Interviews & insights

This is the eighth year that we have published our annual Entertainment and Media outlook. In this year we are seeing many of the trends that we have alluded to in previous years really feeding into revenue growth in a very large way. So while some of the trends are familiar, really the impact in terms of financial dollars is reading out very clear. Overall the market is going to be great, 6.4% that includes both consumer spending on media, as well as advertising related spending.

If we take a look first of all at the geographical differences. Asia Pacific for the second year running is really leading the growth globally. 9.6% for Asia overall, and if Japan was excluded from that, then it would actually be much higher, in excess of 12%. The huge markets of China and India are leading that growth, but something that we are seeing this year is the emergence of Latin America as a real power growth as well. Not yet in terms of the same rates of growth as Asia, but certainly developing very quickly.

The Emerging Markets story in this year's outlook is again extremely important. In fact over the next 5 years, 24% of the total growth worldwide is going to come from the BRIC countries, Brazil, Russia and in particular India and China, where growth rates are in the region of 18% and 15%.respectively. One of the key challenges that the industry is continuing to have to deal with, it is how to protect and how to monetise Intellectual Property. Obviously in various parts of the world and almost globally, we are seeing illegal downloads and other forms of piracy. One of the ways of dealing with that is considering alternative business models, perhaps business models which are more advertising focused.

As I mentioned before there are considerable regional differences. The markets of Asia and of Latin America are actually being driven, primarily by spending over mobile platforms, wireless platforms. Notwithstanding the huge explosion in growth in China, that has yet to be successfully monetised, and so it is mobile where we are seeing a lot of activity. One statistic that I find particularly compelling is for example in India where there is an increase in mobile subscribers of 6 million per month.

In terms of overall growth the top 4 sectors are, the Internet, television distribution, video games and casinos. As you can see, all very very different and completely unique stories. For the Internet, clearly Internet access spending and also advertising spending on-line, that area in particular has really come of age and will come of age during the course of the outlook. Television distribution, there's the emergence of mobile television, particularly in markets like Asia, and also IP TV. Video games, by the end of this forecast period, people will be spending more on video games than they have been doing on music. And then finally casinos, again a completely different story, but the emergence again of Asia, particularly in terms of Macau which is now bigger than Las Vegas and the integrated resort that we are going to see being developed in Singapore.

Given the growth levels that we are talking about, as well as the changes that we are talking about, it's hardly surprising that the sector over all is attracting considerable interest from private equity for example.

In summary we are entering an extremely exciting period for the industry. We've got strong growth, that growth is coming in different areas from what we've seen before. It's obviously underlined by broadband and wireless penetration. But what it really means to the industry is opportunity, change, change can be challenging, but overall at the end of these five years the Entertainment and Media industry is going to emerge a stronger industry.

The global Entertainment and Media outlook continues to have a very strong story about Asia. The overall rates of growth for Asia exceed any other part of the world. Obviously the key markets of India and China are driving that growth. But even the mature markets of Japan and Korea are beginning to see some exciting developments, again particularly in the on-line space as well as in wireless.

In many instances the developments that we are seeing here in Asia are actually leading some of the global developments, for example the successes that we have see in Korea and Japan, both with mobile games and more recently with mobile television, are examples of where the region is leading the world. In terms of the sectors where we actually see considerable growth, interestingly enough the top 4 are the same as the top 4 for the world overall but actually come in a different order. In Asia it is actually TV distribution that we see doing particularly well and actually being the fastest growing, and that really is driven by mobile television and also by IP TV. Not just in Hong Kong, where we have seen a very strong player for a number of years now, but across the region. The Internet actually is the second fastest growing. In terms of monetising the large number of broadband connections that we have, that still remains a challenge, and I believe we are going to see the emergence of many more advertising based business models. The third fastest growing is actually casinos. For those of us in the business region we know the importance of casinos to the Asian culture, and what is happening in Singapore and obviously in Macau is of extreme interest to all of us in the region. And finally video games. Actually the rate of growth in video games is not as much as the rest of the world, but that is actually because we start from a very high base. We've been leading in video games for a number of years. The rate of growth for the next 5 years, round about 10% for each year, that's still extremely strong.

Another sector where there has been some very interesting developments in the course of the last 2 years, is actually music. Last year in 2006 the music industry actually grew 15.6% in Asia and clearly that bucked the trend in other parts of the world. That is driven entirely by digital distribution. Interestingly in Asia 90% of that digital distribution is actually on the mobile phone rather than on-line, and that is a feature that separates our region from the rest of the world.

Being a region that is dominated right now by the emerging markets of China and India, we are seeing advertising rates actually growing in advance and above the rates of GDP growth. Advertising in the region obviously is going to be considerably speared by the Beijing Olympics in 2008 and that will drive as I mentioned advertising spending across multiple forms of media.