Masso Group

Consulting and analysis firm PricewaterhouseCoopers released its five-year global entertainment and media forecast this week. PwC Entertainment & Media Practice Chairman James O'Shaughnessy in New York and Managing Partner Marcel Fenez in Hong Kong note that this latest version of the report, which is now in its ninth year, marks emerging-market growth, in addition to unprecedented established-market gains. MediaWorks takes a look at the forecasts for several of the media market's largest sectors, including internet-access spending and internet advertising, TV advertising and subscriptions,

newspaper and magazine publishing, radio and out-of-home advertising, and recorded music, film and video games.

Internet advertising and spending posted notable gains through the past 18 months, and is projected to steadily increase over the next five years. In general, and with the exception of the lapsing recorded-music sector and a struggling newspaper market, the media industry has done well for itself of late. PwC estimates that total global media and entertainment spending rose 6.4% in 2007, with internet-access spending in particular posting a 16.7% increase.

Internet
In other internet-centric categories, such as advertising, a 33.2% upswing in 2007 significantly surpassed estimates that were 4.8 percentage points lower, an indicator of the inimitable nature of the web in reaching target audiences.

Experts credit increasing availability of wired and wireless broadband in driving spending, thus upping the allure of advertising.

Competition across the board has reduced pricing for basic wired broadband services, and as a result, spending for such services is expected to reach $209 billion in five years. Coupled with wireless network upgrades and 3G service rollouts accounting for $118 billion in that same time frame, the overall internet-access market is set for a 12.1% expansion.

Through 2012, internet-access spending is expected to see double-digit growth globally, reaching $340.9 billion by the end of that five-year period. That's a big jump, even by industry standards, from the $85.7 billion seen in 2003. Advertising on the web is likewise expected to surge, rising by 22.1% to reach $77.1 billion next year. By 2012, that number will almost double to $120.3 billion.

Internationally, a handful of countries bear watching, including Pakistan, China, Colombia and the Philippines. The PwC report cites "strong economic expansion" in the media-related increases expected in these and other growing markets abroad.

Infrastructure upgrades are the chief catalysts in the Saudi Arabia/Pan-Arab region (including the United Arab Emirates, Egypt, Kuwait and Qatar and others), whose countries are expected to post the greatest growth in entertainment and media markets -- 19.1% annually.

The internet-access market in that region is forecasted to grow at a 30.1% annual rate, rising to $13.8 billion by 2012 -- figures that exceed both the Russian and French markets.

Other notable market expansions are foreseen in India (18.5%), Indonesia (18.1%) and Turkey (16.7%).

The internet-access market in the U.S. was worth $41.252 billion in 2007, and is projected to increase steadily to nearly $48 billion by the end of 2008 and $69 billion by 2012.

Domestic advertising on the net is likewise as fruitful, posting $21.9 billion in '07, and expected to reach $26 billion by year's end. The projection for 2012 is over $44 billion.

Entertainment
TV-based advertising picked up 3.7% last year, and is expected to touch $216 billion in 2012. In the U.S., ad spots totaled just over $70 billion last year, and can be expected to tack on another $6 billion by the end of '08, hitting $88.8 billion in five years' time.

Subscription and license fees likewise are experiencing growth. A global estimate puts the value at $280.7 billion in 2012, an increase of over $107 billion from 2007. In the U.S., TV subscriptions and license fees will reach $94 billion in 2012, compared to this year's $70 billion.

The record industry, however, is not as fortunate. At $33.4 billion worldwide in 2007, it's down 4.1% to $32.1 in 2008, and expected to remain flat through 2012. Down 12% to $10.3 billion in the U.S. last year, value is expected to rappel to $7.86 billion by 2012.

The film industry has experienced steady expansion, with a 2.5% increase worldwide to just under $86 billion in 2007. Domestically, that number stayed flat at $35.5 billion. A 4.3% increase at the box office balanced out a less than enthusiastic home video market. While the unpredictable quality of film releases and audience reaction accounts for the bulk of the industry's success, analysts believe digital cinema, upgrades to 3-D formats, and more modern theaters with a greater number of screens in more countries throughout Europe, Asia and Latin America will bolster box-office numbers.

The high-def DVD category is expected to do well with the "Blu-Ray" format widely accepted as an industry standard. Still, online piracy remains a continuing detriment, particularly in the Asia-Pacific and Latin American regions. The forecast for the industry through 2012: a 5.3% compound annual rate of expansion, up to $111 billion.

The introduction of several video game consoles from a smattering of major brands, and the subsequent spike in software purchases lifted spending to $41.95 billion last year, a 27.3% increase worldwide ($12 billion in the U.S, a 29.7% increase). Further double-digit growth can be expected through 2008, followed by lower, single-digit jumps until the next round of major redesigns in 2012, where the market will total $68 billion globally, and $17.6 billion in the U.S.

Print
Global newspaper publishing squeaked out a 0.1% increase in 2007 to a $186 billion total. U.S. papers were not as lucky, suffering a 6.7% drop, down from almost $60 billion in 2006 to $55.8 billion. Steady margins over the next five years will ultimately see a 2.4% upswing for the U.S. in 2012 -- all the way to $53.8 billion -- but not before more losses. International papers will post more stable figures, growing at a 2.2% compounded annual rate to $208 billion.

While consumer magazine publishing is still doing better than its newspaper counterpart, the industry only enjoyed a 2.1% increase globally in 2007, resulting in $80.2 billion for this sector, slightly less than domestic titles, which saw a 3.5% jump to $24 billion. Faster circulation spending growth and an ever-expanding digital ad market balanced sinking print-based advertising. A 3.5% compound annual rate of expansion is expected through 2012 to a total global take of $95 billion.

Radio, Out-of-Home
Finally, the radio and out-of-home advertising market saw a 3.3% increase in 2007, with $74.4 billion. In the U.S., out-of-home was slightly better, with a 6.9% increase to $27 billion, as radio only grew by 1.4% to $32 billion. Digital billboards will offer space to multiple brands, thereby generating more revenue. Innovative digital technologies and striking displays, which we are beginning to see to start of, will likewise stimulate spending.

Like other industries, radio will face steep competition from the Internet in terms of advertising, leading to a near-term decline in radio ad spots in the U.S., though satellite services can be expected to boost spending in both the U.S. and Canada. The total radio market is expected to grow at a 2.6% compounded annual rate to $53.8 billion. In general, out-of-home advertising will grow at a 6.8% compounded rate over the next five years to $38 billion.

(Source: Advertising Age)