PWC Forecasts Our Digital Future
June 16, 2009 at 5:47 AM (PT)
By 2013, the acceleration of the digital transition will create a more fragmented entertainment and media landscape characterized by a wide divergence of revenue models, according to PRICEWATERHOUSECOOPERS’ Global Entertainment and Media Outlook: 2009-2013, which was released today. The report underscores that the key to sustainable revenue streams in 2013 lies in providing a content experience that cannot be readily duplicated elsewhere, whether the revenue model is ad-supported, subscription or a combination.
The report forecasts that global entertainment and media spending will rise from $1.4 trillion to $1.6 trillion in 2013, growing at a compound annual growth rate of 2.7%. The U.S. Entertainment and Media market will grow at 1.2%, reaching $495 billion in 2013.
"The current economic slowdown, shifting consumer behavior and new ad-supported revenue models are triggering acceleration of digital migration. While the impact of these new models and dynamics throughout the entertainment and media industry will be strong, it also opens up new creative opportunities for the industry," said PRICEWATERHOUSECOOPERS U.S. Leader/Entertainment, Media & Communications Practice BILL COBOURN. "The current decline in revenues is not because of declining demand. In fact, demand for E&M appears to be increasing. The challenge is to identify ad models that are able to withstand the downward pressure on ad rates in the digital environment and on subscription models that capture the consumers’ preferences for premium content."
* Terrestrial radio advertising will be hurt by the poor economic conditions as well as competition from the Internet.
* The growth of satellite radio will be stymied by poor auto sales.
* Out-of-home advertising will be driven by digital billboards, video networks, and improved audience measurement systems.
* The radio and out-of-home market will decrease to $28.8 billion in 2013, declining by a 0.6 percent compound annual rate.
* Terrestrial radio advertising will fall by 22.8% during the next three years and at a 4.5% compound annual rate through 2013 to $14.8 billion in 2013 from $18.6 billion in 2008.
* Satellite radio advertising will increase from $100 million in 2008 to $230 million in 2013, an 18.1% compound annual increase.
* Radio advertising as a whole will total $15.0 billion in 2013, down 4.3% on a compound annual basis from 2008.
* Satellite radio subscription spending will expand from $3.3 billion in 2008 to $5.1 billion in 2013, a 9.4% increase compounded annually.
* The overall satellite radio market including advertising will grow by 9.7% compounded annually to $5.3 billion in 2013
* The overall radio market will total $20.1 billion in 2013, declining by a 1.7% compound annual rate from 2008.
* Out-of-home advertising will rise at a 2.4% compound annual rate from $7.7 billion in 2008 to $8.7 billion in 2013.
The Outlook For Music
* The availability of digital music without copy protection software will boost Internet distribution.
* Bundled services, side loading, and free streaming will cut into the mobile phone music market.
* The migration to digital distribution will result in steep declines in physical distribution.
* The recorded music market will contract at a 4.4% compound annual rate to $7.2 billion in 2013 from $9 billion in 2008.
* Physical distribution will drop from $6.2 billion in 2008 to $2.1 billion in 2013, a 19.4% compound annual decrease.
* Digital distribution will increase at a 12.5% compound annual rate to $5.1 billion from $2.8 billion in 2008. Digital distribution will overtake physical distribution in 2011.
* Licensed music downloaded over the Internet will expand from $1.9 billion in 2008 to $4.4 billion in 2013, a 17.5% compound annual increase.
* Digital music distributed to mobile phones will total$720 million in 2013 from $868 million in 2008, a 3.7% decline compounded annually.