PwC Entertainment & Media Outlook2017-2021

www.pwc.no

www.pwc.com/outlook

Consumer/end-user & advertising spending

5 Year historical & 5 Year forecast data 54 countries 17 segments

Out-of-home advertising

Traditional TV and home video

Virtual realityE-sports

Business- to-business

Internet advertising

Internet video

Video games MusicCinema

Book publishingRadio Magazine publishing

TV advertisingData consumption

Newspaper publishing

Internet access

Emerging technologies are enabling companies to differentiate by creating innovative user experiences

The accelerating speed of technological change is opening up large opportunities for innovation in product offerings that revolve around user experience

Emerging technologies are

changing the E&M industry

2021 outlook

Artificialintelligence

Internet of Things

Blockchain

Augmented reality

3D printing

Robots

Virtual realityDrones

Virtual reality

E-sports

1 Technology is the driving force behind new and rapidly growing segments 2 Exploitation of data and new technology

is enabling innovative user experiences.

Technology companies now dominate the world‘s largest companies measured by market capitalization

2007

2017

Top 5 public traded companies by market cap (June 30) TechOther

Source: FT Global 500 & Ycharts.com

Companies are already leveraging emerging technologies to enhance user experience

Technologies transforming

E&M

AI/ auto-mation AR/ VR

Cyber- security

Access, not owner-

ship

Big data/ data

analytics

Internet of Things

3D printing

Cloud

Worldwide tech company developing next mobile OS with AI-powered features to streamline consumer experience.

A U.S-based VR startup is planning to open a VR multiplex immersing consumers in a personalized entertainment experience.

Global telecom company invests in entertainment operating system to deliver a personalized entertainment experience across all devices.

Social networking company releases anti- harassment capabilities to enhance user safety.

Multinational E&M conglomerate has created a patent-pending 3D printer.

The sharing economy shifts consumer behaviour from owning assets.

E-commerce company is investing in an IoT voice-led operating system to enable smart devices.

Multinational tech company providing real-time sports statistics and point-by-point analysis.

Business Insider, Forbes, Variety, International Data Corp., Tech News World, CNBC, PwC

What Are the Global Trends?

Expected global growth in E&M expenditures of 4.3%

Scandinavia3.1%

Germany1.8%

Russia7.2%

Japan1.8%

China8.3%

India10.5%

Global4.3%Brazil

4.7%

US3.7%

France2.4%

UK3.0%

BRIC: 8.0%

Mature: 3.1%

E-sports and internet video are expected to outperform the other segments in the global E&M market in terms of percentage growth

Global growth by segment 2016-2021F

E-sports

Internet video

Internet advertising

Video games

Internet access

Cinema

Total music revenue

TV advertising

Business-to-business

Radio

Total traditional TV and home video

Books

Magazines

Newspaper

21,7 %

11,6 %

9,8 %

8,2 %

6,0 %

4,4 %

3,5 %

2,8 %

2,7 %

2,1 %

1,3 %

1,1 %

-0,5 %

-2,7 %

The Scandinavian E&M market

Spending on digital channels is expected to drive growth in the Scandinavian E&M market

2012

2013

2014

2015

2016

2017

F

2018

F

2019

F

2020

F

2021

F

40

35

30

25

20

15

10

5

US

D in

bill

ions

Internet Access

Non-Digital

Digital

Total Digital and

Non-Digital

5.0%

8.1%

-0.9%

2016-2021F CAGR

3.1%

Digital is defined as:• Online and mobile internet

advertising• Mobile TV subscription• Digital music• Electronic home video• Online and wireless video

games• Digital consumer magazines

circulation spending• Digital newspaper circulation

spending• Digital trade magazine

circulation spending• Electronic consumer,

educational, and professional books

• Satellite radio subscriptions

Internet advertising is expected to lead growth across media segments in the Scandinavian E&M market towards 2021

Scandinavian growth by segment 2016-2021F

Internet advertising

Video games

Internet access

Internet video

Music

Radio

Out-of-home advertising

Business-to-business

TV subscriptions and licence fees

TV advertising

Book publishing

Filmed entertainment

Magazine publishing

Newspaper publishing

8,3 %

6,7 %

5,0 %

4,2 %

2,8 %

2,4 %

2,1 %

1,4 %

1,1 %

0,9 %

-0,2 %

-1,0 %

-1,3 %

-4,6 %

Digital advertising revenues are expected to represent 58% of total Scandinavian advertising revenues in 2021

2016 2021FCAGR: 3.2 %

Digital advertising Television - excluding online Newspaper print

Business-to-business Magazine print Other

8 566USD

millions

10 023USD

millions14%

12%

58%

48%

16%

18%

5%4%

4%

9%6% 8%

Mobile is expected to make up more than 70 % of internet advertising revenue in USA by 2021

120

100

80

60

40

20

US

D in

bill

ions

Internet advertising in US advertising revenue

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Mobile internet advertising in USA

Non-Mobile internet advertising in USA

18.7%

-3.7%

2016 –2021F CAGR

91%83%

75%

65%

49%

40%

34%

30%

27%26%

74%73%

70%66%

60%

51%

35%25%

17%9%

User Experience Driving Growth

Print will continue to see a negative growth rate and digital will not compensate for this loss

60 %

50 %

40 %

30 %

20 %

10 %

0 %

(10 %)

Year-over-year % growth rate in Scandinavia

2016 –2021F CAGR

- 6.0 %3.1 %

- 6.7 %

11.7 %

Print advertisingDigital advertising

Print circulation

Digital circulation

2013

2014

2015

2016

2017

F

2018

F

2019

F

2020

F

2021

F

Mobile will continue to be the biggest growth story towards 2021 in internet advertising

