Outlook perspectives

Every year, we choose an overarching development to structure our thoughts on the intriguing media and entertainment industry. This year we zoom-in on one overarching theme which we believe will impact the global as well as local developments over the coming years: personalisation.

Consumers increasingly succeed in tailoring their media experiences to accommodate their individual needs. Media companies fight for our attention and strive to help consumers navigate in the abundance of free and paid content.

Let us guide you during a brief walk in the PARC while we discover four circumstances media companies, consumers and authorities need to bear in mind while Putting back the Me in Media. Subsequently, we discuss the main developments in advertising and consumer spend. Finally, we briefly reflect on how local parties can use scale and unique assets to compete with global giants.

Privacy: Great to get to know you!

Recommendations in platforms, personalised advertisements, personalised news. The possibilities new technologies offer are endless. Historically, options for media were restricted since they were primarily a one-way street. Obviously, the success of a newspapers headline could be measured by the single copy sale of a specific day, but more feedback required extensive surveys. Nowadays, the party that is distributing digital media can immediately get feedback on an individual level. This enables media and technology companies to get to know their audiences in an unparalleled manner and tailor the user experience. How does this make you feel? Thrilled by the options, or scared since others may get to know you better than you do yourself, and can actually influence you more than you know? For many consumers, the answer is a bit of both. The coming decade, companies, consumers and authorities will have to collaborate to ensure that we can grasp the possibilities offered by new technologies, while developing an environment we trust and can control.

Advertising: Can I have your attention please?

  • “Advertising is a marketing communication that employs an openly sponsored, non-personal message to promote or sell a product, service or idea.” This quote from William J. Stanton is the definition still used by Wikipedia (at least on 13 October, 2019). It goes without saying that the addition non-personal is rapidly getting outdated in this context. Even though there is still room for mass media – as illustrated by the TV advertising market in the Netherlands that is worth 0.8 billion euros – other types of advertising are rapidly winning ground and will continue to do so.

  • Many subindustries convey promising messages in thought leaderships and conferences regarding the added value of existing and new ways of advertising. 

  • The good news for mass media is that they can benefit from the options new technologies have to offer. For instance, consumers are able to watch live TV on the go, and it only takes a while before you will be offered different TV advertisements than your neighbour.

  • The preferred level of personalisation is a balancing act. A lot of advertisement space is considered as waste, both by advertisers and consumers. On the other hand, an advertisement which is too personal can raise concerns and result in an increasing usage of for instance ad-blockers. 

Revenue models: Life is all about priorities!

  • In particular when it comes to economics, different people take different decisions. Consumers and companies are constantly exploring new ways to pay for getting access to media. Time, data, euros, access to personal networks. These are just four examples of how we can pay for getting access to media. Some companies use a very strict position when it comes to payment models. Others leave more flexibility for the consumer. One area of attention that will be the centrepiece of the public debate, is to what extend consumers should be in control – e.g. when it comes to usage of their data.

  • Also refer to the Consumer spend analysis below, and to the segment specific deep-dives. 

  • One area of attention that will be the centrepiece of the public debate, is to what extent consumers should be in control – e.g. when it comes to usage of their data. We expect more and more creative transparent models will be explored over the coming 1-3 years.

Content creation: We are all publishers! 

  • Consumers are getting used to becoming content creators themselves. The quality of camera’s, connectivity and apps of mobile equipment is increasing rapidly. Every consumer can turn into a content creator if they want to. 

  • For some consumers, this is the start of a well-payed media career, for example as influencer or gamer. For others, this is just a way to connect with friends and family, via ring-fenced social media for instance. 

  • This new way of content creation and distribution makes media authorities face new challenges. The volume of new content is enormous, and instead of monitoring a handful of media companies, the authorities need to monitor a huge group of international media companies and millions of individuals and even machines. 

  • We believe that technology does not have to be just part of the cause, but can also be part of the solution. Besides authorities, also existing media companies can re-invent their role in the media landscape, for example by curating the content and help consumers navigate this media abundance.

The stakes have never been higher – a bird’s-eye view of Media spend in the Netherlands

Demand for entertainment & media (E&M) has never been greater. The spread of ever-faster broadband to ever-more home and mobile devices means consumers can enjoy an array of digital services at almost any time or place. Companies from across the telecoms, media and technology (TMT) landscape are ramping up investments in TV shows, series, short videos and movies to compete for the attention of both global and local audiences, while video games, podcasts, live events, esports and other newer forms of E&M are growing rapidly in popularity. 

This increasing demand for E&M is resulting in an ever growing consumer and advertising spend. Below, we highlight some of the larger trends. I encourage you to have a look at our segment-specific data, projections and analyses which are included in our free-to-access online environment.

