Singapore, 24 June 2008 - Entertainment and media (E&M) companies hoping to drive growth over the next five years will need to accommodate dramatic changes in devices, market and consumer behaviour through striking strategic business alliances, according to PricewaterhouseCoopers’ Global Entertainment and Media Outlook: 2008-2012 , released today. The report also underscores the direction of change being set by the ‘Net Generation’, who are accelerating the digital/mobile transition and driving the industry toward a future in which content and advertising are tailored to the wants and needs of individual consumers.
“We’re seeing a new emerging landscape for entertainment and media companies,” said Greg Unsworth, Partner and Asia Pacific Technology Industry Leader, PwC Singapore. “The industry is grappling with a range of emerging business models, a number of which reflect the transition to more free, ad-supported, on-demand and online distribution of products. No single company will be able to successfully operate independently over the next five years. The challenges and the demand for innovation are too significant. Notwithstanding these trends, traditional and physical format continue to grow, as companies seek to manage the digital transition along with threats of piracy”.
Strategic alliances will replace vertical integration
While digital and mobile are driving growth, established and traditional business segments will continue to dominate revenues, with the exception of recorded music, where digital distribution will surpass physical distribution in 2011. The highly anticipated report showcases the importance of continuing to extract revenues from traditional business segments while emerging technologies continue to solidify their consumer position. Global compound annual growth rate (CAGR) is forecast at 6.6% for the sector, anticipated to reach US$2.2 trillion in 2012.
Several critical technologies are now reaching tipping points that will deeply influence both the pace and direction of E&M growth over the next five years. Broadband penetration is fast expanding given Asia Pacific governments’ view of it as being critical to economic growth and global competitiveness. Strong growth in Internet Protocol Television (IPTV), Internet advertising, and video games are also in the forecast. Asia Pacific’s E&M industry is piqued to reach US$508 billion by 2012, growing at 8.8% CAGR from 2008 to 2012.
Health of media driven by the ‘Net Generation’ and maintained by the over 50s
The ‘Net Generation’, defined as the global, connected youth generation born between 1977 and 1997 who are the first consumers to “grow up digital”, continues to set the pace of change in the global E&M industry while exhibiting an influence that is driving new business models that are revolutionising the relationship between companies and their customers.
As they make these technologies regular components of their everyday lives, the ‘Net Generation’ is also driving the technology engagement of prior generations, connecting older generations with the latest trends in emerging media technology.
Meanwhile, consumers over the age of 50 are creating a balance in the industry by devoting significant amounts of attention to the more traditional media of their generation as the ‘Net Generation’ drives growth in digital and mobile entertainment. This growth will help sustain traditional formats even as this generation becomes increasingly interested in the platforms embraced by their children and grandchildren.
Growth continues to be driven by emerging markets
Over the next five years, the Asia Pacific will continue to be one of the fastest growing regions. CAGR for the Asia Pacific E&M market is set to outpace expansion of the global E&M industry at 8.8%, increasing from US$333 billion in 2007 to US$508 billion in 2012, with a distinctive shift from analog to digital media. Excluding Japan, which will experience relatively slower growth, Asia Pacific will grow at a 12.0% compound annual rate.
Although digital and mobile distribution comprised only 5% of total E&M spending in 2007, revenues in Asia Pacific will see double-digit increases over the next five years, with Internet advertising taking the lead with 23.3% CAGR, TV subscriptions and license fees growing at 16.1% CAGR, casino and other regulated gaming 15.4%, video games 11.3% and Internet access 11.3%.
As the trend towards globalisation in the E&M industry continues, Brazil, Russia, India and China (the BRIC countries) will remain important sources for growth throughout the entire sector, driven by rising disposable incomes and an increasingly urbanised middle class. In addition, a large and diverse group of countries are also breaking away from the pack. E&M markets across fifteen countries will expand at double-digit annual rates during the next five years, with Saudi Arabia and the Pan-Arab region experiencing the fastest growth.
Growth is driven by the rising value of online and mobile opportunities
With the Internet being the fastest growing advertising medium, governments in Asia Pacific are encouraging broadband penetration; with wired broadband access spending being the fastest-growing component, expanding at a projected CAGR of 13.4%, to reach US$46.5 billion in 2012 from US$24.8 billion in 2007.