Shifting consumer preferences, advances in technology and ongoing disruption to business models are the new strategic imperative for entertainment and media (E&M) companies is to turn customers into fans.
Significant shifts are underway in how Africa’s E&M companies compete and generate value, as the quality of the experience they deliver to consumers becomes their primary basis for strategic differentiation and revenue growth.
To thrive in a marketplace that is increasingly competitive and crowded, companies are focusing on implementing strategies and building capabilities to engage with consumers. This is according to PwC’s ‘Entertainment and media outlook: 2017 – 2021: An African perspective’ released today.
By 2021 total E&M revenue in South Africa is expected to reach R177.9 billion, up from R132.7 billion in 2016. Internet access remains the key growth driver and will account for R27 billion of this increase. The fastest growing sectors will be virtual reality (VR) and e-sports compounded annually at 72.6% and 39.6%, although these segments are still new revenue lines and remain the smallest in terms of absolute revenue numbers. Although overall growth in revenue will hold up, it is expected to slow down by the end of 2021.
The Outlook is a comprehensive source of analyses and five-year forecasts of consumer and advertising spending across five countries (South Africa, Nigeria, Kenya, Ghana and Tanzania) and 14 segments: Internet, data consumption, television, cinema, video games, e-sports, virtual reality, newspaper publishing, magazine publishing, book publishing, business-to-business publishing, music, out-of-home, and radio.
“Companies that wish to capture value amid shifting consumer preferences and business model disruptions must focus on an increasingly prominent source of competitive advantage: the user experience. They must harness technology and data to attract, retain and engage users–and convert them into devoted fans,” says Vicki Myburgh, Entertainment and Media Industry Leader for PwC Southern Africa. These imperatives assume a larger importance because, as we document in the Outlook, the entertainment and media industry is confronting several challenges to continued top-line growth.
Digital spend will continue to drive the overall growth. Nearly 40% of total spend will be derived from Internet access in revenue. South Africa’s mobile Internet penetration is forecast to rise to 77.8% by the end of 2021 from 52.3% in 2016. This increased Internet penetration will drive mobile Internet access revenues, which are projected to grow by a CAGR of 10.7% to nearly R62 billion.
South Africa can expect a CAGR of 7.2% for consumer revenue over the forecast period, rising from R87.4 billion in 2016 to R123.7 billion in 2021. The largest contributor will be Internet access, with a 48% share in 2016 rising to 56% in 2021.
South Africa continues to remain the largest TV market on the African continent, with total revenues of R40.9 billion in 2016. The total TV market is estimated to be worth R51.2 billion by 2021. At this time, end-user spending (Pay-TV subscriptions, physical and Internet home video and licence fees) will account for 56.7% of the total TV market.
The video game market is also performing well and revenue is forecast to grow at a CAGR of 15.4% to reach R5.4 billion in 2021, up from R2.6 billion in 2016. The primary growth driver in the video games market is social/casual gaming revenue, which will be worth R3.7 billion by 2021. Furthermore, the console and PC markets are experiencing a significant shift towards digital and online/micro transaction revenue, which will exceed physical sales for the first time in 2020.
The growing interest in gaming is helping to fuel the rapid growth in the related segment of VR and e-sports. As a segment that only reached consumers in 2016, almost the entire VR market is new. According to the Outlook, the consumer VR content market will be worth R455 million by 2021. Of this, R282 million will be spending on VR video.
Alongside video, the B2B market is showing continued growth. In 2016 revenues grew by 3.8% to R9.7 billion and by 2021 this is forecast to rise to R11 billion, a CAGR of 2.6%. The slowdown in growth is largely attributable to ongoing macroeconomic challenges which are likely to weigh on B2B revenues.
The South African cinema sector currently presents a mixed picture. Overall revenue, including box office and cinema advertising, is expected to reach R2.2 billion in 2021, up from R1.9 billion in 2016. South Africa continues to be an attractive destination for international filmmakers. Although some short-term economic and political issues are impacting the film sector, it is expected in the long term to continue to expand.
South Africa’s music industry is on a growth curve with live music being a key driver. Live music revenue is expected to rise from R1.2 billion in 2016 to R1.7 billion in 2021, a CAGR of 7.4% over the forecast period.
