Figures of the week: Africa’s entertainment and media industry

Last weekend, the sixth edition of the MTV Africa Music Awards was held in Johannesburg, South Africa. The Artist of the Year award went to Nigerian Afro-pop star WizKid, whose summer collaboration with hip hop artist Drake recently became Spotify’s most streamed song ever, with 875 million individual streams. Despite this success, while the industry has recently experienced strong growth, poor distribution networks and weak intellectual property laws coupled with rampant piracy represent challenges to long-term growth.

Africa’s entertainment and media (E&M) sector—especially in Nigeria, Kenya, and South Africa—has grown in leaps and bounds over the last two decades as artists have risen from relative international obscurity to global recognition. The E&M sector—which encompasses books, movies, internet, newspapers, radio, TV, and video games—in these three countries is projected to grow at a faster rate than that of the world’s average (Figure 1). The music industry largely contributes to the growth of the E&M sector. In Nigeria for instance, music is the fastest-growing E&M sector, behind the internet.

Figure 1: Projected compound annual growth rates in the entertainment and media sector, 2015-2020

Source: Global Entertainment and Media Outlook 2016–2020, PwC, Ovum.

Price Waterhouse Coopers Entertainment and Media Outlook estimates South Africa total music revenue will grow at a compound annual growth rate (CAGR) of 4.4 percent to R2.4 billion ($178 million) by 2020, fueled by surging digital music streaming revenue. As noted above, Nigeria remains one of the world’s fastest-growing E&M markets with overall growth of 15.7 percent last year, reaching $3.8 billion. Nigeria’s music industry alone is expected to grow at a breathtaking 12.9 percent CAGR—almost doubling from $47 million in 2015 to over $86 million in 2020—on the back of strong mobile music revenue. Similar to Nigeria, Kenya will enjoy strong growth in the next five years as a result of its strong mobile music sector. Kenya’s total music industry revenue is projected to rise from $19 million today to $29 million in 2020 (Figure 2).

 Figure 2: Music industry spending, selected countries (US$ million)

Source: PwC Entertainment and Media Outlook: South Africa – Nigeria – Kenya.
Note: Data after 2015 are projections.

According to the PwC report, the rapid growth of the African music industry can be attributed to three factors: demographics, internet penetration, and streaming. Data from PricewaterhouseCooper’s Entertainment and Media Outlook suggests that E&M spending in the 10 youngest markets worldwide is growing three times as rapidly as in the 10 oldest. More simply, argues the PwC report, growth in E&M spending is determined more by the age of a country’s population than by its comparative wealth, as seen in the top right quadrant of Figure 3.  Indeed, six in every 10 Africans are aged under 24 years—the youngest population of any region globally.

Figure 3: Youth population and growth in E&M

Source: Global Entertainment and Media Outlook, 2016-2020, PwC.

As stated in the PwC report, increased mobile and internet penetration drives E&M revenue generation. In 2015, around half a billion Africans had subscribed to mobile services; by 2020, there will be around 725 million unique subscribers. In the last 10 years, African countries have adopted mobile and internet technology at a faster rate than the rest of the world. Partnerships between telecommunication companies and the music industry have resulted in an explosion of digital distribution and thus mobile revenue. PwC expects mobile music revenue in Nigeria and Kenya to grow 21.9 percent and 18.7 percent respectively.

The PwC report also highlights that the rapid growth in streaming services will more than offset dwindling physical album and download sales. Streaming services such as Spotify and Apple Music have not only generated record revenues domestically but they have also introduced African music and artists to a global audience. In South Africa digital music streaming revenue is forecast to rise from $5.3 million in 2015 to $31.5 million in 2020, a 42.7 percent CAGR.

As noted above, even though strong growth is expected from the industry, there are still major challenges, one of which is piracy, as discussed by experts such as Jenny Mbaye, currently a lecturer in Culture and Creative Industries at City University of London, who claims, “The protection of intellectual property throughout the region remains a concerning issue […] In this sense, the piracy challenge calls for actively confronting and redressing the persisting lack of information and poor documentation of the processes that animate the chain of production and labor dynamics in these economies.”

These challenges notwithstanding, the stage has been set for the African music industry to stake a claim as part of the global music mainstream. Perhaps an African clean sweep at the Grammys is in the not-so-distant future.

Junaid Belo-Osagie contributed to this post.