Feature: Entertainment and media industry to grow

Since emerging from the grips of the COVID-19 pandemic, various industries across Africa have rebounded relatively well after having to undergo a process of reinvention. Across the continent, key multibillion-dollar industries are navigating new challenges to meet consumer needs and retain a strong customer base.

For Africa’s entertainment and media (E&M) industry, 2022 was a challenging year. Steep cost-of-living increases caused consumers in South Africa, Kenya and Nigeria to re-evaluate discretionary spending on E&M products and services; however, PwC’s latest ‘Africa Entertainment and Media Outlook 2023–2027’ report indicates that strong growth is expected across multiple segments, with all markets ahead of pre-COVID revenue levels.

E&M revenue set to increase in SA, Nigeria and Kenya

Growth in South Africa’s E&M market stabilised to 8,8% in 2022, down from 15,4% in 2021, when the market was rebounding after the end of the COVID-19 pandemic. Growth continues to be healthy and will outpace the global average over each year of the forecast period. Total revenue will increase from R176,7 billion in 2022 to R231,2 billion in 2027, at a 5,5% compound growth annual rate (CAGR). The market will see strong growth in over-the-top (OTT) and cinema, but the largest revenue gains will come from growth in the Internet access segment, as new users take out subscriptions to mobile and fixed broadband services and existing customers upgrade their packages.

Of the three markets covered, Nigeria will have the most impressive growth story, with the country set to see E&M revenue growth at a 16,5% CAGR to 2027. This is the strongest rate of growth globally and revenue in the country will more than double, from US$6,0 billion in 2022 to US$12,9 billion in 2027. By 2027, the market will still be experiencing double-digit growth in revenue, primarily due to large gains in Internet access revenue, particularly mobile. Over the next five years, the number of mobile Internet subscribers in Nigeria will increase from 54 million to 78 million, but penetration will still be less than a third of the population in 2027.

Kenya’s E&M market saw revenue growth of 9,8% in 2022 to total US$2,3 billion. Unlike South Africa and Nigeria, all E&M segments are set to rise to 2027, with revenue reaching US$3,2 billion in that year. Internet advertising and OTT video will be the fastest-rising segments in Kenya. OTT revenue will more than double from US$6,0 million in 2022 to US$14,2 million in 2027. Like South Africa and Nigeria, Kenya’s Internet access segment will see the largest increase in revenue. By the end of the forecast period, mobile Internet penetration will stand at 58,0% in Kenya, and mobile will take an 83.9% share of Internet access revenue.

Advertising and streaming services are forcing reinvention, faster

In 2022, advertising became a key factor that forced industry leaders to reassess and reinvent how they operate. Competition for consumers’ attention, and the revenue that follows, is heightening thanks in part to a steady stream of new entrants. Disney+ launched in South Africa in May 2022 and MultiChoice agreed to a partnership with Disney to offer access to Disney+ through its DStv platforms. Meanwhile, in November 2022 Paramount announced that its streaming platform, Paramount+, would launch in Africa by 2024.

Streaming services are continuing to apply pressure to traditional TV services, with many now forgoing them and paying for services that instead provide an abundance of on-demand video content. Total TV advertising revenue contracted by -3,3% in South Africa in 2022, predominantly due to falls in terrestrial TV advertising. However, this is expected to be temporary, with the segment forecast to rebound in 2024 and increase at an overall 1,2% CAGR through to 2027. In Nigeria and Kenya, TV advertising growth will be much stronger, with CAGRs of 6,7% and 5,4% expected over the next five years, respectively.

Music streaming sees uptick

The music streaming market continues its march across South Africa, Nigeria and Kenya, with strong growth being experienced in music streaming subscription revenue. ‘Spotify has grown a sizeable foothold in South Africa,’ Stuart says. ‘South African users have streamed more than 1,2 billion hours of music since Spotify launched in 2018.’ The service has also benefited more local artists, although South African musicians have struggled to generate a significant income from music streaming.

The rise of gen AI and the metaverse

Generative artificial intelligence (gen AI) has infiltrated almost every industry since it took the world by storm in 2022. Parts of the E&M industry have reacted to gen AI with concern, but some regulations have been established to regulate its use in the industry. The South African Artificial Intelligence Association (SAAIA) launched in June 2023 with to promote the advancement of responsible AI in South Africa. In August 2023, Nigeria’s National Information Technology Development Agency announced the launch of a national AI strategy. The strategy is intended to utilise AI for sustainable development, job creation and social inclusion.

On the metaverse front, there is solid engagement in South Africa. A survey by cybersecurity company Kaspersky has found that 61,3% of workers in South Africa believe that the metaverse will be transformative for industries. Many companies are involved with metaverse projects, with 69,6% of respondents saying their companies are planning or actively working on them.

Mobile is the key driver of Internet access in Africa

The rollout of fast and reliable 5G networks is progressing in Africa, but efforts are being hampered by multiple factors such as regulation, affordability, geography and investment. In May 2023, Nigeria had over 700 5G sites across 13 cities, while Kenya had 370 sites in July 2023, intending to add 595 new sites by the end of March 2024.

5G smartphones accounted for 19,3% of global connections in 2022, compared to 3,1%, 2,1% and 1,2% in South Africa, Kenya and Nigeria respectively. Despite the low uptake of 5G, African markets are mobile-first, with fixed broadband penetration levels below the global average. Low rates of uptake are particularly pronounced in Nigeria and Kenya, where fixed broadband penetration is below 10%. Penetration is higher in South Africa, at 43,3% in 2022, albeit still significantly lower than the global average of 76,1%. The rollout of 5G will enable consumers to access and engage with data-heavy services and platforms on the go.

Innovative thinking and creativity needed for the road ahead

In the coming years, there will be more inflection points beyond the continued rise of advertising and the growth of digital. Continued rollout of 5G will see its penetration almost surpassing that of 4G by the end of the forecast period − a tipping point that will be reached globally in 2025.

Establishing robust Internet connectivity in Africa’s key growing economies will underpin and facilitate this growth moving forward, with opportunities for consumers and advertisers across music and video streaming, gaming and the metaverse all reliant on fast and reliable Internet access.

International and domestic players alike are investing in local content and services to attract audiences and keep them engaged in an increasingly crowded landscape. Whatever pathways emerge, the imperative will be to lean into innovative thinking.

The entertainment and media industry has always been a creative endeavour. Now, that creativity must be extended in an effort to generate and measure returns on substantial investments in order to pursue a path of growth.

For more on this report, visit https://www.pwc.co.za/en/publications/entertainment-and-media-outlook.html.

Author
Alinah Motaung, PwC Africa Entertainment and Media Leader, and Charles Stuart, PwC South Africa Entertainment and Media Partner