Seizing the initiative: as growth goes digital, advertising spearheads the migration

  • Advertising will outpace consumer spending in the migration to digital; imperative for companies to apply a ‘digital mindset’ to build the right approach to monetise the digital consumer
  • In Singapore, internet advertising will represent the fastest growth yet still lag behind large mature markets
  • Leveraging on the Infocomm Media Masterplan 2025 will enable entertainment & media companies to develop opportunities through a regional data marketplace and services for an aging population

SINGAPORE, 11 June 2014 - Total entertainment and media spending on digital (excluding spend on Internet access) is forecast to grow globally at a 12.2% compound annual growth rate (CAGR) between 2013 and 2018 and account for 65% of global entertainment and media spending growth – almost two out of every three dollars. Advertising is leading the way; in 2018, 33% of total advertising revenue across the world is forecast to be digital, compared to 17% of consumer revenue. However, monetising the digital consumer will not just be about the application of technology. It will be about applying a ‘digital mindset’ to build the right behaviours, advancing from a digital strategy – to a business strategy fit for a digital age, according to PwC’s Global entertainment and media outlook 2014-2018 (Outlook).

Overview of global trends and forecasts

Approaching a significant advertising tipping point
Globally, mobile Internet penetration will reach 55% in 2018, which will help drive digital advertising to increase its share from 14% of total advertising revenue in 2009 to 33% by 2018. With Internet advertising growing at a 10.7% CAGR (compared to a total advertising CAGR of 4.4%), the industry is approaching a significant tipping point: in 2018, Internet advertising will be poised to overtake TV advertising. In 2009, TV advertising was double that of Internet advertising, but in 2018, Internet advertising will only be trailing TV advertising by a mere US$20bn. In particular, significant gains in mobile Internet advertising are forecast with a CAGR of 21.5%.

Monetising the digital consumer: challenge and opportunity
Spending on digitally delivered content will only account for 17% of total consumer spending globally in 2018 (excluding spending on Internet access), compared to 33% of total advertising spending. However, the growth of ‘24/7 access’ and micro-transactions suggest that the key to monetising the digital consumer is to adopt flexible business models that offer more choice and better experiences. Electronic home video over-the-top (OTT)/streaming and digital music streaming are two of the fastest-growing consumer sub-segments in the Outlook, set to rise at a CAGR of 28.1% and 13.4% respectively.

Nine markets driving growth
Nine high-growth markets are powering global entertainment and media revenue. China, Brazil, Russia, India, Mexico, South Africa, Turkey, Argentina and Indonesia are markets to watch, collectively forecast to account for 21.7% of global entertainment and media revenue in 2018, up from just 12.4% in 2009. In the same year, a major tipping point will occur: China will overtake Japan as the world’s second-largest entertainment and media market, behind only the US.

Greg Unsworth, Technology, Media and Telecommunications Industry Leader, PwC Singapore said:

“What all these markets have in common is a growing middle class boosting spending in entertainment and media. But the similarities stop here. Realising the revenue potential of these markets demands a deep understanding of the local context and appropriate market segmentation. Differing local tastes, pricing expectations, and the predominant delivery platforms will ultimately determine what entertainment and media content consumers in each market will be willing to pay for. Given their intimate local market knowledge, domestic organisations are in prime position to realise the opportunity of the emerging middle class in each market. The optimal approach for international players will most certainly be to collaborate with local partners. The growing middle class may be a global trend, but the opportunity is more localised.”

Singapore trends and forecasts

Continued Greg Unsworth, Technology, Media & Telecommunications Leader, PwC Singapore.

“Singapore is uniquely placed in the region to play a greater role in supporting the growth of digital media in the region. Its advanced infrastructure, regional access to high growth markets and ability to test-bed new technologies and business models will ensure new opportunities to develop the media sector. This has already been regonised by the bold initiatives contemplated in the Singapore government’s Infocomm Media Masterplan 2025.”

Internet advertising & video games
Internet and video games continue to outperform the other sectors…

Singapore has a growing Internet advertising market, particularly given the size of the country. Total Internet advertising revenue is forecast to grow at a CAGR of 10.3% from US$162mn in 2013 to US$264mn in 2018.

