Growth in Global Entertainment & Media Industry Will be Driven by Strategic Alliances Internet Advertising and Internet Access Remain Fastest U.S. Growth Segments With Double Digit Gains Expected for Next Five Years
NEW YORK, June 18, 2008 (PRIME NEWSWIRE) -- Although digital and mobile distribution comprised only 5 percent of global entertainment and media (E&M) spending in 2007, these revenues will account for 24 percent of all growth throughout the industry during the next five years, according to PricewaterhouseCoopers' Global Entertainment and Media Outlook: 2008-2012 (Outlook) released today. The report also underscores the importance of continuing to extract revenues from traditional business segments while emerging technologies continue to solidify their consumer position. PwC's annual report pegs global compound annual growth rate (CAGR) at 6.6 percent for the sector, anticipating it reaching $2.2 trillion in 2012. The U.S. E&M market will grow at 4.8 percent CAGR reaching $759 billion in 2012.
"In the U.S., consumers are showing a preference for free, or heavily discounted, ad-supported content and services in the new digital and mobile environment," said Jim O'Shaughnessy, global chairman, entertainment & media practice, PricewaterhouseCoopers. "This ensures that the importance of advertising will continue to grow -- both to entertainment and media companies themselves and to their customers."
Strategic Alliances Will Replace Vertical Integration
According to the Outlook, entertainment and media companies hoping to drive growth during the next five years will need to accommodate dramatic changes in devices, market and consumer behavior through strategic business alliances.
Several critical technologies are now reaching tipping points that will deeply influence both the pace and direction of entertainment and media growth during the next five years. Broadband penetration continues to accelerate globally. Mobile is gaining ground quickly -- adding subscribers and upgrading infrastructure to enable the next wave of mobile expansion, driven by Internet access, advertising and television. Modern movie houses, digital cinemas and 3-D upgrades are enhancing the cinema-going experience, while high-definition television subscriptions and a resolution of the high definition DVD format wars will invigorate digital living rooms. The global broadband boom continues unabated, fuelling overall growth, and more than doubling again to 661 million households in 2012, a 16.4 percent compound annual increase. According to the Outlook, U.S. broadband households will reach 101 million households in 2012, a 10.5 percent CAGR.
While digital and mobile are driving growth, according to the Outlook, established and traditional business segments will continue to dominate revenues, with the exception of recorded music, where digital distribution will surpass physical distribution in 2011. By 2012, digital and mobile revenues will account for just 11 percent of total E&M spending, or $234 billion of the $2.2 trillion global market. In comparison, by 2012, digital and mobile revenues will account for 10 percent of total E&M spending in the U.S., or $75 billion of the $759 billion U.S. market.
"We're seeing a new business model solidify for entertainment and media companies," said Marcel Fenez, managing partner, global entertainment & media practice, PricewaterhouseCoopers. "Some, such as the film industry, have dabbled in this in the past, but those will be small movements compared to what lies ahead. No single company will be able to successfully go it alone over the next five years. The challenges are too significant and the demand for innovation too complete."
Health of media is driven by the Net Generation and maintained by consumers over the age of 50
The Net Generation continues to set the pace and direction of change in the entertainment and media industry while exhibiting an influence that is driving new business models that are revolutionizing the relationship between companies and their customers. As they make these technologies regular components of their everyday lives, the Net Generation is also driving the technology engagement of prior generations, connecting older generations with the latest trends in emerging media technology.
What is more, this is truly a global phenomenon to which companies are increasingly paying attention. Consider: In the BRIC countries, people under the age of 25 comprise at least 31 percent of the countries' total populations -- 43 percent in Brazil, 31 percent in Russia, 50 percent in India and 38 percent in China. Meanwhile, in the United States, people under the age of 25 represent 34 percent of the total population. The imperative, then, is that companies must expand their global reach to young people who will propel spending on Internet access and digital entertainment and media during the coming years.
Meanwhile, consumers over the age of 50 are creating a balance in the industry by devoting significant amounts of attention to the more traditional media of their generation as the Net Generation drives growth in digital and mobile entertainment. In every region of the world except EMEA (Europe, Middle East, Africa), the 50+ population will see double digit growth rates and globally, this population will increase from 1.1 billion to 1.25 billion, a 13.1 percent rise through 2012. This growth will help sustain traditional formats even as this generation becomes increasingly interested in the platforms embraced by their children and grandchildren.
"Companies are rapidly embracing new and emerging technologies in the entertainment and media industry, while adapting to the demands of the Net Generation. And rightly so, because it will help to drive their business forward and remain competitive in a marketplace driven by innovation. However, they must also remain focused on managing their traditional businesses, a key component and driver of their revenues. By effectively managing emerging and traditional business lines, they will be able to identify opportunities they can exploit so they can migrate to the new digital environment and meet the demands of the Net Generation," added Fenez.
