After a period of rapid expansion, the video subscription market is starting to plateau in the UK, according to the latest forecast from PwC. The report, ‘Global Entertainment & Media (E&M) Outlook 2024-2028’, notes that the UK is the largest OTT market in Western Europe, but subscription uptake is expected to slow over the next four years. Against this backdrop, streaming companies will continue to diversify their revenue streams, with advertising poised to take on an increasing role in OTT business models.
The outlook is in line with last month’s Media Nations report from Ofcom, which suggested that SVOD penetration in the UK has held steady at around 68 percent of households since the end of 2021. Similarly, PwC found that OTT video subscriptions per household grew at 20 percent CAGR between 2019 and 2024, but this is forecast to slow to 3 percent CAGR between 2024 and 2028.
As a result, subscription revenues are also expected to slow to 6 percent CAGR. UK video subscriptions will rise to £8.3 billion in 2028, according to PwC, from £6.5 billion in 2024. But as cost-conscious consumers tire of continued price hikes, streaming firms will look for other sources of income in the years ahead. The report highlights ad-supported tiers, password sharing crackdowns, the introduction of live sports, and industry consolidation as key trends in the next few years.
Cracking down
These new business models will predominantly focus on advertising; the report forecasts that ads will account for 30 percent of UK streaming revenues by 2028, up from 24 percent in 2024. Ongoing initiatives to limit password sharing are also expected to drive revenues for streaming companies, following in the footsteps of Netflix, which has reportedly found success in using its password sharing crackdown to drive customers to its ad-supported tier. Disney is also set to implement its own password sharing clampdown in September, while in Europe, Nordic streaming service Viaplay is to start limiting account sharing this summer.
“Despite the OTT market being extremely competitive and mature, revenue has expanded rapidly in recent years with the market nearly doubling in size since 2020 – thanks in part to the accelerated growth experienced during the pandemic,” said Ben Bird, Entertainment and Media Sector Leader at PwC UK. “Prices have risen for several major platforms and despite the difficult macroeconomic environment, the market has continued to flourish. Operators are leveraging their content rights and original productions to boost take up, leaving consumers needing to subscribe to multiple services or rotate platforms to access the content they desire, such as sports streaming with English Premier League football spread across three different streaming platforms. The option to have ad-supported plans is also driving growth, in some cases offering the chance to subscribe for slightly less.”
Market maturity
Looking beyond streaming, the UK’s wider entertainment and media (E&M) market is due to expand by 4 percent CAGR over the next four years. Total E&M revenues are forecast to surpass £100 billion this year, before overtaking Germany in 2025 to become the largest E&M market in Europe. UK E&M revenues are expected to reach £121 billion by 2028.
Again, advertising is to make a growing contribution to total E&M revenues. In the UK, advertising makes up 39 percent of the E&M market, compared to 29 percent across Western Europe. And the UK ad market is the most digitally mature in the region, according to PwC; internet advertising represents 80 percent of total ad revenues, compared to 66 percent across Western Europe.
The report forecasts UK digital ad revenues to grow by 8 percent CAGR, reaching £44 billion in 2028, up from £32 billion in 2024. Paid search will account for just over half of total digital ad revenues by 2028, driven by the growth of the retail paid search segment.
“The UK is one of the most online-heavy advertising markets in the world,” said Dan Bunyan, Partner at PwC’s Strategy& division. “This relative maturity means that the UK internet advertising market is more sensitive to macroeconomic factors. Even so, the market is still expected to grow over the next four years with paid search supported by rapid gains in retail media, and video supporting growth.”
The AI era
The report additionally highlights the scope for media companies to leverage generative AI in order to re-shape business models, enhance creative and boost ad revenues. PwC forecasts AI to increasingly influence how ad content is created, placed and measured, across various channels.
“So far, many of the applications of GenAI in the E&M industry have focused on speed and efficiency cost savings,” said Mary Shelton Rose, Partner and UK Technology, Media and Telecoms Leader at PwC. “As we look ahead, the industry should further explore how GenAI can lead to greater value creation through experimenting, iterating, and scaling new solutions and processes, which can be monetised to drive top-line revenue growth.”
Gaming revenues are also set to expand by 3 percent CAGR over the four-year period. The report calls the UK “the largest and most well-established gaming market in Europe”, with total video games and esports revenue forecast to grow from £7.4 billion in 2024 to £8.4 billion in 2028. More than half of the UK’s games revenues will come from social and casual gaming, according to PwC, with ongoing developments in smartphones and 5G improving connectivity for multiplayer games.
Finally, live music and cinema are set for further growth, at 1.9 percent and 6 percent CAGR respectively. Live music ticket sales are set to grow from £1.75 billion in 2024 to £1.9 billion by 2028, with Taylor Swift’s Eras Tour helping the live music industry recover from the pandemic. Meanwhile UK box office spend is on track to surpass pre-Covid levels in 2027, before reaching £1.3 billion in 2028.
“Continued growth in consumer spend on online platforms such as for gaming and streaming, together with offline environments like cinema and live music, highlight that consumers continue to seek engaging content experiences – regardless of the means of consumption,” said Dan Bunyan. “Investment in high-quality content remains critical for the UK E&M economy to maintain its leading position in Western Europe.”