Singapore is an affluent market, and is one of the most digitally advanced markets on the planet. It possesses a very high broadband penetration (estimated at 116%) and many ad companies base their Asian regional offices in Singapore, all helping to promote growth in internet advertising. As a proportion of the total advertising spend though, Singapore still lags behind many of the longer developed mature markets in digital advertising revenues.

Display is the largest segment within Internet advertising; display Internet advertising revenue had a 43% share of total Internet advertising revenue in 2013. Search, however, is growing more quickly than display: paid search Internet advertising revenue is forecast to grow at a CAGR of 9.7% (compared with 6.6% for display) to reach US$77mn in 2018. At 30% of total Internet advertising revenue, search has the second-largest share, and large global sites dominate the market as a result of Singapore’s size and ethnically diverse population.

Mobile and video advertising will be the fastest growing digital formats albeit from a lower base.

Total video games revenue in Singapore was US$357mn in 2013, up from 2009’s figure of US$313mn. Revenue is forecast to grow by a CAGR of 9.0% to reach US$550mn in 2018.

Singapore has one of the world’s highest smartphone penetration rates which, combined with gamer-friendly mobile data services, has driven mobile games revenue. In 2013, mobile games revenue accounted for 42% of total video games revenue. This will fall slightly to 41% in 2018, at which point mobile video games revenue will have reached US$223mn.

Online gaming is increasingly popular in Singapore and online games revenue will reach US$179mn in 2018. High broadband penetration has allowed the online gaming segment to flourish, as has the free-to-play model.

TV advertising

Consistent growth is expected over the forecast period, with a CAGR of 3.8%, taking the 2018 total to US$456mn. At this time, terrestrial will still dominate with 82% of the TV advertising revenues attributable to free-to-air channels, although multichannel revenues and emergent online TV advertising will also contribute to growth.

Newspaper publishing
Growth remains robust compared to other markets

At a time when newspapers elsewhere are losing money, total newspaper advertising revenue in Singapore will continue to grow steadily in the near term, from US$788mn in 2013 to US$905mn in 2018, a CAGR of 2.8%. The average daily unit circulation total has been falling, the total had been buoyed in the past by free dailies but they are now also losing readers. However, increases in advertising revenue will more than compensate for the reduction in circulation.

Out-of-home advertising
Growth will be driven by digital platforms…

Revenue generated by the market for OOH advertising in Singapore has risen from US$117mn in 2009 to US$138mn in 2013, an increase of 18%. The market is forecast to grow by a CAGR of 3.2% and will see revenue of US$162mn in 2018.

Singapore’s OOH advertising market has benefitted from an expansion in the island’s rail network, which will increase the number of commuters and offer different demographics to advertisers.

Digital OOH (DOOH) is forecast to grow by a CAGR of 16.5% over the forecast period (in 2018 revenue is forecast to be US$90mn) and overtake traditional OOH advertising in 2017.

Filmed entertainment
OTT/Streaming revenue will drive the vast majority of growth in electronic home video…

Singapore’s filmed entertainment sector will be worth US$386mn by 2018, up from US$328mn in 2013, a CAGR of 3.3%.

Box office will generate over half of the revenue over the forecast period, and revenue will reach US$199mn in 2018, up from US$164mn in 2013, a CAGR of 4%. Cinema advertising revenue will rise by a CAGR of 6.8% to US$13mn in 2018 on the back of the resilient local box office.

Over-the-top (OTT) movie streaming in Singapore will continue its rapid growth. Electronic home video OTT/streaming revenue will increase to US$47mn by 2018, up from US$9mn in 2018, a CAGR of 38.3%. OTT expansion is being driven by the number of players in the market. Growth of electronic home video through-TV-subscription revenue will be more modest, growing from US$25mn in 2013 to US$30mn in 2018, a CAGR of 3.5%.

As to be expected, given the buoyancy of the electronic home video segment, total physical home video revenue is in decline. Sell through revenue accounts for the bulk of total physical home video revenue and is set to fall from US$109mn in 2013 to US$87mn in 2018, a CAGR of -4.5%, while the much smaller rentals revenue will fall from US$11.5mn in 2013 to US$8.9 in 2018, a CAGR of -5%.

