For the media and entertainment industry the dawn of the metaverse, and the word soup of acronyms that accompanies it, is the latest high-profile technology wave that threatens to simultaneously upend established distribution models and reinvent both the experience and the relationship with the audience.

Music is the media sector (outside gaming) that has moved fastest to experiment with metaverse applications, so far mainly on gaming platforms like Fortnite and Roblox, which provide a ready game-centric audience but offer little lasting innovation.

Music's metaverse potential beyond gaming is huge, led by artists who want a more dynamic online presence, though we anticipate a long trajectory towards mainstream applications as questions remain around formats, design, platforms, and monetisation.

The pandemic years boosted many businesses selling services on subscription in the UK: work-from-home gave people more time and money to widen the services they enjoyed in the home, such as gaming, entertainment and music, also boosting engagement with trusted news

The cost-of-living crisis dented the number of subscribers to OTT SVOD and news services in Q2 2022. Broadband and mobile are must-have; bundles of services (e.g. Sky’s pay-TV and broadband or mobile) are more resilient; yearly and multi-year contracts prevent churn relative to monthly contracts; and services that cater to passions (e.g. football) are always need-to-have

Subscription (or supporter) media and news services reaped the demand for trusted news through the pandemic, but now face a tough challenge to their toplines from the economic downturn—and also to transition to a sustainable business model for media audiences, while advertisers are also feeling the heat

The UK's cultural industries remain the strongest in Europe and digital distribution is a strong vector for the globalisation of British culture

The international reach and reputation of UK news providers is unparalleled, with the BBC, the largest news provider globally, reaching half a billion users weekly

Independent commissioning drives a dynamic ecosystem of TV exports with global clout—worth an estimated £3.4 billion—that remains stable despite Brexit

Streaming had a strong 2021 with royalties to rightsholders, labels and music publishers increasing by 24% to $16.9 billion (IFPI). Spotify drove the segment’s rise as the leading service by users and subscribers (422m and 182m) followed by subscription services Apple Music and Amazon Prime Music, while YouTube is both ad-supported and subscription

Spotify’s 2021 revenue growth of 22% was powered by user growth (+18%) around the world on the subscription (16%) and ad-supported tiers (19%). User growth represented a deceleration from the pandemic-induced exceptional rise of 27% from 2019 to 2020

Spotify reports royalties generated by artists on its Loud and Clear platform. The number of artists in 2021 generating material revenues—over $10,000—increased by 24% to 52,600. 28% are ‘self-distributing artists’ using services such as Distrokid, TuneCore, CD Baby—the number almost trebled since 2017

With sport at the heart of the pay-TV ecosystem, dedicated online-only streaming services could emerge as a threat to leading players like Sky 

The liveliest newcomer, DAZN, launched in 2016 with mostly second-tier sports. Now in seven markets and counting, it has recently made bold moves into top-flight competitions, notably in Italy, albeit as a secondary player 

History has not been kind to those challenging pay-TV incumbents by selling sports unbundled—particularly in Europe, as Setanta, ESPN, beIN SPORTS and Mediaset can testify. If DAZN can stick to secondary positions in premium rights, or simply less-expensive sports, perhaps it will fare better 

The UK’s labour market is tight, with an unemployment rate of 4.1%, the lowest since 1973. Peak vacancies and reports of skill shortages mask dull hiring plans amidst the gathering Brexit gloom, which will hit temporary hiring hard. We expect media expenditure to fall in 2018, substantially more among print publishers, spilling over into 2019 expenditure on media

The recruitment industry has benefited from the structural shift to outsourcing, and large agencies are portals in their own right, providing tools to companies to sift applicants to find the best match. Companies doing their own recruitment of professionals value listing on LinkedIn, the top UK site by visitors, and the efficiency of paying per applicant rather than for the listing

Second-placed Indeed has gained considerable momentum since being acquired by Japan’s Recruit Holdings in 2012. Indeed acquired third-placed Glassdoor in 2018, the latter having built its market position through user-generated reviews of employers. With Google serious again about Jobs, a sector (among others) it has tried to disrupt before, Monster and Jobsite are the more vulnerable to being crowded out 

The UK consumer’s loss of confidence since the June 2016 referendum vote in favour of Brexit has reduced the revenues of both estate agents and auto dealers, with knock-on effects on their media spend, entrenching further the leadership positions of Rightmove and Auto Trader respectively. Only the UK’s recruitment marketplace is buoyant with a record level of vacancies, benefiting general recruitment aggregator Indeed, although deepening Brexit gloom among businesses will rapidly melt away vacancies

With internet users flocking to portals and away from print media, advertisers have followed suit with media spend on these portals to stimulate purchaser interest, although transactions are still conducted offline. Facebook and Google, which have long histories of contesting markets for local advertisers with little success, have re-entered classifieds. Facebook Marketplace is now accepting listings from estate agents and dealers, expanding from C2C to B2C in homes and cars. Google Jobs launched in the UK in July 2018 and enjoys partnerships with all the major portals other than Indeed

The sharp decline in sales and shift to lettings, sluggish price growth and pressure on estate agents’ commissions, are making marketing key to driving transactional activity in a longer sales funnel. Rightmove’s revenues are on track for a 10% increase in 2018 on the uplift in average revenue per agent (ARPA). Zoopla's market share rose with the end of OnTheMarket's 'one-other-portal' rule for shareholders upon its AIM listing in February 2018 

Radio faces challenges from Spotify and other online audio propositions, while the radio “dial” is challenged by smart speakers and global tech. UK radio broadcasters have risen to the occasion through innovation

New DAB stations have helped radio achieve record audiences and revenues. Combined digital listening is now over 50%, but FM remains the primary platform. The current mix of FM/AM and digital maintains radio’s relevance for the medium term

The long-term future is digital—a wide-ranging sector review is required to determine how to support digital radio’s growth and the question of a future switchover

Recorded music revenues in Japan are stuck in decline as physical sales sag, although 2017 marks the first year when streaming gained a foothold with 8 million subscribers. 

J-pop fans spend on 'experiences' with their idols including events, merchandise, CDs and DVDs, which streaming cannot replicate. Top native LINE MUSIC offers integration with a popular messaging app and bundling with mobile. 

Serving international repertoire, Apple Music claims more subscribers than Spotify in Japan, which is more localised, and has most users on the free tier. Amazon Prime Music is a looming constraint on the adoption of subscriptions. 

Online advertising became the majority of all UK ad spend last year, in step with China but ahead of all other major markets. 

Direct response has further increased its share to 54% of UK ad spend, fuelled by the self-serve platforms of Google, Facebook and Amazon, while content media nets just 11% of the online advertising pot.

We estimate that all online-delivered channels - including "pure play" online properties, broadcaster VOD, digital out-of-home and online radio - could account for well over 60% of UK ad spend by 2020, but only with improved commitment to industry governance.