MUMBAI: The global entertainment and media industry is poised to grow at a 7.3 per cent compound annual growth rate (CAGR) to $1.8 trillion in 2009! These were the findings of PricewaterhouseCoopers' Global Entertainment and Media Outlook: 2005-2009.
The study also revealed that the entertainment and media industry at present in its strongest position since 2000. Additionally, improved economic conditions and an advertising upswing, combined with expanding online distribution of music, films, books and video games, will be key drivers triggering end-user spending.
The study also revealed that new spending streams triggered by broadband Internet and wireless technologies will account for a significant portion of total growth in global spending. Total revenues from new spending streams will increase significantly from $11.4 billion in 2004 to nearly $73 billion worldwide by 2009, according to predictions published in the new edition of the Outlook.
"The entertainment and media industry continues to display an extraordinary ability to reinvent itself and create new revenue streams through innovative offerings that barely existed as recently as 2000. Online and wireless video games, online film rental subscriptions, licensed digital distribution of music, and the rapid adoption of ring tones and mobile music downloads are becoming critical components of the industry and driving significant revenues across all regions," said PricewaterhouseCoopers' Entertainment and Media Practice global leader Wayne Jackson.
Asia Pacific will remain the fastest-growing region during the next five years, led by powerful growth in China, which is on track to overtake Japan as the region's biggest market by 2008. Spending growth in China will be the highest in the world, at a 14.2 per cent CAGR excluding Internet access spending, and 25.2 per cent after accounting for the explosion in Internet access spending. The growth in the region will be led by double-digit increases in the Internet, video games, casino gaming, TV distribution and recorded music segments.
"Rapid economic growth and a continually improving regulatory environment, which is facilitating greater investment in China, will drive spending and accelerate regional growth during the next five years. These factors and the aggressive roll out of broadband infrastructure will enable the country to generate the most significant increase in media penetration beyond any other region. The only cloud on the horizon is the on-going threat of piracy, which continues to hinder growth throughout Asia/Pacific, where efforts to stem the tide have had only limited success," said PricewaterhouseCoopers' Entertainment & Media Practice Asia Pacific leader Marcel Fenez.
Key drivers of global entertainment and media industry
A favorable economic environment and new spending streams will offset declining categories. Broadband Internet will be the major growth catalyst across all regions, boosting overall Internet access spending and creating new opportunities for online advertising and making it easier to conduct online transactions. In addition, entertainment companies are increasingly licensing a greater amount of content to digital distribution services, which will help to alleviate the negative impact of piracy.
Online and wireless games are the fastest-growing components of the video game market, and online film rental subscriptions will boost the home video rental market. Electronic books represent a small but expanding area that will bolster the professional and college book markets and provide new distribution opportunities for consumer books. Video-on-demand (VOD) and satellite radio are emerging new spending streams contributing to growth.
Global advertising upswing
Global advertising spending will increase at a robust 5.9 per cent CAGR during the 2005-2009 period, rising to $477 billion in 2009 from $358 billion in 2004. Television advertising is projected to expand at a 6.4 per cent CAGR during this period, boosted by new channels and an expanding multi-channel household universe. Television remains the largest advertising medium, rising to $186 billion in 2009.
Internet advertising is the fastest-growing advertising medium with a projected 15.8 percent compound annual increase to $32 billion globally in 2009.
Growth by region
The US remains the largest entertainment and media market but is projected to be the slowest-growing region at a 5.6 per cent CAGR, reaching $690 billion in 2009. While US economic conditions will generally remain favorable, rising interest rates and higher energy costs will lead to slightly more moderate growth rates during the next five years. After several years of sluggish growth, the EMEA region will recover, growing at a 6.5 per cent CAGR to reach $572 billion in 2009.
"We're forecasting healthy growth in EMEA with double-digit increases in video games, including console games, handheld games, PC games, online games, and wireless games, as well as Internet advertising and access spending, and TV distribution," said PricewaterhouseCoopers' Entertainment & Media Practice European leader John Middelweerd.
"Recorded music, one of the slowest-growing segments over the past few years, will experience an enormous turnaround to become one of the fastest-growing segments in EMEA during the next five years, as spending on mobile music and legal digital distribution services take off," he added.
Asia Pacific will remain the world's third-largest region. It is projected to average 11.6 per cent CAGR increasing to $432 billion in 2009. Latin America's entertainment and media market is projected to rise at an 8.2 per cent CAGR to $47 billion in 2009. Canada is projected to expand at a 6 per cent CAGR to $37 billion in 2009, fueled by double-digit increases in video games and the Internet.
Key findings by segment
Television Networks (Broadcast and Cable): Digital television will add to the number of outlets and fuel multi-channel advertising, which will be the principal driver. Public TV license fees in EMEA and Asia/Pacific will continue to be slow-growing components of the market. Spending will increase at a 6 per cent CAGR annually to $204 billion in 2009 from $152 billion in 2004.
Television Distribution (Station, Cable and DBS): Subscription TV household growth will drive spending in Asia/Pacific, Latin America, and EMEA, while saturated markets will dampen growth in the United States and Canada. VOD and pay-per-view will contribute to growth in the US, EMEA and Canada, but piracy will remain a problem, particularly in Asia/Pacific and Latin America. The market will reach $210 billion in 2009 from $146 billion in 2004, a 7.4 per cent compound annual increase.
Recorded Music: In 2004, the recorded music market finally reversed course and grew by 5.7 per cent to $38 billion. Ring tone spending and an expanding digital distribution market are the biggest growth drivers. Globally, recorded music spending will rise at an 8.3 per cent CAGR to $56 billion in 2009. Spending in the US will rise to $18.8 billion in 2009, an 8 per cent CAGR.
Filmed Entertainment: Rising DVD household penetration and DVD sell-through will continue to drive home video spending, but generally at the expense of in-store rentals. An emerging online film rental subscription market will buttress rental spending, but continued piracy will cut growth, particularly in Asia/Pacific and Latin America. Box office in EMEA, Asia/Pacific, and Latin America will benefit from modernised theaters and more screens. Nevertheless, as the DVD hardware market begins to approach maturity, growth will moderate. Spending will increase at a 7.1 per cent CAGR, rising to $119 billion in 2009.
Internet Access and Advertising: Broadband will be the principal driver of access spending during the next five years and will surpass the dial-up market. There is still huge potential for subscriber growth in Asia/Pacific, where access spending is expected to more than triple. In the US, EMEA and Canada, however, penetration is approaching saturation, and access spending will slow.
Internet advertising will grow rapidly, fueled by an expanding broadband subscriber base and ad formats geared to broadband, such as keyword search and full-motion video. Spending is expected to more than double during the next five years, increasing to $289 billion in 2009, growing at a 16.9 per cent compound annual rate.
Video Games: After a drop to single-digit growth in 2005 as the current generation of consoles enters its last year, growth will ramp up in 2006 as the next generation of console hardware is introduced, leading to a new round of console game software spending. Online and wireless will become important distribution channels for video games, helped by growing broadband penetration and new mobile phones that will be used as much for entertainment as for communication. Overall, the video game market will expand at a 16.5 per cent CAGR to $55 billion in 2009 driven by growth in Asia/Pacific, the largest market.
The Outlook also includes in-depth global analysis and five-year market forecasts for eight other industry segments, including: radio and out-of-home advertising, business information, magazine publishing, newspaper publishing, book publishing, theme parks and amusement parks, casino gaming (included for the first time, covering gross gaming revenues generated on-site at casinos), and sports.
