What you need to know:

• PwC has released its Entertainment & Media Outlook 2022, predicting 8.3 per cent growth in ad revenues in 2022 slowing to 4.5 per cent in 2023. That’s after more than 20 per cent growth in 2021.
• The firm puts internet advertising at $10.7bn in 2021, $2.3bn lower than the PwC-audited $13bn industry figure for the IAB.
• PwC’s Dan Robins blamed industry groups claiming all territory they can for their sector – BVOD is counted in both IAB and ThinkTV industry estimates, for example.
• PwC has put a spotlight on retailer media, estimating the current market size at $850 million – and growing to $2.14bn by 2026 in its mid-range forecast and circa $3bn in the upper band.
• Robins claimed PwC didn’t miss the now $850m retailer media sector in previous reports but didn’t have good enough figures to be accurate.
• Meanwhile, gaming ads, cited as a $64m market in last year's outlook and considered a perennial underperformer in the ad market despite huge audiences, is now reported closer to $1.3bn.

Go figure

Retailer media has emerged as an $850m juggernaut per PwC's latest figures, with games advertising also leaping from a $64m market last year to circa $1.3bn in 2022.

The consultant's annual five-year Entertainment & Media Outlook also posts a $2.3bn gap between the size of the digital market ($10.7bn) versus figures it signed off for the IAB ($13bn) earlier this year.

Top line

While the marketing industry is preparing for potential economic headwinds, the report forecasts 8.3 per cent growth in advertising revenues for 2022, the second highest growth rate on record. The highest year was 2021, where the advertising market grew to $19.7bn, up a staggering 20.3 per cent year-on-year following an anomalous 2020 – and still more than 17 per cent higher than pre-pandemic 2019. The ad market is slipstreaming strong consumer spending across the media and entertainment sectors, PwC says.

“They are the strongest growth rates that we have seen in both consumer and advertiser spend,” Laurence Dell, PwC Partner, said. “Consumer spend in entertainment and media has grown significantly despite everything in the last couple of years.”

That growth is clear in entertainment and media spend. Every household in Australia will spend $512 more in 2022 on entertainment and media compared to 2019, making it a $48.3bn category, PwC said. The firm predicts there’ll be another $7.2 billion to play for over the next five years.

But the record growth is slowing – fast. In 2023, it’s anticipated the market will grow 4.5 per cent, “dampening further to near-flat in the subsequent forecast years”.

Digital gap

PwC says the “internet advertising” category recorded $10.667bn in revenue in 2021. Yet for IAB Australia, PwC prepares audited figures that show internet advertising stood at circa $13bn industry in 2021. 

Dan Robins, PwC Australia Director and Editor of the Outlook report, said the $2.3bn gap was due to significant overlap in what each industry group claims as part of its sector. Elements of out-of-home, TV, newsmedia, audio and magazines are technically digital advertising and as such are claimed as part of the IAB’s overall sector figures.

“The IAB reports a number that includes the full spectrum of online video and BVOD. And that gets you, on top of all of the other pieces, to $13 billion. ThinkTV also puts out a number with linear TV and BVOD in it. So if you just took those two together you'd get to $17bn, which is inaccurate because BVOD is covered twice,” Robins said.

“To give accuracy, we have decided to leave it in its inherent channel rather than risk a double up,” he added.

Robins said auditors compile figures based on data submitted by industry players, which don't typically share direct numbers.

Gaming skyrockets

In last year's Outlook report, spanning 2021-2025, PwC reported games advertising at just $64m. This year, it’s a separate, $1.298bn category – and is expected to grow to more than $2.1bn by 2026. While gaming has benefited from the Covid lockdowns, the 20x higher figure suggests a significant revision from from PwC.

“We take from our global sources, and we constantly update,” Robins said.

“It's not right to really compare our reports year-on-year, to be honest. Because any given sector, the data might change even just from ours being a calendar year. And sometimes you get a financial year report. And so that then changes what was the forecast into an actual," he suggested. "We've added in a line for gaming that we didn't have before.”

Retailer media

Retailer media is now an $850 million category and could grow as high as $3bn by 2026, PwC estimates, in its first exploration of the sector. Its mid-range forecast puts the industry at $2.14bn by 2026, with annual growth of about 20 per cent over the next five years.

“This is part of a trend that, though not new, has come to stark prominence over the two years — the rise and rise of retailer media,” PwC’s report said.

The Outlook predicts most of that growth will come from the major players – Woolworths’ Cartology, Coles Media, Endeavour Group and Chemist Warehouse, for example. Pure play retailers like Amazon will be a fast-growing minority in the next few years.

Last year, Mi3 authored a deep dive report on the retailer media sector. Experts predicted a $1bn market within three years – those estimates now appear conservative as Coles and Woolworths rapidly build their media businesses.

Retailers, PwC predicts, will build an integrated model, a standalone media business or outsource the skills to a third party, with 50 to 90 per cent margins to be gained.

Previous PwC Outlook reports make little mention of retailer media, and contained no financial figures for a sector that now appears to be almost as big as out of home. Robins defended the omission.

“We only talk when we've got something real to say,” he said.

“We talked about retailer media last year in Outlook. It was in there. It just wasn't broken out as a segment because there wasn't really much data around then – and we had other things to talk about in terms of our research. This year we think now is a good time, not just to put a number against it, but we have clients talking to us about what do we do in the space.”