Global Entertainment and Media Outlook: 2006 – 2010

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Global Entertainment and media industry to grow 6.6% annually to US £1.8 Trillion in 2010 driven by Digital, Mobile and Broadband channels.
The global entertainment and media (E&M) industry has entered a solid growth phase and will increase at a 6.6% compound annual growth rate (CAGR) to US$1.8 trillion in 2010, according to PricewaterhouseCoopers ‘Global Entertainment and Media Outlook: 2006–2010’, released today.

Phil Stokes, UK leader of PricewaterhouseCoopers LLP entertainment and media practice said while the growth of physical formats has slowed, new revenue streams are growing rapidly and the availability of licensed digital distribution now provides consumers alternatives to piracy.


     “Digital technologies, primarily broadband internet and mobile, are
     becoming increasingly lucrative distribution channels that are
     changing the way consumers acquire entertainment and media content.
     Physical formats remain important, but the rapid growth in broadband
     penetration is increasing the availability of legal digital
     alternatives for consumers demanding high quality content delivered in
     ways that match their individual lifestyles.
     “The UK is the largest market in EMEA and is forecast to grow from
     US$90 billion in 2005 to US$118 billion in 2010, a CAGR of 5.5% as
     compared to 5.0% for Western Europe as a whole.  UK growth is driven
     primarily by solid performances in TV subscriptions, sports and
     business information, together with significant growth in internet
     advertising and access spending, video games and casino and other
     regulated gaming.”

Global spending via online and wireless channels reached US$19 billion in

2005 and will increase to US$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.

Wayne Jackson, global leader of PricewaterhouseCoopers entertainment and media practice said:

     “Virtually every segment of the entertainment and media industry is
     shifting from physical distribution to digital distribution of
     content.
     “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.”

Marcel Fenez, Asia Pacific leader of PricewaterhouseCoopers entertainment and media practice said:

     “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.
     “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 will be a major growth driver, while wireless subscriber growth and the rollout of next generation handsets and high-speed wireless networks will stimulate mobile markets.

In 2005, broadband penetration totalled 187 million households, up from 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 impacts sales in many markets, its incremental influence 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% CAGR during the forecast period, to US$521 billion in 2010 from US$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% CAGR to US$52 billion in 2010.  The internet will constitute nearly 10% of global advertising in 2010 compared with less than 3% in 2002.

Growth by Region – U.S. Remains Largest but Slowest-Growing

James O’Shaughnessy, U.S. leader of PricewaterhouseCoopers entertainment & media practice said:

“The US remains the largest E&M market, growing at a 5.6% CAGR reaching

US$726 billion in 2010.  Video games and the internet will be the fastest-growing segments, with compound annual increases of 8.9 and 8.4%, 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% CAGR to reach US$580 billion in 2010.  Led by Russia, Central and Eastern Europe will again be the fastest-growing area in EMEA, rising by a 12% CAGR with double-digit growth expected in internet and access spending, radio and out-of-home advertising, TV distribution, TV networks and video games.

 

John Middelweerd, European leader of PricewaterhouseCoopers entertainment & media practice said:

     “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.  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 globally, led by explosive growth in the People’s Republic of China and in India.  Spending in Asia Pacific will average 9.2% CAGR – the highest of all of the regions – reaching US$425 billion in 2010.  Latin America’s E&M market, the fastest growing region in 2005, is projected to rise at an 8.5% CAGR to US$60 billion in 2010.  Canada is projected to expand at a 5.9% CAGR to US$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 the principal driver of future growth, but it will come at the expense of dial-up spending in the US, 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

US$51.6 billion at an 18.1% CAGR and internet access will increase to

US$214 billion at an 11.9% 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%, 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 U.S., EMEA, Asia Pacific, and Canada.  Overall, the video game market will expand at an 11.4% CAGR to

US$46 billion in 2010 from US$27 billion in 2005.

Casino and Other Regulated Gaming: Casino and other regulated gaming rose by 10.9%, 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 US$82 billion in 2005 to

US$125 billion in 2010, an 8.8% 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 US$230.3 billion in 2010 from US$154.4 billion in 2005, at an 8.3% 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 analogue 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% CAGR to reach US$227 billion in 2010 from US$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 theatres 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% CAGR, rising to US$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.  The rise in broadband subscribers 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% CAGR to US$47.9 billion in 2010.  Spending in the U.S. will rise to US$14.7 billion in 2010, at a 3.7% CAGR.

PricewaterhouseCoopers ‘Global Entertainment and Media Outlook: 2006 – 2010’ 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.