Humans have an insatiable desire to entertain themselves. Variety and stimulation literally lead to neurogenesis (brain-cell growth), whilst a joint study by Harvard University and the University of Virginia found that students prefer to experience physical pain rather than 15 minutes of boredom. Sensory deprivation leads to hallucinations and psychosis, whilst visual memory, information processing and verbal fluency deteriorate. We need excitement.Humans have an insatiable desire to entertain themselves. Variety and stimulation literally lead to neurogenesis (brain-cell growth), whilst a joint study by Harvard University and the University of Virginia found that students prefer to experience physical pain rather than 15 minutes of boredom. Sensory deprivation leads to hallucinations and psychosis, whilst visual memory, information processing and verbal fluency deteriorate. We need excitement.
As the world economy develops, incomes increase and our basic requirements for food and shelter are covered, what is the next destination for our disposable income? As global consumer spending has increased, predominance in the world economy has shifted from primary goods (raw materials such as food and wood) to secondary products (such as your clothing, or the electronic device you’re currently reading this on) to finally, tertiary services and beyond; this is where the world of Media and Entertainment enters the spending hierarchy.
Looking at the supply enablers that will help meet this rising structural demand:
- Smartphones are becoming ever more pervasive in society, providing information at the user’s fingertips and opening up entire new markets in developing markets. Smartphones are set to become increasingly powerful and less expensive.
- High speed internet (both mobile and broadband) provide access to the zettabytes (one zettabyte = one trillion gigabytes or alternatively 667 trillion two-hour films in high definition) of data being processed over the internet each year.
- The proliferation of social networks as peer-driven, content-sharing encourages users to share and consume TV, film and games (to name a few).
Distribution models are changing as media moves from linear broadcasting (live TV) and individual products (film tickets), to on-demand and subscription packages (like Netflix and Spotify). Instant gratification and consumption of content is now easily available.From the confluence of these trends, it is estimated that TV and video will account for over 35% of consumers’ spending in 2020 (PwC, 2016).
Indeed, in the long-term, many service-based jobs are at risk from automation. A portion of the associated cost savings are likely to be re-allocated to areas that provide enjoyment/higher utility to individuals, such as entertainment. Of course, from a less positive point of view, those displaced by automation will have more time out of work to spend watching TV and films. In both regards, demand for entertainment should continue to increase within our lifetimes at least.
The amount of leisure time that we enjoy has grown significantly over the last few decades, leaving us looking for ways to fill our free time. One result has been that the time spent watching television has jumped up since the 1970s. These trends are expected to continue as productivity and incomes increase, and we choose to spend less of our time working.
In both the long and the short-term, the prospects for Media and Entertainment look promising. Consequently, we believe investment in the media industry represents a stable and attractive proposition. Our investment strategy in the media sector looks to harness these current and future growth trends and deliver real returns to investors.