Regional Highlights -- U.S. remains largest but slowest growing; Latin America and Asia Pacific are fastest-growing
The U.S. currently remains the largest but slowest growing E&M market, growing at a 4.8 percent compound annual growth rate reaching $759 billion in 2012. Internet advertising and Internet access spending will be the only two segments with double-digit growth during the next five years, boosted by continued growth in broadband. Video games will be the next leading growth segment, expanding at a 7.9 percent CAGR.
During the next five years, Asia Pacific and Latin America will be the fastest growing regions. Double-digit increases are expected in each region for Internet advertising, Internet access spending, TV subscription and license fees, casino and other regulated gaming and video games. Latin America will total $85 billion in 2012, up from $51 billion in 2007, advancing from a relatively small base at 10.6 percent CAGR. Meanwhile, spending in Asia Pacific will average 8.8 percent CAGR, the second highest of any region, increasing from $333 billion in 2007 to $508 billion in 2012.
EMEA, the second largest market, will expand at a 6.8 percent CAGR to reach $792 billion in 2012. Central and Eastern Europe and Middle East/Africa will fuel growth in this territory. Internet advertising, Internet access spending and video games will continue to average double-digit compound annual increases during the next five years.
Segment highlights -- Growth is driven by the rising value of online and mobile opportunities
While Internet advertising growth will moderate from that in recent years, it will see the most robust growth globally, at 19.5 percent CAGR through to 2012. Internet access (12.1 percent CAGR), video games (10.3 percent CAGR) and television subscriptions and license fees (10.1 percent CAGR) will all experience double-digit growth, globally. Yet in the U.S., the three leading segments will be Internet advertising (15.1 percent CAGR), Internet access (10.9 percent CAGR) and video games (7.9 percent CAGR).
More established segments -- television advertising (global 5.9 percent; U.S. 4.9 percent CAGR), theme parks (global 5 percent, U.S. 3.9 percent CAGR), casino gaming (global 6.5 percent; U.S. 4.0 percent CAGR), filmed entertainment (global 5.3 percent; U.S. 4.6 percent CAGR) and sports (global 6.5 percent; U.S. 6.1 percent CAGR) -- are all set to grow at between approximately 4 percent and 7 percent compounded annually.
The publishing segments including newspapers (global 2.2 percent; U.S. -0.7 percent CAGR), consumer magazines (global 3.5 percent; U.S. 3.8 percent CAGR), consumer & educational books (global 2.8 percent; U.S. 2.5 percent CAGR), business-to-business publishing (global 3.2 percent; U.S. 2.6 percent CAGR) as well as recorded music (global -0.6 percent; U.S. -5.3 percent CAGR) face the stiffest challenges, where the declines in physical distribution are at their most significant and growth in digital distribution -- although rapid -- is struggling to make up for the shortfall.
While the rest of the world expects growth, the U.S. newspaper segment is expected to decline. However, U.S. newspaper web site advertising will reach $6.4 billion, a 15.1 percent compound annual increase by 2012. Web sites will account for 15 percent of total daily newspaper advertising, more than twice its 7 percent share in 2007.
Beyond the BRIC: New forces emerging
As the trend towards globalization in the entertainment and media industry continues, Brazil, Russia, India and China will remain important sources for growth throughout the entire E&M sector, driven by rising disposable incomes and an increasingly urbanized middle class. In addition, a large and diverse group of countries are also breaking away from the pack. According to the Outlook, E&M markets across fifteen countries will expand at double-digit annual rates during the next five years, with Saudi Arabia and the Pan-Arab region experiencing the fastest growth. Vietnam will be the world's fastest-growing television subscription and license fee market over the next five years -- growing at 29.3 percent CAGR.
About the Outlook
PricewaterhouseCoopers' Global Entertainment and Media Outlook: 2008-2012, the ninth annual edition, contains in-depth analyses and forecasts of 15 major industry segments across five regions of the globe -- the United States, EMEA (Europe, Middle East, Africa), Asia Pacific, Latin America, and Canada -- plus a Global Overview. It is available in hard copy or electronically (PDF) for US$995 at http://www.pwc.com/outlook. The "Global Overview" is available separately for US$95 in hard copy or electronically, and individual segment chapters are also available for US$95 in electronic format only.
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PricewaterhouseCoopers Laura Schooler 646-471-3229 Brainerd Communicators AJ Goodman Ray Yeung 212-986-6667
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PricewaterhouseCoopers Laura Schooler 646-471-3229 Brainerd Communicators AJ Goodman Ray Yeung 212-986-6667