PwC report predicts Irish Entertainment and Media industry will see strong growth over the next 5 years on digital platforms

It’s the golden age of the empowered consumer, with the demand for digital experiences increasing and becoming the norm, according to the latest Global Entertainment & Media Outlook 2011-2015 from PwC. In many markets the Entertainment & Media (E&M) industry has been profoundly changed as the ongoing consumer migration to digital has accelerated due largely to the device revolution.

Global Entertainment and Media Industry
Over the next five years we forecast that aggregate E&M global spending will rise from US$1.4 trillion in 2010 to $1.9 trillion in 2015, a 5.7 per cent compound annual advance driven by economic growth, but masking the accelerating shift of spending from traditional to digital platforms. Currently digital accounts for 26 per cent of all spending but by 2015 we expect digital’s share to rise to 33.9 per cent.

Advertising, the most cyclically sensitive of the three E&M spending streams, recorded the largest year-on-year swing, rebounding at 5.8 per cent in 2010 from an 11 per cent slump in 2009. Overall global advertising will increase at a 5.5 per cent compound annual rate from $442 billion in 2010 to $578 billion in 2015.

Consumer/end-user spending also improved, rising 2.2 per cent in 2010 after a fall of 0.4 per cent in 2009. In contrast Internet access spending was barely affected by the economic cycle growing at 9.2 per cent in both 2009 and 2010 and is expected to rise from $270 billion in 2010 to $408 billion in 2015, an 8.6 per cent compound annual increase.

Irish Entertainment and Media Industry
While the economic conditions in Ireland remain uncertain, the Entertainment and Media industry here will lag the global recovery. 2010 saw a further decline in the value of the overall market in Ireland, albeit at a lower level than in 2009. This was driven by a further decline in advertising spending, while the other part of the industry, consumer spending, grew, driven largely by internet access spending.

The overall market in 2010 was valued at $4.26bn, a slight decline from $4.3bn in 2009. The market is expected to return to 2009 levels in 2011, and continue to grow in 2012 and thereafter. Over the five year period 2011-2015 the overall market is predicted to show a compound growth rate per annum of 3.5%, bringing the total value to just over $5bn by 2015.
The advertising market in 2010 was valued at $1.23bn, a decline of 7% from 2009. The market is expected to be flat in 2011, before returning to modest growth in 2012. Overall the advertising market in Ireland is expected to grow at a compound average growth rate (CAGR) of 2.3% over the next 5 years, to bring it to $1.38bn in 2015, less than the highs of 2006-2008.
Growth in spending on internet access has not been impacted by the recession and is expected to continue growing at double digit growth over the next 5 years. The internet access market in 2010 was valued at $421m, and, with increasing broadband penetration and more wired mobile devices becoming the norm, the market is predicted to grow to $692m by 2015, representing a compound average growth rate of 10.4%.
The rest of the consumer spending market grew slightly in 2010 and is expected to remain flat at $2.6bn in 2011 before returning to modest growth next year. Over the 5 year period to 2015 it is expected to achieve a compound average growth rate of 2.8% to bring it to just under $3bn.

Reflecting the global trend of digital experiences becoming the norm, the key areas of growth over the next 5 years in the Irish Entertainment and Media market will be on digital platforms. Both internet access and internet advertising spending will experience double digital compound average growth rates over the period 2011-15, 10.4% and 11.4% respectively. Video games (CAGR 6.5%) and TV Subscriptions (CAGR 5%) will also experience continued growth with ongoing platform innovations and a continuous flow of new content in each area.

The more traditional advertising platforms will experience lower levels of growth over the 5 year period, with some platforms, such as newspaper advertising, only returning to minor growth in 2013 and largely staying flat over the 5 year period to 2015.

The Digitally Empowered Consumer
The whole E&M industry is being driven to create experiences that engage today’s empowered consumer, by redesigning the content experience to be multi-purpose and multi-platform which, in turn, creates multiple opportunities for monetisation.

Susan Kilty, Partner, PwC E&M Practice, said:

“The coming five years will see digital technologies progressively increase their influence across the industry, and that rapid change in technologies and consumer behaviours will continue across all E&M segments.”

“Convenience, experience and quality are the key ingredients that matter to consumers when choosing from the menu of content and delivery channels available. Alongside these sit participation and privilege. Consumers enjoy playing an active role in shaping their content plus they are happy to pay for privileges which enable them to ‘jump the queue’ to get earlier access to content. The challenge for companies is to turn these five attributes – convenience, experience, quality, participation and privilege – into sustainable, profitable and engaged relationships with the consumer by offering advantages which outweigh the attractiveness of free or pirated content.”

The past year has seen the strategic focus of E&M executives switch positively from inward to outward, as companies embrace multi-partner collaboration along the value chain. Digital technologies provide the focus and opportunity for these collaborations and can be seen as the central driver of future operating models, consumer relationships and profitable revenue growth.

