MUMBAI: The media and entertainment industry as a whole is on an upscale growth curve. The global entertainment and media (E&M) industry has entered a solid growth phase and will increase at a 6.6 per cent compound annual growth rate (CAGR) to $1.8 trillion in 2010, according to PricewaterhouseCoopers’ Global Entertainment and Media Outlook: 2006-2010, released today.Interestingly, the report indicates that the Asia Pacific will remain the fastest-growing region in this industry, led by explosive growth in the People’s Republic of China and India, while US remains the largest but growing at a slow pace.
New revenue streams are growing rapidly, the growth of physical formats has slowed, and availability of licensed digital distribution now provides consumers alternatives to piracy, the report says.
Digital technologies, chiefly broadband internet and mobile, are becoming established and increasingly lucrative distribution channels that are changing the way consumers acquire entertainment and media content. Global spending via online and wireless channels reached $19 billion in 2005 and will increase to $67 billion by 2010, the Outlook says. Digital technologies consist of five categories: online rental subscriptions and digital streaming in filmed entertainment, licensed digital downloads and mobile music in recorded music, online and wireless video games, electronic books, and online casino gaming.
“Virtually every segment of the entertainment and media industry is shifting from physical distribution to digital distribution of content,” said PricewaterhouseCoopers’ Entertainment & Media Practice global leader Wayne Jackson. “As this shift continues, we see more revenue opportunities for entertainment and media companies. So while physical distribution of content is declining, that decline will be offset somewhat by digital distribution, which is driving and creating new growth opportunities.”
“We expect that Asia Pacific will remain the fastest-growing region for the industry, reflecting both the underlying economic growth and local developments and initiatives. The growth will be led by double-digit increases in Internet, TV distribution, casino and other regulated gaming and video games,” said PricewaterhouseCoopers’ Entertainment & Media Practice Asia Pacific leader Marcel Fenez. “Significantly, we also expect that the People’s Republic of China will pass Japan in 2009 to become the largest market in Asia Pacific.”
Key Drivers of Global E&M Industry
Continued expansion in the broadband household universe will be a major growth driver, and wireless subscriber growth and rollout of next generation handsets and high-speed wireless networks will stimulate mobile markets. In 2005, the broadband universe totaled 187 million households, up from only 30 million in 2001. By 2010, there will be an additional 246 million broadband households, bringing the total to 433 million globally.
The number of people with a wireless telephone subscription is also growing rapidly, with a total of 1.8 billion globally in 2005. That figure will rise to 2.8 billion by 2010, adding one billion potential customers to mobile content during the next five years.
Although piracy still cannibalizes sales in many markets, its incremental impact on legitimate sales will lessen. Industry trade associations, greater government action, the advent of convenient licensed alternatives and improved economic conditions are working to limit piracy.
In the TV distribution market in Asia Pacific, piracy remains a significant problem showing no signs of improvement. However, for the overall E&M industry, incremental losses to piracy are slowing, which will have a positive impact on the overall end-user market.
Global Advertising -Olympic Games and Fifa World Cups to Create Growth Spikes
Global advertising will increase at a 6.2 per cent CAGR during the forecast period, to $521 billion in 2010 from $385 billion in 2005. Growth improvement achieved during the past two years will be sustained through 2008, but more moderate increases are projected during 2009-10 as the current economic recovery in many countries begins to falter. The Internet will remain the fastest-growing advertising medium, at an 18.1 per cent CAGR to $52 billion in 2010. The Internet will constitute nearly 10 per cent of global advertising in 2010 compared with less than 3 per cent in 2002.
Growth by Region – U.S. Remains Largest but Slowest-Growing “The U.S. remains the largest E&M market, growing at a 5.6 per cent compound annual growth rate reaching $726 billion in 2010,” said James O’Shaughnessy, U.S. Leader of PricewaterhouseCoopers Entertainment & Media practice. “Video games and the Internet will be the fastest-growing segments, with compound annual increases of 8.9 and 8.4 per cent, respectively. Video games will be propelled by next generation console games and rapid growth in online and wireless games, while increased broadband penetration will enhance Internet access spending and stimulate online advertising.”
EMEA, the second largest market, will expand at a 6.1 per cent CAGR to reach $580 billion in 2010. Led by Russia, Central and Eastern Europe will again be the fastest-growing area in EMEA, rising by a 12 per cent CAGR with double-digit growth expected in Internet and access spending, radio and out- of-home advertising, TV distribution, TV networks and video games.
