2025 media and entertainment outlook

Traditional video studios often contend on multiple fronts to acquire and retain paying subscribers for their streaming services while also courting brands and advertisers to their ad-supported offerings. Those with pay TV businesses on cable and satellite should also consider investments in those media against the needs of their streaming video services. Studios often face higher content production and distribution costs, higher acquisition costs, more investment in advertising technologies, and a need to grow and compete globally—not just with other streamers but also with social platforms and video game companies.

In this year’s media and entertainment (M&E) outlook, generative AI is weaving through nearly everything—if not in full deployment, then at the core of most strategies. For large players—some of whom have developed and commercialized the most advanced AI systems in the world—generative AI is now amplifying their businesses, further widening their competitive moats.³ Other M&E companies are looking to see where generative AI might impact their business, but there are emerging use cases and growing efficiency, efficacy, and affordability of generative AI that may make experimentation more attractive.⁴

Generative AI could both amplify and disrupt innovators and incumbents alike. It could make TV, film, and game studios more efficient and productive while eroding their moats around premium content. It could empower creators and brands to produce more content and collaborate on targeted advertising, while flooding social platforms with synthetic media, nonhuman influencers, AI slop, dangerous content, and scams. At the edges, agile newcomers leveraging AI may further disrupt the landscape.

In 2025, M&E is expected to be animated by three key patterns.

1. Ads, aggregators, and the new moats: Social platforms demonstrate the advantage of investing in technologies that can help reinforce engagement and advertising.
2. Scale and asymmetric competition: Traditional studios often vie for attention and revenues with much larger competitors reaching and modeling billions of global users.
3. AI empowerment: While generative AI can strengthen big studios, it can also erode their content moats, enabling smaller creators and a possible market rebalance.

Underneath these patterns, economic uncertainty is growing.⁵ As 2025 unfolds, the world appears volatile, uncertain, complex, and ambiguous—or “VUCA”—to crib from military planners. M&E faces volatility in demand, the cost of debt, revenues, technology, and regulation. AI’s rapid evolution could intensify these challenges.

For some M&E companies, attention is still the main currency. In our 2025 Digital Media Trends survey, we found that people in the United States have an average of six hours of entertainment time each day.⁶ This number isn’t expected to grow and, for many, the amount of discretionary spending they have for entertainment isn’t growing either.⁷ What does this calculus look like in other global markets? And what are the levers for engagement and revenues in the new landscape?

In 2025, media and entertainment companies should understand how technology and scale have come to dominate the market. They should consider what role they want to play in this new landscape.

Competition for video is much bigger

Some streaming video services have emerged as market leaders by leveraging data, leading content development, and expanding globally. This leaves many other studios in a less profitable and more precarious position. Both groups now likely face much larger competitors.

Leading social video platforms have scale advantages in reach, audience size, technology, and capitalization. They may enjoy network effects that can reinforce their value with each new user and creator; economies of scale with tools for content and advertising that can address global and local segments and geographies; integrated e-commerce and digital marketplaces; and volumes of user data with large budgets for advanced AI that can amplify the platform. This can enable social platforms to experiment at a scale unattainable for smaller players, and able to bear risks that could sink many other businesses.

Some large tech companies also offer content and advertising, and have the financial muscle to endure losses, invest in original content, and bundle services as part of larger offerings. Leading streamers may have brand power, but they confront competition from platforms that can subsidize entertainment ambitions with profits from cloud computing, hardware, advertising networks, and other revenue streams. If there is a desire for more of those six hours of consumer entertainment time, they may not face many barriers.

These capabilities can constitute defensible moats against competitors and represent another feature of the 2025 market landscape for M&E: competitive asymmetry. This poses a challenge for studios that may need to get bigger (and more efficient), reinforce their differentiated value as premium channels, and reach across social, podcasts, and even gaming.

In 2025, the asymmetry that helps shape media and entertainment may drive more partnerships, joint ventures, and mergers and acquisitions. Studios and streamers may collaborate more to aggregate eyes and IP, reinforce their core differentiation of premium video entertainment, and work to attain competitive data and AI capabilities. This will likely require significant digital transformation to catch up with their competitors—some of whom also have large businesses offering cloud and SaaS capabilities.

Scale and competitive pressures may be pushing more players to the ends of the M&E spectrum. However, in 2025, we will look for early signs that smaller, leaner, technologically amplified, and creatively funded studios will bring more impactful and independent content into a newly revived middle of the market. Although high costs and scale advantages are leading to fewer larger players that dominate both premium and commodity entertainment, there seems to be growing demand for more options beyond social creators and blockbuster franchises—and more ways to meet that demand with less financial risk.

