PwC: Oz ad revenue to stay down

No recovery anytime soon, annual Australia report said

SYDNEY -- Advertising revenue will continue to contract while new business models will develop around consumer revenue, fueled by structural change in the Australian media and entertainment sectors, PricewaterhouseCoopers said Monday in its annual Australian Media and Entertainment Outlook.

While a broader economic recovery is on the cards, and advertising dollars continue to migrate from traditional media to online, “there’s unlikely to be a bounce in advertising revenues that normally appears after a cyclical downturn,” David Wiadrowksi, PWC lead partner for technology, information, communications and entertainment, said.

As a result consumer spending on media and entertainment products and services here will grow 5.5% over the next five years from US$11.6 billion in 2009 to $14.8 billion in 2013, while ad spend w ill increase just 1.7% to $10.7 billion in 2013. In total the sector will be worth $25 billion in five years, the firm said.

“The migration of advertising to digital platforms were there is endless inventory and new performance remuneration models driving down revenues means online advertising revenues will not replace those lost by the traditional media,” he said.

Leading the growth are the Internet, pay TV and interactive games sectors with compound annual growth rates of 10.4%, 9.1% and 7.6% over the next five years, to $5.6 billion, $3.53 billion and $1.8 billion dollars each of revenue respectively.

Filmed entertainment is the only other part of the sector to show growth in the next five years, increasing 4.9% to $3.15 billion, with online rental subscription and digital downloads to grow substantially.

Growth overall will driven by initiatives like the roll-out of the federal government’s planned $35.7 billion National Broadband Network and Web-enabled mobile phones as a primary distribution platform for the entertainment and media of the future, industry developments which PWC has dubbed “the game changers."

“Consumers are going to be the growth engine of future. Entertainment and media businesses must adjust their business models so they are not left behind. A number of developments are radically reshaping the entertainment and media industry and the incumbents need to be ready rather than defensive,” the report said.

The NBN will “change everything” Wiadrowksi said.
“We predict that faster broadband will allow more video consumption online. This may introduce more competitors for TV ad revenues as online publishers will be able to serve television-style advertising. Additionally Internet service providers will seek to buy or make content to differentiate themselves, essentially becoming converged media companies,” the report said.

Traditional Media’s growth will be much smaller with out of home advertising, free to air television, radio and newspapers all showing declines in compound annual growth rate over the next five years.