15 June 2010
London, 15 JUN 2010 -- Over the next five years digital technologies will progressively increase their impact across all segments of entertainment and media (E&M) as digital transformation continues to expand and escalate. The uncertain economic background has done nothing to slow the pace of change, which has been far quicker than predicted 12 months ago. It is clear that the consumer is firmly in the driving seat of these changes, according to the latest Global Entertainment & Media Outlook 2010-2014, from PricewaterhouseCoopers (PwC).
Following a year of decline in 2009, the global E&M market, as a whole, will grow by 5.0 per cent compounded annually for the entire forecast period to 2014 reaching US$1.7 trillion, up from US$1.3 trillion in 2009. Fastest growing region throughout the forecast period is Latin America growing at 8.8 per cent compound annual rate (CAR) during the next 5 years to US$77 billion in 2014. Asia Pacific is next at 6.4 per cent CAR through to 2014 to US$475 billion. Europe, Middle East and Africa (EMEA) follows at 4.6 per cent to US$581 billion in 2014. The largest, but slowest growing market is North America growing at 3.9 per cent CAR taking it from US$460 billion in 2009 to US$558 billion in 2014.
Consumers are embracing new media experiences with staggering speed. The advancing digital transformation is driving audience fragmentation to a level not previously seen. However, the current wave of change is of a different magnitude from previous ones both in its speed and its simultaneous impact across all segments.
Marcel Fenez, Global Leader, Entertainment & Media practice, PricewaterhouseCoopers said:
“Some companies perceive the continuing fragmentation of the market as a threat but it should be seized upon as an opportunity. It offers companies the chance for creativity around the approaches to their buyers, be it via traditional channels to market or, more importantly, by embracing social media. Either way, it’s imperative that they capture the hearts, minds and money of these consumers.”
Although there is consistency in the inevitable migration to digital, the ways in which this presents itself and the pace of change continues to vary by market. Regional and country variations in current market size and future growth reflect local factors around infrastructure, access availability and consumer behaviour. For example the mobile internet explosion has already happened in Japan, accounting for some 53 per cent of global spending on mobile Internet access in 2009 while other markets are still at the bottom of their growth curve.
Advertising revenues have been particularly hit by the turbulent markets and while there are signs of a rebound, this is still fragile in nature. Spend is unlikely to return to former levels. By 2014, the US advertising spend is expected to still be 9 per cent below its level in 2006. Overall, global advertising will increase at a 4.2 per cent CAR from US$406 billion in 2009 to US$498 billion in 2014. Internet advertising will join television in 2014 as the only media with spending in excess of US$100 billion.
The projections reflect the fragmentation of the market and behavioural changes of consumers. The advertising industry is responding to consumers’ shifting attention and has embarked upon a long-term journey towards total marketing or total brand communication. Brands are changing their focus from advertising on a medium, to marketing through, and with, content.
Consumer feedback and usage provides the only reliable guide to the commercial viability of products and services, and the global consumer base is being used as a test-bed for new offerings and consumption modes. However, as responses are still evolving it is up to the industry to anticipate and identify where they are heading and pre-empt the needs and wants of consumers. PwC believes that three themes will emerge from changing consumer behaviour:
The rising power of mobility and devices: Advances in technology and products will see increasingly converged, multi-functional and interoperable mobile devices come of age as a consumption platform by the end of 2011. Consumers are increasingly demanding “ubiquity”, with content flowing across different devices to support ever-greater interactivity and convenience. They are using mobile in new ways, and downloading ever-increasing numbers of mobile applications (“apps”) to support their lifestyles. The ability to consume and interact with content anywhere, anytime—and to share and discuss that content experience with other people via social networks—will become an increasingly integral part of people’s lives.
The growing dominance of the Internet experience over all content consumption: Using the Internet is now one of the great unifying experiences of the current era for consumers everywhere—and their expectation of Internet-style interactivity and access to content will continue to expand across media consumption in every segment. This trend is initially at its clearest in television. Equally, people are already consuming magazines and newspapers on Internet-enabled tablets, and streaming personalised music services such as Pandora in preference to buying physical CDs or even digital downloads.
Increasing engagement and readiness to pay for content—driven by improved consumption experiences and convenience: Ongoing fragmentation means that media offerings will need greater consumer engagement and quality to get themselves heard - and paid. Consumers are more willing to pay for content when accompanied by convenience and flexibility in usage, personalisation , and/or a differentiated experience that cannot be created elsewhere. Local relevance will also become important once again as an aspect of convenience and relevance.
“The use of the Internet has become one of the great unifying experiences shared by billions of people across the world and this is now causing a parallel trend with the “re-socialisation” of the media consumption experience. Historically reading books or newspapers has been a solitary activity. However the combination of digital access, mobility and social networking is seeing consumption of all forms of media migrate from a solo activity towards being a social experience with viewers use social networking forums to discuss and share their views and content.”
Digital migration and the changes in consumer behaviour have put extreme pressure on existing business models. It has caused the industry to radically rethink its approach to monetising content as it strives to capture new sources of revenue, be it from transactions or from participation with others operating in the evolving digital value chain.
Inevitably this results in individual companies searching for where to position themselves in the new digital world. Partnering with other organisations is becoming imperative in order to create viable commercial content offerings while sharing the costs and risks. Increasingly potential partners are being found from a diverse set of industries.
Whatever the partnership or collaboration we see seven critical factors for operating succesfully in the new value chain:
“Creativity and innovation have always been associated with the entertainment & media industries and now is the time for the industry to tear up their existing business models and embrace the new and emerging opportunities. However they structure themselves, be it via partnerships or collaboration, they need to deliver a superior consumer experience and be sufficiently flexible to capture revenues from an increasingly fragmented market. Those who do, will be the drivers of this exciting but challenging industry.”
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