Bartley O’Connor, PwC E&M Practice, said:

“The continuing shift towards digital platforms and digital distribution of content at a global level presents considerable opportunities for Ireland and companies based here – from indigenous start-ups to multinationals. Disruptive technologies and innovative approaches to content generation and distribution will continue to emerge, and Ireland needs to do all it can to encourage and support companies and ideas in this area given the opportunities that exist on a global scale in this industry.”

Launching the report, Pat Rabbitte, T.D., Minister for Communications, Energy and Natural Resources said:

“This is an important time in the development of media and internet globally and in Ireland. The continuing evolution of the internet and digital media, as outlined in PwC’s Outlook publication, presents Ireland with an immediate opportunity to develop a global market in the trade of digital services and to harness the wider economic, social and cultural benefits of these technologies. The Government is committed to engaging with Irish companies operating in this dynamic landscape to ensure the right regulatory and policy framework is in place.”

ENDS

Global Key Stats from the E&M Outlook:

Latin America will be the fastest-growing region in terms of E&M spending during the next five years, with a projected 10.5 percent compound annual increase to $109 billion in 2015 from $66 billion in 2010. Asia Pacific will be next at 6.5 percent compounded annually from $393 billion to $539 billion. EMEA will expand at a 5.2 percent compound annual rate to $614 billion in 2015 from $477 billion in 2010. North America will increase by 4.7 percent on a compound annual basis from $481 billion to $607 billion.
Twelve countries had spending above $25 billion in 2010. Of the leading countries, China and Brazil will be the fastest growing over the next five years with projected compound annual increases of 11.6 per cent and 11.4 per cent respectively.
The Internet will be the fastest-growing advertising segment during the next five years, overtaking newspapers in 2012 to become the second-largest advertising category behind television. Television advertising will continue to benefit from viewing and its association with Internet usage and the major sporting events over the next couple of years, such as the London 2012 Olympics, will drive double-digit increases during this period. The trade magazines sector saw a dramatic decline of 20.4 per cent in 2009 but by 2012 through to 2015 we expect it to be one of the faster growing sectors.
In 2010 digital advertising accounted for 15.9 per cent of total global advertising and is projected to account for 22.5 per cent in 2015. Non-digital accounted for 84.1 per cent of total advertising in 2010 and is projected to account for 77.5 per cent in 2015.
Overall digital spending increased by 12.9 per cent in 2010 compared with a 2 per cent increase in non-digital spending. This pattern will continue and we project digital’s share to rise to 33.9 per cent by 2015. Digital spending will increased at a projected 11.5 per cent compound annual growth rate during the next 5 years compared to compound annual growth of 3.3 per cent for non-digital spending. Accounting for just a quarter of the market, digital will generate 59 per cent of total E&M spending growth during the next five years.
Broadband is a key driver of digital spending as broadband facilitates digital transactions. Latin America and Asia Pacific are currently the regions with the lowest broadband penetration and therefore the regions with the highest potential for growth. Over the next 5 years we expect the number of broadband households to double in Latin America and in Asia Pacific to grow by 75 per cent.
Mobile Internet access growth is also an important driver of E&M spending with all regions experiencing significant growth through to 2015. The number of mobile access subscribers will more than double in EMEA and Asia Pacific, will more than triple in North America and will increase by more than 400 per cent in Latin America during the next five years.
While there is a continued decline in physical spending in music, the digital market continues to grow and is expected to overtake physical spending by 2014. Nevertheless, overall music spending is expected to fall at a 1.1 per cent compound annual growth rate of $22 billion in 2015 from $23 billion in 2010.
The filmed entertainment market is being boosted by 3D, Blu-ray and the growing electronic market. The proliferation of tablets, expanding broadband penetration and faster broadband speeds is contributing to an increase in spending of 6.1 per cent compound annual rate to $113 billion in 2015, from $84 billion in 2010. Asia Pacific and Latin America will be the fastest-growing regions.
In the video games market, the overall market is projected to expand to $82 billion in 2015, an 8.2 per cent compound annual increase from $56 billion in 2010. Asia Pacific will be the fastest growing region over the next five years with an 11.8 per cent compound annual increase, mainly fuelled by large increases in online games.

Notes to Editor

About the Outlook
PricewaterhouseCoopers Global Entertainment & Media outlook 2011-2015, the 12th annual edition, contains in-depth analysis and forecasts of 13 major industry segments across four regions of the globe: North America (USA and Canada), EMEA (Europe, Middle East and Africa), Asia Pacific and Latin America. To access the Global Entertainment & Media Outlook 2011-2015 online go to: www.pwc.com/outlook. For press copies contact Fiona Scholes, fiona.scholes@uk.pwc.com.

Digital Spending
Digital spending, as included in the Outlook, consists of broadband and mobile Internet access, online and mobile Internet advertising, video-on-demand, mobile TV subscriptions, digital music, electronic home video, online and wireless video games, digital consumer magazine circulation spending, digital newspaper circulation spending, digital trade magazine circulation spending, electronic consumer, educational and professional books, and satellite radio subscriptions.

About PwC
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