Media and metaverse

What the future of the entertainment and media industry will hold

Bogdan Sutter
Director Advisory, Strategy and Digital Change Expert, PwC Switzerland

Our latest «Swiss Entertainment & Media Outlook 2022-2026» explores the pandemic’s lasting impact on the industry, and reveals what the future will hold.

Switzerland’s entertainment and media (E&M) industry has roared back into action, with year-on-year revenues up 7.6% in 2021 and a further 5.4% rise expected in 2022, according to our latest «Swiss Entertainment & Media Outlook 2022-2026».

However, this strong overall growth masks a far more mixed picture. Although industries that were hit hard by the pandemic, such as live music and cinema, have made strong comebacks, revenues remain below pre-pandemic levels. Meanwhile, sectors such as video games and over-the-top (OTT) video have exploded in popularity after thriving under lockdown conditions. They’re now outperforming pre-pandemic forecasts.

The shift from physical to digital

Overall, the pandemic has accelerated the switch from physical to digital formats. This shift is unfolding across many parts of the E&M space. Perhaps the most prominent example is newspapers. Revenues fell by a staggering 17.1% in 2020, and they’re struggling to recover. The downturn is primarily down to a sharp decline in demand for print, which has more than offset the modest rise in digital revenues. And a public vote rejected government proposals for a cash injection to bolster broadcast and print media. This means that to safeguard relevance and profitability, newspaper outlets will need to innovate and focus more on online formats.

Another key example is consumer books. Consumers have become increasingly fond of e-books and audiobooks in the past few years. However, growth in these segments has been outweighed by the dramatic fall in print. As a result, revenues are falling across the overall segment.

The shift from physical to digital is also prevalent in business-to-business (B2B) sectors. Demand for business information and trade magazines has remained strong, even during the economic downturn caused by the pandemic. But gradually, print revenues are declining and growth is being driven by digital products and services.

Changing rhythms in the music industry

The move from physical to digital has even affected the music industry. With live events cancelled, locked-down consumers seeking entertainment sparked an increase in subscriptions to digital music services. This growth has been spurred by ease of access to vast libraries of content, and music offerings being bundled with other services such as mobile contracts and over-the-top (OTT) services.

Now, live music has slowly begun to return to venue calendars, and many of Switzerland’s biggest festivals have made comebacks. However, live music revenues remain well below pre-pandemic levels. And from 2022 onwards, digital revenue will continue to gradually boost its share of the music market.

Cinemas have reopened, but have lockdowns changed viewing habits forever?

Cinema was the worst-hit segment in 2020, as many theatres had to remain closed for much of the year. However, 2021 marked a strong comeback, with 30.5% growth as cinemas reopened. The sector’s recovery was buoyed by the delayed release of many films that had been set to premiere in 2020. One example is James Bond’s No Time to Die, which was the top-grossing film in Switzerland in 2021 by some margin. The cinema sector in Switzerland will experience modest growth from 2022 to 2026, gradually recouping the losses suffered during the COVID-19 pandemic. Total revenues won’t recover to pre-pandemic levels until 2024.

While cinemas suffered, streaming services achieved unprecedented growth. Several new OTT services have launched in Switzerland, including Disney+ and Play Suisse (the streaming platform run by the Swiss Broadcasting Corporation, SRG SSR). We’re also seeing a blend of advertising-based video on demand (AVOD) and subscription-based video on demand (SVOD) services. Although the market is becoming increasingly saturated, revenues are set to continue climbing at a compound annual growth rate of 6.5%. So while it looks like the pandemic has changed viewing habits forever, the meteoric growth of OTT services hasn’t (for now, at least) meant the end of cinemas.

Welcome to the metaverse

There’s been dramatic growth in augmented and virtual reality (AR and VR). Mobile AR revenues have shot up from just 7mnCHF in 2017 to 39mnCHF in 2021 – and they’re forecast to reach 97mnCHF by 2026. This growth is primarily driven by mobile AR advertising, such as AR adverts (e.g. branded Snapchat lenses) and ordinary adverts served alongside in-app AR-enabled content. VR is on a similarly impressive growth trajectory. Its rise is mostly down to the increased popularity of VR gaming.

“The Swiss metaverse ecosystem is at an early stage, but it’s already beginning to thrive.”

Underpinning the booming AR and VR markets is the emergence of the metaverse: a stunningly realistic 3D digital world where consumers and businesses can purchase and sell goods and services, and interact with people, customers and communities. It’s enabling exciting new use cases spanning everything from gaming and advertising to fashion and virtual concerts. The Swiss metaverse ecosystem is at an early stage, but it’s already beginning to thrive. Switzerland is set to become a hub for the metaverse, thanks to its strong blockchain, crypto and technology market. What’s more, Meta (formerly Facebook), Google and Microsoft have all concentrated their metaverse activities in Zurich.

Shifting sands in the advertising landscape

There’s also been a seismic shift in the advertising market. As the pandemic pushed consumers online, there’s been a huge spike in online advertising. This trend is set to continue, with online advertising set to make up nearly two-thirds of total advertising revenues by 2026.

Other advertising segments paint a mixed picture. Out-of-home (OOH) advertising plummeted as people were told to stay at home, and its recovery will take several years. Meanwhile, many companies cut TV advertising budgets in 2020 as they looked to streamline their spend. Although they’ve risen slightly since then, they won’t recover to pre-pandemic levels within the next five years.

Adaptation is key

It’s clear that the pandemic has transformed the Swiss E&M industry. Although it might feel like life has largely returned to normal, it’s not the normal we knew before. As we emerge into the post-pandemic era, companies in the E&M space must ensure their products and services meet consumers’ evolving demands and desires – or risk losing out to competitors.

Swiss Entertainment & Media Outlook

The whole study will go into more detail about the outlook for the E&M market in Switzerland until 2026 in 13 different segments.

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Bogdan Sutter

Director Advisory, Strategy und Transformation Expert, PwC Switzerland

Tel: +41 79 356 30 80