Hong Kong, 8 Jun 2017 - In Hong Kong, total digital revenue surpassed non-digital in 2016 for advertising and consumer spending. This trend is projected to continue at a Compound Annual Growth Rate (CAGR) of 6% to reach US$6.6bn in revenue in 2021, according to PwC’s Global entertainment and media outlook 2017–2021. Paid search and high video consumption is driving this shift to online advertising. However, the Outlook projects Hong Kong’s entertainment and media industry will grow at a CAGR of 3% in 2016-2021, lagging behind a 4.7% growth of GDP CAGR. To cope with the challenges of shifting consumption habits of content, companies must embrace technology to improve quality of content and create the most compelling user experience.
Top 3 segments experiencing highest growth in 2016-2021 are internet video (22.9%), internet advertising (10.2%) and video games (6.6%).
“2016 marks a tipping point in digital revenue surpassing non-digital forms. Key drivers include social media platforms as well as better data analytics and advertising technology that has improved the quality and relevancy of adverts to drive mobile advertising spend. This gives companies greater flexibility in planning and measuring digital adverts more effectively,” said Cecilia Yau, PwC Hong Kong Entertainment and Media Leader.
In Hong Kong, Mobile Internet advertising is forecasted to grow at a CAGR of 17.5% to reach US$587mn by 2019, surpassing paid search. The segment is generating the highest growth among four engines of advertising for this period such as paid search (8.7%) classified (4.8%) and display (3.0%) advertising.
Mobile video Internet advertising revenue will be the fastest growing sub-sector over the next five years, projected to rise at a CAGR of 29.2%. In 2016, this sub-sector achieved US$41mn in revenue; by 2021, it will be worth US$146mn.
“Mobile advertising will continue to dominate internet advertising spend. The wide consumer reach makes mobile a truly valuable marketing platform but for content owners, success hinges on monetising users and content for new revenues. Measuring analytics from social media and online searches is key to understanding users’ digital footprint to optimise products and enhance the brand experience,” said Wilson Chow, PwC China and Hong Kong TMT Leader.
Hong Kong’s media landscape is also supportive of this shift to mobile advertising, a city with a high population of unique mobile internet users - at 6 million - as well as a high mobile penetration rate expected to hit 89.5% by 2021. Hong Kong’s high broad band coverage and speed of such services that provide users with instant access to video streaming are other factors contributing to this trend. Rapid growth in mobile advertising is expected to continue as consumers continue to share and consume content on smartphones.
China is the second-largest market Internet advertising market globally after the US, and largest in Asia. Regionally, Japan and Korea came in at second and third place. In 2016, the mainland accounted for 19.8% global Internet advertising revenue worth US$37.5mn. Whereas the US remains the largest market accounting for 38.2% of global total Internet advertising revenue in 2016.
An important tipping point was reached in the global advertising industry in 2016 with revenue from Internet advertising exceeding that generated by TV advertising for the first time. Global internet advertising grew by 19.1% year-on-year to surpass TV in 2016, and the former is expected to reach $302.9mn by 2021.
Total TV advertising revenue in Hong Kong reached UD$664mn in 2016 after two years of sharp declines in 2014 and 2015. Hong Kong’s traditional TV market is highly correlated to the slowdown of domestic consumption and retail sales. Stagnant growth in this market reflect shifting generational preferences as younger viewers opt to spend less and stream more.
Despite an expected decline in TV subscriptions (at a CAGR of -0.4%) in 2021, the rise of over-the-top (OTT) TV services for subscription on-demand (SVOD) and television on-demand (TVD) will completely offset the drop in TV subscriptions, especially due to the growth in SVOD (at a CAGR of 29%) in 2021.
Ms Yau explains: “Hong Kong TV operators face intense competition for attention amid continual media disruption. It is vital for companies to capitalise on technology that innovates product offerings and enhances the user experience across the content journey. The popularity of OTT services in the past year demonstrates new revenue streams by harnessing technology and data to better adapt to how content is consumed and monetised.”
Within the video games segment, social/casual gaming revenue (US$373mn) exceeded traditional gaming revenue (US$360mn) in Hong Kong for the first time in 2016. The figure marks a year-on-year increase of 25.8%. Hong Kong’s total video games revenue for 2016 was US$742mn, which reflects the increasing importance of this segment in the entertainment & media sector.
Wilson Chow elaborates on the overall implications of this year’s report for Hong Kong media owners: “To gain consumer market share, companies must be innovative and embrace new technology and monetisation models to deliver valuable content onto social media platforms. Capitalising on user data to customise content and quick to adapt to new platforms that revolve around the user experience is key to differentiation, efficiency and sustainable growth.”
He adds, “Improving user experience through emerging technologies like augmented reality and virtual reality onto mobile games can increase engagement with core customers. Also worth noting is the emergent e-Sports sector. Hong Kong’s East meets West trade show location enhances the city’s attractiveness to become a global e-Sports hub for gamers and advertisers. That ultimately creates monetisation opportunities of the fast growing video game segment.”
About the Global entertainment and media outlook
PwC’s 18th annual edition of the Global entertainment and media outlook 2017-2021, is a comprehensive online source of global analysis for consumer and advertising spend. With like-for-like, five-year historical and five-year forecast data and commentary across 16 industry segments in 54 countries, the Outlook makes it easy to compare and contrast consumer and advertising spend across segments and countries. Find out more at www.pwc.com/outlook.
Segments covered by the Global entertainment and media outlook
Books, Business-to-business, Cinema, E-sports, Internet access, Internet advertising, Internet video, Magazines, Music, Newspaper, Out-of-home advertising, Radio, Traditional TV and home video, TV advertising, Video game, Virtual reality.
About Global entertainment and media outlook data
Much of the content in this press release is taken from data in the Global entertainment and media outlook 2017-2021. PwC continually seeks to update the online Global entertainment and media outlook data. Therefore, please note that the data in this press release may not be aligned with the data found online. The online Global entertainment and media outlook 2017-2021 is the most up-to-date source of consumer and advertising spend data.
Senior Manager, PwC Hong Kong
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