Studios bulk up to face fearsome competitors

In a more competitive environment, many SVOD services appear to have realized they may be in a less profitable and more challenging business than pay TV. Yet, many still draw significant ad revenues from pay TV programming, and they’re hesitant to sunset those businesses despite ongoing declines in subscribers.⁸ More are now separating their pay TV business from their “core business” of streaming video services.⁹ In the year ahead, studios may need to invest more in IP and capabilities while cutting costs in operations and productions.

In the United States, premium SVOD subscriptions grew by about 10% in 2024.¹⁰ Globally, overall subscriber growth appears to be cooling, drawing services into less saturated markets, particularly Asia-Pacific countries.¹¹ Services should weigh the potential to increase subscribers and engagement in those markets against a potentially lower average revenues per user (ARPU).¹²

A few leading streamers enjoy stronger pricing power and have been able to raise subscription prices without losing subscribers, offering cheaper ad-supported options to more price-sensitive customers.¹³ However, ad-supported subscriptions may move their business model toward advertisers while still requiring larger audiences to attract brands. Some services have seen lower-than-expected costs to reach consumers (CPMs).¹⁴ With some services launching ad-supported options, there has been an excess of ad inventory, further softening streaming CPMs—which lowers ad revenues.

Perhaps, a larger challenge is that the bulk of advertising now goes to social platforms and hyperscalers that spend billions on advanced AI capabilities that reinforce their value to advertisers.¹⁵ More streamers and studios may join forces to gather larger audiences and richer content catalogs that can better capture subscriptions and advertising revenues. They may program more live experiences, like sports, that can bring together large numbers of viewers and brands around cultural moments.

Some streamers may seek distribution through social platforms, leveraging those capabilities to engineer discovery, hype, and fan engagement for their own shows and services. However, this could also lure them toward cheaper content that looks more like social media. They should tread carefully: Even younger generations value streaming TV and movies equally with social media and video games.¹⁶

Streamers may seek greater balance and return on investment in their portfolios, from expensive premium content to cheaper genres like reality shows, live comedy, and documentaries. They may also look to spend less on content that underperforms. Leveraging fandoms—ardent fans of specific shows and franchises—could better predict engagement, increase retention on services, and unlock value in back catalogs. Global expansion could also yield more compelling stories—generative AI can make global content more accessible with dubbing and localization.¹⁷

Advanced analytics and AI could also improve “hit finding,” but many studios may be behind the curve on digital transformation, data, and AI capabilities. Getting more ROI out of IP may require a comprehensive approach to modernizing finances and operations, driving down costs, and building a deeper understanding of audiences and engagement. Arguably, many studios have resisted the requirements of modernity, both in infrastructure investments and creativity.

In 2025, a need for studios to focus their business may come to the fore, but the pathway for many could become clearer.

• Divest underperforming businesses.
• Drive down operational costs, modernize business tools, and transform financial operations.
• Enable higher-performing IP.
• Bring together bigger audiences with partnerships and acquisitions and bundles.
• Invest in advanced data and ad tech that bring audiences, advertisers, and content together
• Finally, amplify all of these with AI.

Global entertainment platforms: Social, personalized, and free

In our recent 2025 Digital Media Trends study of US consumers, 56% of Gen Zs and 43% of millennials surveyed reported that social media content is more relevant to them than traditional content like TV shows and movies.¹⁸ The moats that studios have enjoyed around premium video entertainment are steadily being eroded by independent creators, and the definition of quality is shifting under user-generated content that commands global attention without the prestige of traditional studios.¹⁹ The economics of content and the value of entertainment have expanded from scarce and expensive to abundant and free, while enabling social platforms to become global distribution networks.

While studios spend on increasingly expensive content production, social platforms have invested billions in optimizing their platforms for engagement and advertising. Spending on content is mainly deferred to independent creators, though some social video platforms have been bundling linear streaming channels, live programming, and SVOD services into single destinations, reinforced by user data, AI, and cloud technologies.²⁰ Social platforms may become a larger destination for media and entertainment, not just social media.

