Highlights and trends across 9 segments of the Canadian entertainment and media industry

From: PwC Canada


1. Data consumption


Canada is a mature digital economy, ranking high in most global technology benchmarks. There are 14.3 million broadband households, with a penetration rate of over 102% and over 26 million mobile Internet subscribers.

Virtually all Canadians with Internet access have at least one social media account (predominantly Facebook with 80% of total accounts), which they access mainly through mobile devices (60%) rather than desktops or laptops (35%).


In line with global trends, Canadians are also avid consumers of video content, which means a thriving market exists in video-on-demand (VOD) streaming services. The number of subscription OTT viewers is expected to reach 18 million in 2019. There are currently 25 online TV services, with Netflix taking a market share of over 70%. Video now accounts for over 83% of all Internet data content and is expected to more than double in volume from 26.6 trillion megabytes in 2019 to 63.5 trillion megabytes in 2023.

2. Traditional TV and home video


The Canadian TV subscription market is extremely mature, with innovative products and lively competition between cable, satellite and IPTV providers. But pressure from the Internet video sector has seen substantial cord-cutting in recent years, declining by 1.3% year-over-year to 10.7 million households in 2018. While this trend will slow, with little change in subscriber numbers over the forecast period, there is pressure on operators to upsell households to premium packages to boost revenue in a saturated market.


Internet Protocol TV (IPTV) will be the only platform to grow over the next five years, at a 2.2% CAGR to 2.9 million households in 2023. Canada’s telecommunications companies, led by Bell and Telus, are pushing IPTV partly as a defensive strategy to stem the loss of residential telephone subscribers to cable. But the five leading IPTV services Bell’s Fibe TV, Manitoba Telecom Services (MTS), SaskTel, Aliant TV and Telus TV—also see IPTV as an important part of their growth strategy. Cable will slow the high churn rates of recent years, but the sector will still decline at a 0.5% CAGR to just under 6 million households in 2023.


3. OTT


Canadian OTT video revenue will increase at a 10.7% CAGR from US$1.6 billion in 2018 to US$2.7 billion in 2023. Canada’s growth trajectory will be just enough to keep it ahead of the fifth-placed market, the United Kingdom, with an OTT video sector value of US$2.6 billion in 2023.

Canada was the first market outside the United States in which Netflix launched, giving it a huge first-mover advantage over rivals that has led to a dominance seen in few, if any, other territories globally. If Netflix was measured like traditional broadcasters, estimates suggest it may be the biggest TV network in CanadaOTT or pay TV with a reach exceeding 50% of the English-speaking population.

Traditional broadcasters are trying to fight back. In 2018 CTV created a super hub for its on-demand streaming content for paid subscribers. But two new video-streaming offerings, CTV Movies and CTV Vault, are ad-supported and free. Rogers Communications-owned Citytv has launched Citytv NOW to deliver its programming lineup on-demand, while FX NOW will carry shows from the FX channel, like American Horror Story, to subscribers.


4. Video games


Canadian video games and eSports revenue is continuing to grow strongly and is forecast to reach US$2.8 billion by 2023, increasing at a 5.5% CAGR, roughly half the size of markets like the United Kingdom and Germany. Both traditional and social/casual gaming revenue are growing steadily, although as in most markets the social/casual market is growing more quickly, despite having recently overtaken traditional gaming revenue to become the largest component of the market. Video games development is also a major industry in Canada, with a competitive tax-incentive system encouraging major hubs in Montreal and Vancouver. Almost 600 studios were active in the country in 2018.


Social/casual gaming continues to be the fastest-growing area of the Canadian video games market, and is forecast to increase from US$1.1 billion in 2018 to US$1.5 billion in 2023 at a 6% CAGR, having made up over 50% of Canada’s total video games revenue since 2015. It’s in this market that microtransaction-based monetization techniques have enjoyed the most success, although it remains difficult to break into. Discovery remains a big problem for mobile publishers on crowded app stores dominated by a handful of reliable, widely recognized hits like Candy Crush and Clash of Clans, although Fortnite and PlayerUnknown’s Battlegrounds did enjoy significant success in 2018. Fortnite, in particular, is an example of the universal accessibility that publishers will seek to emulate as consumers respond to experiences that are free and can be played on any system.


5. eSports


Canada’s eSports revenue has been building strongly, reaching US$19 million in 2018 from just US$2.8 million in 2014. It’s growing more slowly than the neighbouring US market, which is a primary focus of the global eSports industry, but is still rising at a very healthy 14.5% CAGR to the end of the forecast period.


The fastest-growing and most substantial segment of Canada’s eSports market comes from media rights revenue, which will more than double in the forecast period to reach US$11 million at a 23.9% CAGR. Dedicated eSports channel Ginx eSports TV launched in the country in May 2017, featuring tournaments and regular magazine-style programming. No immediate competition has emerged in the broadcast space, although as in every market, an online streaming giant, Twitch, is a significant factor., The increasing profile of eSports events will ensure media rights remain the market’s most valuable sector for the foreseeable future.

