Digital and mobile media to drive growth

PwC report makes for gloomy reading otherwise

LONDON -- Digital and mobile media will drive the bulk of growth in the entertainment and media sectors in the U.K. during the next four years, but will be not be enough to plug the gap left by a decline in revenue from traditional media, according to research published Tuesday by PricewaterhouseCoopers.

The data on the effect of the recession on the U.K.'s media, entertainment and advertising sectors predicts that even by 2013 the overall U.K. advertising market will still be $3 billion below the market high of 2007 levels.

The research warns that 2009-10 will continue to be hit by tough market conditions, and predicts that even the fast-growing internet advertising sector will contract by 3.2% in 2009-10, while television advertising revenue will be down 10.5% by the end of next year.

By 2011-13 TV advertising revenue is predicted to be growing by 3.4% while wireless and mobile revenue is projected to be up by 11.5%.

"The combination of a global recession and the structural shift towards digital platforms has accelerated the decline of some traditional media," says report author and PwC partner David Lancefield.

"The considerable growth in digital usage and revenues will not plug the gap left behind over the next few years," he added.

PWC's research found that U.K. advertising companies have born the brunt of the media recession, suffering a 50% increase in insolvencies over the last year compared to a 40% year-on-year increase in insolvencies from publishing companies and a 25% increase in film and television company bankruptcies, with smaller companies in each sector hit disproportionately hard.

The rate of insolvencies peaked in the first three months of the year, but in the second quarter the rates fell. Since 2007 352 U.K. advertising companies have ceased to operate, closely followed by 317 insolvencies in publishing and 264 television and film companies.

"In the main, we are seeing small advertising companies slide into insolvency," Lancefield said. "The contraction in advertising budgets is hurting all companies but currently picking off the small independents that do not have deep pockets or the ability to diversify."

Both advertising and TV/film insolvencies peaked in the first quarter of 2009 with 68 and 22 collapses respectively as the cyclical downturn hit hard.

"TV, film and advertising companies rely on a healthy stream of work coming through the door, with a long lead time from story board to screen," Lancefield said. "Any extended pauses between contracts, or reduction in budgets in the current climate, could mean the lights go out."
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