In 2025, advertising on social video platforms will likely see another year of 20% growth. It’s now the largest category of digital advertising, followed by the connected TV (CTV) category which includes ad-supported streaming video services. ²¹ The growth in social advertising reflects the maturity of those platforms in delivering highly targeted impressions and conversions, and shows clear results. The investments they make in data centers and AI, for example, accrue to their core advertising business model.²² With growing ad inventories driving down CPMs, conversions may become more valuable than impressions, favoring greater personalization, relevancy, and persuasion in advertising.²³

Social platforms are also more easily extensible than streaming video and smart TVs. Some offer tipping mechanisms and direct subscriptions to creators, and creator funds and revenue-sharing schemes to further incentivize creators to produce for the platforms. However, in 2025, the biggest creators may show their strength in negotiating media and advertising deals: Creators are even meeting with CMOs to build advertising partnerships.²⁴ Some social platforms offer livestream sales events, embedded product links, and virtual fitting rooms.²⁵ Platforms that have established themselves as a discovery channel for brands and retailers could move toward becoming an end-to-end marketplace.

In 2025, social platforms will likely get bigger, while extending more generative AI capabilities to creators and advertisers. However, synthetic media and virtual AI influencers could bring an explosion of content and a further blurring of influence, authenticity, and truth. Legislation against moderation could lead to perceived toxicity, while child protections could force platforms to offer underage services that could be impacted by the threat of losing Section 230 liability protections.²⁶ This emerging condition could reinforce a need to validate content with media supply chains that establish and certify provenance. Yet this also underscores the impact that these platforms can have, enabling anyone to share with everyone.

Gaming looks for the next growth engine

The video game industry had challenges in 2024. High-profile launches failed, live service games were canceled, studios were shut down, and the industry saw broad layoffs.²⁷ Despite growth in gamers and time spent gaming, global revenues were mostly flat.²⁸ Mobile gameplay and development of mobile games also slowed, despite contributing nearly half of gaming revenues globally.²⁹ This state is partly due to the unfolding reset after the COVID-19 pandemic boosted media and entertainment. At the same time, gaming M&A saw notable growth in 2024, with private equity firms leaning in.³⁰ By many accounts, gaming is strong, but the industry appears weighed down by costs and is seeking the next generation of experiences to drive growth.³¹

The games industry is also escalating costs to support a narrow tier of premium franchises that dominate gaming time and revenues.³² The biggest games can last for 10 years or more, with ongoing monetization opportunities, like direct purchases of games, subscriptions to games libraries, in-game purchasing of content and virtual goods, advertising, and brand and franchise partnerships.³³

In 2025, games studios and publishers have a formidable slate of titles planned, and a new gaming console is expected, likely stoking renewed engagement.³⁴ The very biggest games can now cost upwards of US$1 billion to develop and bring to market successfully.³⁵ In an industry that has been resistant to price hikes, there is more discussion about how much premium games can charge, and how much gamers will pay.³⁶ Perhaps more than TV and film, the stakes for premium games are high.

In 2025, this may lead to more consolidation at the high end, particularly in an acquisition-friendly regulatory environment. More crossovers into TV and film are slated.³⁷ In 2024, films and TV based on popular games drove significant revenues for video entertainment.³⁸ Game companies will likely seek to develop and acquire more IP, balance their portfolios toward growing audience segments, and develop stronger monetization strategies, while leveraging AI to model better ROI and lower risk.

Empowered by development platforms and distribution markets, smaller independent studios have been steadily building strength and engagement around an abundance of titles outside of the major franchises.³⁹ But this wealth of options can drive more marketing costs to reach potential audiences.⁴⁰ Independent studios can also face funding challenges while trying to stand out in a crowded market increasingly dominated by leading franchises. The industry may be watching to see if gamers are tiring of the same top franchises and giving more time to independent games that may be less encumbered by risk.

Gaming is increasingly a social experience. This enables games to be stickier and helps some of the biggest multiplayer franchises persist. The social nature of these games and the strong fandoms they engender can also make it harder for even the biggest new games to draw players away from incumbents. Instead of convincing just one gamer to adopt a new offering, studios and publishers may need to convince an entire friend group to migrate to a new offering.

Growth cycles in gaming have often been led by new technologies.⁴¹ Consoles and personal computers brought games out of the arcade; graphics processing units enabled greater immersion and first-person gaming; the internet brought online play and multiplayer experiences; smartphones led the mobile explosion. So far, the adoption of virtual reality has been slow despite strong hardware, while augmented reality still faces hardware challenges.⁴² Games now seem to be waiting for the next breakthrough that could unlock new experiences and drive a new growth cycle.

