Executive Summary
The Swiss Entertainment and Media Outlook presents 5-year annual historical data and forecasts for the next five years across eleven industry segments, plus an annually adapted deep-dive into a hot topic and a special focus report on current media trends. In each segment of the outlook we share our point of view on the Swiss entertainment and media market and offer detailed commentaries on the major developments in the coming years.
SEMO 2022 is now available
State of the Swiss market
Switzerland is getting smart – not because of a single, radical innovation, but through a variety of technological advances. Artificial intelligence, Blockchain or the Internet of Things increasingly allow us to fast-forward away from the banal “buzzwords” to a profound basis for a previously unimaginable future. Breakthroughs with these technologies open up new fields of application and business models for the Swiss entertainment, media and telecom markets. The already digitalised segments have created new spheres of efficiency, mainly by means of advanced data analysis. The print and non-digital sectors, on the other hand, face immense structural challenges. To cope with stagnation or even a downturn in sales figures, new monetisation strategies must be exploited. Also, due to increasing global competition, Swiss companies in the analysed markets are tending to expand their value chains and build ecosystems in order to tap new revenue streams.
Since 2017, new survey methods for the Internet Advertising and OTT/Streaming segments enable more precise estimates of sales volumes in Switzerland. Revenue figures for international players such as Google, Facebook, Amazon and Netflix remain guesstimates due to a lack of official national data. Nonetheless, the approximate income flowing to these international enterprises is taken into account in the Swiss Entertainment and Media Outlook due to its considerable market influence. In 2017, total revenues in the Swiss entertainment and media market amounted to 16.2 billion.
For the sake of comparability, though, the overall growth rate for the E&M market this year does not reflect the additional surveyed revenues of international players and the change of methodology. In 2017, Swiss E&M revenues climbed by 1.3%, a slightly slower growth rate than in previous years. The eleven considered E&M segments show different performances, also strongly dependent on the successful adaptation of new digital solutions.
Let’s look ahead. By 2022, the segments covered in the Swiss E&M Outlook are expected to grow with a CAGR of 1.4% to a total volume of CHF 17.4 billion by 2022.
For 2018, we expect growth of 1.6 percent. The main propellant here comes from the online and mobile advertising sector and from business fields with streaming offerings in form of VOD & PPV or music titles. Growth in these areas is mainly being driven by major international companies, the so-called Over-The-Top players.
Great opportunities for growth are also seen in the Digital Out of Home market with innovative ad solutions and in the Video Games sector, which should continue to excel thanks to the huge growth potential of eSports. In the TV and Radio market, data-based income streams like those from programmatic advertising are key to achieving positive numbers. The Swiss Internet Access and TV Subscription markets are saturated and therefore stagnating with a slightly downward bias. Non-digital media, especially the Newspapers and Magazines print segments, but also the physical sales of Music and Filmed Entertainment continue to record sizeable declines.
The entry of strong competitors, the development of new technologies and features at ever shorter intervals, and the rapidly changing behaviour of users are forcing an ongoing paradigm shift for media, entertainment and telecom companies. To remain competitive and in a position to seize new business opportunities, they must remain on top of the latest developments in the market, invest further in new technology and stay agile. The Swiss Entertainment and Media Outlook 2018-2022 provides a detailed overview of the current market developments, leading-edge business innovations and segment-specific trends, plus forecasts for the next five years based on data analyses and relevant insights from experts in these fields. In this year's Deep Dive chapter, we discuss how artificial intelligence is transforming the Swiss media and telecom market, as well as provide insights and use cases from Swiss media and telecom companies.
* Internet Advertising: A new more precise survey method includes Mobile Search since 2017
** Filmed Entertainment: A new more precise survey method required retrospective adjustments
*** Consumer Magazine / Newspaper Publishing: Digital Ad for Print is included in the segment "Internet Ad" since 2017
Main shifts in the E&M industry
Shift 1: E&M companies are building ecosystems
The borders between media, telecom and entertainment are becoming increasingly blurred. Large media companies are expanding their traditional publishing business through the addition of digital platforms, augmenting their value chain with new customer services, and trying to move closer to the transaction business. New technologies like Artificial Intelligence give rise to new use cases for building media ecosystems that encompass content generation, cross-media advertising, online marketplaces and entertainment services. Telecom providers as well are increasingly focusing on new business cases, for example with applications for the Internet of Things, Cloud computing and cyber security, but also for interactive TV and gaming offerings. Swiss E&M companies in general are providing more and more integrated solutions these days and are targeting business models that centre on a direct relationship with consumers. Through consolidation, these companies aim to preserve their market position and ability to compete against the international players who continue to encroach on all segments of the market.