It is notable that only one digital subcomponent is seeing a significant decline in the entire Outlook – digital music downloading revenue, which is forecast to see a -15.7% CAGR, as consumers shift from ownership to access. Digital music streaming revenue is forecast to rise at a CACR of 34.5% to 2021, reaching R518 million in that year. This growth rate is only beaten by new revenue lines from VR and e-sports.
Among the largely non-digital segments, magazines and newspaper revenue are set to continue their decline. Total newspaper revenue in the South African newspaper market has been unpredictable. The market showed growth in 2013, declined in 2014 and bounced back marginally in 2015, contracting at a slower rate. In 2016, total newspaper revenue was worth R8.9 billion, but this figure is forecast to drop to R7.4 billion in 2021. Marginal growth is expected for the book publishing industry over the next five years. The educational book market will contract by a -0.1% CAGR. On the contrary, professional titles and consumer books will exhibit some growth as e-book revenues continue to grow.
The report shows that South Africa’s total entertainment and media advertising revenue is expected to rise to R54.2 billion by 2021 from R45.3 billion in 2016, representing a 3.7% CAGR. TV advertising remains dominant, but in terms of absolute growth it is Internet advertising that is almost an equal contributor, helped by a sizeable 12.9% CAGR.
Myburgh says: “It is clear that something fundamental has changed in the entertainment and media industry. E&M companies that have become accustomed to competing and creating differentiation, based primarily on content and distribution, need to focus more intensely on the user experience. The marketplace has increasingly become more competitive, slower-growing and dependent on personal recommendations.
“Thriving in this new world of intense competition and continual disruption will be challenging. The opportunities are, however, immense. Across the industry, the resulting quest to create the most compelling, engaging and intuitive user experiences is now the primary objective for growth and investment strategies, with technology and data at the centre.
“Accordingly, companies will need to develop strategies to engage, grow and monetise their most valuable customers: their fans.”
In terms of total E&M revenue, Nigeria is one of the fastest-growing countries in our Outlook, but this figure must be treated with caution, as a huge proportion of that growth comes from Internet access revenue alone–specifically mobile Internet access revenue. Of the US$2.8 billion that the Nigerian market will add between 2016 and 2021, all but US$452 million will come from Internet access revenue. The combined elements of TV and video will add nearly US$200 million in revenue growth to 2021.
The E&M industry was worth US$2.1 billion in 2016, up 13.6% on 2015. Revenue is forecast to grow at an 8.5% CAGR over the next five years, hitting the US$3 billion mark in 2020, and totalling US$3.2 billion in 2021. Internet access is the most established industry within the Kenyan market, boasting the largest revenues and one of the highest growth rates to 2021.
Ghana’s E&M industry is beginning to gear up. In 2012, total revenue was just at US$214 million, but four consecutive years of year-on-year growth above 25% have led it to revenues of US$685 million in 2016. This is forecast to more than double over the next five years, with revenues of U$1 billion being surpassed in 2019 and a total of US$1.5 billion forecast for 2021, thanks to a 16.5% CAGR.
Tanzania’s total E&M revenue stood at US$504 million in 2016, but is set to more than double to US$1.1 billion in 2021, a 17.2% CAGR over the coming five years. The symbolic crossing of the US$1 billion mark is set to occur in 2021. This is significant growth from 2012 where the industry stood at just US$175 million.
Veeam passes $1bn, prepares for cloud’s ‘Act II’
Leader in cloud-data management reveals how it will harness the next growth phase of the data revolution, writes ARTHUR GOLDSTUCK
Veeam Software, the quiet leader in backup solutions for cloud data management,has announced that it has passed $1-billion in revenues, and is preparing for the next phase of sustained growth in the sector.
Now, it is unveiling what it calls Act II, following five years of rapid growth through modernisation of the data centre. At the VeeamON 2019conferencein Miami this week, company co-founder Ratmir Timashev declared that the opportunities in this new era, focused on managing data for the hybrid cloud, would drive the next phase of growth.
“Veeam created the VMware backup market and has dominated it as the leader for the last decade,” said Timashev, who is also executive vice president for sales and marketing at the organisation. “This was Veeam’s Act I and I am delighted that we have surpassed the $1 billion mark; in 2013 I predicted we’d achieve this in less than six years.
