How will the entertainment industry change with the rise of virtual events in 2025?

According to PwC’s 26th Annual Global CEO Survey, 40% of E&M CEOs said their current business model would not be viable in ten years. This suggests a sense of urgency for incumbents in the entertainment industry to adapt to the changing landscape. The entertainment and media industries have experienced a sharp deceleration in revenue growth, from 10.6% in 2021 to 5.4% in 2022, due to sluggish consumer spending. This slowdown is pushing companies to reset expectations, refocus inward, and seek ways to recharge growth by tapping into geographical and sectoral hotspots and harnessing emerging technologies, such as generative AI. The rise of virtual events in 2025 will be a key driver of this transformation, as the industry embraces online streaming platforms, immersive technologies, and innovative audience engagement strategies to adapt to the changing consumer behavior and business models.

Key Takeaways

• The entertainment industry is facing a critical inflection point due to declining consumer spending and the rising influence of advertising.
• Companies are being forced to reset expectations, refocus inward, and seek new growth opportunities by leveraging emerging technologies.
• The rise of virtual events in 2025 will be a key driver of transformation in the industry, as it embraces online streaming platforms and innovative audience engagement strategies.
• Adapting to the changing consumer behavior and business models will be crucial for entertainment companies to thrive in the coming years.
• The industry must focus on developing effective monetization and cybersecurity measures for virtual events to ensure a seamless and secure experience for attendees.

Resetting Expectations and Embracing Virtual Events

The entertainment industry is facing a critical juncture as consumer spending on entertainment and media (E&M) products and services declines, while the influence of advertising continues to rise. This shift in market dynamics is compelling industry leaders to reassess their business models and embrace the rise of virtual events as a strategic imperative for adapting to the changing landscape.

Declining Consumer Spending and Advertising Shift

Consumer spending on E&M is projected to grow at a modest 2.4% compound annual growth rate (CAGR) between 2022 and 2027, while advertising revenue is expected to rise from $763.7 billion to $952.6 billion, representing a more robust 4.5% CAGR. This trajectory positions advertising as the first of the three major E&M categories to potentially reach the $1 trillion annual revenue milestone. Notably, the estimated share of total global digital advertising revenue claimed by the duopoly of Meta and Alphabet has fallen for five consecutive years, dipping below 50% for the first time, as a broader range of players, including e-commerce sites, video games, and streaming platforms, capture a larger slice of the market.

Retrenchment and Resetting of Business Models

The combination of higher interest rates and a sharp decline in stock markets in 2022 has prompted investors and executives to scrutinize business models more closely. Many leaders of digital companies that experienced rapid growth during the pandemic pursued aggressive strategies, fueled by abundant capital, focusing on total addressable markets and prioritizing customer acquisition over profitability. However, this approach is now being reevaluated, as a broad-based resetting of expectations and a renewed emphasis on profitability, margins, and capital discipline take precedence. Tech giants like Meta have declared 2023 as the “year of efficiency,” and widespread layoffs in the sector have impacted over 168,000 jobs in the first four months of the year. Streaming platforms, such as Netflix, have also taken steps to curb password sharing and moderate their content spending growth, reflecting the industry’s shift towards more sustainable and disciplined business models.

Growth Hotspots and Emerging Trends

As the entertainment industry navigates the ever-evolving landscape, two key growth hotspots and emerging trends have taken center stage: the rise of advertising-supported streaming services and the expansion of over-the-top (OTT) streaming in emerging markets.

Advertising and Ad-Supported Streaming Services

Advertising is firmly in the ascendancy, with revenue from ad-supported video on demand set to nearly double over the next five years. The streaming industry has undergone a remarkable shift, moving from a model that promised to liberate paying subscribers from the burden of advertisements to one that now relies on advertising as a core revenue stream.

Free, ad-supported streaming TV (FAST) services, such as Pluto TV and Rakuten, are gaining traction as device manufacturers like Roku, Samsung, and LG exploit streaming channels as a new revenue source. Even Netflix, which eschewed advertising for its first 25 years, launched its ad-supported tier in 2022 at a lower price, even as it ratcheted up the price of the ad-free version.

Expansion in Emerging Markets

OTT (over-the-top) streaming, a key driver of growth, is expanding most rapidly in emerging markets. The combination of large, historically underserved rural populations, the spread of mobile broadband, and strong demand for local and sports content presents major opportunities in these regions.

In 2022, when Indonesia switched off its analogue terrestrial broadcasting signal, it was estimated that the country had the highest consumption rate of OTT video in Southeast Asia, with nearly one in three Indonesians using streaming services and the number of hours watched growing at a 40% annual rate. Global giants like Netflix, Amazon Prime, Disney+ Hotstar, and HBO Go compete in the Indonesian streaming market with a thriving community of local and regional players.

entertainment industry change with the rise of virtual events in 2025?

Hybrid Events and Switching Between In-Person and Virtual

The entertainment industry has not switched back to in-person events only after the pandemic, but instead has adopted a hybrid model of both in-person and virtual events. The lines are blurred as many attendees might join some sessions at an event in-person and others virtually, or perhaps catch up later by watching recordings. Event hosts might charge different pricing for in-person events compared to virtual ones, or a single fee that gives attendees access to both. Navigating the VAT treatment for each type of supply and switching between them might be challenging for event hosts, as the chances of making mistakes greatly increase due to the complexity of having to deal with multiple VAT treatments for the same fee.

Virtual Event Monetization and Engagement Strategies

As the entertainment industry embraces virtual events in 2025, businesses will need to develop effective monetization and audience engagement strategies. This may include exploring various pricing models, such as tiered access to content, memberships, or pay-per-view. Businesses will also need to leverage data analytics and cybersecurity measures to enhance the virtual event experience, protect content, and optimize revenue streams. Innovative approaches to virtual event production, using immersive technologies like virtual reality and augmented reality, can also help create more engaging and memorable experiences for attendees.

Conclusion

The entertainment industry stands at a critical juncture, grappling with declining consumer spending, the rising influence of advertising, and the imperative to adapt to the surge of virtual events anticipated in 2025. Companies must reset their expectations, refocus inward, and uncover new avenues for growth by tapping into geographical and sectoral hotspots, while harnessing the power of emerging technologies.

The shift towards virtual events will be a key driver of this transformation, as the industry embraces online streaming platforms, immersive technologies, and innovative audience engagement strategies to cater to evolving consumer preferences and business models. As the industry navigates the challenges of hybrid events, virtual event monetization, and evolving VAT regulations, those organizations that can successfully adapt and innovate will be poised to thrive in the years to come.

The path forward demands a keen understanding of the industry’s landscape, a willingness to embrace change, and a commitment to strategic investments in technology and talent. By doing so, entertainment companies can position themselves to capitalize on the opportunities presented by the rise of virtual events and cement their relevance in the dynamic and ever-evolving entertainment landscape of the future.