Shift 2: Smart technologies are leading the way
Breakthroughs in machine learning, investments in highspeed networks and the adoption of Blockchain are bringing new customer solutions to the market. At the same time, new technologies have a big impact on the internal service delivery processes of media, telecom and entertainment companies. Artificial Intelligence will have profound effects in all sectors of the E&M market and become a major new battleground for the industry. The Swiss media companies are currently developing and implementing various "use cases" for AI. In the publishing sector, AI offers Swiss media companies great potential in the areas of research, live monitoring and paid content models – not to mention robotic journalism in certain instances. Blockchain is becoming an increasingly hot topic for the music business as well as for big media houses with online marketplaces in their portfolio. Telecom providers as well see promising opportunities for new business models, for instance in the area of the Internet of Things for B2B organisations and manufacturers. The advancement of highspeed networks like 5G and fibre optics in combination with the inexorable growth of data volume form the basis for this trend.
Shift 3: Personalised content with surprising effects enhances user experience
It is becoming increasingly important for media, technology and telecom companies not only to differentiate themselves through an appealing user experience, but also to control the entire user journey. It is essential to determine what drives user engagement and retention before, during and after the purchase or consumption, regardless of content, channel or technology. The companies that will succeed in the market are those that best transform the expectations and needs of so-called “fans” into an end-to-end experience. These companies aim to excel as general contractors, orchestrators and integrators. No matter whether such a construct is created by the company itself or cobbled together through acquisitions, it is necessary to create a user experience that surprises and inspires influencers to share content. Fans' interest and passion for the product must be continually renewed to retain existing customers, and their feedback needs to be integrated through advanced data analysis, thereby enabling the placement of improved personalised content with a “Wow” effect. What must be avoided is that users end up in the so-called "filter bubble". Doing so would reduce the waste coverage of advertising campaigns.
Shift 4: The extent of international competition is becoming transparent
As global and national convergence continues, the role of Swiss companies’ in the future Swiss E&M market will be put to the test. Large global companies are applying similar business models by combining content, commerce, advertising, and communications – and this from an extremely potent financial base. The aim is to maintain exclusive control over every single aspect of consumption, activities and the customer relationship. In the filmed entertainment area, international OTT players are menacing national content providers with their enormous spending power and wide array of available content. In the Internet Advertising field, the rapid growth being seen is strongly driven by international OTT providers. It is no secret that huge sums for paid advertising in Switzerland ultimately flow into the coffers of US companies, an amount that is invested not just by large Swiss customers, but also SMEs. However, the US tech giants are not seen as enemies, but rather as fellow members of our ecosystem, and Swiss E&M companies also focus on opportunities to share their success. Social media platforms can be used in order to optimise advertising campaigns and generate higher traffic.
Swiss Entertainment and Media Outlook 2018-2022 – an overview
Internet Access Spending
Expansion of high-speed networks opens new data-based business opportunities with the Internet of Things
The wired broadband market comprises various technologies such as cable, LTE and fibreoptic networks. Switzerland is one of the most advanced countries in this segment, with a total turnover of CHF 4’860 in 2017. Wired broadband revenues are expected to grow modestly at a CAGR of 0.4% over the next five years. This growth should come from the expansion of ultra-broadband networks and substantial infrastructure investments. In mobile communications, we assume a decline of 2% in 2018 due to the current strong price pressure in a nearly saturated market. The market is expected to stabilise thereafter, especially due to the introduction of the new 5G mobile standard which will lead to rapid growth in data traffic and an increasing number of networked devices. This opens new opportunities for business in the fields of Cloud computing, IT services and the Internet of Things.
