Each year, PwC conducts a mammoth analysis of the media and entertainment sectors across 54 countries, with forecasts based on consumer and advertising spending data. Here is a Japan-specific distillation, with an emphasis on fast-growing media segments. Growth percentages are compound annual growth rates (CAGR).
Online spend will grow at half the pace of the US. By 2021, PwC reckons online advertising revenues in Japan will have grown by less than 5 percent to around US$14.3 billion. Japan is one of the world’s leading markets. But compare that to growth of nearly 10 percent in the US (the world’s largest internet advertising market by a long way) to $116.2 billion. There, online advertising has already surpassed TV, at $72.5 billion versus $70.6 billion. Still, the gap between online and TV spend is narrowing in Japan. TV is expected to fall between 2020 and 2021 to $15.9 billion.
In-app advertising will be a major driver of mobile growth. Mobile advertising in Japan is already worth $3.5 billion, but is set to grow to $5.5 billion by 2021. Programmatic buying is helping things along, but platforms such as Line, which signed a deal with US app monetisation company Tapjoy last year, are likely to benefit strongly from increasing demand for advertising within mobile applications.
The shift to online video is still gaining momentum. PwC expects video advertising to gradually eat into revenue from other display advertising channels over the next five years, growing by 7.5 percent to $446 million by 2021. PwC sees video and mobile growing healthily while other display advertising stays flat. While that’s encouraging for the likes of YouTube and Unruly, to put things in perspective, in the US, mobile video advertising alone will be worth $16.2 billion. PwC also notes the growth of branded online video as linear TV advertising loses relevance due to time-shifted viewing and the option of skipping through ads.
Online TV advertising will be worth $1 billion in five years. Where traditional broadcasters have been focused on subscription-based services online, free ad-supported services are likely to grow quickly. Platforms such as Abema TV will also stimulate the online TV advertising market to become the second biggest after the US.
Physical home video will still be worth more than internet video in 2021. But companies like Netflix still have huge potential. PwC sees the internet video market growing at a rate of 14.5 percent to nearly $2 billion within the five-year period. Both Netflix and Amazon are expected to continue to invest heavily in local content, and Netflix is likely to gain an advantage thanks to a deal with SoftBank to pre-install its app on the company’s smartphones.
Widespread uptake of programmatic trading is not guaranteed. It depends on the successful establishment of PMPs (private marketplaces) with Japanese media outlets, PwC says. PMPs are invitation-only marketplaces that allow publishers to have more say in the types of advertisers and advertising that appears on their sites. PwC does however see increasing demand for performance-based advertising, which includes search and automated ad networks as well as programmatic.
Being an early sponsor of Esports could pay off. Esports is huge in markets like the US and Korea, but only just getting off the ground in Japan. Currently worth less than $5 million, the market will grow more than 36 percent to $23 million by 2021. PwC notes the formation at last of strong Japanese teams in globally popular games such as League of Legends, and expects Nintendo’s Switch to support the growth of tournaments in the country. Sponsorship is still scant, but for brands with the right proposition it makes sense to support and be part of the growth story given the low bar to entry relative to regular sports sponsorship.
Spending on branded VR may not match the hype. We are led to believe that every man and his dog want a piece of VR’s action. Make no mistake, growth will be impressive: from $500 million this year to nearly $2 billion by 2021. But while consumer VR content will be sizeable, with VR video set to overtake VR games this year, PwC expects spending on communications and utility apps to remain low at just over $18 million by the end of the forecast period. That is proportionally in line with the US, where the consumer market will be worth $5 billion with $64 million spent on apps.