Deloitte TMT 2023 Predictions: Across the globe, video streamers introduce ad-supported tiers, and spend big on live sports; AI tools design chips better and faster; and space gets crowded with satellites

• Don't fear the tiers: major formerly ad-free streaming services will offer cheaper or free options with advertising
• Streamers are getting in the game with live sports, in a bid to turn fans into subscribers
• Chips are getting more complicated and design talent is scarce: AI tools could come to their rescue
• Five thousand satellites in orbit could connect the world with data, but managing traffic in space is challenging

Deloitte today released its Technology, Media & Telecommunications (TMT) 2023 Predictions report which highlights the biggest global trends in TMT and how they could impact businesses and consumers. The report focuses on the crucial roles artificial intelligence (AI), advertising video on demand (AVOD), 5G and chips could play in our hyperconnected world.

"This year's TMT predictions underscore a common theme, both with consumers and businesses-to do more with less- as inflationary pressures, supply chain issues and other world events continue to cause uncertainty," said Kevin Westcott , vice chair, Deloitte LLP, U.S. TMT and global Telecommunications, Media and Entertainment (TME) practice leader. "Given this, consumers are looking for more cost-effective ways to communicate, to be entertained, and to be productive, while businesses are looking for efficient ways to innovate in order to compete, differentiate and grow revenue. Our thinking on these emerging trends should help guide TMT organizations as they plan for the future and strive to meet their customers' needs."

Don't fear the tiers: Global growth in streaming services includes AVOD increase
Deloitte predicts that major streaming services that have been ad-free will add AVOD (advertising video on demand) options. While ad-free subscriptions aren't going away, Deloitte anticipates that by the end of 2023, major subscription video-on-demand services in developed markets will likely launch new ad-funded tiers. By the end of 2024, half of these providers will likely also have launched a free ad-supported streaming TV service (FAST). And by 2030, Deloitte expects that most online video service subscriptions will be partially or wholly ad funded.

"Our recent research showed the churn rate for streaming services in the U.S. was 37%. This means media and entertainment companies should continuously look for ways to generate new revenue while appealing to cost-conscious consumers who have a growing appetite for more compelling and diverse content," said Jana Arbanas , vice chair, Deloitte LLP and U.S. telecom, media and entertainment sector leader. "Advertising video on demand, for example, can satisfy both objectives by giving consumers more options that work within their budget and streaming companies more opportunity for growth by working with eager advertisers, not to mention more lasting relationship with consumers."

The next arena for the streaming wars: live sports
Streaming providers are spending billions of dollars on live sports. They have purchased rights across the spectrum of sporting events in a bid to attract, retain, and monetize their audiences via this popular content. Deloitte predicts that in 2023, streamers could spend more than US$6 billion ¹ on major sports rights in the largest global markets.

Semiconductor companies turn to AI and high-power materials to design future chips
Chip companies are using AI to help design chips faster, cheaper, and more efficiently. Deloitte predicts that the world's leading semiconductor companies could spend US$300 million on internal and third-party AI tools for designing chips in 2023, and that number may grow by 20% annually for the next four years to surpass US$500 million in 2026. The impact of AI will likely go far beyond the money spent on AI design tools. They can enable chipmakers to push the boundaries of Moore's Law, save time and money, and even drag older chip designs into the modern era.

"The semiconductor shortage has demonstrated the need for faster, more efficient manufacturing of chips in order to meet demand," said Paul Silverglate , vice chair, Deloitte LLP and U.S. technology sector leader. "Artificial intelligence aided design can be used to address this need and can also make older chips better by moving to more advanced process nodes, and even help close the chip talent gap. By making chip design exponentially faster with AI, semiconductor companies can move beyond the current market challenges and focus more on what's next."

Supercharged semiconductors made of high-power materials are taking chip development to a new level. Replacing silicon, these materials—primarily gallium nitride and silicon carbide—are suited for the higher voltages, power levels, and resilience needed for increasingly common applications such as EV batteries, super-efficient consumer electronics chargers, powerful solar panels, advanced military applications, space technology and nuclear energy. Deloitte predicts that chips made of high-power semiconducting materials could sell a combined US$3.3 billion in 2023, up almost 40% from 2022. Growth in these types of chips, collectively known as power compound semiconductors, is expected to accelerate to nearly 60% in 2024, possibly generating revenue of more than US$5 billion .

