Digital Spending Remains Main Growth Engine and Will Expand
to 25 Percent of E&M Market in the U.S.
Rise of Consumer Control and 'Digital Behavior' Drives Shift
in Spending Towards Digital / Mobile Platforms
NEW YORK, June 16, 2009 (GLOBE NEWSWIRE) -- By 2013, the acceleration of the digital transition will create a more fragmented entertainment and media landscape characterized by a wide divergence of revenue models, according to PricewaterhouseCoopers' Global Entertainment and Media Outlook: 2009-2013 (Outlook), released today. The report underscores that the key to sustainable revenue streams in 2013 lies in providing a content experience that cannot be readily duplicated elsewhere, whether the revenue model is ad-supported, subscription or a combination. The report forecasts that global entertainment and media spending will rise from $1.4 trillion to $1.6 trillion in 2013, growing at a compound annual growth rate (CAGR) of 2.7 percent. The U.S. E&M market will grow at 1.2 percent CAGR reaching $495 billion in 2013.
"The current economic slowdown, shifting consumer behavior and new ad-supported revenue models are triggering acceleration of digital migration. While the impact of these new models and dynamics throughout the entertainment and media industry will be strong, it also opens up new creative opportunities for the industry," said Bill Cobourn, U.S. leader, entertainment, media & communications practice, PricewaterhouseCoopers. "The current decline in revenues is not because of declining demand. In fact, demand for E&M appears to be increasing. The challenge is to identify ad models that are able to withstand the downward pressure on ad rates in the digital environment and on subscription models that capture the consumers' preferences for premium content."
Economic downturn accelerating digital migration
The economic environment is accelerating digital migration, forcing companies to strive for greater efficiency from distribution and advertising, while consumers continue to seek greater control and higher value from their buying decisions. Digital spending will remain the industry's main growth engine, rising in the U.S. from 17 percent of total industry revenues in 2008 to 25 percent in 2013. Accelerated digitization coupled with growing divergence between the revenue performance of different segments and markets will create an E&M landscape characterized by a myriad of business models and a far more tailored approach.
The growth rates of more digitally-driven segments such as Internet advertising and TV subscriptions will outperform the industry as a whole during both the downturn and the recovery, as will Internet access, although it is not an entertainment and media segment in itself, but is a key driver of spending in most E&M segments. And while the downturn impacts the pace of growth in each segment, it does not alter the underlying pattern of digital revenues expanding at the expense of non-digital.
Rise of consumer 'digital behavior'
The accelerating digital transformation is reinforcing and proliferating new consumption habits and 'digital behaviors,' as consumers seek more control from the content they desire. Consumers are taking control in various ways on ever-expanding content platforms, while improvements in technology continue to allow for improved downloading and streaming.
From mobile Internet to online communities, and from movies-on-demand to uploading self-generated content, advances in digital technology are enabling this control. These behavioral changes are driving a progressive shift towards digital and mobile platforms. By 2013, these platforms will account for 78 percent of total consumer/end-user/access growth expanding at a 12.2 percent CAGR to reach $387 billion (from $218 billion in 2008), compared with only a 1.2 percent CAGR for the non-digital marketplace. Digital and mobile platforms in the U.S. will account for 51 percent of total consumer/end-user/access growth, expanding at an 11.5 percent CAGR to $82 billion in 2013 from $48 billion in 2008 compared with 2.3 percent CAGR for the non-digital marketplace.
New generation of ad-supported revenue models emerging
As digital behaviors become more dominant among consumers, a new generation of ad-supported revenue models will emerge, capitalizing on the evolving consumption habits to deliver more targeted and relevant advertising. However, what will matter throughout the forecast period is not the overall size of an increasingly fragmented ad market, but the ability to use relevance and personalization of advertising to boost share of wallet. As consumers receive an increasing proportion of their entertainment and media through digital/mobile platforms, advertisers will shift their resources from traditional media to new media. As a result, the Internet will account for 19 percent of U.S. advertising in 2013, compared with 13 percent in 2008 and only 5 percent in 2004.
U.S. segment highlights
In the U.S., Internet access and Internet advertising will continue to outperform the other E&M segments, with 9.1 percent and 6.3 percent CAGR, respectively. Video games (5.8 percent CAGR) and TV subscriptions (5.5 percent CAGR) are set to grow more than 5 percent compounded annually. Filmed entertainment will increase at a 3.3 percent CAGR, and out-of-home advertising will grow at a 2.5 percent CAGR. The remaining segments will increase by less than 1 percent on a compound annual basis or will decline. These include consumer and educational book publishing (0.7 percent CAGR), TV advertising (-0.6 percent CAGR), consumer magazine publishing (-1.7 percent CAGR), radio (-2.2 percent CAGR), business-to-business publishing (-3.3 percent CAGR), recorded music (-4.7 percent CAGR) and newspaper publishing (-5.9 percent CAGR).
Overall U.S. consumer/end-user spending will grow by a 1.9 percent CAGR, while U.S. advertising spending will decline by a -1.7 percent CAGR from $189 billion in 2008 to reach $174 billion in 2013.
About the Outlook
PricewaterhouseCoopers' Global Entertainment & Media Outlook 2009-2013, the 10th annual edition contains in-depth analyses and forecast of 12 major industry segments across four regions of the globe: North America (USA, Canada), EMEA (Europe, Middle East, Africa), Asia Pacific and Latin America. To order copies go to: http://www.pwc.com/outlook.
About PricewaterhouseCoopers
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