"Content, distribution and technology companies need to aggressively seek out new relationships to accommodate the shift towards convergence. Furthermore, companies will need to test new business models to address increased fragmentation and intellectual property in a digital era," said Jim O'Shaughnessy, global chairman, Entertainment & Media practice, PricewaterhouseCoopers. "Deal activity across the entertainment and media sector is accelerating, driven by the migration to digital formats."
Global advertising will increase at a 5.4% CAGR during the forecast period, rising to $531 billion in 2011 from $407 billion in 2006. Internet will remain the fastest growing advertising medium, with a projected 18.3% CAGR to $73 billion in 2011. Advertising on the internet has truly come of age, and by 2011 will comprise 14% of the global advertising market. Out-of- home will be the second fastest growing advertising medium, with a projected 6.5% CAGR.
Key Drivers of Global E&M Industry
In every region, spending on convergent platforms will grow faster than other E&M platforms and will account for 72% of the total E&M growth during the next five years. Asia Pacific will be the fastest growing convergent platform region, with a projected 13.5% increase and double-digit growth is expected in Latin America as Internet and broadband penetration begins to gain momentum.
Economic expansion and a surging entertainment and media market are driving significant growth in Brazil, Russia, India and China (BRIC). Led by India and China, E&M spending in BRIC will continue to grow at double-digit annual rates during the next five years and will account for 24% of global E&M growth during the next five years. Spending for the BRIC countries will increase by a 14.7% CAGR, expanding from $127 billion in 2006, to $251.5 billion in 2011. That gain will be nearly three times the projected 5.5% compound annual increase for the rest of the world.
"The surge in broadband and wireless adoption is generating new digital revenue streams across multiple segments," said Marcel Fenez, global managing partner, Entertainment & Media practice, PricewaterhouseCoopers. "Broadband growth is driving online advertising while the proliferation of next- generation wireless devices designed to play digital music, video games and receive TV programming is fueling mobile distribution. For example, Asia Pacific spending on distribution of television programming on mobile phones is expected to reach $6.5 billion in 2011 from just $26 million in 2006."
Regional Highlights
The US remains the largest but slowest growing E&M market, growing at a 5.3% CAGR, reaching $754 billion in 2011. US spending on Internet advertising and access will surpass spending on newspaper publishing in 2009. EMEA, the second largest market, will expand at a 5.5% CAGR to reach $617 billion in 2011. Led by Saudi Arabia/Pan Arab and South Africa, Middle East/Africa will continue to be the growth region, averaging 8.5% CAGR during the forecast period. TV distribution, Internet advertising and access spending and video games will be the fastest growth segments for EMEA, averaging double-digit CAGR during the next five years.
Asia Pacific will remain the fastest-growing region during the next five years, with the fastest economic growth and double digit increases in Internet, TV distribution, casino and other regulated gaming and video games. Spending in Asia Pacific will average 9.6% annual growth, the fastest of any region, increasing from $297 billion in 2006 to $470 billion in 2011. India will be the fastest growing during the next five years at 18.5% CAGR while China will continue to record double-digit annual gains that will average 16.8% CAGR.
Latin America's E&M market, the second fastest growing region, is projected to rise at an 8.9% CAGR to $68 billion in 2011. Canada is projected to expand at a 5.6% CAGR to $47 billion in 2011, with double-digit growth projected for Internet and radio/out-of-home advertising.
Segment highlights from the Outlook - Internet, TV Distribution, and Video Games to be Fastest-Growing
Internet Advertising and Access Spending: The global Internet market rose 21.8%, the fastest-growing segment in 2006 and the fourth consecutive increase in excess of 20%. Advertising rose 37.9% and access spending increased 18.8%. The migration of Internet subscribers from dial-up to broadband is the principal driver. Cable operators and telephone companies have introduced triple play packages that combine broadband with television and telephone service. Globally, Internet advertising and access spending is expected to grow from $177 billion in 2006 to $332 billion in 2011, a 13.4% CAGR.
Television Distribution: The global television distribution market, the second fastest growing segment, increased by 9.4% in 2006, an improvement compared with the 6.5% increase in 2005. Aggressive roll-out of Internet protocol television from telephone companies is stimulating competition and fueling subscriber growth. Cable operators are migrating their subscribers to digital platforms that not only boost monthly subscription revenues but also expand the market for video-on-demand. Mobile television is emerging as an important distribution channel, particularly in Asia Pacific, boosted by new service rollouts and enhanced wireless devices. Globally, the television distribution market will increase from $161 billion in 2006 to $251 billion in 2011, a 9.3% CAGR.
Video Games: The introduction of the new generation of video game consoles and the associated increase in video game software purchases for those consoles boosted spending by 14.3% in 2006. New Internet-enabled consoles and growing broadband penetration will spur growth in the online game market while next-generation wireless devices will drive demand for wireless games. Globally, video game spending is expected to rise from $32 billion in 2006 to $49 billion in 2011, a 9.1% CAGR.
Television Networks (Broadcast and Cable): The TV network market rose 6.2% in 2006, comparable to the 6.3% gains in 2003 and 2005, but significantly less than the growth in 2004, which had been driven by the Summer Olympics advertising. Multi-channel advertising will be the fastest-growing sector in each region, buoyed by large increases in digital households. High-definition television (HDTV), new channels, and economic expansion will also boost advertising on free-to-air channels. Globally, spending will increase from $172 billion in 2006 to $228 billion in 2011 at a 5.8% CAGR.
Sports: Sports increased 12% in 2006, the largest increase during the past five years, buoyed by the FIFA World Cup, the Winter Olympics, and the return of the National Hockey League (NHL) in North America. Competition in the TV distribution market is fueling demand for TV rights fees, leading to record deals. Spending in the sports segment is expected to increase from $96 billion in 2006 to $124 billion in 2011, at a 5.2% CAGR.
Filmed Entertainment: Filmed entertainment rebounded in 2006 with a 2.9% advance following a 2.6% decline in 2005. A strong slate of films boosted the box office market in each region while supporting the home video market. Digital download-to-own streaming services will generate incremental revenue in the United States and EMEA. Box office will be enhanced by digital cinemas in the United States, EMEA, and Asia Pacific and by modern theatres and more screens in Central and Eastern Europe, Asia Pacific, and Latin America. Globally, filmed entertainment spending will rise from $81 billion in 2006 to $103 billion in 2011 at a 4.9% CAGR.
Radio and out-of-home advertising: The radio and out-of-home market rose 4.5% in 2006, down from the 5.2% annual gains during 2004-05 although an improvement compared with the 2.7% annual gains during 2002-03. Out-of-home was the faster-growing component with a 6.3% increase while radio rose by only 3.6%. Out-of-home will be fueled by digital billboards. Improved out-of-home audience measurement systems will attract advertisers, and the expansion of captive video networks will also fuel growth. Globally, the radio and out-of- home advertising segment is expected to increase from $69 billion in 2006 to $89 billion in 2011, a 5.2% CAGR.