Broadband satellites will need to navigate a crowded sky
Deloitte predicts that more than 5,000 broadband satellites could be in low-Earth orbit (LEO) by the end of 2023, because of growth in commercial data satellite deployments to provide high-speed internet to every corner of the world. They could make up two working constellations providing high-speed internet to nearly a million subscribers on all parts of the planet, no matter how remote.

If every organization currently planning to build an LEO constellation succeeds, seven to 10 competing networks could be operational by 2030, with a total of 40,000 to 50,000 satellites serving more than 10 million end users. This growth would likely require more to protect the commons of space including increased industry collaboration and new capabilities for space situational awareness, in-orbit satellite servicing, and space debris removal.

Additional Deloitte 2023 TMT Predictions:

• Tech's commitment to faster climate action
  Many organizations want to reach net zero and the technology industry is making a strong commitment. According to an analysis of the Deloitte CxO sustainability survey , tech companies are working harder and faster to impact climate change and are 13% more likely than non-tech companies to target net zero by 2030.
• 5G networks to transform enterprise connectivity
  By introducing virtualized, cloud-centric capabilities, 5G standalone (SA) networks are poised to drive disruptive change that could make previous advances in wireless technology (2G/3G/4G) appear incremental. Deloitte expects the number of mobile network operators (MNOs) investing in 5G standalone networks—with trials, planned deployments, or actual rollouts—to double from more than 100 operators in 2022 to at least 200 by the end of 2023.
• Virtual production gets real: bringing real-time visual effects onto the set
  The tools and techniques of virtual production are transforming film and cinema, increasing flexibility, shortening production times, and bringing real-time computer-generated imagery and visual effects out of post-production and onto real-life sets. Deloitte predicts that the market for virtual production tools will grow to US$2.2 billion in 2023—up 20% from an estimated US$1.8 billion in 2022.
• Gaming M&A is growing on the back of consolidation, portfolio plays, and game tech
  Deloitte predicts that in 2023, the number of video game company mergers and acquisitions will continue to increase by around 25%, slightly slower than the estimated 30% quarterly growth of 2022. Video game services, experiences, and business models are innovating, console supply chains are loosening up to meet pent-up demand for next-gen experiences, and many anticipated games that were delayed in 2022 are now set to reach players in the coming year.
• VR market gaining momentum
  Deloitte predicts that the VR market will generate US$7 billion in revenue globally in 2023, a 50% increase over 2022's US$4.7 billion . As VR grows in popularity, 90% of that revenue will likely come from headset kit sales, with 14 million units averaging US$450 each expected to sell in 2023. The remainder should comprise mostly of VR content—principally games, but also some enterprise applications—which could see revenues of just over US$1 billion . Improvements in the underlying technology, including power, screens, and audio should fuel this growth. Next year, headsets should offer higher frame rates, higher-resolution displays, and enhanced spatial audio, enabling a realistic, immersive experience.
• Shopping goes social, trending past US$1 trillion annually
  Deloitte predicts spending for goods and services on social media will surpass US$1 trillion globally in 2023, growing 25% annually with more than two billion people shopping this way in the last year. The social commerce market is outgrowing traditional e-commerce. In a Deloitte survey , Generation Z and Millennials are more likely than Gen X respondents to say that social media influencers affect their buying decisions.
• Growth in the emerging enterprise edge computing market
  Cloud, telco, equipment, and platform companies are vying for a share of enterprise investments in edge services and products that make computing faster, safer, and cheaper. Deloitte predicts that the enterprise market for edge computing will grow at 22% in 2023, compared to 4% growth in spending on enterprise networking equipment and 6% on overall enterprise IT for the same year. Most of this growth will likely come from expenditures on hardware initially but should migrate toward software and services as the market matures.

About this report
Deloitte's annual TMT Predictions report provides an outlook on technology, media and telecommunications trends that may disrupt and transform the business and consumer ecosystems worldwide. Visit www.deloitte.com/predictions .

About Deloitte
Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world's most admired brands, including nearly 90% of the Fortune 500® and more than 7,000 private companies. Our people come together for the greater good and work across the industry sectors that drive and shape today's marketplace — delivering measurable and lasting results that help reinforce public trust in our capital markets, inspire clients to see challenges as opportunities to transform and thrive, and help lead the way toward a stronger economy and a healthier society. Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them. Building on more than 175 years of service, our network of member firms spans more than 150 countries and territories. Learn how Deloitte's approximately 415,000 people worldwide connect for impact at www.deloitte.com .

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