“During the next five years, TV distribution, Internet advertising and access spending, and casino and other regulated gaming will continue to record double-digit increases, as will video games for the EMEA region,” said PricewaterhouseCoopers Entertainment & Media practice European Leader John Middelweerd. “The sports market will also see a further boost due to a revitalized TV rights market and by revenues from sponsorship and merchandising around the two FIFA World Cups (Germany in 2006 and South Africa in 2010) and other major sporting events taking part in the territory.”
Asia Pacific remains the fastest-growing region, led by explosive growth in the People’s Republic of China and India. Spending in Asia Pacific will average 9.2 per cent compound annual growth-the highest of all of the regions- reaching $425 billion in 2010. Latin America’s E&M market, the fastest growing region in 2005, is projected to rise at an 8.5 per cent CAGR to $60 billion in 2010. Canada is projected to expand at a 5.9 per cent CAGR to $41 billion in 2010, with double-digit growth in video games and the return of the NHL boosting its sports market.
Key Findings by Segment – Internet Advertising and Access and Video Games to be Fastest-Growing
Internet Advertising and Access: Increased broadband access will be principal driver of future growth, but it will come at the expense of dial-up spending in the U.S., EMEA and Canada. Internet advertising is growing rapidly, stimulated by an expanding broadband subscriber base and ad formats geared to broadband, including keyword search and full-motion video. Triple- play service bundles that combine broadband Internet access with telephone service and television distribution are making broadband increasingly attractive. Globally, Internet advertising will grow to $51.6 billion at an 18.1 per cent CAGR and Internet access will increase to $214 billion at an 11.9 per cent CAGR.
Video Games: The video game market was in a transition year in 2005, awaiting the introduction of the next-generation consoles. Growth slumped to 3.3 per cent , the slowest increase during the past five years. The next generation of consoles and recently introduced handheld games will spur the console/handheld market in the U.S., EMEA, Asia Pacific, and Canada, while PC games will continue to decline or see little growth in the U.S. and EMEA. The introduction of new wireless phones capable of downloading games will boost the wireless game market in the US, EMEA, Asia Pacific, and Canada. Overall, the video game market will expand at an 11.4 per cent CAGR to $46 billion in 2010 from $27 billion in 2005.
Casino and Other Regulated Gaming: Casino and other regulated gaming rose by 10.9 per cent, the second fastest growing segment in 2005. Rapid growth in online gaming and new casinos will propel growth, with Asia Pacific expected to experience the largest increase because new casinos in Macao will make that portion of the People’s Republic of China a major casino gaming destination. Spending will increase from $82 billion in 2005 to $125 billion in 2010, an 8.8 per cent CAGR.
Television Distribution: Saturated markets will continue to dampen growth in the U.S. and will hold down growth in Canada as well. Conversely, in EMEA, Asia Pacific, and Latin America, large increases in the number of subscription TV households will generate double-digit gains. Continued piracy problems in Asia Pacific, however, will limit market potential in that region. Video-on- demand will expand in all regions, contributing to overall market growth. The introduction of IPTV will contribute to subscriber growth, and the migration of subscribers to higher-priced digital services will increase revenue per subscriber. The market will reach $230.3
billion in 2010 from $154.4 billion in 2005, at an 8.3 per cent CAGR.
Television Networks (Broadcast and Cable): Digital platforms will support new channels and fuel multi-channel advertising, which will be the principal driver during the next five years. New analog channels, digital broadcasting, and HDTV will increase the appeal of free-to-air channels.
Distribution to mobile phones will further expand viewing and advertising. Public TV license fees in EMEA and Asia Pacific will continue to be slow-growing components of the market. Spending will increase at 6.6 per cent CAGR to reach $227 billion in 2010 from $164 billion in 2005.
Filmed Entertainment: While filmed entertainment declined in 2005, we expect a rebound in box office spending and introduction of high-definition DVDs to boost home video. Decreases at the box office and a sharp slowdown in home video spending caused the downturn. Box office spending rebound will be triggered by the construction of modern theaters and more screens in Central and Eastern Europe, Asia Pacific and Latin America, and by digital cinemas in the United States, EMEA, and Asia Pacific. Spending will increase at a 5.3 per cent CAGR, rising to $104 billion in 2010.
Recorded Music: Growth in digital distribution and mobile music will drive spending in each market, offsetting further declines in spending on physical formats. Rising broadband subscribership will continue to fuel digital distribution, while an expanding wireless universe and upgrades to next generation wireless networks will foster mobile music growth. Globally, recorded music spending will rise at a 5.2 per cent CAGR to $47.9 billion in 2010. Spending in the US will rise to $14.7 billion in 2010, at a 3.7 per cent CAGR. The Outlook also includes in-depth global analyses and five-year market forecasts for seven other industry segments, including: radio and out-of-home advertising, business information, magazine publishing, newspaper publishing, book publishing, theme parks and amusement parks, and sports.