Internet Advertising
Growth is being strongly driven by international ad-tech companies and mobile advertising formats
Switzerland is one of the most advanced markets for Internet and mobile usage in Western Europe, as also reflected in the Internet advertising market. In 2017, more precise methodology enabled the reporting of revenue not only for Desktop, but also for Mobile Search. Including this, total revenue for Internet Advertising amounted to CHF 2.3 billion in 2017 and is forecast to grow at a CAGR of 9.6% through 2022. Growth will be powered mainly by international ad-tech companies that have a firm grip on advertising wallets. Banner Advertising is gaining ground and is expected to grow annually in the low double-digit range. Only moderate growth is forecast for Affiliated Ads and Classifieds. The business with classifieds (marketplaces) is examined in more detail in the chapter “Internet Advertising” with insights on Tamedia and Ringier, the two market leaders in this field.
TV Subscription and License Fees
Bundled offers with innovative and interactive features for Video on Demand are key for a strong market position
The fragmentation of the Swiss TV market will probably peak out within the next two years. Companies have to differentiate themselves further through original content, user experience and pricing. In 2017, revenues generated from TV subscribers amounted to CHF 2.2 billion. Due to saturation in the Swiss TV market, revenues are expected to expand at a sluggish annual growth rate of 0.2% over the next five years. In 2017, a main focal point for broadcasters and content providers in Switzerland was to launch new bundle packages covering telephony and flexible mobile subscriptions, ultra-fast Internet and digital TV with innovative features.
Overall, the TV subscription and licence fees market is projected to grow at a CAGR of 0.4%. By 2019, the mandatory licence fees for TV and radio will be levied in form of a general tax which will result in reduced income for the Swiss public channels but higher grants for the domestic private channels. Royalties for audio-visual works will increase, however this only accounts for a marginal share of total market revenues.
TV Advertising
The trend is going towards “moving-image advertising” concepts as advertisers barely distinguish anymore between TV and online video ad campaigns
Switzerland’s TV advertising and sponsoring revenues were reported by 62 channels in 2017. In total, these broadcasters earned net revenues of CHF 774 million, a decline of 2.1% compared to the 4.6% growth recorded in 2016. The drop can be attributed in part to the sizeable losses public channels incurred in 2017. However, the downturn also reflects the market fluctuation caused in a given year by the lack of any major live sport events, which remain a crucial factor for TV advertising revenues.
Long-established revenue streams in the industry are being challenged as 2017 was the first year in which digital ad spending surpassed traditional TV advertising outlays. However, TV is expected to remain an important ad channel due to its vast reach and efficiency, which produces a great branding effect. The trend now is in the direction of moving-image advertising concepts as advertisers barely distinguish anymore between TV and online video ad campaigns. The total broadcast advertising and sponsoring market is projected to grow at a 0.4% CAGR through 2022.
Music
Streaming is the most important driver of recorded music revenues, and Blockchain has the potential to disrupt the market sooner or later
After having suffered for years in a challenging market environment, the Swiss music market recovered last year: total revenues increased by 2.1% in 2017. While the streaming segment is enjoying rapid growth, downloads and sales of CDs and LPs continue to shrink. The bulk of total revenue in the Swiss music market is attributable to the live music segment, which pulled in CHF 577 million last year. Live music (which covers concerts and music festivals) is expected to grow at a CAGR of 0.8% over the next five years due to the stable number of visitors and unaltered ticket prices. The overall Swiss music market is likely to record a CAGR of 1.1% through 2022, driven by the growth of digital distribution yet restrained by physical distribution. The most influential cause of change in the music business and related revenues is streaming. Furthermore, Blockchain could very well start to disrupt the recorded music market at some point.
Filmed Entertainment
Multiplex cinemas are entering a new era of data-based advertising, with opportunities for face recognition
The digital home video channel is the clear winner in the filmed entertainment industry, growing at a 16% pace in 2017. Physical sell-through and rentals of home video have been declining constantly in recent years and will continue to dwindle. The shrinking revenues from physical home video sales and rentals are being more than compensated by digital growth and the adjusted subscriber numbers in the OTT streaming and VOD markets. In 2017, total home video market revenues expanded by 4.0%.
The cinema industry can still rely on its unique user experience and early access to blockbusters as differentiation factors in its fight against OTT providers, whereas it is still heavily dependent on the availability of quality blockbusters or sequels to well-known movies. As for 2017, the Swiss cinema year ended up with CHF 241 million in revenues. As cinemas have experienced only very few innovations in the past decades, leading-edge applications such as face recognition and data analysis can be expected to open new doors.
