Economic Update

Published 01 Jun 2023

– Several emerging markets have developed internationally known film industries

– Streaming services are leveraging local content to expand to new markets

– The global industry is receiving funding from more emerging market sources

– Many countries are targeting increased investment in local production

As audiences return to entertainment in physical venues following the Covid-19 pandemic, several emerging markets are looking to film and media to diversify economic revenue streams and extend their cultural reach abroad.

Global cinema box office revenue saw a strong upswing in the first quarter of 2023, with the year’s gross revenue set to reach $32bn. While still 20% below the annual average recorded in the 2017-19 period, the figures show that the industry is well on its way to recovery.

The North American market, which includes the US and Canada, is the global leader, with a projected revenue of $9bn for 2023, according to UK-based sector analytics firm Gower Street. China outperformed the North American market in 2020 and 2021, however, and is set to earn $6.8bn in 2023, following the derestriction of the country’s cinemas at the end of 2022.

Latin America saw the largest gain from 2021, at 87% growth in revenue in 2022 thanks in part to sustained performance from Mexico and Brazil, which boast domestic markets valuing $63m and $35m, respectively. Meanwhile, the Asia-Pacific region excluding China is closest to 2019 figures, with its $5.2bn revenue in 2022 some 26% below pre-pandemic figures.

The Middle East has emerged as the fastest-growing regional market for cinema over the past four years, even as pandemic-fuelled closures slashed box office sales. The region recorded $743m in revenue in 2019 and recovered to $558m in 2021. Four Arab countries were among the top-10 countries in the world in terms of the share of premium cinema screens in 2021, according to a report by research firm Omdia: Saudi Arabia ranked fourth, followed by the UAE at sixth, and Kuwait and Oman at eighth and tenth, respectively.

According to global consultancy PwC, cinema box office revenue in the Middle East are projected to grow to $1bn by 2024.

Beyond box office sales, many emerging markets see investment in entertainment as a path to diversification and increased global reputation, as the global entertainment industry becomes more multi-polar with the emergence of new trends and sources of investment.

Global reach

The global spread of a country’s media can help it have an outsized effect on consumer trends, with the rise of South Korean music, television and film since the 1990s – termed the Korean wave, or hallyu – being one prominent example. Following the debut of hit series Squid Game, Netflix reported that more than 60% of its subscribers watched South Korean content in 2022.

The distribution of content produced by smaller film industries has been facilitated in part by the rise of streaming services, which has in turn challenged the primary role of cinemas in generating revenue for the film and entertainment industry.

Hindi-language Bollywood, long eponymous with Indian cinema, has since been eclipsed by South Indian film producers, with the $160m in global revenue that the 2022 Telugu-language action film RRR generated demonstrating how the country’s industry is changing.

India produces an average of 1600 films per year, but cinema box office sales have fallen sharply in recent years. Over-the-top streaming services are also influencing this shift, as India’s 1.4bn-strong population gets increasing access to international productions, as well as Telugu, Tamil, Malayalam and Kannada-language films once primarily marketed to regional consumers. According to government estimates, some 96m Indians had access to streaming services as of late 2022.

Nigeria’s film industry, dubbed Nollywood, also boasts considerable cultural and economic clout as the West African nation’s second-largest employer after agriculture. It remains the largest film industry on the continent and the third largest globally in terms of the number of movies produced annually, behind Hollywood and Bollywood.

A new copyright law passed in April 2023 by then-President Muhammadu Buhari could help the industry combat piracy, a major drain on revenue, by protecting intellectual property in the digital sphere.

Mexico’s film industry is also receiving a boost from streaming services, with Netflix and Prime Video pledging $300m each to support the production of Mexican film projects over the next several years. The domestic industry has typically been supported by the government-led Mexican Institute for Cinematography, which recently restructured its funding mechanism to support local productions. Notably, the Focine fund launched in early 2023 aims to support indigenous and Afro-Mexican filmmakers.

Thanks to skilled human capital and low production costs, Mexico has also attracted a significant number of international projects in recent years, with a record $5.3bn in foreign direct investment flowing into the country via the film and video industry in 2022.

Increased investment

A number of countries are investing in entertainment as part of their diversification plans – either to build a domestic film industry or gain shares in international media companies − most notably in the MENA region.

Both public funds and private companies are working to acquire shares in global entertainment activity, with a number of Gulf countries exploring electronic sports as part of their diversification plans. Qatar-based broadcaster BeIN Media bought filmmaker Miramax in 2016 and retained a 51% stake in the company following a deal with Paramount Global, who bought the remaining shares for $375m in 2020.

In January 2023 Kakao Entertainment, the entertainment subsidiary of South Korean internet giant Kakao, raised $966m from sovereign wealth funds, including Saudi Arabia’s Public Investment Fund.

The Kingdom’s strategy to boost its standing in the entertainment industry involves developing a local industry through investment in studios and theatres, as well as drawing the interest of foreign producers and media companies through high-profile events such as the Red Sea International Film Festival, with the first iteration held in Jeddah in 2019.

The festival’s financing arm, the Red Sea Fund, has assets totalling more than $14m to fund over 100 film projects. At this year’s Cannes Film Festival the Kingdom’s Cultural Development Fund announced the debut of two funds for film industry investment valued at $180m.

Brazil, typically an entertainment powerhouse, saw public spending on film and TV production drop dramatically under former President Jair Bolsonaro. Since President Luiz Inácio Lula da Silva took office in January 2023, however, ApexBrasil, the country’s trade and investment promotion agency, has focused on renewing production agreements to support Brazilian filmmakers. New developments could see the promotion of productions from the country’s Amazon and north-east states, as well co-production deals in Brazil’s priority markets of Latin America and Africa.