Total Entertainment & Media spend (€ millions)
Netherlands Historical data Forecast data CAGR%
  2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2019-23
Digital advertising 1411 1531 1706 1861 1997 2139 2289 2426 2545 2656 5.9%
   y-o-y growth   8.5% 11.4% 9.1% 7.3% 7.1% 7.0% 6.0% 4.9%
4.4%  
Non-digital advertising 1799 1744 1721 1633 1638 1605 1582 1550 1541 1507 -1.7%
   y-o-y growth   -3.1% -1.3% -5.1% 0.3% -2.0% -1.5% -2.0% -0.6% -2.3%  
Digital consumer 728 954 1224 1445 1695 1839 1959 2062 2161 2237 5.7%
   y-o-y growth   31.0% 28.3% 18.0% 17.3% 8.5% 6.5% 5.2% 4.8% 3.5%  
Non-digital consumer 4283 4272 4259 4264 4227 4199 4170 4145 4119 4090 -0.7%
   y-o-y growth   -0.3% -0.3% 0.1% -0.9% -0.7% -0.7% -0.6% -0.6% -0.7%  
Total digital E&M 2140 2485 2931 3306 3692 3978 4248 4488 4706 4893 5.8%
   y-o-y growth   16.1% 17.9% 12.8% 11.7% 7.8% 6.8% 5.6% 4.9% 4.0%  
Total non-digital E&M 6082 6016 5980 5897 5865 5804 5752 5695 5660 5597 -0.9%
   y-o-y growth   -1.1% -0.6% -1.4% -0.5% -1.0% -0.9% -1.0% -0.6% -1.1%  
Total E&M 8222 8501 8911 9203 9557 9782 10000 10183 10366 10490 1.9%
y-o-y growth   3.4% 4.8% 3.3% 3.8% 2.4% 2.2% 1.8% 1.8% 1.2%  
Source: PwC, IFPI, RAB, Screenforce, NVBF, NDP Nieuwsmedia, KVB, Ovum, IAB Europe. Note: Because we rounded off amounts and percentages throughout this Outlook, tables may not sum to 100%

Consumer spend

Consumer spend increased by 4% in 2018, and is expected to increase at least by 2% in 2019. This increase is mainly driven by the willingness to subscribe to ad-free video and audio streaming services. Unlike pay-per-view video concepts, Dutch consumers seem to be willing to pay for high-quality video and endless inventories of audio. In the gaming industry, we see a different trend; gamers from all ages get more and more familiar with in-game purchases. 

Many international parties have announced to launch video services across Europe, including the Netherlands. Although this may impact the ability of existing providers to increase prices, we believe that there is sufficient room for new entrants to enter and grow the OTT market. 

So far, Dutch consumers have been loyal to their Pay TV subscriptions, which providers often embed in internet and telephony bundles. It remains to be seen if, and when, consumers will decide to stop paying for Pay TV and free up part of their budget for other purposes such as OTT subscriptions and live events. 

KPN’s recently introduced ‘Husselen’ [Shuffle, ed.] subscription indicates that providers are lowering the bar by truly tailoring bundles to customer’s needs, instead of continuously expanding the breadth of bundles.

For the mid-term, we are a bit less positive about consumer spending. Although unemployment rates are low and overall consumer confidence is still high, we expect that uncertainties regarding the economic circumstances may result in a more critical view on how consumers spend their money. 

When making projections on the impact of for instance GDP on media spend, we need to bear in mind some lessons learned from previous recessions. We believe that the industry may not be recession-proof, but certain parts are at least recession-resistant. Every hour that is not spent at work is an extra hour that can be spent on leisure, and subscriptions can be a cost-effective manner for spending leisure time.

Somewhat linked to this: certain media companies, such as Videoland and Quibi have announced to consider introducing ad-based subscriptions in order to reach certain audiences. Also publishers may start considering to introduce subscriptions where consumers will pay with their data in order to obtain free, personalized content and advertisements.

Enjoy eLive

Regardless of the increasing possibility to consume personalised media anywhere and anytime, out-of-home entertainment is still performing well. Dutch consumers are willing and able to spend part of their media budget on visiting cinemas and live music events. A wide variety of businesses and entrepreneurs, including event hall operators and for instance magazine publishers, are actively exploring ways to attract and entertain audiences with common interests. Local examples include RTL’s HealthyFest, Sanoma’s Libelle Zomerweek, and Ziggo’s F1 Live in the Ziggo Dome.

