Written by: Tanay Sonawane, Varshith Uppalapati and Jonathan Ouyang
The industry of entertainment is about as old as society itself, having changed from drawing on cave walls to our diverse and high tech methods to cure boredom, the way we entertain ourselves has never been through so much technological change. From streaming strategies, creator evolution to the rise of the Metaverse and interactive experiences powered by AI, entertainment is going places we can not wait to see. Here, we bring you with us to delve into the ever-evolving entertainment ecosystem and some of the recent trends and innovations coming about.
Streaming providers need to find new ways of making cash
In 2022, 15 years since the inception of the video streaming revolution, streaming service giants in the US (the most mature market so far) finally overtook old school cable and broadcast TV. This has led to a global expansion, and the rise of domestic streaming services by media companies in different countries, especially in Asia like JioTV and Hotstar in India. As a delivery technology, on-demand streaming has changed the game when it comes to video consumption, upending the entire entertainment industry, the fate of Blockbuster is a case in point. Nowadays, we hear more about people’s favourite shows on their favourite service rather than their favourite TV channel.
However, the massive revenues reminiscent of the cable TV era seem to be a distant memory, with streaming now estimated to generate only one-sixth of the revenue per household compared to pay TV. This is because audiences are fragmented, cancelling subscriptions is easy, and advertising has yet to unlock revenues needed. From the cost perspective, content has only become more expensive to acquire and produce with services spending billions on content to lure content hungry subscribers. This has resulted in a tough landscape where profitability remains a key challenge to face. In the coming years, we can anticipate experimentation with everything from pricing to content release, and especially advertising as the industry responds to a poor economic outlook and the potential for people to ditch subscriptions to save money. Most US streaming platforms now offer budget-friendly, ad-supported options and discounted annual subscriptions to combat this. Free Ad-Supported Television services such as Pluto TV have also emerged with a more ad-centric approach, seemingly keeping TV alive for just a little longer. Providers are testing different payment models, such as limited ads versus premium ad-free subscriptions and adjusting premium package prices to explore subsidisation options. Additionally, content release schedules may undergo further experimentation, potentially requiring lower-tier subscribers to wait 15-30 days for new releases, certainly a bummer if you crave that spoiler free viewing experience.
Streamers are also working diligently to emulate the profitable advertising model of cable TV within their streaming platforms. If more advertisers come on board, ad revenues might compensate for subscription costs and content expenditures. With so many new, ad-supported streaming offerings hitting the market, 2023 may see considerable movement and innovation in streaming advertising. Streamers may experience pressure to harness their data assets, construct efficient ad platforms, and furnish advertisers with comprehensive data on actual viewership. This means that you could soon be getting ads for petrol when you watch fast and furious on your service of choice. The industry might also shift its focus away from subscriber counts and towards viewership per household, further shaking pricing dynamics.
Who says content creators HAVE to use social media platforms?
The creator economy is on the rise within the realm of social media, with nearly 70% of US consumers following one or more online personalities. We all know them from our days scrolling mindlessly on Youtube or Tiktok. These creators wield substantial influence by fuelling social commerce, instigating viral trends, and bolstering user-generated video consumption on social platforms. Just seeing the purchasing decisions of younger people being driven by these creators is enough to prove this. Although many creators are deemed successful, with content creation as their profession, a majority earn less than $50,000 annually, prompting them to seek diverse income sources. Notably, brand partnerships account for over half of their earnings, while follower contributions play a lesser role. Despite the presence of "creator funds" on select traditional social media platforms, creators do not receive substantial revenue directly from these platforms.
Even in a seemingly mutually beneficial scenario for creators, brands, and social platforms, seasoned creators are exploring alternatives to traditional social media. They are in search of avenues to enhance audience engagement, cultivate communities, monetize content, and escape algorithmic limitations that can impede their reach and income potential. Independent creators are emerging as a novel model, sidestepping traditional platforms to connect directly with consumers.
Drawing inspiration from the music industry, where some artists initially gained recognition on user-generated video platforms before achieving mainstream fame, this evolving creator economy model presents a blend of challenges and opportunities. Creators gain access to a broader marketplace for capitalising on their content and partnerships, but they may face difficulties in collaborating with brands focused on viral reach. For brands, this model offers the potential to identify creators closely aligned with their products and niche audiences, yet navigating this crowded creator landscape to find ideal partners can be challenging. Social platforms, while likely to remain vital for creators, may experience audience attrition if creators migrate elsewhere. Nevertheless, platforms have the chance to enhance support for existing creators and welcome newcomers into their ecosystems.
