PwC E&M Survey
Over the next five years, digital technologies will become increasingly widespread across all segments of entertainment and media (E&M) as the digital migration continues to expand according to the PricewaterhouseCoopers Global Entertainment and Media Outlook for 2009-2013. Though the current economic downturn has impacted virtually every sector of the E&M marketplace it has also accelerated and intensified the digital migration among both providers and consumers of content.
The global E&M market as a whole, including both consumer and advertising spending will grow by 2.7% compounded annually for the entire forecast period to $1.6 trln in 2013. Initially, the PwC report expects to see a 3.9% drop in 2009 and a mere 0.4% advance in 2010, with a period of much faster growth during the remaining period to 7.1% in 2013.
“This recession will last longer than previous ones due to a steeper downturn and the impact on consumer spending will be much steeper than in the past,” the report said. E&M is not immune to that trend – consumer spending in E&M will fall by a projected 1.2% in 2009, remaining weak in 2010 and seeing only relatively low growth at 3.2% in 2011.
Latin America and Asia Pacific remain the fastest growing regions increasing at an annual compound rate of 5.1% and 4.5% through to 2013 reaching $73 bln and $413 bln, respectively. Excluding Japan, the dominant country in the Asia Pacific region which accounted for 45% of total spending in 2008, E&M spending in Asia Pacific will increase at a projected 7.1% compound annual rate over the period of the forecast.
Digital migration
During the period under review, the switch to digital will drive divergences in revenue performance between different segments and geographies. Change will impact the managing of brands, characters, titles and talent across distribution platforms supported by new commercial models.
The case for digital migration, however, will continue to vary across geographies depending on the availability of efficient and cost-effective broadband and mobile infrastructure.
Marcel Fenez, Global Leader Entertainment & Media practice, PricewaterhouseCoopers, said that i n some ways this could be called “the perfect storm”.
“Inside every cloud is a silver lining and in this case, a digital one. Companies who grasp the opportunities which are appearing in this fast changing marketplace and are agile enough to adapt their business models will be able to take full advantage of the potential and new revenue models as they emerge,” Marcel added.
Consumer behaviour
The accelerated migration to digital technologies has reinforced and proliferated new consumption habits and “digital behaviours” as consumers seek more control over where, when and how they consume content while, more than ever, watching the pennies and seeking the best value from the choices they make.
“This younger generation is now exerting influence over older generations who are, in turn, taking a growing interest in new and emerging platforms. End-user spending through digital/mobile platforms accounted for 23.4% of the overall consumer/end-user/ access market in 2008 and we expect this to account for 78% of total growth during the next five years,” Marcel added.
Consumers are adopting “time-shifting”, using digital video recorders and video-on-demand to free them up from the TV schedule enabling them to watch what they want when they want. Increased broadband penetration is enabling them to get what they want from wherever they want while improvements in technology allow better downloading and streaming. Growth in mobile access is allowing consumers to access the Internet from any location and giving rise to the popularity of high-end devices such as smartphones, iPods, and the Kindle that combine mobility and access.
The advances in digital music are also allowing consumers to purchase songs individually through digital channels and generating growth in ‘sideloading’, which allows consumers to buy music less expensively online, then transferring that music to mobile devices.
The changing face of advertising
Over the next five years, advertisers will shift their resources to reflect the increasingly fragmented ad market. In the mobile arena, opportunities across the advertising continuum will enable the growth between brands and consumers, ranging from click-through banner ads and pre-roll ads on video clips through coupons and online subscriptions. Video game ads are expected to outpace the rest of the advertising industry (albeit from a low base) at 13.8% CAGR compared to an overall industry decline at a compound rate of 0.6% during the forecast period. The growing proportion of Internet and mobile advertising in the overall global advertising mix will rise from around 12% in 2008 to 19% in 2013.
Going forward, the successful models will be those that provide enough product differentiation from free or low-cost substitutes to generate revenue from either consumers, advertisers or, more likely, both.
“Segments will have to consolidate, the least loyal customers will have already left, higher quality products will be valued by both consumers and advertisers, and digital distribution will have become main stream, commanding fees more in line with its value. But for each of the industry’s diverse segments to participate fully in this growth, they will first need to embrace the digital future,” concluded Marcel.