Video Games
The gaming industry is attracting more companies, even those outside the traditional gaming market
The Swiss video games market is well positioned and attracts a large consumer base. The gamification of services remains a key trend in the gaming industry, and mobile gaming continues to outpace the trend in traditional gaming. eSports offer a promising opportunity and an interesting platform for new businesses. Moreover, brands outside the traditional gaming market have realised the enormous potential that comes with this rapidly growing market and are starting to invest in professional eSports teams. The Swiss Federal Council has even decided to endorse the game-developer industry out of the conviction that games, as a “digital cultural asset”, foster new forms of creative and technological advancement. The Swiss video games market is expected to grow at a 5.1% CAGR through 2022. A substantial driver will be the social/casual gaming area, aside from console and PC games where the growth projections are more moderate.
Radio
The advent of “programmatic radio” opens up new avenues for radio campaigns with data-based, fully automated and dynamic spots
Radio remains widely popular in Switzerland. The average Swiss citizen is exposed to radio for up to two hours every day. In late 2017, the Swiss Federal Council announced the schedule for the transition from FM transmission to digital DAB+ radio. This phase-out is likely to be completed in 2021 – three years ahead of the original schedule. Swiss public and private radio stations will be allotted their share of the public licence fees according to the new radio and television law (RTVG). Additionally, private stations generate advertising revenues. In 2017, investments in radio advertising by major players like the car and retail industries were relatively low. This resulted in a 4.8 per cent decline in radio advertising revenues to a total of CHF 114 million. However, it is expected that, thanks to innovations in programmatic radio, a fresh breeze will start to blow in the radio space.
Out-of-Home
Digital Out-of-Home media open the way to enhanced eye-catching ads and direct interaction with the audience
In a time when advertising is omnipresent across all media channels, OOH is still able to reach a wide audience with the special advantage of being non-skippable and not easily avoidable. Overall, the Swiss OOH market grossed a total of CHF 452 million in 2017 with a year-on-year growth rate of 0.7%. In 2017, the Swiss physical OOH market declined slightly, while the smaller digital OOH segment grew by 16.7%. In Switzerland and around the world, the OOH market is transforming from conventional poster advertising to digital billboards. The variety and adaptability of DOOH applications offers huge potential to create an interactive, eye-catching way of advertising. It is expected that the DOOH market segment, by opening up new customer categories, will record annual growth rates of about 13.4% through 2022. The classic analogue OOH market is forecast to stagnate in the near future.
Consumer Magazines
Publishers need to retain their customer base by attracting readers who are willing to pay, and by catching them with smart paywall models
The publishing segment is faced with structural change. The revenue shares over the past five years indicate a clear decline in print circulation and the corresponding advertising. Whilst digital circulation and digital advertising have experienced robust growth in recent, overall revenues from advertising and magazine circulation experienced a 7.2% declined in 2017 to a total of CHF 795 million. The deteriorating trend within the consumer magazine industry is expected to continue. For both circulation and advertising revenues in the magazines segment, negative CAGRs are foreseen over the next five years, namely -4.5% and -4.3%, respectively. To establish digital advertising and digital circulation as a reliable revenue stream, market players need to look for new income models and ways to convince the consumer to pay for quality content.
Newspapers
Publishing houses increasingly face a dilemma between focusing on either quality or diversity
The far-reaching structural change in the newspaper industry has led to a declining revenue trend in the Swiss newspaper market. In 2017, this resulted in a 6.9% drop in revenues for the total newspaper segment including circulation and advertising. Swiss newspapers are struggling to counter the decline in print with growth from digital channels. Overall, circulation revenues declined by 2.9% in 2017, and this trend is expected to continue more or less over the next five years.
The decline in print and digital advertising revenues accelerated in 2017 with a drop of -9.6%. The local newspaper industry is increasingly lacking the advertising income necessary to fund the production of journalistic content. With digital paywall options, the Swiss newspaper market is only at the threshold of a trend-setting development, and online advertising is not yet a sufficient revenue source to finance high-quality journalism. Nonetheless, digital offerings such as programmatic and content advertising are on the advance. We expect continued strong growth in the digital sector and forecast a CAGR in the low double-digits for digital advertising, but anticipate shrinking revenues for the print advertising market at a CAGR of -9.5 over the next five years.
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