Faster and more responsive mobile connectivity will not only enhance the ability of consumers to discover and consume media and other events in ‘the real world’, but it will also help popularise more novel out-of-home experiences.  At live sports events, for example, spectators will be able to access different camera angles and data about players in real-time via their smartphones. Consumers will be able to interact with computer-generated characters and objects overlaid on the real world, thanks to augmented reality technology. Competitive video gaming, also known as esports, will also further blend live experiences and connected technology.

The game is on

The ability to reach any consumer at any time and place will ratchet up competition for attention – and not just between companies that are active in the same sectors. As Netflix noted in a shareholder letter published in early 2019: “We compete with (and lose to) Fortnite more than HBO”. In other words, the most important metric in a world of near-infinite digital distractions will be how much time people choose to spend using a service, rather than doing something else. Besides the media industry, these developments also impact consumer markets. For example, time as well as financial spend, are moving towards gaming at the account of for instance the physical toy industry. 

This multi-mode battle for attention will intensify as an array of digital media services become more accessible, affordable, and easy-to-use. As Netflix’s reference to Fortnite suggests, gaming companies will be significant competitors. The Netherlands will be a key battleground given its citizen’s high levels of technology adoption and disposable income, with consumer spend on video games rising from €1.0 billion in 2018 to €1.2 billion in 2023.

Cloud gaming promises to further the share of attention of gaming, by enabling users to stream games from the Internet to any device. This will also lead to a new kind of ‘super-casual’ gaming segment where anyone can start playing a console-quality game as easily as watching an online video. In fact, when Google unveiled its Stadia cloud-gaming service, it demonstrated the ability to jump from watching a YouTube video about a game to actually playing that game in seconds.

The astonishing success of the ‘battle royale’ genre in 2018, spearheaded by Fortnite, has reshaped the strategies of leading games publishers. While the base game remains free, Fortnite provides a stream of fresh content for all players, while encouraging the purchase of a ‘Battle Pass’ which unlocks additional features. This has resulted in a highly engaged and loyal community of players. Both Call of Duty and EA’s Battlefield V adopted similar models in 2018 and many more are expected to emerge. 

Advertising spend

As described in Internet Advertising, the rise of Internet advertising is continuing. Global players succeed in attaining year-on-year double-digit growth by providing endless opportunities to advisers. A wide range of stakeholders keep a close eye on this development for different reasons, which can be categorised as Trust, Technology and Talent.

Traditional, often local or regional media companies, work hard to determine how to benefit from the new technologies the global players helped developing. It took newspaper and magazine publishers many years to develop profitable digital advertising models. Gradually, some of the initiatives start to pay off. Often, these initiatives entail a combination of traditional, text-based publishing and cross-media elements, such as video, audio, live events, gaming, web-shops and other digital offerings like comparison websites and apps. 

The main segment to keep a close look at over the coming 12-24 months is TV-advertising. Changing consumer behaviour, changing regulation, and a changing competitive landscape are ingredients for potentially the largest disruption the local TV advertising industry has faced over the last decade. Another important development is the rise of voice and the implications it will ultimately have on the advertising industry.

Serving customers with deep intelligence

Artificial intelligence (AI) will play an increasingly influential role in the lives of consumers. AI will permeate the world in many ways, as technology to detect, understand, and react to sound, vision, movement and emotion is embedded into a growing array of devices, apps, and services.

AI promises to help E&M companies to better understand their customers and so deliver more personal experiences, but it could also undermine their traditional sources of power and differentiation. Voice control, for example, is already changing how people search, discover, and access TV, just like the way Spotify’s playlists change the role of albums. The spread of voice control could lead to attempts of E&M service providers to curate and control access to content recede into the background, especially if consumers prefer to use third-party digital assistants. 

AI will also present major challenges to advertising companies. The ease of voice search, coupled with increased penetration of smart speakers, will significantly change how consumers shop and buy for an array of goods and services over the next five years. But delivering paid search ads to screenless devices such as smart speakers will remain a major challenge. For this reason, Google and, increasingly, Amazon will prioritise devices with screens, such as the Echo Show.

AI also presents two major challenges to regulators and policy-makers. On the one hand, national governments see the technology as a driver of investment and efficiencies in both the public and private sectors. In the Netherlands, for example, a partnership of various business and science groups called AINED has drafted an AI strategy aimed at making the technology a national priority. On the other, AI will pose an array of unprecedented legal, social and ethical challenges that may need to be regulated. 

Few local companies will have the data, technology, and resources to challenge the likes of Amazon and Google in the market for general purpose digital assistants. But E&M companies will need to investigate how they can deliver AI-powered experiences that are more tailored to their content, services, and audiences. A key decision will be the extent to which they harness the technology and reach of tech giants and how that might enhance or diminish their role in the consumer world and the industry value chain in the longer-term. 

