators are protected. As the speed and quality of AI-generated content continue to improve, the industry will need to find the right balance between embracing the technology's benefits and safeguarding the creative ecosystem.

Global Opportunities: Diverse Growth Trajectories

The E&M industry's growth is not evenly distributed across regions and countries. While the United States remains the world's largest market, representing more than one-third of global spending in 2023, its growth rate of 4.3% CAGR through 2028 is slower than the global average of 4.6%.Emerging markets, such as Indonesia and India, are experiencing rapid growth, with CAGRs of 8.5% and 8.3%, respectively, through 2028. China, the second-largest market, is also projected to grow at a robust 7.1% CAGR during the same period.These high-growth regions are characterized by young, tech-savvy populations with increasing purchasing power, as well as supportive government policies and investments in the E&M sector. For example, the Indonesian government is actively working to address challenges in areas like funding, talent, infrastructure, and regulation to foster the industry's development.The diversity of growth trajectories across the globe underscores the need for E&M companies to adopt a nuanced, localized approach to capturing opportunities and navigating the evolving competitive landscape.

The Evolving Landscape: Balancing Disruption and Opportunity

The global entertainment and media industry continues to navigate a dynamic and ever-changing landscape, marked by both challenges and opportunities. While economic headwinds, technological disruption, and increased competition have tested the industry's resilience, the sector has demonstrated its ability to adapt and thrive.The gaming industry's remarkable growth, the streaming services' business model reinvention, the rise of advertising as a driving force, and the transformative potential of generative AI all point to the industry's capacity for innovation and reinvention. At the same time, the industry must grapple with the complexities of global markets, shifting consumer preferences, and the need to balance creativity, technology, and profitability.As the E&M industry looks to the future, the key to success will lie in its ability to remain agile, consumer-centric, and willing to embrace the disruptive forces that continue to shape the landscape. By leveraging the power of new technologies, diversifying revenue streams, and fostering a collaborative ecosystem, the industry can navigate the challenges and capitalize on the abundant opportunities that lie ahead.