An alternate virtual world is becoming a bigger part of our real world itself.
If you are anything like us, then you are probably wondering what is the “Metaverse”… Think of it as a “cyberspace”, like in the movie Ready Player One or The Matrix. The Metaverse refers to a broad shift in how we interact with technology such as virtual reality (VR) and augmented reality (AR), where we can engage with entertainment forms such as virtual concerts, gaming, VR theme parks, competitive entertainment, sports betting, and even concerts. We are even seeing individuals buy and sell digital virtual property in such environments, almost like a virtual Rightmove.
In short, the Metaverse Live Entertainment market is growing with accelerated momentum, at a CAGR (2022-2027) of 9.07% Its market value is projected to rise to US$460M by 2030, a 92% increase in value compared to 2023’s market value of $240M.
Accelerated by the COVID-19 pandemic, the market is driven by multiple factors:
1. The growing adoption of AR/VR and other immersive technologies, underscored by an increasing desire for a more interactive entertainment experience. In this regard, the ongoing development of AR devices such as smart glasses such as those from Dispelix (we have come far from google glass haven't we) is likely to further raise awareness, contributing to the growth of users across the globe (reaching 3.2 million by 2030, a 39% increase compared to 2023), especially with regards to content hungry gamers.
2. A rising consumer adoption of online gaming. Among various fields of application, the gaming sector was the first to fully utilise the technologies of the Metaverse. The rising Metaverse gamer community will not only enhance market development in the gaming realm, but will also lead the exploration of other parts of the market, as socialisation is a key aspect of online gaming. We should see that the rapidly growing population of gamers will positively impact the growth of the global market in the forecasted period. When they say “gamers rise up!” they may not be wrong…
However, it should be noted that concerns over data privacy and security, health, the high cost of AR/VR technologies, and legal challenges associated with the rights of digital collectibles are still key issues that restrain market growth. Nevertheless, we should not underestimate the potential of a space that allows users to access virtual and mixed reality worlds, interact in real-time, and transcend geographical boundaries. Connection is a human demand, now more than ever we can be closer to people without even leaving the house.
Gaming has never been so immersive
The rise of interactive entertainment, from dusty SNES video game cartridges to virtual reality (VR), and augmented reality (AR), has built the childhoods and even adulthoods of entire generations. Indeed, with the rise of interactive entertainment, our experiences are becoming less passive. Now, one does not only have to dream about being Spider-man, but can actually become him through the power of games.
Video games, in particular, have become a dominant force in the industry. The global video game market was estimated to be valued at US$217.05 billion in 2022, and is expected to grow at a CAGR of 13.4% from 2023 to 2030. In the US, the industry is expected to hit over $70 billion in 2027, experiencing a CAGR of 6.06% from 2023 to 2027.
We can largely attribute the growth of the market to the emergence of high bandwidth network connectivity such as the penetration of 5G, and, perhaps more importantly, the continuous demand for 3D games of which we just can’t get enough. This demand is considerably derived from the fact that the population of the gamer community has continuously increased year-on-year with broadening demographics - a result of increased accessibility, social interaction, and a general shift in the social outlook of gaming. Gone are the days when games were seen as a nerdy hobby, now games are the main hobby of many. Additionally, technological developments in smartphone gaming have further enhanced convenience and availability of low-cost gaming opportunities, thus not only contributing to the growing gamer community, but also offering lucrative growth opportunities for the overall sector.
Lastly, Esports – competitive gaming at a professional level – now boasts large followings and multimillion-dollar prize pools Gaming is now not just a leisure activity but a professional sport. This both enhances the gaming population and also leads to a surge in the demand for high-quality and immersive games, bringing ground-breaking experiences for both gamer and viewer. With the rise of interactive narratives and other forms of interactive entertainment on the horizon, we should expect this to be an excitingly promising sector.
Conclusion
From our exploration of this industry together, we can see that for an industry as old as humanity, the way in which we entertain and are entertained has changed significantly. We can see that the entertainment industry is still growing, and 20 to 30 years down the line, we will see innovations discussed here playing an even bigger role in our lives. Now is no better time to be excited about the future of how we entertain ourselves.
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