Digital Access Drives Entertainment And Media Industry Growth, Says PwC
June 6, 2013 at 3:55 AM (PT)
Consumer access to entertainment and media content and experiences is being democratized by ever-increasing access to the Internet and explosive growth in the ownership of smart devices. According to PwC’s annual "Global Entertainment and Media Outlook 2013-2017" -- an in-depth five-year outlook for global consumer spending and advertising revenues directly related to entertainment and media content -- even though traditional, non-digital media will continue to dominate E&M spending during the forecast period, growth will be concentrated in digital media platforms and consumption.
Therefore, E&M companies are raising the bar in terms of customer insight and engagement, as well as business model and operating agility, as digital innovation continues to redefine the industry landscape.
The Outlook forecasts that global E&M spending is expected to rise from $1.6 trillion in 2012 to $2.2 trillion by 2017, growing at a compound annual growth rate (CAGR) of 5.6%. The U.S. remains the largest E&M market, growing at 4.8% CAGR reaching $632 billion in 2017, from $499 billion in 2012.
Digital E&M spending, largely driven by widespread smart device ownership, is expected to account for 44% of all spending in mature markets by 2017, which is almost double the level in 2008 and up from 34% in 2012. Digital spending in the U.S. is expected to account for 43% of all E&M spending in 2017, up from 31% in 2012.
"The E&M industry is undergoing a significant shift as digital disruption across every segment is accelerating and as digital media remains the clear driving force behind E&M revenues over the next five years," said PwC U.S. Entertainment, Media & Communications Practice Leader KEN SHARKEY. "To drive growth and compete effectively in the future, E&M companies must invest in constant innovation that encompasses its products and services, operating and business models and, most importantly, focus on customer experience, understanding and engagement."
Outlook findings showcase how current industry trends are impacting consumers, advertisers, content creators and digital distributors.
Understanding the new consumer is key -- Over the next five years and beyond, E&M businesses will increasingly engage with a new and more diverse global customer base, with different needs and expectations, especially with a rising middle class across emerging markets. Going forward, the E&M companies most likely to seize a profitable position will be those with the speed, flexibility and insight to engage and monetize the diverse global base of connected consumers by delivering personalized, relevant and ultimately indispensable content experiences.
Consumers are increasingly in control but also increasingly confused -- Over the past five years, consumers have seen an explosion in their media choices. This year’s Outlook highlights that this blizzard of consumption choices is creating confusion in the minds of the consumer and this extends to the legitimacy of the content they access. In response, PwC believes companies across the E&M industry must revisit their business and operating models. By innovating in agile ways and harnessing technologies to gain deep insight into consumers’ tastes and behaviors, E&M companies are starting to define a profitable, consumer-centric, multiplatform future.
From ‘mass media’ to ‘my media’ -- As media consumption fragments across devices, consumers increasingly demand personalized experiences: their content on their chosen devices, when they want it. This move to ‘my media’ can be seen in ‘cord-cutting’, where consumers abandon their pay TV subscriptions and instead access the content they want via cheaper, Internet and mobile broadband-based content services. Operators, who have already been successful in launching triple-play products that bundle TV, broadband and telephony, along with entering the Over-the-Top (OTT) world themselves with ‘TV Everywhere,’ must adapt their services to changing consumer expectations for more on-demand content. A further manifestation of ‘my media’ is consumers’ growing use of the ‘second screen’ - smartphones and tablets - to comment on and share the experience of TV and other companion content with friends, often via social media.
Overall, U.S. advertising is expected to increase at a 4.1% CAGR from $167 billion in 2012 to $204 billion in 2017. Internet advertising is expected to average 13.7% CAGR followed by video games, one of the smallest segments, at 11.6% CAGR. Television advertising, the largest segment, is expected to grow at 5.1% CAGR. Out-of-home advertising and filmed entertainment advertising are expected to grow by 5.0% and 3.2% CAGR, respectively. Radio advertising is expected to have slower growth at 1.4% CAGR. Consumer magazine (-1.5%), business-to-business (-3.3%) and newspaper advertising (-4.2%) are all expected to decline.