Digital services, mobile broadband and multiple screens boost Entertainment & Media spending
Digital to account for almost half of all U.S. E&M spending by 2017
NEW YORK, June 4, 2013 – Consumer access to entertainment & media (E&M) content and experiences is being democratized by ever increasing access to the Internet and explosive growth in the ownership of smart devices. According to PwC’s annual Global Entertainment and Media Outlook 2013-2017 – an in-depth five-year outlook for global consumer spending and advertising revenues directly related to entertainment and media content – released today, even though traditional, non-digital media will continue to dominate E&M spending during the forecast period, growth will be concentrated in digital media platforms and consumption. Therefore, E&M companies are raising the bar in terms of customer insight and engagement, as well as business model and operating agility, as digital innovation continues to redefine the industry landscape.
The Outlook forecasts that global E&M spending is expected to rise from $1.6 trillion in 2012 to $2.2 trillion by 2017, growing at a compound annual growth rate (CAGR) of 5.6 percent. The U.S. remains the largest E&M market, growing at 4.8 percent CAGR reaching $632 billion in 2017, from $499 billion in 2012.
Digital E&M spending, largely driven by widespread smart device ownership, is expected to account for 44 percent of all spending in mature markets by 2017, which is almost double the level in 2008 and up from 34 percent in 2012. Digital spending in the U.S. is expected to account for 43 percent of all E&M spending in 2017, up from 31 percent in 2012.
“The E&M industry is undergoing a significant shift as digital disruption across every segment is accelerating and as digital media remains the clear driving force behind E&M revenues over the next five years,” said Ken Sharkey, PwC’s US entertainment, media & communications practice leader. “To drive growth and compete effectively in the future, E&M companies must invest in constant innovation that encompasses its products and services, operating and business models and, most importantly, focus on customer experience, understanding and engagement.”
Outlook findings showcase how current industry trends are impacting consumers, advertisers, content creators and digital distributors.
Understanding the new consumer is key - Over the next five years and beyond, E&M businesses will increasingly engage with a new and more diverse global customer base, with different needs and expectations, especially with a rising middle class across emerging markets. Going forward, the E&M companies most likely to seize a profitable position will be those with the speed, flexibility and insight to engage and monetize the diverse global base of connected consumers by delivering personalized, relevant and ultimately indispensable content experiences.
Consumers are increasingly in control but also increasingly confused - Over the past five years, consumers have seen an explosion in their media choices. This year’s Outlook highlights that this blizzard of consumption choices is creating confusion in the minds of the consumer and this extends to the legitimacy of the content they access. In response, PwC believes companies across the E&M industry must revisit their business and operating models. By innovating in agile ways and harnessing technologies to gain deep insight into consumers’ tastes and behaviors, E&M companies are starting to define a profitable, consumer-centric, multiplatform future.
From ‘mass media’ to ‘my media’ - As media consumption fragments across devices, consumers increasingly demand personalized experiences: their content on their chosen devices, when they want it. This move to ‘my media’ can be seen in ‘cord-cutting’, where consumers abandon their pay TV subscriptions and instead access the content they want via cheaper, Internet and mobile broadband-based content services. Operators, who have already been successful in launching triple-play products that bundle TV, broadband and telephony, along with entering the Over-the-Top (OTT) world themselves with ‘TV Everywhere,’ must adapt their services to changing consumer expectations for more on-demand content. A further manifestation of ‘my media’ is consumers’ growing use of the ‘second screen’ - smartphones and tablets - to comment on and share the experience of TV and other companion content with friends, often via social media.
Multi-platform analytics drive advertiser insights into the connected consumer - Outlook shows how advertising spending is continuing to migrate to new digital platforms. In the U.S., digital advertising is expected to account for 34 percent of advertising revenues by 2017, up from 22 percent in 2012. As more consumers access content across multiple screens, devices and platforms, advertising must also become platform-agnostic. The ability to attract advertising revenues in the future will depend on offering advertisers credible, cross-platform metrics that define and measure audience reach, engagement and relevance.
