Spending on Video Games And Internet TV Booming

June 7, 2017, 7:13 PM UTC

People are increasingly playing video games and binge watching TV online for entertainment while spending less time on older pastimes like reading and watching old-fashioned cable TV.

Spending on video games in the United States is expected to grow 6% annually to $28.5 billion in 2021 from $21 billion in 2016, according to a new report from consulting firm PwC. Other hot U.S. growth areas include Internet video services like Netflix (NFLX), which will see an 10% annual sales increase to $19 billion in 2021, while spending on virtual reality is expected to grow 64% annually to $5 billion over the same period.

The shifting tastes of former TV junkies and avid news readers has been roiling the media and communications industries. Ratings for traditional network fare have plunged, along with the stock prices of companies that make the shows like Viacom and AMC Networks. Stock market investors have fallen in love with the new online entertainment giants, including Netflix and Amazon

At the opposite end of the spectrum, the print media business is expected to continue shrink as fewer people read print products filled with lucrative ads and shift their attention online, where publishers make much less. Newspaper revenue is expected to contract 4% annually through 2021 to $24 billion while magazine spending will be nearly unchanged at $30 billion.

Book sales, including audio and ebooks, will do slightly better with growth of less than 1% annually to $38 billion in 2021. The proportion of sales going to ebooks is expected to remain relatively steady at about 29% to 30%. 

The television business had held up better than print amid the online transitions, but cracks are starting to show as cord cutting accelerates. TV advertising should rise just 1% annually to $75 billion in 2021 while revenue from radio, which is starting to be displaced somewhat by podcasting,  will grow less than 2% annually to $24 billion in 2021.

Hollywood has been focusing on 3D technology and fancier theater going experiences. But the industry still isn’t growing much. U.S. receipts are forecast to grow only 1% a year to $11 billion. Those annoying ads at the movies will grow slightly faster at 2% a year and add about $1 billion to the industry’s revenue in 2021.

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The big changes in how people get their entertainment portend even bigger changes for the distributors operating the networks that carry content. Traditional broadcast and cable TV revenue is projected to shrink 1% annually to $105 billion by 2021.

Internet service providers have been big beneficiaries of cord cutting and the larger moves towards digital entertainment. Their revenue is expected to gain 6% annually to hit $190 billion, with almost all of the growth coming from mobile data plans, PwC said.

One challenge for telecommunications and cable home Internet providers like Verizon (VZ) and Comcast (CMCSA) is that their big investments to offer higher speeds haven’t convinced customers to pay much more for their service, PwC said in the report. At the same time, more customers than ever are “cutting the cord” to expensive TV bundles.

That’s prompted some cable companies to offer lower priced packages with fewer channels, dubbed skinny bundles. But it’s still not enough to entice most cord cutters.

“US telecoms and cable operators need to combat cord cutting and make themselves attractive to the millennial generation, while looking for new revenue streams to finance their ongoing investment in next-generation fixed and mobile networks,” the consulting firm noted. “Offering a skinny bundle is one line of defense but operators will have to be imaginative with pricing and content if they are to justify any premium they charge on very high speed services.”

Music is an old business that is bucking the trend and finally experiencing a revival, thanks to the growing popularity of phone-friendly streaming services like Apple’s (AAPL) Apple Music and Spotify. The music industry’s revenue from all sources is projected to grow 6% annually to $23 billion by 2021, up from $17 billion last year.

But $4.4 billion of the growth, or about 80%, is solely due to the streaming services, PwC said. That’s great for music publishers, but most musicians complain they make a lot less money from streaming services than they did when consumers actually bought individual songs. 

Additionally. revenue from the still small business of e-sports, or the watching of professional video game leagues, is exploding at 69% annually. Although impressive, the starting point is so low that spending on the niche will total only $300 million by 2021.


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