Media & Entertainment 2025 Outlook

(Source: Zoey, Rumi, and Mira from Netflix’s “KPop Demon Hunters.”Netflix)

Introduction

Traditional media and entertainment companies are no longer just competing for time and attention; they now face far more formidable rivals in the realms of content creation and advertising that underpin the video business. Content production costs continue to soar for major studios in TV, film, and gaming, while capital investment in data centers and AI is increasingly concentrated among hyperscalers and leading social platforms. As global enterprises push user-generated content (UGC) and immersive, interactive gaming experiences, consumer media habits are evolving, and trusted business models are coming under strain.

According to Deloitte’s Digital Media Trends report, while TV and film once dominated entertainment, audiences now allocate time more evenly across TV, movies, streaming video, social media, and gaming—especially among younger generations. Consumers desire both short-form niche content and long-form premium film and television, but the platforms and contexts through which they consume are shifting. Concurrently, economic and technological factors—including soaring production costs, an advertising-driven business model, and intense industry competition—are reshaping the landscape.

The video entertainment market is increasingly defined by a handful of dominant subscription video on demand (SVOD) services, social video platforms, and hyperscale tech giants. These players leverage data and technology to reach massive, global audiences, engaging users and monetizing access for brands and advertisers. Gaming, especially among younger demographics, is rapidly becoming a major entertainment business, increasingly intersecting with video content. Game engines are now tools not only for games but also for TV and film production, further blurring the lines between gaming and video IP expansion.

The Disruptive Impact of Generative AI

Traditional video studios must compete across multiple markets to attract and retain paid streaming subscribers, while simultaneously vying for brands and advertisers for their ad-supported offerings. Studios operating cable and satellite pay TV face a balancing act between investing in traditional media and meeting surging demand for streaming video. They confront rising content creation and distribution costs, escalating customer acquisition expenses, expanding investments in advertising technologies, and fierce global competition from social platforms and gaming companies.

Generative AI has emerged as a pivotal focus area in the media and entertainment (M&E) industry, already central to most strategies despite incomplete adoption. The world’s leading AI developers have leveraged generative AI to expand competitive advantages, while other firms watch closely, experimenting with new use cases as AI’s efficiency, effectiveness, and economic viability improve.

AI introduces a dual-edged dynamic of amplification and disruption. It can boost efficiency and productivity for TV, film, and game studios but also lowers traditional entry barriers to premium content. Generative AI empowers creators and brands to produce more content and collaborate more effectively in targeted advertising. Conversely, it also fuels a surge in synthetic media, non-human influencers, AI-generated garbage content, harmful material, and fraud—challenges that agile startups maximizing AI capabilities may intensify.

Advertising, Aggregation Platforms, and New Entry Barriers: Social platforms validate the value of investing in technologies that enhance engagement and advertising effectiveness.

Scale and Competitive Asymmetry: Traditional studios compete for attention and revenue against much larger players with access to billions of global users and sophisticated data modeling.

Influence of AI: Generative AI can strengthen large studios’ influence but simultaneously lowers content entry barriers, enabling smaller creators to grow and reshaping market dynamics.

Attention remains the most valuable asset for M&E companies. In 2025, U.S. consumers spend roughly six hours daily on entertainment content—a figure unlikely to rise significantly along with consumer discretionary spending. This prompts questions about how other global markets differ, what levers drive engagement and monetization in the changing landscape, and how firms can strategically position themselves amid technology-driven platform dominance.

Intensifying Competition in Video Content

Leading SVOD platforms have emerged through superior data utilization, original content development, and global expansion, pushing many studios into less profitable, precarious positions. Yet, they now face even larger competitors—social video platforms with network effects, vast user bases, integrated e-commerce, extensive data, and significant AI investment budgets that enable large-scale experimentation.

Major tech firms also provision content and ads with deep financial capacity to absorb losses, invest in originals, and bundle services, building defensible ‘moats’—a hallmark of competitive asymmetry in the M&E market. Legacy studios are thus driven to scale operations, differentiate premium channels, and expand into social, podcasting, and gaming to compete effectively.

This asymmetry accelerates partnerships, joint ventures, and M&A activity, as studios and streamers consolidate viewer bases and IP assets, enhancing premium content differentiation and data/AI competencies. Digital transformation—especially competing against cloud and SaaS giants—becomes imperative.

Rising pressures increasingly polarize the M&E industry. However, nimble, well-funded, technologically sophisticated independent studios may rejuvenate the mid-market, delivering influential non-blockbuster content. Growing demand for alternatives beyond social creators and blockbuster franchises points toward lower-risk new approaches emerging.

