Market Outlook

Market Outlook: Fast Facts


 

Content Demand

UK HETV delivered £5.6B of production spend, double pre-pandemic levels (1)

2021 Global Ad Spending topped a record $700 billion, with projected growth in 2022 (2)

2022 streaming investment is likely to drive global spend on content past $230 billion (3)


 

Limited Resources

The surge in global production is outstripping the availability of crew

Demand is exacerbating strain on existing studio infrastructure and equipment suppliers


 

Increased Cost of Production

Strained Supply Chain

Expense of key materials is 10% percent higher compared to 2020 (4)

Low accessibility of steel and lumber drive up cost of materials by 25-30% (5)

Inflationary Environment

Increased costs in everything from fuel to electrical equipment to gaffer tape

COVID Safety

Expense of production has grown 15-30 % over past year due to new line items: (6)

PPE (Protective Personal Equipment)

Frequent COVID testing and personnel

Cala Agulla, Mallorca

(1) Max Goldbart and Tom Grater (2022, February 4), UK Film & TV Posts Record $7.6BN Production Spend In 2021; Another Challenging Year For Box Office, DEADLINE, https://deadline.com/2022/02/uk-film-another-challenging-year-for-box-office-1234926637/.

(2) Brad Adgate (2021, December 8), Agencies Agree; 2021 Was A Record Year For Ad Spending, With More Growth Expected In 2022, Forbes, https://www.forbes.com/sites/bradadgate/2021/12/08/agencies-agree-2021-was-a-record-year-for-ad-spending-with-more-growth-expected-in-2022/?sh=12dd799f7bc6

(3) Roya Sanei and Dan Stevenson (2021, December 20), Content spend sees double digit growth and reaches $220 billion in 2021, driven by SVoD services, Ampere Analytics, https://www.ampereanalysis.com/press/release/dl/content-spend-sees-double-digit-growth-and-reaches-220-billion-in-2021-driven-by-svod-se

(4) Bryn Sandberg (2021, June 2), Rising Inflation Hits Hollywood as Production Costs “Have Shot Through the Roof,” Hollywood Reporter, https://www.hollywoodreporter.com/business/business-news/hollywood-production-costs-20211234961515-1234961515/

(5) Ibid.

(6) Ibid.

Market Outlook: Summary

Introduction

As the world emerges from the COVID-19 pandemic, the entertainment industry faces a nuanced yet exciting production landscape. 2022 has seen a positive uptick in consumers returning to movie theaters. Of the overall composition of viewers returning to cinemas, Gen-Z comprise the greatest audience. While a volatile economic landscape related to the Russia-Ukraine War, global supply chain shortages, and record-high inflation may strain consumers’ ability to purchase tickets to movies or subscribe to streaming services, there remains a robust demand for content. The increased investment made in 2022 to SVOD (video on demand) and HETV (high end television drama) reflects the sustained growth in film and TV production and the continued call for new content. However, the proliferation of new media exacerbates the record lows in recruitment of crew and management that took hold in the throes of COVID-19. This report will examine the factors that are causing the greatest market shifts in the entertainment sector and forecast how lifestyle changes post-pandemic will impact the future of television and film production.

Porto, Portugal

Audience Trends

The entertainment industry is seeing a significant rise in the number of individuals opting for in-person movie experiences. The 2022 box office saw a 365% increase in ticket sales from 2021 in the first two quarters alone and may ring in double of last year by January 2022, for a total of $8 billion in sales.(7) In Q2, historically the highest earning quartile of the year, Top Gun: Maverick is on its way to matching or out-grossing Avengers: Infinity War, the highest grossing film of Q2 2018. Given the bankable success of high action, big-budget films in theaters, it is likely that such movies will continue to have exclusive theater releases before being made available on streaming platforms.

Inversely, while streaming service subscriptions saw exponential growth over the course of the pandemic, many consumers who now feel the pressure of rising interest rates and three-decade high inflation are canceling subscriptions and cutting down their number of subscriptions.(8) The UK streaming boom has temporarily plateaued. The number of consumers who opted to cancel subscriptions as a money-saving measure reached its highest ever level in the first three months of 2022 at 38%.(9) As Netflix, the highest-grossing streaming service, saw a decline in subscriptions in the first months of 2022, the push for new content across all platforms becomes even more paramount.

Madrid, Spain

(7) Sarah Whitten, (2022, April 24), Movie theater owners are optimistic ticket sales can continue to recover as the key summer season approaches, CNBC, https://www.cnbc.com/2022/04/24/movie-theater-owners-optimistic-about-2022-box-office-before-cinemacon.html

(8) Mark Sweeney, (2022, April 28), Streaming subscriptions in decline as UK households cut budgets, The Guardian, https://www.theguardian.com/media/2022/apr/18/streaming-subscriptions-in-decline-as-uk-households-cut-budgets

(9) Ibid.

SVOD and HETV Focus

The increased investment across streaming and television platforms reflects audience’s continued and growing demand for new content. The United Kingdom’s introduction of HETV tax relief in 2013 is also stimulating a boom in the country’s film and HETV production. BFI statistics show that total spending on content reached £5.6 billion in 2021, a new record. Streaming services, led by Netflix, pushed total global content spending past $220 billion in 2021, up 14% YOY. Ampere Analysis, a data and analytics firm specializing in the media sector, predicts that the same production companies will invest over $230 billion in new content over the course of 2022.

Malaga, Spain

Global Strain on Supply Chains

Strained supply chains and lack of crew and management at production companies has been exacerbated by the United Kingdom’s production boom. According to Screenskills’s “Unscripted TV Production in the UK: 2021 skills review,” the most acute shortages were in production management and senior editorial roles, while the hardest to recruit proved to be production coordinators, production managers, and series producers. The challenge to set design brought about during the pandemic by supply shortages remains a reality.

In addition to the exponential rise in cost of materials such as glass, steel, and plywood, production companies struggle to account for the newer line items related to COVID safety, such as frequent testing and additional COVID personnel. With the estimated 25-30% increased cost of production, the entertainment industry now faces the crucial question of whether studios are better suited to content aggregation and content dissemination via streaming or content development and licensing.

Alcudia, Mallorca

Global Advertising Spend

In 2021, the advertising industry spent a record $710 billion on content and marketing. The global marketplace is now 19% larger than pre-COVID levels and is expected to grow steadily in 2022 (+12%) to an estimated $795 billion.(10) The boom Palma Pictures saw in TVC projects reflects this trend.

With more films being released to movie theaters, cinema advertising alone is projected to reach nearly $700 million in 2022, a year-over-year increase of 70%. In addition to this forecast, Digital Ad spend is predicted to double Linear TV Ad spend in 2022.

Sevilla, Spain

10 Magna Resarch Team, (2021, December 6), Global Advertising Market Reaches New Heights, and Exceeds Pre-Covid Levels, MAGNA, https://magnaglobal.com/global-advertising-market-reaches-new-heights-and-exceeds-pre-covid-levels/