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VR, video games and music will power entertainment and media growth through 2021, PwC report says

The Hollywood sign (Robyn Beck / AFP/Getty Images)

The U.S. entertainment and media business is expected to see modest-to-slow growth over the next five years, according to a new report from PricewaterhouseCoopers.

The report singles out traditional sectors such as cinema and television as areas of sluggishness, while pointing to emerging industries including e-sports and virtual reality as sectors poised for the most growth.

Total domestic revenue for all media and entertainment industries is expected to rise less than 4% annually over the next five years, reaching $759 billion in 2021.

The forecast data comes as media companies are scrambling to find innovative ways to reach consumers in a rapidly changing environment.

“[Entertainment and media] companies are operating amidst a wave of geopolitical turbulence, regulatory changes and technological disruption,” Mark McCaffrey, PwC’s leader for U.S. technology, media, and telecommunications, said in a statement. “These companies are facing significant pressures on growth.”

Virtual reality is set to expand the most of any industry, with 68 million headsets in use by 2021, according to the study. VR is projected to generate $4.9 billion in revenue, up from $421 million in 2016.

The report cites advancements in the technology of lower-cost headsets, as well as VR’s expanding relationship with video game makers and digital news and content creators.

Video game makers will see continued, steady gains, fueled in part by the boom in e-sports — referring to competitive online games. The U.S. has overtaken South Korea as the world’s largest e-sports market.

The video game industry is expected to grow 6.2 % annually to $28.5 billion by 2021.

And thanks to the boom in subscription streaming services such as Spotify and Apple Music, the music industry may be on the road to recovery. While revenue is still nowhere near the numbers seen in the heyday of the early 2000s, a nearly 100% increase in overall streaming revenue in 2016 has record companies optimistic about the future.

Areas that will see the least growth in coming years include cinema, radio, publishing, traditional TV — industries that have been most affected by digital disruption. TV and cinema have been especially hard hit as younger audiences turn to online video services like Netflix, Hulu and YouTube.

Box-office revenue is forecast to grow a modest 1.3 % to $12.1 billion in revenue by 2021, while TV is projected to continue its downward trend, losing 0.7 % annually to $105 billion.

TV advertising revenue is expected to rise about 1% annually as advertisers move online. Internet advertising and video are each projected to make significant gains of close to 10% annual growth. Newspapers will be the hardest hit, with revenue shrinking more than 4% annually.

Globally, revenue is expected to grow 4.2% to $2.2 trillion in 2021, down from a 4.4% increase in last year’s PwC’s forecast. The report attributes part of the decrease to the effects of digital disruption.