2016 2021FCAGR: 8.3 %

3 788USD

millions

5 638USD

millions

16%24%

17%

40%15%

4%

25%

35%

19%

4%

2016 –2021F CAGRMobile 17.6 %

Video 8.9 %Classified 2.8%

Search 10.7 %

Banner/Display 0.3 %

Internet advertising market by sub segment in Scandinavia

Number of apps per smartphone & tablet is expected to continue to grow and drive growth in mobile internet advertising

Apps per smartphone & tablet

200

180

160

140

120

100

80

60

40

20

2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

2016 –2021F CAGR

7.7 %9.2 %10.5 %

6.0 %Western EuropeScandinaviaCentral & Eastern Europe

US

Num

ber o

f app

s

The gap between TV advertising revenue and Internet revenue is increasing

Internet and TV advertising revenues in Scandinavia

6 000

5 000

4 000

3 000

2 000

1 000

2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

2016 –2021F CAGR

0.9 %8.3%

TVInternet

USD

in m

illio

ns

Traditional losing ground to online streaming services focusing on user experience

Traditional TV advertising is losing ground to online streaming services.

2012

2013

2014

2015

2016

2017

F

2018

F

2019

F

2020

F

2021

F

1 800

CAGR 1,80%CAGR 0,90%

1 500

1 200

900

600

300

US

D in

mill

ions

84% 83% 81% 80% 79% 77% 76% 75% 73% 72%

5% 6% 7% 8% 9% 10% 11%

15% 15% 15% 15% 16% 16% 16% 16% 17% 17%

Online

Multichannel

Terrestrial

14.5%

-0.9%

2.8%

2016 –2021F CAGR

Electronic home video is expected to grow, but cinema is still keeping up

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2012

2013

2014

2015

2016

2017

F

2018

F

2019

F

2020

F

2021

F

Scandinavianfilmedentertainmentrevenue

Physical home video

Cinema tickets

Electronic home video

-9.6%

4.2%

2.0%

2016 –2021F CAGR

54%

7%

39% 38%

21%

41%33%

33%

35% 35%

41%

24%18% 16% 14% 12% 11% 10%

46% 49% 51% 52% 52% 53%

36% 35% 36% 36% 36% 37%

Despite growth in streaming, live music will continue to be the main revenue stream in the music industry

Live music

Physical music

Streaming

2.5%

6.7%

-3.7%

2016 –2021F CAGR100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2012

2013

2014

2015

2016

2017

F

2018

F

2019

F

2020

F

2021

F

Scandinavian music revenue

68%

12%

16%13%

11% 11% 10% 10% 9% 9% 8% 8%

16%19% 21% 23% 24% 25% 26% 27% 27%

67% 68% 67% 66% 65% 65% 64% 64% 65%

Emerging technologies will change how companies generate, distribute and control content

Among emerging technologies, AI, IoT and VR received most funding in 2016

Global VC funding, Essential Eight technologies

5 876USD

millions

33%

29%

24%

14%

IoTVROther (Robots, AR, Drones, 3D Printing and Blockchain)

AI

Source: CB Insights, PwC, VC Funding

Outlook2017-21:AIisalreadyentertainingyou.DeborahBothun&DavidLancefield

Benefits from AI include an improved ability to tap into consumer preferences and generate personalized content

AI can help companies innovate content creation and improve customer experience

Simplifying content creation• AI-generated music• AI generated video-ads

Improving the customer experience• AI-generated content curation (e.g. Spotify playlists)• AI-generatedproductrecommendations(film,TV,music)

Better, more creative decisions• Maximizationoffilmandcontentlicensingrevenues• AI-generated insight from video and social media

Freedom of repetitive tasks• Programmatic ad buying• Newsletter curation, creation and distribution• AI-generatedsportssummaries,filmscoringandstockmusic

Artificial Intelligence (AI) could contribute up to $15.7 trillion to the global economy by 2030 and the E&M industry can seize a significant share of this gain

PwC AI-report: Sizing the prize

Scandinavia is better positioned to create value from Internet Of Things compared to the rest of the world

Key drivers for the Scandinavian IoT value creation potential

1 Welldevelopedfiber-andinternet- infrastructure

2 4G coverage is widely spread across Scandinavia. Sweden is leading in testing 5G coverage.

3 On average, each person in the Nordics has almost 3 devices connected to the internet in 2016. By 2021, this is expected

to grow to 6 devices per capita, which represents four times as many devices as in the rest of the world.

By expanding to new or even non-existing entertainment platforms, E&M companies can unlock the potential of IoT

PwC AI-report: Sizing the prize

67M USDIoT Scandinavian market size 2016

20 %Nordic loT CAGR 2016-2021 in the

Nordics 2016 - 2021Source: Connected Things: New digital ecosystems – unlocking the growth potential of IoT (2017) Arthur D. Little and Telia

We are at an amazing point in history for artists. A revolution is going to happen, and next year it’s going to take over. It’s the ability of artists to have the control and the say of what they do with their music at large. The answer to this is in the blockchain.”

- Imogen Heap, British singer & songwriter

CEO perspective: E&M CEOs are mostly concerned about changing consumer behaviour

81 % 78 % 78 %

77 % 75 %

of E&M CEOs are concerned about

changing consumer behaviour

of E&M CEOs are concerned about availability of key

skills

of E&M CEOs are concerned about

uncertain economic growth

of E&M CEOs are concerned about the

speed of technological change

of E&M CEOs are concerned about

volatile energy costs

Find your own Outlook story

online ...www.pwc.com/outlook

Contact us!

Eivind NilsenPartner 952 608 32eivind.nilsen@pwc.com

Øystein B. SandvikDirector 952 604 15oystein.sandvik@pwc.com

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