Content creators must have better insight into what customers will pay for in order to engage - For content creators to adapt to the demands of connected consumers, they will need to get closer to the behaviors and needs of those consumers than ever before. This includes harvesting data from social media, adapting the way products are created and distributed, and embracing new business models, including partnerships. As they pursue these strategies, the good news for content creators is that content’s central role in attracting, engaging and retaining consumers has been strengthened by the fragmentation of media choices.
The race for content - The rising value of content has fired the starting-gun on an industry-wide race to acquire it. Recent years have seen several major acquisitions of content assets, as consumers’ rising expectation of ubiquitous access to premium and library content drives companies to focus on licensing and/or acquiring content, as well as on developing deeper customer engagement and insights.
New business models for content creators to engage connected consumers - To ensure their content remains relevant and valuable to their audiences, content companies must build new business models around five imperatives:
Digital distributors must deliver a differentiated experience to help deter piracy - Tackling piracy in the connected era cannot rely just on consumer education and tighter regulation and enforcement, important as those are. It means understanding consumers in order to deliver the right content to the right people, at the right time, place and price via the right experience. It’s also vital to sign-post where the legitimate content is available.
“Connected consumers are clearly in control and an even greater portion of viewing and interaction of TV and film content will take place on multiple screens and devices. E&M companies have the opportunity to deepen engagement with consumers by trying different business models for delivering content and experimenting with price points and offerings,” said Deborah Bothun, PwC’s US advisory entertainment media & communications leader.
U.S. advertising: Internet and video games lead the way
Overall, U.S. advertising is expected to increase at a 4.1 percent CAGR from $167 billion in 2012 to $204 billion in 2017. Internet advertising is expected to average 13.7 percent CAGR followed by video games, one of the smallest segments, at 11.6 percent CAGR. Television advertising, the largest segment, is expected to grow at 5.1 percent CAGR. Out-of-home advertising and filmed entertainment advertising are expected to grow by 5.0 percent and 3.2 percent CAGR, respectively. Radio advertising is expected to have slower growth at 1.4 percent CAGR. Consumer magazine (-1.5 percent), business-to-business (-3.3 percent) and newspaper advertising (-4.2 percent) are all expected to decline.
U.S. segment highlights
In the U.S., Internet advertising is expected to continue to outperform all other E&M segments, with double-digit gains of 13.7 percent CAGR expected. Internet access (11.0 percent CAGR), video games (6.2 percent CAGR), TV advertising (5.1 percent CAGR) and out-of-home advertising (5.0 percent CAGR), are expected to grow more than 5 percent compounded annually.
Filmed entertainment (3.4 percent CAGR), business-to-business publishing (2.7 percent CAGR), radio (2.5 percent CAGR), TV subscriptions (2.2 percent CAGR), music (1.2 percent CAGR) and consumer and educational book publishing (0.7 percent CAGR) are expected to generate modest growth.
Spending on consumer magazine publishing (-1.3 percent CAGR) and newspaper publishing (-2.9 percent CAGR) is expected to decline moderately.
Overall, U.S. consumer/end-user spending is expected to grow by 2.6 percent CAGR.
About the Outlook
PwC’s Global Entertainment and Media Outlook 2013-2017, the 14th annual edition, contains in-depth analysis and historical and forecast data for advertising and consumer/end-user spending in 13 major industry segments across 50 countries. Find out more at http://www.pwc.com/outlook.
Segments covered by the Outlook
Business-to-business, consumer and educational books, consumer magazine publishing, filmed entertainment, Internet access spending: wired and mobile, Internet advertising: wired and mobile, newspaper publishing, out-of-home advertising, radio, music, television advertising, TV Subscriptions and license fees and video games.
Digital spending consists of broadband and mobile Internet access; online and mobile Internet advertising; 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.
Historical information is obtained principally from confidential and proprietary sources. PwC analyzes recent trends in industry performance and identifies factors underlying those trends. Models are then developed to quantify the impact of each factor on industry spending. Forecasts are also based on an analysis of the dynamics of each segment in each region and on the factors that affect those dynamics.
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