TORONTO, June 21, 2007 — The overall Canadian entertainment and media (E&M) market is experiencing sustained growth and will expand at a consistent 5.6% compound annual growth rate (CAGR) to US$47 billion in 2011 from $36 billion in 2006. According to the latest PricewaterhouseCoopers (PwC) Global Entertainment and Media Outlook: 2007–2011, growth in Canada is comparable to the global growth projected at 6.4% CAGR to US$2 trillion in 2011. Asia Pacific and Latin America are the highest of the regions advancing at compound rates of 9.6% and 8.9% respectively, well in excess of their growth in nominal GDP.
The eighth annual edition of PwC’s Outlook contains in-depth analyses and forecasts of 14 major industry segments across five regions of the globe — the U.S., EMEA (Europe, Middle East, Africa), Asia Pacific, Latin America, and Canada.
Double-digit growth is expected for digital and mobile spending in each region during the next five years rising to US$153 billion by 2011. Spending related to the distribution of entertainment and media on convergent platforms (convergence of the home computer, wireless handset and television) is also growing at high single digit rates and will overtake other traditional platforms in 2008.
In Canada, the Internet access and advertising segment is expected to see the largest growth with a 12.2% CAGR, reaching US$4.5 billion in 2011 from US$2.5 billion in 2006. Internet advertising leads the way, growing at 23.5% CAGR to US$2 billion in 2011. Internet access spending will grow at a 6.3% CAGR to US$2.5 billion in 2011fueled by a 9.9% CAGR in broadband access spending offsetting decline in dial-up.
Tracey Jennings, Canada’s new leader of the Entertainment and Media practice comments, “Online advertising is growing explosively in each region fuelled by the growth of the Internet as an entertainment centre for social networking and a distribution channel to access entertainment content.
Speed is important to enable access to content such as playing video games or other content including music and video downloads. Increasing broadband and high-speed wireless networks in Canada are, therefore, fuelling growth in internet and wireless distributions of other segments, most significantly video games and music.”
Supposed ‘traditional’ markets will see solid expansion as well with the radio/out-of-home market in Canada to advance at an 11.7% CAGR — the fastest of any region — rising from US$1.6 billion in 2006 to US$2.8 billion in 2011. Driven by new technologies in digital billboards, 3D displays, and in-store video networks, out-of-home advertising will make up a chunk of the growth with an expansion of 8.7% CAGR, rising from US$331 million in 2006 to US$502 million in 2011. Radio will continue to attract significant audiences and will expand to US$2.3 billion in 2011 from US$1.3 billion in 2006, a 12.4% CAGR.
“Radio offers strong local markets and good access to targeted consumers making it very attractive to advertisers. The audience has not gone away from local radio as once predicted,” notes Jennings. “Radio has also taken advantage of Internet technology and increasingly mobile to further their message and their reach.”
Video gaming is another key sector for the Canadian E&M market, being propelled by the high broadband penetration in the country. This sector will expand to US$1.4 billion in 2011, a CAGR of 9.4%. Console/handheld games will expand at a 5.4% annual rate from US$425 million in 2006 to US$554 million in 2011. Online games will grow from US$248 million in 2006 to US$476 million in 2011, reflecting a 13.9% CAGR. Wireless games will increase from US$89 million in 2006 to US$230 million in 2011, a whopping 20.9% CAGR increase — the largest growth rate of the market.
“Canada has one of the highest broadband penetration rates in the world. Possibly as a result, online games represent a more significant segment of the gaming market in Canada than in other regions. In 2006, the online gaming segment constituted 28% of the gaming market in Canada compared with 21% in Asia Pacific — another area with high broadband penetration,” says Jerry Brown, Director responsible for PwC's Canadian Entertainment and Media Advisory Practice.
Other key Canadian projections from the Outlook are summarized below.
TV Distribution and Networks (broadcast and cable)
The entrance of telephone companies into the TV distribution market will enhance total subscription penetration and the Canadian market will expand at a 5.7% CAGR to US$5.5 billion in 2011.
Basic subscription spending will grow at a 4.8% CAGR to US$3.5 billion. Premium subscriptions will rise to US$853 million, a 4.5% increase reflecting Canada’s relatively mature premium market. Video-on-demand (which is exclusive to cable companies and IP TV providers) will continue to be the fastest-growing category, with a 28.9% CAGR increase to US$498 million in 2011.
