PwC: Mobile display ad revenue to drive Internet advertising in HK

Affected by the pandemic, Hong Kong entertainment and media (E&M) revenues fell by 11.1% year on year in 2020, from US$8.81bn to US$7.83bn due to COVID-19 disruption, said a recent PwC’s Global Entertainment & Media Outlook 2021 – 2025. However, Hong Kong E&M revenue will see a year-on-year rise of 7.65% from 2020 (US$7.8bn) to US$8.4bn in 2021 as the pandemic effects subside.

Over the next five years, total E&M growth in Hong Kong is projected at a compound annual growth rate (CAGR) of 4.38% to reach US$10bn in 2025. Hong Kong E&M revenue took one of the biggest hits when compared to the rest of the markets across Asia Pacific and Mainland China. Mainland China’s maturity in digital platforms has aided in it being the first country to exceed pre-pandemic revenues (2020), said the study.  Meanwhile, total E&M revenue in Asia Pacific is well spread, showing a similar trend to the global trajectory with year-on-year rise US$778bn in 2021.

Internet advertising

Total revenue from Internet advertising spend in Hong Kong continues to grow at 6.1% CAGR to reach US$1,06bn in 2025 from US$841mn in 2021. Mobile display will be the platform driving this growth.

In fact, the proportion of mobile display advertising revenues to the entire Internet advertising in Hong Kong will rise from 16.5% in 2016 to 40.1% in 2025.

Similar to global, Asia Pacific and Mainland China markets, Hong Kong’s Internet advertising spend is led by mobile. Globally, mobile display advertising will consume 43.3% of total internet advertising spend in 2025 and Mainland China contributing 49.6%% of the total share.

Despite the shift to digital advertising, Hong Kong’s advertising is still dominated by non-digital. This is due to strong traditional media presence and penetration (household) of terrestrial TV.

Edmund Lee, PwC Hong Kong Consulting Leader, said the ever-increasing connectivity and speed by 5G has led to higher video consumption. Mobile display advertising in Hong Kong will continue to lead growth - its proportion will rise to 40.1% in 2020 from 16.5% in 2016, against total Internet advertising revenue.

He added, “Whether it’s the relentless rise of streaming, the growing influence of gaming and user-generated content tapping into new audiences or 5G enabled IoT applications, they are focused on improving the consumer experience. These forces will result in power shifts to consumers, and alter the dynamics of the E&M industry.”

OTT

Digital platforms including OTT video, video games and internet advertising were less affected by the pandemic. OTT video revenue in Hong Kong experienced a year of rapid growth at a 10.32% rate to hit US$305mn in 2021. It is projected at a 9.12% growth by 2025. Asia Pacific is anticipated to grow at 11.7% growth of US$21.4bn in 2021, and reach US$33.2bn in 2025.

Hong Kong has a lower CAGR to Asia Pacific and to Global due to subscription penetration (one subscription per household) and a smaller population size.

The global rate of OTT is predicted at a 9.38% CAGR of US$65.6bn in 2021 to US$93.9bn in 2025. Despite this, steady growth of OTT, combined with revenues from traditional TV, continue to dominate the share in Asia Pacific (exclude Mainland China).

Hong Kong’s largest OTT platform providers are myTV SUPER, ViuTV and Netflix.

Lee added that OTT and Video games saw a boost from the lockdown as online viewing habits stayed, OTT providers met the high demand by expanding the breadth and depth of content to lock in viewers. “Hong Kong OTT market remains saturated, so with little room for subscription growth, new revenue sources will come from premium content bundle, higher definition or niche content offerings,” he said.

Video games

Hong Kong has a large video games market with total revenue reaching US$991mn in 2020. The segment is poised for robust growth - revenue reaching US$1.2bn at 4.11% CAGR in 2025. Strong growth trajectory is consistent in Mainland China and the US, the two largest gaming markets with revenue to hit US$41.1bn and US$43.9bn respectively in 2025.

Social gaming is growing faster than traditional games at a CAGR of 4.59% and 3.50% respectively by 2025. Social/casual gaming is becoming the leading trend in Hong Kong and Singapore, two competing markets as a distribution centre for games. Singapore is ahead of Hong Kong in social gaming due to its government’s financial incentives to the sector.

Global video games market is worth US$146.7bn in 2020, up from US$92.9bn in 2016, and will continue to grow through forecast period at 4.99% CAGR to reach US$192.4bn in 2025. 

"The steady growth reflects a mature market with high rates of smartphone penetration, and a rapid shift to digital revenue sources. Social/casual gaming leads this growth,” Cecilia Yau, PwC Mainland China and Hong Kong Media Leader said.

Hardest hit sectors in Hong Kong’s E&M industry were those Live Music, Cinema and out-of-home advertising (OOH). These segments however show the biggest rebound in 2021, albeit from a low base in 2020. Cinema revenue in Hong Kong also contracted by 72% in 2020, but is on course to grow 64% in 2021, driven by the rebound as COVID-19 restrictions ease. The renewed growth of Cinema will see revenues return to pre-pandemic levels by 2024.