How AI is Fueling Digital Ads, Video Games & Expansion in Emerging Media Markets

PwC’s recent Outlook report paints a resilient E&M industry navigating a complex mix of headwinds—macroeconomic uncertainty, leveling consumer-spend—with tailwinds from digital transformation, AI adoption, and growth in emerging markets. The overall projected CAGR of ~3.7% globally suggests solid growth, though below pre-pandemic highs, reflecting constraints on discretionary consumption in mature economies.,

Advertising’s predicted ascendance—from one of three pillars to the de facto engine of revenue growth—is central. Key digital advertising segments such as retail search, social/mobile video, and connected TV are growing at double‐digit rates (≈14-15% per annum), while traditional consumer spending products/services show only ~2% CAGR. This suggests a sector tilting toward ad-subsidised models, freemium/AVOD, and monetization via audience scale and personalisation.,,

Video games and offline consumer experiences (cinema, live music, events) continue to be strong pillars. Gaming’s growth rate (~5.7%) exceeds that of the broader industry; offline formats, while increasingly challenged, still dominate consumer E&M spend (~61%) in 2024, and are projected to maintain a majority share in 2029. This tension between digital engagement and offline consumption will define competitive strategy.,

Regional divergence is stark: India, China, and Indonesia lead growth, driven by rising internet penetration, youthful demographics, and increasing ad spend per user; mature markets like US, Western Europe have slower growth, with constraints from subscription fatigue, regulatory pressures, and competition. Companies focused in emerging markets or with cross-border scale are likely to outperform.,

AI emerges as both an accelerant and disruptor—it transforms ad delivery (hyper-personalisation), content production (automation/localisation), experience innovation (connected & streaming TV), and value chains. Yet, it also raises strategic risks: creative disruption, regulatory scrutiny (data/privacy), and potential for substitution effects.,,

Strategic implications:

• E&M companies need to double down on advertising innovation: invest in AI, programmatic channels, CTV/streaming ad tech, and cross-platform measurement.
• Subscription models will be under pressure; hybrid monetization (especially ad-supported tiers, bundling, regionally priced content) will be necessary in mature markets.
• Investors should reallocate toward high growth in emerging economies, creator economies, immersive/experiential formats, and businesses enabling tech-driven advertising and content production.
• Risk factors to monitor include consumer discretionary spending, inflation, content regulation/privacy/AI policy, and supply-side constraints (e.g., talent, production costs).

Open questions:

• How will regulatory regimes evolve around AI, ad targeting, data privacy, and intellectual property—could these undercut ad-driven revenue models?
• Can subscription fatigue be reversed or offset through enhanced value proposition (e.g., live sports, exclusive content) or through price reconfiguration?
• What will be the margin impact of scaling AI-assisted content production versus quality control and brand integrity?
• How resilient are offline revenue streams (cinema, events) to macro shocks (pandemic, geopolitical instability) and competition from immersive digital alternatives?