PwC has issued its latest annual Entertainment & Media Outlook report, containing projections for online and offline media advertising markets through 2020. The outlook for traditional media advertising is similar to previous forecasts in that TV and out-of-home advertising have the healthiest futures, while the outlook for print (at least in print format) is dim. As consumer behavior shifts online, so will advertiser spending, with some interesting milestones expected to take place during the forecast period.
[Editor’s note: MarketingCharts has been studying the media and advertising markets, and two recent studies are available for interested readers. The first MarketingCharts report examines the stated influence of each of the advertising media identified below (and some others) on consumers’ purchases, sorted by gender, generation and household income. The second analyzes the demographic composition of various major media and their sub-segments.]
The following is a look at some of the highlights for major media markets covered by PwC, ordered by projected size in 2020 and specific to the US.
Online advertising is expected to overtake TV advertising in size next year, a much more bullish forecast than in last year’s report, when that milestone was forecast for 2019. It’s the same prediction as recently made by eMarketer (among others), which at the time also envisioned mobile rivaling TV in ad dollars in 2020. (The PwC forecast doesn’t see mobile coming anywhere close to TV by 2020.)
Nevertheless, PwC predicts that online advertising spending will exceed $75 billion next year, surpassing the $74.7 billion projected for TV. Online advertising is expected to grow at a compound annual rate of 9.4% from 2015 through 2020, compared to TV’s 3.2% rate.
As expected, mobile’s share of online ad spend is expected to grow throughout the forecast period, increasing from a forecast 41% share this year to a predicted 49% share in 2020, buoyed by a 2015-2020 compound annual growth rate (CAGR) of 17.5%. It’s interesting to note that PwC doesn’t see mobile attaining majority share of US online advertising by 2020, though it will be close.
Among mobile advertising types, display (including video) is expected to remain larger than search, rising from 58% share of mobile ad spend to 62% in 2020. Mobile video will be the fastest-growing segment, with its 2015-2020 CAGR of 30.3% bringing it almost on par with other mobile display advertising formats by 2020.
Of the “wired” (non-mobile) internet advertising types, paid search is expected to retain its dominance, growing from $21.5 billion this year (53% share of wired internet advertising) to $24.4 billion in 2020 (52% share). That’s also an interesting shift from last year’s report, in which paid search was predicted to cede its majority share of wired internet advertising by 2019.
Despite retaining its majority share through 2020, paid search’s CAGR of 3.6% will be eclipsed by video ads’ forecast CAGR of 19.3%, which will double desktop video advertising spending from an estimated $5.1 billion this year to $10.2 billion in 2020.
Meanwhile, among the other “wired” internet advertising categories, display (non-video) ads are predicted to have the slowest growth, actually declining with a CAGR of -3.6%. Display ad revenues are forecast to shrink from $10.9 billion this year to $9.5 billion in 2020.
TV advertising spending is projected to grow from $73 billion this year to $74.7 billion next year, at which point it will cede its status as the top media advertising market. Overall, TV will grow at a compound annual rate of 3.2% from 2015 through 2020. So while TV viewing is slightly down, a trend more exacerbated about youth, advertisers are expected to continue to spend on the medium, even if its growth is more muted than digital. That’s likely due at least in part to the continued effectiveness of advertising on TV.
The researchers note that: “The TV advertising industry is adjusting to a decline in linear audiences, as viewership shifts to OTT and online video services across a range of devices. New comprehensive audience measurement tools will be vital as companies seek to monetise an increasingly complex industry. But when advertisers reach consumers they will be vying for attention more than ever before…
There is a wider problem for the TV advertising industry in sufficiently engaging with audiences. Even if advertisers effectively utilise multiplatform viewing, there is an increasing trend towards the usage of other screens. This is not solely the viewing of video content, but households simultaneously browsing apps and websites on smartphones and other connected devices while watching TV. The end result is advertisements increasingly vying for attention with a range of other media.
Advertisers must counter this trend with more engaging, targeted and interactive advertising campaigns that hold attention. In addition, comprehensive audience-measurement tools, highlighting opportunities for advertisers that have previously been ambiguous, will boost the online TV advertising market in the long term.”