6. Cinema


Canada’s film sector will show slow growth over the forecast period. Total cinema revenue will edge up from US$830 million in 2018 to US$852 million in 2023, at a very modest 0.5% CAGR.


The sector continues to have notable success in attracting foreign production. As Telefilm Canada revealed, total film and television production volume in Canada—which includes foreign location and service production—reached an all-time high in 2016–2017. Growth was driven by foreign location and service production, accounting for over two-thirds of the growth recorded.


In 2017, 732 films were released in Canadian cinemas, of which 87 were from Hollywood studiosand they dominated the box office charts. With the Canadian economy expanding, low unemployment, rising wages and inflation in check, cinema might benefit.

7. Music


Total recorded music revenue was US$698 million in 2018—up 9.2% from US$639 million in the previous year—and is expected to increase further to US$934 million in 2023, rising at a 6% CAGR.


Last year, Universal Music Canada (UMC) entered into a partnership with Toronto-based eSports outfit Luminosity Gaming to connect music and gaming. The record company’s artists can share their music and content with Luminosity’s sizable audience across social media and popular live video-streaming platform Twitch. The new allies said the deal would allow them to cross-promote and integrate their industries. To mark the tie-up UMC launched Gaming Hip Hop, a new playlist designed for gamers to stream while they play.


Total live music revenue was US$753 million in 2018 and is forecast to be worth US$885 million in 2023, rising at a 3.3% CAGR. In early 2019, the Canadian Competition Bureau concluded an investigation into Ticketmaster’s TradeDesk inventory-management tool for professional ticket resellers and found that the software is not in contravention of federal competition legislation. The Competition Bureau had been looking into allegations that Ticketmaster was supporting ticket touting by enabling resellers to sell inventory on the secondary market through the platform.


But the Competition Bureau said it was pursuing litigation against Ticketmaster and parent Live Nation relating to alleged misleading marketing. The case relates to the practice of “drip pricing,” where investigators found that advertised prices are misrepresented because consumers need to subsequently pay additional fees later on in the purchasing process. The Competition Bureau reports that Ticketmaster charges can inflate the advertised price by as much as 65%. Canadian law requires that all compulsory costs be included in the price of tickets.


8. Internet access


Fixed and mobile Internet penetration will increase slightly over the forecast period. The fixed sector is already mature, but in the mobile sector, the high cost of mobile data will keep mobile Internet penetration relatively low. But the regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), is moving ahead with several measures that would create a more competitive market, drive down mobile data costs and potentially lead to more rapid growth in fixed and mobile Internet penetration. The Government of Canada is also carrying out a review of the Telecommunications Act, the Radiocommunication Act and the Broadcasting Act.


5G

The government plans to release 5G spectrum by 2020. The leading operators are running 5G trials, and the Canadian Wireless Telecommunications Association launched the 5G Canada Council in December 2017 as a platform for discussion on Canada’s 5G rollout.

The governments of Canada, Quebec and Ontario, along with private investors, have formed a partnership called ENCQOR (Evolution of Networked Services through a Corridor in Québec and Ontario for Research and Innovation). ENCQOR is funding a CA$400-million (US$318 million) 5G test corridor between the provinces of Quebec and Ontario to allow SMEs to test 5G applications.


The Accelerated Investment Initiative, announced in the government’s 2018 autumn economic statement, will provide tax incentives for additional investments in facilities-based networks and encourage the ongoing deployment of next-generation networks, including 5G.


9. Internet advertising


Paid search Internet advertising revenue in Canada was US$1.2 billion, a slight fall from the 2017 figure, but it’s expected to keep falling through to 2023. Google dominates Canada’s search engine market, according to data from Statcounter for 2018, with a 92.9% share of the market.


Display Internet advertising revenue is relatively small, comprising just 16.3% of Canada’s overall Internet advertising revenue in 2018. Overall display Internet advertising showed a 2.2% fall from its value in 2017 and is expected to continue to fall year-over-year until 2023. Zenith predicts that by 2020, more than 90% of display ads will be programmatic.


Total mobile Internet advertising revenue for 2018 was US$2.6 billion, which was almost half of all Internet advertising spending. It’s expected to grow to US$3.6 billion by 2023. This growth in mobile advertising is likely to get a boost from the introduction of Spotify Ad studio in Canada in March 2018. It allows marketers to run audio ads on their platforms within seconds. Through their musical tastes and choices, Spotify claims to understand its audiences’ mindsets, context and moods. As a result its targeting is based on playlists and genres as well as gender, location and age. According to research by Nielsen Media Lab, audio is more effective at persuading people to buy than display ads and people who listen are 24% more likely to recall what they heard.



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