“However, the market is now changing. Backup is still critical, but customers are now building hybrid clouds with AWS, Azure, IBM and Google, and they need more than just backup. To succeed in this changing environment, Veeam has had to adapt. Veeam, with its 60,000-plus channel and service provider partners and the broadest ecosystem of technology partners, including Cisco, HPE, NetApp, Nutanix and Pure Storage, is best positioned to dominate the new cloud data management in our Act II.”
In South Africa, Veeam expects similar growth. Speaking at the Cisco Connect conference in Sun City this week, country manager Kate Mollett told Gadget’s BRYAN TURNER that the company was doing exceptionally well in this market.
“In financial year 2018, we saw double-digit growth, which was really very encouraging if you consider the state of the economy, and not so much customer sentiment, but customers have been more cautious with how they spend their money. We’ve seen a fluctuation in the currency, so we see customers pausing with big decisions and hoping for a recovery in the Rand-Dollar. But despite all of the negatives, we have double digit growth which is really good. We continue to grow our team and hire.
“From a Veeam perspective, last year we were responsible for Veeam Africa South, which consisted of South Africa, SADC countries, and the Indian Ocean Islands. We’ve now been given the responsibility for the whole of Africa. This is really fantastic because we are now able to drive a single strategy for Africa from South Africa.”
Veeam has been the leading provider of backup, recovery and replication solutions for more than a decade, and is growing rapidly at a time when other players in the backup market are struggling to innovate on demand.
“Backup is not sexy and they made a pretty successful company out of something that others seem to be screwing up,” said Roy Illsley, Distinguished Analyst at Ovum, speaking in Miami after the VeeamOn conference. “Others have not invested much in new products and they don’t solve key challenges that most organisations want solved. Theyre resting on their laurels and are stuck in the physical world of backup instead of embracing the cloud.”
Illsley readily buys into the Veeam tagline. “It just works”.
“They are very good at marketing but are also a good engineering comany that does produce the goods. Their big strength, that it just works, is a reliable feature they have built into their product portfolio.”
Veeam said in statement from the event that, while it had initially focused on server virtualisation for VMware environments, in recent years it had expanded this core offering. It was now delivering integration with multiple hypervisors, physical servers and endpoints, along with public and software-as-a-service workloads, while partnering with leading cloud, storage, server, hyperconverged (HCI) and application vendors.
This week, it announced a new “with Veeam”program, which brings in enterprise storage and hyperconverged (HCI) vendors to provide customers with comprehensive secondary storage solutions that combine Veeam software with industry-leading infrastructure systems. Companies like ExaGrid and Nutanix have already announced partnerships.
Timashev said: “From day one, we have focused on partnerships to deliver customer value. Working with our storage and cloud partners, we are delivering choice, flexibility and value to customers of all sizes.”
‘Energy scavenging’ funded
As the drive towards a 5G future gathers momentum, the University of Surrey’s research into technology that could power countless internet enabled devices – including those needed for autonomous cars – has won over £1M from the Engineering and Physical Sciences Research Council (EPSRC) and industry partners.
Surrey’s Advanced Technology Institute (ATI) has been working on triboelectric nanogenerators (TENG), an energy harvesting technology capable of ‘scavenging’ energy from movements such as human motion, machine vibration, wind and vehicle movements to power small electronic components.
TENG energy harvesting is based on a combination of electrostatic charging and electrostatic induction, providing high output, peak efficiency and low-cost solutions for small scale electronic devices. It’s thought such devices will be vital for the smart sensors needed to enable driverless cars to work safely, wearable electronics, health sensors in ‘smart hospitals’ and robotics in ‘smart factories.’
The ATI will be partnered on this development project with the Georgia Institute of Technology, QinetiQ, MAS Holdings, National Physical Laboratory, Soochow University and Jaguar Land Rover.
Professor Ravi Silva, Director of the ATI and the principal investigator of the TENG project, said: “TENG technology is ideal to power the next generation of electronic devices due to its small footprint and capacity to integrate into systems we use every day. Here at the ATI, we are constantly looking to develop such advanced technologies leading towards our quest to realise worldwide “free energy”.
“TENGs are an ideal candidate to power the autonomous electronic systems for Internet of Things applications and wearable electronic devices. We believe this research grant will allow us to further the design of optimized energy harvesters.”