In 2025, attention will likely focus on generative AI and its potential to lower costs, understand audiences, and unlock creativity. Leading development platforms already offer AI capabilities, with road maps for more capabilities planned.⁴³ More generative AI capabilities in production, distribution, and operations could reinforce the strongest incumbents while potentially uplifting independent studios to build bigger, better games that reach more players. In 2025, game studios and publishers are expected to work to rein in costs, grow franchises, and enable more creativity, while applying more generative AI to each of these areas.

Data and AI power the advertising ecosystem

Historically, studios generated most revenues from networks, pay TV advertisers and affiliates, movie theaters, merchandise, and physical media like DVDs.⁴⁴ Many are no longer viable or are declining.⁴⁵ With SVOD, some are now working to build more competitive ad platforms, combining upfront bidding with automated ad networks. However, they may need more unified data, AI, and supply-side advertising capabilities.

Ad spend on streaming video, through the CTV category, is growing at about 12% year-over-year, though some is due to reallocations of spending on pay TV advertising.⁴⁶ Some savvy acquirers have bought CTV makers as a direct ad route into the living room.⁴⁷ In 2025, ads on streaming services could be an attractive category for their reach, and for their prices.⁴⁸ But advertisers may expect greater reach and efficacy.

Streaming content doesn’t typically have the ad markers that indicate where ads can be placed, resulting in sudden breaks in content.⁴⁹ Ads may be mismatched with content and audiences. Ad load could be fine for one viewer but cause another to tune out. Attribution and ad effectiveness are still somewhat opaque.⁵⁰ Streamers are working to address these challenges but may still face a deficit.

The rise of social platforms has helped make ad tech much more data-driven and granular. Unlike TV and SVOD content, every interaction with social content offers a data point to the service. Generative AI is now being used to create hundreds—or thousands—of ad variations that can target specific segments with greater personalization and rapidly A/B test the efficacy of such variations.⁵¹ Social CPMs have been rising accordingly.⁵²

Competing for ad dollars is also about competing in data and AI, further intensifying the economics of digital entertainment. In 2025, streaming video providers are expected to invest more in their advertising capabilities, building modernized ad networks that reach across multiple streaming video properties and leverage advanced AI capabilities.⁵³ Done well, this approach can unify ad offerings, potentially overcoming the challenges of standards fragmentation. This can help aggregators gain more leverage in negotiating content deals and make it easier for brands to reach valuable audience segments. Additionally, such networks could potentially address audiences simultaneously across linear TV, streaming, and web channels, increasing the value of advertising spend.

Success will likely require more than partnerships and engineering. Providers should work to clarify the unique value of their audience—for example, on a niche streaming service—and then reinforce that value with data. Identifying and supporting fans could be a key component, leveraging social media and podcast communities where fans connect.⁵⁴ Knowing their audience and integrating data around their behaviors can support better modeling and targeting, helping services to offer a comprehensive view to advertisers. In this way, providers may be able to compete more on their own terms and widen their own moats against much larger competitors.

Navigating through uncertainty

The media and entertainment industry now faces competitors empowered by advanced technologies; legions of independent creators redefining entertainment and information; and a world of interactive, immersive, and social video games. Generative AI promises to reckon with it all—and capitalize on it—better than we humans can. Within this competitive landscape, the future of entertainment is being revealed by the convergence of TV and film, gaming, and social video.⁵⁵

Many media companies may need to modernize their existing businesses before they can adopt advanced capabilities. They are exposed not just to hyperscale competitors, but also to smaller, newer competitors that are native to an era of data, AI, gaming, and social media. This presents another uncertainty for 2025: How much can advanced technologies uplift new disruptors? Will the current revolutions mint new business models and the next global titans? They could produce new kinds of content, interactions, and shared experiences.

Despite funding and advances, the impact of generative AI remains uncertain. Which use cases will work best for which parts of the value chain? Will the models that power generative AI continue to advance, or will they stabilize around a new plateau of capabilities? Will the costs to train them come down, and will trust in their results increase? In 2025, it will likely become clearer where generative AI excels and is trustworthy, and where it may fall short. Investors and regulators are likely paying close attention.

So, 2025 presents both a clearer understanding of how the business of media and entertainment has evolved and what the new territory looks like, while also being fraught with uncertainties that could tip the scales in one direction or the other. Navigating uncertainty demands both flexibility and vision, and the ability to dodge and pivot in the moment while staying focused on a clear destination. In 2025, more media and entertainment companies will likely be challenged to know where they’re going and how they intend to get there.