The television network market is expected to expand at a 4.5% CAGR to US$4.6 billion in 2011. Specialty channel advertising will be the fastest growing sector, with a projected 7.6% CAGR increase to US$1.1 billion.
“Digital distribution enhances the specialty and pay-television markets by substantially increasing channel capacity and providing those channels with greater exposure,” notes Jennings. “Audiences are growing, and advertising is following. Specialty channel advertising rose 10.6% in 2006 and averaged 14.2% CAGR annually during the past five years. During the same period, national broadcast advertising rose at only a 2.7% CAGR.”
Recorded music
The PwC Outlook projects that recorded music spending in Canada will trickle up at a slow 1.0% CAGR from US$752 million in 2006 to US$791 million in 2011. Physical distribution will fall from US$675 million in 2006 to US$433 million in 2011, an 8.5% compound annual decline. Digital distribution will expand by 36% compounded annually to US$358 million from $77 million in 2006. Internet distribution will total US$193 million in 2011 from US$29 million in 2006, a 46.1% CAGR increase. Sales of music to mobile phones will rise by 28% CAGR to US$165 million in 2011 from US$48 million in 2006.
“A rise in album and music video average prices may have contributed to the drop in unit sales in 2006. The average album price rose 2.2% to US$12.78, and the average music video increased 8.2% to US$14.98. To help limit unit sales erosion and to combat piracy, we expect average prices to resume a downward trend,” says Brown.
Filmed Entertainment
Filmed entertainment spending in Canada will grow at a 4% CAGR to US$6.9 billion in 2011 from $5.6 billion in 2006. Box office spending will expand by 4.6% compounded annually to $1 billion. Home video sell-through will increase to US$4 billion in 2011 from $3.3 billion in 2006, a 3.7% CAGR increase. In-store rental growth will average 1.1% compounded annually to US$1.6 billion from US$1.5 billion. Online rental subscriptions will rise to US$285 million in 2011 from only $12 million in 2006, an 88.4% compounded annually. The overall home video rental market will expand at a 4.4% CAGR to US$1.9 billion. Total home video spending will rise from US$4.8 billion to US$5.8 billion, averaging a 3.9% CAGR.
Brown notes that, “There are some very interesting trends in Canada in the filmed entertainment market. First of all, the arrival of digital distribution in the theatres will help open the market to Canadian and speciality films and enable them to find a larger audience as reduced duplication costs will allow for a wider release. Secondly, the industry is innovating with related products such as reduced prices for popcorn and soda on low-volume Tuesdays and screenings of events such hockey games and opera at theatres when there is no TV coverage. This provides exhibitors a chance to promote upcoming films and showcase theatre amenities. In addition theatres are driving revenues through co-promotions with businesses such as banks leading to increased theatre traffic supported by the sponsoring partner.”
Casino and Other Regulated Gaming
Canada’s casino and online gaming market is expected to grow by a 7.9% CAGR from US$4 billion in 2006 to $5.9 billion in 2011. Casino gaming revenue will expand from US$3.3 billion in 2006 to $4.6 billion in 2011, a 7.3% increase compounded annually. Online gaming will reach US$859 million in 2011 from US$529 million in 2006, growing at a 10.2% CAGR.
“Online gaming revenue totalled US$529 million in 2006, 20% more than in 2005. During the past five years, online gaming revenues quadrupled. That growth is suspected to be one of the reasons that lottery revenues in Canada have declined,” says Jennings.
Newspaper Publishing
Free newspapers and competition from the Internet will lead to continued declines in unit circulation and a decrease in circulation spending. Advertisers will follow readers to the Internet, leading to declines in classified advertising and slower growth in overall newspaper advertising. The newspaper industry in Canada will expand at a 1% CAGR from US$3.1 billion in 2006 to US$3.2 billion in 2011. Advertising will reach US$2.5 billion in 2011, up 1.3% on a compound annual basis from US$2.4 billion in 2006.
“It’s not all bad news for newspapers. Growth in broadband Internet access is stimulating Internet advertising in general, and newspaper Web sites are benefiting from that trend given the inherent strength of newspaper brands as a means of driving local search traffic. In addition, “rich content” video ads, coupons and circulars — popular formats among packaged-goods advertisers and supermarket chains — can be distributed easily and efficiently online,” says Brown.
For further details on the PricewaterhouseCoopers Global Entertainment and Media Outlook: 2007–2011 please contact:
or visit www.pwc.com/outlook.
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