Entertainment and media revenue to make up 60% of Hong Kong's revenue by 2023

It will primarily be driven by the OTT segment’s 18.7% CAGR to $3.14b.

Hong Kong’s fastest revenue growth in entertainment and media (E&M) will be in digitally driven segments which will account for over 60% of total revenue in 2023, according to PwC’s Global Entertainment & Media Outlook 2019-2023. 

The change is driven by consumers adopting digital formats to revolve around their personal preferences, and supported by Hong Kong’s faster internet speeds and mobile connectivity.

Hong Kong’s top segments fueling E&M growth, measured in compound annual growth rate (CAGR), is over-the-top (OTT) video, which is set to increase by 18.7% CAGR and double from $1.33b (US$170m) in 2018 to $3.14b (US$400m) in 2023, above global average CAGR of 13.8%.

The second fastest growing segment is said to be internet advertising with a CAGR of 6.2%, with revenue to reach $6.13b (US$782m) over the next five years, compared to $4.53b (US$578m) in 2018.

“In general, OTT players remain competitive on price, high-quality content and meet consumers’ demand for personalised media, which could undercut revenues of traditional media platforms,” PwC said, adding that at the current trajectory, OTT video is expected to bypass traditional TV and video by 2023. 

Meanwhile, fuelling the growth is Hong Kong’s high speed mobile internet penetration exceeding 90%, as well as advances in technology and service offerings that highlights the shift in consumption behavior from passive to active consumption, and from linear to on-demand viewing.

“OTT is becoming the fastest growing segment for advertisers. The combination of artificial intelligence (AI) and 5G will enable higher quality speed and quality of videos, and support technologies like virtual reality (VR) and augmented reality (AR) to bring immersive experience of live events like sports and music at home or on mobile devices,” Cecilia Yau, PwC mainland China and Hong Kong’s media leader, said.

To indicate the speed of growth in the region, the Asia Pacific OTT market is set to overtake North America in 2021 to become the world’s largest OTT market.

Whilst China’s OTT industry continues to outpace Hong Kong at a 20.4% CAGR (Hong Kong 18.9%), the industry has seen rapid expansion in recent years. The success of China’s OTT market is a good example for Hong Kong media companies, Yau explained.

“One example that gives Chinese OTT players an edge is their ability to provide both flexible and a variety of service offerings ranging from subscription plans to value added services powered by advanced electronic payment methods which offers convenience and address the needs of fragmented consumers. However, electronic payment options is an area Hong Kong companies continues to lag behind,” adds Cecilia Yau.

Within Hong Kong’s internet advertising, mobile video advertising is the dominant driver of growth. It is estimated to rise at a 19.5% CAGR and generate revenue of $831.05m (US$106m) by 2023. Mobile video advertising growth is on track with the Asia Pacific region of 23.6% CAGR by 2023 driven by faster and more reliable mobile connectivity that enables mobile video consumption.

“Media companies must offer products and pricing schemes that provide individualised consumption, and be agile in response to consumers’ changing behaviours. To compete, E&M companies must consider expanding consumer touch points and use technologies to take convenience to a new level, and meets consumers at the point of consumption,” said Wilson Chow, PwC Global, Mainland China and Hong Kong’s technology, media and telecommunications Leader.