Content = King
As content becomes more digitized, streaming is emerging as the dominant digital format paired with a digital subscription model.
Many of the fastest-growing and most scalable consumer revenue models are based on digital subscriptions. In 2015, the likes of Netflix saw global subscription video-on-demand (SVOD) revenue leap by 32.3% to US$10.9bn, while in music, streaming is starting to cannibalise downloads. However, this type of model is unlikely to succeed without compelling content witness how an inability to secure rights to key content has hampered subscription services for books. Free alternatives are a further inhibitor of subscription growth, especially for the likes of newspapers and magazines.
The difficulty of monetising digital magazines means digital growth will not make up for print losses.
While digital will grow strongly, it will still make up only 30% of total consumer magazine revenue in 2020, up from 16% in 2015. Consumers have proved reluctant to spend money on digital magazines, and digital ad space costs far less than its print equivalent. Ad-blocking software and the ready availability of free online alternatives will also hinder revenue growth.
The economics of newspaper publishing have passed a tipping-point, with circulation revenue now exceeding advertising revenue.
As more news moves online and demand for news grows in emerging markets, global newspaper circulation will continue to increase while revenues decline. These countervailing trends will see 2015`s total global newspaper revenue of US$130.5bn fall to US$121.1bn in 2020, a compound annual decline of 1.5%.
The explosion in smartphone adoption is changing how listeners consume radio especially in-car.
With more and more radio listening hours being consumed out of the home on smart devices, traditional radio broadcasters must have a strong mobile Internet presence or face losing out to digital streamers. In-car radio listening is under particular threat, with the entry of tech giants Apple and Google meaning drivers can use their interactive digital dashboard screen as a monitor for their smartphones.
Rising online viewing is driving online TV advertising and the development of new measurement services.
At a 15.1% CAGR, online TV advertising will more than double to US$10.19bn in 2020. However, with the prominence of ad-free subscription video-on-demand services like Netflix and Amazon, online TV advertising will still account for only 4.8% of global TV advertising revenue in 2020. The rise of online viewing and connected devices is driving the development of new audience measurement services and as these emerge, they`ll help monetise changing consumption patterns and target ad campaigns more accurately.
The largest linear TV audiences are increasingly concentrated on live sports and premium entertainment boosting the price of sports rights and related ad slots.
As premium entertainment shows and live sporting events increasingly become the exclusive domain of pay-TV operators, multichannel TV advertising revenue is benefitting. Intensifying competition for sporting content saw record fees paid for the English Premier League soccer and NFL football in 2015 and in 2016, 30-second slots for advertisers in the Super Bowl reached a new peak of US$50mn. Looking forward, the 2016 and 2020 Olympic Games will provide a further boost to ad revenues.
OOH growth will be powered by digital but physical OOH will hold firm.
Out-of-home providers are increasingly investing in digital infrastructure a trend that has helped sustain steady growth in global OOH revenue, which is set to continue at a CAGR of 4.3% to reach US$42.74bn in 2020. While increasing revenue from Internet-connected digital OOH will be the main engine of growth, traditional formats are holding their ground unlike in many other segments with physical OOH revenue set to remain steady.
Increasing integration between out-of-home advertising and Internet advertising will ultimately open up e-commerce opportunities but this will take time.
Increasingly networked and automated OOH infrastructure will facilitate programmatic advertising, and provide the ability to personalise ads and automate and dynamically manage inventory. At the same time, integrating technologies such as mobile wallets and near-field communication will enable digital OOH to expand into e-commerce, allowing consumers to buy directly from advertisements. However, the relatively subdued global economy means investment in new technologies will not happen rapidly, and new consumer behaviours notably buying directly from OOH ads will also take time to ramp up.
Mobile advertising will be one of the big growth stories through 2020 but won`t come to dominate the Internet advertising market.
While mobile advertising will grow at a CAGR of 19.6% to US$84.8bn in 2020, reflecting the ubiquity of mobile in consumers` lives, mobile`s share of total global Internet advertising will still be just 32.6% even in 2020. Until the measurement and user experience of mobile ads improve, advertisers will stick with traditional media and other forms of Internet advertising, notably search.