Even so, online is predicted to comprise just a small portion of overall TV advertising revenues though the forecast period. Indeed, only $5.4 billion of the $81.7 billion in TV advertising revenues forecast for 2020 (or about 6.6%) are expected to be from online TV, as online TV advertising revenues’ CAGR of 8.9% is well below last year’s forecast rate of 14.4%.
Meanwhile, within the broadcast advertising segment, broadcast networks are forecast to see a slightly higher advertising CAGR (3.9%) than cable networks (3.7%).
The radio advertising market in the US is expected to remain relatively flat through the forecast period, increasing marginally from $17.8 billion this year to $18.4 billion in 2020. Radio advertising is predicted to have a 2015-2020 CAGR of 1%, excluding satellite radio advertising, which represents just a fractional share of total radio advertising.
Not surprisingly, terrestrial radio online advertising will be the fastest-growing segment, with a CAGR of 7.8%. However, as with TV (and unlike print and out-of-home), digital ad revenues will represent just a small portion of overall radio revenues. Forecast to comprise 7.7% share of total radio ad revenues this year, online radio is projected to grow to 9.7% share of radio revenues by 2020.
The dominant form will continue to be terrestrial radio broadcast advertising, although terrestrial radio ad revenues are predicted to remain mostly stagnant between this year ($16.2 billion) and 2020 ($16.4 billion).
The magazine advertising market is composed of two main segments: consumer magazines; and trade magazines.
The consumer magazine advertising market in the US has estimated value of $16.8 billion this year, and will remain essentially flat through 2020. Growth in digital advertising (2015-2020 CAGR of 14.8%) will be just enough to offset declining print revenues (CAGR of -8.8%). In fact, digital advertising is projected to overtake print advertising as the leading source of consumer magazine advertising revenues in 2020 ($9.2 billion and $7.7 billion, respectively). It’s possible that digital advertising isn’t quite growing at the same rate PwC expected last year, when it forecast the digital majority to occur in 2019.
Meanwhile, the trade magazine market is smaller, but following similar trends. With an overall CAGR of just 0.7% between 2015 ($4.6 billion) and 2020 ($4.7 billion), digital will overtake print in trade magazine ad spend in 2020, with the former boasting a CAGR of 11% as opposed to the latter’s -6% projected CAGR. As such, digital ad revenues are projected to increase from 35% of trade magazine ad revenues this year ($1.6 of $4.6 billion) to 51.4% share in 2020 ($2.4 of $4.7 billion).
The hardest hit of the media types examined, newspaper advertising is the only market expected to see a decline in revenues between this year and 2020, falling from $18.8 billion to $14.9 billion. Unlike magazine advertising, digital advertising in the newspaper market is simply not growing quickly enough (2015-2020 CAGR of 3.4%) to offset print advertising losses (CAGR of -9.3%). Forecast to account for 26.5% of newspaper ad revenues this year, digital is expected to grow to 37.9% share of revenues in 2020.
Meanwhile, each of the three major segments of print advertising (classified, national and retail) is predicted to drop by an annual rate of at least 8.6%, with classified having the worst outlook (of almost -9.7%).
Of note, unlike magazine publishing (both consumer and trade), advertising generates more revenue for newspapers than circulation. But with newspaper advertising on such a sharp decline, circulation revenues ($12.1 billion) will be almost as large as advertising revenues ($14.9 billion) by 2020. The vast majority of circulation revenues will continue to be print-based, at $11.1 billion versus digital’s $1 billion.
Out-of-home (OOH) advertising has the strongest prognosis of the traditional media types, though its healthy outlook is mostly the result of strong projected growth in digital out-of-home advertising. Overall, OOH ad revenues are predicted to grow from $9.2 billion last year to $10.9 billion in 2020, with a 2015-2020 CAGR of 4.3%.
During the forecast period, digital is expected to grow at a compound annual rate of 9.4%, bringing it from 38.3% share of total OOH ad revenues this year to 46.2% share in 2020.
The smallest medium of those identified in this article, cinema advertising is predicted to grow from $857 million this year to $908 million in 2020, with a 2015-2020 CAGR of 1.6%. Cinema advertising revenues will continue to be dwarfed by box office revenues, which are expected to grow at a 1.2% annual clip from 2015 ($10.3 billion) through 2020 ($11 billion).
For more on US media advertising and audiences, see the MarketingCharts reports: