• The coronavirus pandemic accelerated massive changes in Australia’s media and advertising appetites, according to a new report.
• PwC Australia contends spending on streaming platforms will explode by 2025, after audiences latched onto on-demand viewing through lockdowns.
• Cinemas and the live music sector are not expected to recoup their losses for several years, the report states.
• Visit Business Insider Australia’s homepage for more stories.

The coronavirus pandemic permanently altered Australia’s media appetite, ravaged advertising spending, and set the scene for the streaming sector to book billions of dollars in growth over the next five years, according to a new report.

In its annual Australian Entertainment & Media Outlook, released Monday, PwC Australia states the nation’s adoption of digital media, streaming content, and online news was accelerated by the COVID-19 disaster, which led viewers and readers to stay home — and pick up digital devices in the process.

Total advertising spend plummeted by 8% to $15.4 billion over 2020, the report states, as economic uncertainty initially constrained consumer spending and put the screw on brand outreach.

The impact of lockdowns is writ large in the report. The biggest losers were traditional cinema, where combined box office and advertising spend plummeted 41% to $1.3 billion, and out-of-home advertising, which contracted 39% to $772 million.

The report’s most optimistic predictions state out-of-home advertising will reach 2019 spending levels in 2022 while filmed entertainment is not expected to recover until 2025, at the earliest.

Those prolonged spending downturns can be explained by the pandemic, which “induced acceleration to changes in consumer behaviour that have pulled forward digital disruption,” the report states.

The biggest winners include streaming video on demand (SVOD) players like Stan and Netflix, the broadcast video on demand (BVOD) digital offerings from free-to-air networks, and the gaming sector.

“While cinema box office revenues fell -67.4 percent in 2020, this was contrasted by increased availability, sector breadth and catalogue depth of the SVOD players, increased BVOD usage, and the sustained growth of the gaming and esports sector,” the report states.

The domestic SVOD market will balloon 20.4% by 2025, where it will be worth an estimated $3.3 billion, the report states. Free-to-air alternatives are likely to experience their own meteoric growth as appointment viewing becomes a thing of the past, with PwC estimating the sector grew 38.8% in 2020 alone, and could be worth nearly $1 billion in 2025.

Even this growth comes with a caveat, as PwC predicts a bottleneck effect when consumers are asked to choose between dozens of streaming options.

“The stacking of multiple [over-the-top] services has triggered much debate in the industry over the maximum number of subscriptions that a consumer may be willing to take,” the report states.

Viewers have also changed how they engage with content, the report contends, saying that advertisers must increasingly accept that much modern media is viewed passively, spontaneously, or in conjunction with additional content displayed on other screens.

“Whether a function of shorter attention spans or multi-screening, the weighting to spontaneous consumption presents a challenge to advertisers in that the predictability of media consumption may be changing such that plans need to be more dynamically optimised,” it states.

Other sectors can expect dramatic changes over the next few years, through a mix of changing audience tastes and the lingering physical impacts of the pandemic. PwC predicts the overall video game and esports market to expand 21.2% over the next five years, buoyed by ancillary services like user-streaming hub Twitch.

The digital distribution of music, led by streaming platforms like Spotify and Apple Music, is set to lift overall spending on music to 2019 levels by 2023. Conversely, the live music market — hamstrung by lingering border closures and venue occupancy limits — is not expected to return to 2019 levels until 2024, at the earliest.

The media and entertainment sector’s uneven recovery from the crisis will ultimately see more money flowing into the hands of creators and advertisers, if they can adapt to new preferences, the report states.

“However variable the impacts on segments, the outlook for revenues at an industry level remains robust,” the report reads.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.