Music
A tale of two markets; small recorded music market and a live music business that is growing…

Singapore’s music market was worth US$73mn in 2013, down from US$80mn in 2009. Total music revenue is forecast to grow by a CAGR of 1.6% to reach US$80mn in 2018.

Singapore is a tale of two markets: a small recorded music market, and a live music business that is growing at a pace. Singapore is an affluent country with one of the world’s highest smartphone penetration rates, and its youths are hungry for cutting-edge live music.

Smartphone penetration is high and Singapore’s 5.4mn population accounts for some 8.3mn mobile subscriptions. Despite its wealthy, tech-savvy population, Singapore’s recorded music market is moving in a downward direction. Total recorded music revenue fell from US$34mn in 2009 to US$21mn in 2013, and is forecast to drop to US$19mn in 2018, a CAGR of -2.2% over the forecast period.

Total digital recorded music revenue overtook physical recorded music revenue in 2012, the year iTunes arrived. In the years ahead, digital is forecast to grow slowly, but unremarkably, while physical declines to less than US$1mn: total digital recorded music revenue is forecast to rise from US$16mn in 2013 to US$18mn in 2018, a CAGR of 3.1%.

It’s in the live space where a lot of activity is bubbling away. Total live music revenue has increased from US$46mn in 2009 to US$52mn in 2013, and is expected to hit US$61mn in 2018, a CAGR of 3.0% over the forecast period.

Concluded Greg Unsworth, Technology, Media & Telecommunications Leader, PwC Singapore,

“We are going to continue to see healthy growth in the entertainment & media industries in Singapore, particularly in the internet advertising and video gaming segments. Singapore’s strategy to capitalise on and lead the growth of digital is going to bring benefits to the media, entertainment and related industries. Companies in the business of entertainment and media should also take the opportunity to marry these benefits with the appropriate business strategy to address broader opportunities in fast-growing regional markets outside Singapore.”

−ENDS−

Notes:

1. Press access to Outlook content online
To request press access to the online Global entertainment and media outlook 2014-2018, contact Candy Li at candy.yt.li@sg.pwc.com. This will allow you to illustrate this and other media stories both by extracting detail from the Outlook dataset and analysis at a segment and country level, and by creating charts on-screen that can be exported for use with your stories. 

2. About the Outlook
PwC’s 15th annual update of the Global entertainment and media outlook 2014-2018, is a comprehensive online source of global analysis for consumer and advertising spend. With like-for-like, five-year historical and five-year forecast data and commentary across 13 industry segments in 54 countries, the Outlook makes it easy to compare and contrast consumer and advertising spend across segments and countries. Find out more at www.pwc.com/outlook

3. Segments covered by the Outlook
TV subscriptions and licence fees, TV advertising, Internet access, Radio, Out-of-home advertising, Video games, Filmed entertainment, Newspaper publishing, Magazine publishing, Business-to-business, Internet advertising, Book publishing and Music.

4. About Outlook insights
Much of the content in this press release is taken from Outlook insights, which is drawn from data in the Global entertainment and media outlook 2014-2018. PwC continually seeks to update the online Outlook data, therefore please note that the data in Outlook insights, and this press release, may not be aligned with the data found online. The online Global entertainment and media outlook 2014-2018 is the most up-to-date source of consumer and advertising spend data.

5. Digital spending
Digital revenue consists of fixed broadband and mobile Internet access; satellite radio subscriptions; digital PC and console gaming; online and mobile gaming; electronic home video; digital newspaper circulation revenue; digital consumer magazine circulation revenue; digital trade magazine circulation revenue; consumer, educational and professional e-books; online and mobile Internet advertising; digital out-of-home advertising revenue and digital recorded music revenue.

6. About PwC
PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 157 countries with more than 184,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/sg

 

Media Contacts
Candy Li, PwC LLP Singapore (Tel: +65 6236 7429 Email: candy.yt.li@sg.pwc.com or pwcpress.sg@sg.pwc.com)