Oz outlook: 5% growth in 5 years

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SYDNEY -- Australia's media and entertainment sector will grow 5% a year over the next five years, achieving a value of AUS$28.7 billion ($24.6 billion), thanks to strong consumer spending that should outpace ad revenue, PricewaterhouseCoopers said Tuesday in its annual Australian Entertainment and Media Outlook report.

Consumer spending will reach AUS$15.2 billion ($13 billion) by 2011, fueled by double-digit annual growth in the Internet, pay TV and recorded music segments, but increased broadband penetration is needed to sustain that growth, said Peter McNab, PWC's lead partner in Australia for technology, media and entertainment.

"Improved broadband access, in speed and household penetration is the foundation of growth in the near term. Ubiquitous broadband, when it arrives at home, will just accelerate the changes that we're talking about," McNab said.

Broadband penetration in the territory currently stands at 19.2%, a figure that PWC predicts will rise to 92% by 2011. Last year was a "tipping point," with the greatest new revenue coming from digital media as Australians spent more time online and less with traditional media, McNab said.

But while new media continues to grow at a faster rate than traditional media, print, radio and free-to-air TV will still claim the lion's share of ad revenue, holding onto 67% of Australia's ad market, which will increase in value from $11.3 billion ($9.7 billion) this year to AUS$13.4 billion ($11.5 billion) in 2011.

"Mediums that can aggregate mass audiences will still remain a powerful force in this time of audience fragmentation and, while there is much speculation about the rise of new media platforms, TV radio and newspapers are forecast to retain the largest share of revenue," the report says.

Print media will be a driver of that trend. While newspapers growth rate is predicted to be just 1.3%, the lowest of any media, they will still hold the largest share of revenue of any segment at AUS$5.5 billion ($4.73 billion).

Pay TV, meanwhile, will be the fastest-growing segment overall, with a compound annual growth rate (CAGR) of 11.4% and a combined advertising and subscription revenue of $3.17 billion ($2.4 billion), up from $2.08 billion $1.7 billion) this year.

In 2006, pay TV penetration stood at 26.1% of Australian households. In 2011, it will be at 36%, PWC predicts, with competitive subscription pricing and enhanced digital services and programming fueling the growth.

Pay TV revenue, however, will fall just short of free-to-air TV revenue, which will sit at AUS$3.7 billion ($3.18 billion) in 2011, showing growth of just 3.4% over the period. The adoption of an industrywide electronic program guide and the introduction of TiVo next year is expected to increase viewing of free-to-air TV overall.

The Internet sector, at an 11.2% CAGR, will be the No. 2 sector in revenue terms, worth AUS$5.13 billion ($4.4 billion) in 2011, just behind newspapers.

Filmed entertainment will show the second-slowest growth, behind newspapers, at 2.9%, rising from AUS$2.3 billion ($1.9 billion) this year to AUS$2.72 billion ($2.32 billion) in five years.

The report warns that more compelling films and investment in premium technology and services is need if the film sector is to "avoid significant structural decline in the medium term."

"The sell-through home entertainment market in Australia is a mature market and he new high-definition formats are unlikely to create significant growth," the report said.

Cinema admissions will grow just four million, to 87 million, in Australia over the next five years, while Australia's boxoffice will hit the AUS$1 billion ($860 million) mark by 2011, growing 3.5% a year.

Offering a more buoyant view of the Australian production sector in the report was actor Hugh Jackman, the principal of local production company Seed. With a new funding structure and new incentives in place for producers, "there will be a much greater focus on what the marketplace believes are commercial projects than under the old system," Jackman said.

"Increased levels of production and the creation of sustainable production companies will establish a great base for Australia to continue to make a strong contribution to the global industry," he added.
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