Studios Scaling to Compete

Competition drives many SVOD operators to recognize the challenges of less profitable, complex-to-operate businesses compared to pay TV, yet many hesitate to shutter these operations due to advertising revenue dependencies. Distinctions between pay TV and streaming services have begun to crystallize.

Studios must invest more in IP and core competence while cutting operational and production costs. While U.S. premium SVOD subscriptions grew about 10% in 2024, global growth is slowing, prompting firms to explore untapped Asia-Pacific markets with lower average revenue per user (ARPU).

Leading streaming services bolster pricing power, raising fees without high churn alongside ad-supported lower-cost options. However, ad-supported models shift revenue focus to advertisers, requiring broader audience reach. Ad inventory saturation and falling CPMs reduce ad revenue amid growing ad-supported services.

A more significant challenge is the concentration of advertising spending on social platforms and hyperscalers, which invest billions in AI to enhance value for advertisers. Consequently, more streamers and studios collaborate to build larger viewer bases and richer content libraries, expanding combined subscription and advertising revenues. Live content like sports offers opportunities for large-scale cultural event engagement.

Some streaming platforms harness social media as distribution channels, boosting discovery, word-of-mouth, and fan engagement, though this can also draw users toward low-cost social-style content. Young viewers increasingly value streaming and social or gaming content equivalently.

Streamers balance portfolios from expensive premium content to lower-cost reality shows, live comedy, and documentaries, reducing spend on underperformers, leveraging fervent fandoms to predict engagement and retention, and maximizing legacy content value. They also pursue global expansion by localizing content using generative AI for cost-effective dubbing and accessibility.

Despite this, many studios lag in digital transformation, data, and AI capabilities. Maximizing IP ROI demands comprehensive modernization—including financial, operational, cost savings, and audience insights. Many have historically resisted investing adequately in infrastructure and creativity.

In 2025, studios must sharpen focus on core businesses, strategizing around:

  • Divesting underperforming assets,
  • Streamlining operations, modernizing business tools, and transforming financial management,
  • Strengthening valuable IP,
  • Expanding audiences through partnerships, M&A, and bundling,
  • Investing in data and ad tech to connect viewers, advertisers, and content more effectively,
  • Amplifying all improvements with AI-driven efficiency.

Global Entertainment Platforms: Social, Personalized, and Free

Deloitte’s 2025 Digital Media Trends finds 56% of Gen Z and 43% of Millennials in the U.S. regard social media content as more relevant to their lives than traditional TV or film. Premium video content-based entry barriers built by legacy studios are eroding due to independent creators, with quality redefined around globally recognized UGC sans traditional authority.

Content economics and entertainment value have expanded from scarcity and expense to abundance and free availability—enabling social platforms to become dominant global distribution networks. While studios shoulder rising production costs, social platforms invest billions to optimize platforms and enhance advertising features.

Production costs fall more heavily on independent creators. Some social video platforms unify streaming channels, live programming, and SVOD services on single platforms enhanced by user data, AI, and cloud, evolving from mere ‘social media’ into broader ‘media and entertainment destinations.’

The social video advertising market is projected to grow about 20% in 2025—now the largest category in digital advertising, followed by connected TV (CTV) advertising including ad-supported streaming video. This growth highlights mature targeting and conversion capabilities, underpinned by investments in data centers and AI integral to advertising revenue models.

As ad inventory surges, CPMs decline, raising the importance of conversion value. Advertisers demand more personalized, relevant, and persuasive ads.

Social platforms scale more readily than streaming or smart TVs, offering creators sponsorship, subscriptions, funds, and revenue sharing to incentivize content production. Power dynamics increasingly shift to top creators negotiating directly with brands. Some platforms pursue live commerce, embedded product links, and virtual fitting rooms, evolving into end-to-end commerce channels. Generative AI tools are expected to expand for both creators and advertisers.

However, synthetic media and virtual AI influencers raise concerns about content proliferation, influence, authenticity, and truthfulness. Content regulation easing may increase harmful content, while child protection laws reshape services aimed at minors. Content provenance verification and authentication processes become critical.

Gaming Industry Seeks New Growth Drivers

In 2024, the video game industry faced considerable challenges including blockbuster failures, live service terminations, studio shutdowns, and layoffs. Despite rising gamer numbers and playtime, global revenues plateaued, with mobile gaming growth slowing despite comprising nearly half the market. This partly reflects a post-pandemic market adjustment. M&A activity surged, fueled by private equity.