Harnessing scale by any means necessary

Big content, big audiences, and big platforms will be key to competing in tomorrow’s entertainment and media market. The likes of Facebook, Apple, Amazon, Netflix, and Google – or FAANG - have these by definition; competitors will have to use other means. The challenge will be especially great for local companies in the Netherlands and other smaller markets. 

The challenge posed by the FAANGs has also led to the emergence to a new wave of global telecoms and media giants. AT&T, Disney, Comcast, and CBS have all made major acquisitions of rivals and peers in recent years in order to pool content budgets, audiences, and technology spend. While they will roll out their new offerings in the US and other major international markets first, their ambitions are global and so Dutch competitors will need to plan for their impact. European consolidation will likely be a response.

Another solution will be to seek to access scale via partnerships. All around the world, national broadcasters and publishers are forming joint ventures aimed at offering more viable digital-media alternatives. 

Telcos and sub-scale Pay TV providers are going beyond partnering with Netflix to integrate a growing number of third-party OTT video apps into their bundles, platforms and billing capabilities. Meanwhile, various operators, media companies and OTT platforms are also seeking to harness the momentum behind the smartphone market by launching mobile-centric bundles and services. A number of Dutch players are ahead of the curve, with a long history of innovative partnerships.

Year

Participants

Summary

2014

NPO, RTL, Talpa Network

The Dutch public broadcaster NPO launches NLZiet, a subscription online video service, in cooperation with broadcasters RTL and Talpa Network.

2015 

KPN, Netflix

Dutch incumbent telco KPN integrates access to the Netflix app into its TV STBs. Integrated carrier billing is introduced in September 2017.

2016

Ziggo, Netflix

Dutch cable operator Ziggo integrates Netflix into its Horizon platform. The streaming VOD service is accessible on Ziggo customers' Horizon Media Box XL STBs.

2017

T-Mobile, Netflix

Mobile operator T-Mobile offers a three-month free subscription to Netflix with its two-year unlimited post-paid plans.

2018

BrandDeli, Mediahuis, FD Mediagroep, NDC Mediagroep, DPG Media, Talpa Networks, Telegraaf Media Groep, RTL Nederland and Ster.

Online sales platform for digital advertising space. Launched in 2018, and terminated in the Dutch market in 2019

2018

Sanoma, Telegraaf Media Groep, RTL Nederland, DPG Media

NLProfiel: A group of four publishers launch an initiative to pool their audience data for advertisers seeking better targeting and another to move ad-sales technology to a shared platform. 

2019

RTL, DPG Media

Three-year strategic alliance regarding sharing and development of content, incorporate creative branded content partnerships, and connectivity with  the digital advertising market.

Source: PwC, Ovum

Localising to deliver enduring value 

Despite the globalising forces of technology, people still want local stories told by local voices. Even in the Netherlands where the English language is widely spoken, Dutch consumers are attracted to media and entertainment that reflects and resonates with their history, culture, and values. As a result, both global and local players will ramp up investments in content and experiences directly aimed at Dutch audiences. 

The Netherlands is one of the countries Netflix has targeted with its huge increase in spend on local content across Europe – 1.0 billion US dollars (0.9 billion euros) in 2018 and significantly more in 2019 – by commissioning its first Dutch original, Ares, due for release early 2020. 

Local broadcasters and online video providers will also ramp up their investments in high-quality drama. But they will also play to their strengths in sport, news and unscripted programming, which will continue to drive a significant amount of spend, loyalty, and viewing among local audiences. RTL-backed Videoland, for example, has grown its share of the Dutch online video market thanks to exclusive local content, such as reality-TV series Temptation Island.

The popularity of these genres hasn’t escaped the attention of the likes of Netflix and Amazon, so local media companies must work hard to convince rights owners and production companies they will remain their best-possible partners. Few will be able to compete with the kinds of prices the global giants can afford to pay for rights and shows, but they can argue that they have a greater interest in investing in and supporting local content and creative industries over the longer term. 

Co-productions will help spread costs and grow returns from increasingly expensive-to-produce local shows and movies. A growing number of arrangements will involve the tech giants, as well as more traditional participants, such as local and regional broadcasters, funds, and investors. This development will have an additional benefit for local media companies by providing greater exposure of their content to audiences outside of their home territories.

Contact us

Casper Scheffer

Casper Scheffer

Entertainment & Media Industry Leader in the Netherlands, PwC Netherlands

Tel: +31 (0)88 792 65 20

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