PwC's global media outlook: $2 trillion in 2011

PwC: Growth will be slowest in U.S.

NEW YORK -- The global entertainment and media industry will expand at a 6.4% compound annual growth rate over five years to hit $2 trillion in 2011, according to a PricewaterhouseCoopers report released Thursday.

The increase projected in "Global Entertainment and Media Outlook: 2007-2011" compares with the compound annual growth rate of 6.6% that last year's report predicted for the 2006-10 time frame.

The U.S. will remain the biggest but also the slowest-growing media market in the world, expanding at an estimated 5.3% compound annual growth rate to hit $754 billion in 2011, the global consultancy projects.

Asia Pacific will be the fastest-growing region, with an estimated CAGR of 13.5%, according to the report.

Digital media, particularly online and wireless, is pegged to be the key growth engine around the world, with nearly half of total industry growth expected to come from these two areas over the five-year period, PwC predicts.

Filmed entertainment, meanwhile, will be one of the lower-growth segments of the industry, with an estimated CAGR of 4.9% globally to $103.3 billion in 2011 from a preliminary figure of $81.2 billion in 2006.

U.S. film growth will come in below the worldwide average at 4.6% to expand the market to $44 billion in 2011 from $35.2 billion in 2006, according to PwC.

The combined region of Europe/Middle East/Africa (EMEA) will only gain 4% to $26.7 billion, while Asia Pacific will top the five-year filmed entertainment growth charts with a CAGR of 6.8% to $23.1 billion, the firm expects.

Digital cinemas will fuel boxoffice growth and high-definition DVDs will stimulate home video markets around the world. "Digital download-to-own streaming services will generate incremental revenue in the United States and EMEA," the report adds.

PwC sees U.S. boxoffice receipts rising from an estimated $9.5 billion in 2006 to $9.9 billion this year and $10.3 billion in 2008. The following years also should experience steady gains until the boxoffice reaches nearly $11.7 billion in 2011, according to the forecasts. This makes for a five-year CAGR of 4.2%, with ticket prices seen rising 2.2% and admissions 2%.

U.S. home video sell-through sales are projected to increase 5.1% compounded annually from $17 billion in 2006 to $21.9 billion in 2011. In-store rental revenue will fall 1.1% on average over the five-year period, or a total of $400 million, while online rentals will expand from $1.2 billion in 2006 to $3.4 billion in 2011, PwC estimates.

"By the end of the decade, more than 2,000 screens are expected to be 3-D capable," the forecast says about the expected growth trend in 3-D films. "By 2009, the 3-D universe is expected to be large enough to support a major studio film from a leading director."

Meanwhile, PwC predicts that global advertising will expand at a 5.4% CAGR rate to expand from $407 billion in 2006 to $531 billion in 2011, with the Internet remaining the fastest-growing ad medium with a projected 18.3% CAGR to $73 billion, or 14% of total ad spend.

One particularly eye-catching projection calls for U.S. spending on Internet advertising and access will surpass spending on newspaper publishing in 2009.

PwC projects double-digit growth in the online/digital and mobile fields in all territories during the next five years to $153 billion, with TV distribution and video games also figuring as key growth engines.

"Content, distribution and technology companies need to aggressively seek out new relationships to accommodate the shift towards convergence," said Jim O'Shaughnessy, global chairman of PwC's entertainment and media practice.

In terms of regions, economic and media/entertainment growth will continue to boost the importance of Brazil, Russia, India and China, according to PwC. The BRIC region will see double-digit percentage gains during the five-year timeframe and account for 24% of global sector growth.

Its 14.7% compound annual growth will be nearly three times the projected 5.5% increase for the rest of the world.

Overall, PwC expects Internet advertising and access spending to be the biggest industry growth engine with a 13.4% CAGR from an estimated $177 billion in 2006 to $332 billion in 2011.

The worldwide TV distribution market will come in second in terms of growth, with PwC estimating a jump from $161.6 billion in 2006 to $250.7 billion in 2011. This would make for a 9.3% CAGR. In the U.S., the CAGR will reach 5.4% to $123.3 billion, the consultancy predicts.

Telephone companies' entrance into the video service market and rising average revenue per user due to digital TV and high-definition TV will contribute to the projected gains.

The TV network business will grow at a CAGR of 5.8% globally and 6.5% in the U.S. to $228.3 billion and $85.4 billion, respectively, according to the report. It cites HDTV, DVRs, user-generated content and advances in audience measurements as key growth drivers.

Meanwhile, the music market will be a mixed bag at best for the 2007-11 period, PwC says. Its global size will edge up at a 2.3% CAGR to $40.4 billion, while the U.S. business will be the only region to contract at a 0.4% CAGR to $11.3 billion, according to projections.

New mobile phone services, the popularity of ringbacks and other factors should support the music space. Digital music spending will continually expand in the U.S. from an estimated $2.7 billion to $6.6 billion in 2011, making for a CAGR of 28.7%, PwC projects. However, physical music sales will decline at a 13.2% CAGR to $4.7 billion from last year's estimated $9.7 billion, it expects.