Overall TV revenue should decline by about 4% over the next five years, due mainly to the descent of home video sales, but cable and internet video companies should enjoy healthy gains into the next decade, according to PricewaterhouseCoopers.
In its much-anticipated Global Entertainment and Media Outlook 2017-2021, PwC believes that overall TV revenue will fall from $109.04 billion in 2016 to $105.04 billion by 2021. That decline is due almost entirely to the fall-off of home video sales, which PwC sees declining at a 13.4% annual clip through 2021.
Subscription TV, which just went through its worst first quarter ever – declining by about 762,000 subs in the period – is expected to show a slight gain to $101.1 billion in 2021 from $100.9 billion in 2016. Driving that increase is the steadying of subscriber losses in cable to about 0.1% annually from 2017-2021, compared to 2% in 2015 and 1% in 2016.
While cable’s unique broadband infrastructure is expected to keep subscriber losses at a minimum over the next five years, PwC also sees a similar advantage for cable networks. According to PwC, cable ad revenue is expected to grow by 15.6% between 2017 and 2021, from $21.8 to $25.2 billion, while broadcast ad revenue should grow by 5% to $18.9 billion from $18.0 billion.
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In an interview, PwC US Technology, Media and Telecommunications Leader Mark McCaffrey said the ability to target ads is going to play a huge role in cable’s ability to attract ad revenue.
“They’re banking on the fact that the content will attract more viewers and that will create more opportunities for the advertisers,” McCaffrey said. “When you look at analytics and being able to align more [with] who is watching what program and the social end of it that will attract more advertising dollars.”
Internet video is expected to be the biggest beneficiary of targeting, and PwC expects near exponential growth from that sector over the next five years. According to PwC, subscription video on demand revenue is expected to rise 71% from $8.2 billion in 2016 to $14.03 billion in 2021.
While Netflix continues to dominate that space, McCaffrey said other newer entrants will also play a role.
But the PwC exec said any success will come down to how well operators and programmers serve the user.
“We’re facing the day of the user,” McCaffrey said, adding that is who will determine the ultimate direction the industry will take. “The trick is going to be to use technology to create that relationship with the user so you know where their tipping points are on certain items and you can react to it, knowing that even that same user’s views may change next month.”
