Report Predicts Rebound in Entertainment, Media Spending Over Next Five Years
NEW YORK -- The five-year growth outlook for the entertainment and media industry is better this year than last amid economic improvements, a rebound in advertising and continued technological change, including the wider availability of tablet computers, according to PricewaterhouseCoopers' Global Entertainment & Media Outlook: 2011-2015.
Global entertainment and media spending will grow at a compound annual rate of 5.7 percent over the next five years from a projected $1.4 trillion in 2010 to $1.9 trillion in 2015, the global consultancy said in its annual forecast. That global growth would exceed the 5 percent increase that PwC had last year projected for the 2010-2014 period.
PwC predicts the more mature U.S. industry to hit a compound growth rate of 4.6 percent to cross $555 billion in 2015, up from last year's projection of a five-year compound annual gain of 3.8 percent. After what PwC estimates to be a better-than-expected 3.1 percent gain to $443 billion last year - following two years of declines, the U.S. media and entertainment market will accelerate to 3.5 percent growth this year to hit nearly $459 billion, with projected gains of 5.7, 3.9, 5.5 and 4.4 percent in the following years.
"We are a bit more bullish...than we were last year," said Stefanie Kane, a partner in PwC’s entertainment & media practice. "The global economy started recovering perhaps earlier in 2010 than we thought, and advertising has bounced back." In the U.S., for example, ad revenue had declined 14.4 percent in 2009, but swung back to growth of 5.4 percent last year, marking the biggest single-year ad swing PwC has ever recorded.
Rapid technological change is also creating new opportunities in some media segments, PwC said. U.S. digital industry revenue will cross the $100 billion mark on a gross basis this year and on a net basis in 2012, accounting for more than 25 percent of the overall industry in the final years of the five-year forecast period. "That is certainly a milestone" reached thanks to continued fast technological change, including the proliferation of tablet computers, Kane said.
PwC highlighted the need for media and entertainment companies in the digital age to create content that can be made available on multiple platforms, which "creates multiple opportunities for monetization," according to the firm. It predicts that nearly 60 percent of the worldwide industry growth over the next five years will be driven by digital products and services.
Overall, the U.S. will remain the biggest media market in the world over PwC's forecast period, while China will overtake Germany as number three and inch closer to challenging number two Japan by 2015.
Several developed nations will see slower growth than the U.S., including Australia, Italy, France, Germany and Japan, whose 2.6 percent CAGR is the lowest growth rate projected by PwC and is negatively affected by this year's earthquake and tsunami.
Consumer end user spending on media and entertainment in the U.S. may be somewhat weaker due to sluggishness in some physical product categories, but PwC predicts it will grow at a CAGR of 4.3 percent, compared to U.S. advertising growth of 4.2 percent.
The Internet business will drive industry expansion in the U.S. over the 2011-2015 period with a projected gain of 12.2 percent for Web advertising and 7.8 percent growth in Internet access services.
They will be followed by TV subscriptions and license fees, which will record a CAGR of 5.6 percent to get close to $100 billion in 2015 driven by higher subscriber fees, and the film and out-of-home ad segments, which will rise 5.4 percent each on a compound annual basis, according to PwC.
It forecasts that U.S. film growth will outpace a projected 4.6 percent CAGR for the video games industry, which had been a key performer in recent years, but last year declined a projected 1 percent instead of the 7.8 percent gain that PwC had projected. In its 2010-2014 Outlook, PwC had projected a five-year growth rate of 6.4 percent for the gaming sector.
But in 2015, Internet advertising, which accounted for an estimated $26 billion last year, could overtake the film business ($35 billion) as PwC projects them to draw spending of $46.3 billion and $45.7 billion, respectively at the end of its forecast period.
The only U.S. media segments that PwC predicts will see a decline over the 2011-2015 timeframe are music and newspapers with projected compound annual drops of 0.4 percent. Both face declines in the coming years, but will return to slight growth over the course of the five-year period, the firm said.
Kane said there were several surprises as the company's team prepared this year's Outlook. "The ad bounce-back happened at a quicker pace than we had expected," she said. And while consumer magazines are among the improving segments, PwC has somewhat reduced its video game forecasts. "We are still bullish on the sector longer-term, but there has been a little bit of a slowdown in terms of uptake of new devices," Kane explained.