The industry supports a small number of premium franchises that generate most playtime and revenue, investing heavily in their long-term operation and monetization through purchases, subscriptions, in-game content, advertising, and brand partnerships. Upcoming strong game lineups and new consoles in 2025 promise renewed user engagement. Development and launch costs for top games can exceed $1 billion. Discussions continue on premium pricing and gamer willingness to pay, with expectations and risks higher than TV or film.

Favorable regulatory environments suggest further consolidation in premium gaming, with expanding film and TV crossovers. In 2024, game-based film and TV revenues rose significantly.

Studios continue developing IP, balancing portfolios to reach growing audiences, and enhancing monetization strategies while employing AI to forecast ROI and mitigate risks.

Smaller independent studios steadily build strengths and engagement through diverse titles beyond blockbusters, though marketing costs rise. They struggle to distinguish themselves amid intense franchise-dominated competition. Industry observers watch whether gamers tire of major franchises in favor of lower-risk indie games.

Gaming increasingly becomes a social experience, deepening engagement and franchise longevity. Strong fandoms make it difficult for new games to pull players from existing titles, requiring studios to attract entire friend groups rather than single users.

Gaming’s growth cycles historically hinge on technology breakthroughs—from consoles and PCs bringing arcade games home, GPUs enabling immersive, first-person games, to the Internet and smartphones spawning online and mobile gaming. VR adoption lags despite strong hardware; AR still faces hardware hurdles. The industry awaits the next innovation to spark new experiences and growth.

Interest in generative AI will grow, with potential to reduce costs, improve audience insights, and enhance creativity. Leading platforms already offer AI features, with more planned. Expanded generative AI use across production, distribution, and operations will bolster incumbents and aid indie studios in creating bigger games and reaching players.

Studios and publishers focus on cost control, franchise expansion, and creativity, actively leveraging generative AI in all areas.

Data and AI Drive the Advertising Ecosystem

Historically, studios earned most revenue from networks, pay TV advertisers and affiliates, theaters, merchandise, and physical media like DVDs. Many of these have diminished or disappeared. With SVOD’s rise, some studios build more competitive ad platforms combining advance bidding and automated ad networks but need deeper integration of data, AI, and supply-side ad technology.

Connected TV (CTV) ad spending grows about 12% annually, partly due to pay TV ad budget reallocations. Well-funded acquirers have purchased CTV producers as direct-to-living-room ad channels. Post-2025, streaming ads may offer attractive reach and pricing but face challenges: ad placements lack clear mid-content markers, ads may mismatch content and viewers, and ad frequency may cause churn. Attribution and effectiveness measurement remain difficult despite streamer efforts.

Social platform ascendancy drives ad tech toward greater data granularity and segmentation. Unlike TV and SVOD, every interaction with social content generates data points. Generative AI now produces hundreds or thousands of ad variations tailored to segments, rapidly A/B tested for efficiency.

Ad revenue competition is also a data and AI competition, intensifying digital entertainment rivalry. Post-2025, streaming providers will invest heavily in ad capabilities, build modern ad networks operating across assets, and employ advanced AI. Success will mitigate ad standards fragmentation, consolidate offerings, enhance negotiation power with intermediaries, and ease brand access to valuable viewer segments—improving ad spend ROI.

Finding a Path Through Uncertainty

The M&E industry now confronts competitors armed with advanced technology, countless independent creators redefining entertainment and information, and the world of interactive, immersive social video games. Generative AI promises to surpass human capacity in managing and capitalizing on these opportunities.

The future of entertainment lies in the convergence of TV, film, gaming, and social video. Many media companies must modernize legacy operations before adopting advanced capabilities, facing threats from hyperscalers, data/AI-driven newcomers, and social/gaming-based competitors. This increases uncertainty: How disruptive will emerging technologies be? Will ongoing innovation spawn new business models and global leaders? Will novel forms of content, interaction, and shared experience arise?

Despite funding and innovation, generative AI’s impact remains uncertain. Which points in the value chain see greatest benefit? Will AI models keep evolving or plateau? Will learning costs fall and trust rise? Clarification of AI’s strengths and limits will shape investor and regulator attention.

Today, the M&E business navigates deep uncertainty, requiring agility, vision, pivoting skills, and sharp focus toward clear goals. More companies will face profound choices about their direction and strategy in this evolving ecosystem.

* Source: Deloitte (Based on insights from Deloitte)