McKinsey: Global Media Spending On The Rise, Though Slowing Down

McKinsey & Company: Predicting Digital Ad Growth

Global spending on media is forecast to rise at an annual rate of 5.1% during the next five years — to $2.1 trillion in 2019, from $1.6 trillion in 2014, according to a survey by McKINSEY & COMPANY. Yet this growth actually reflects a general slowdown, as indicated by the study of consumer- and ad-spending data in every global media and entertainment sector. Although total expenditures on media rose by 5.4% in 2014, compared with 5.2% in 2013, the increase in both years was lower than the 6.2% compound annual rate recorded between 2009 and 2012.

Digital advertising was the fastest-growing category in 2014, with a 16.1% increase in spending to $168.5 billion, followed by video games at 14.3% to $103.5 billion and broadband at 9.2% to $500.5 billion. Both digital advertising and broadband are entirely digital, and digital fueled the growth of spending on video games. On the other hand, expenditures for traditional nondigital media, such as consumer magazines (down from $57.6 billion to$ 56.5 billion) and newspapers (from $140.6 billion to $140 billion), continued to decline.  Audio entertainment, including all forms of radio, was up slightly, from $97 billion to $98.8 billion)

Digital advertising, video games and broadband are expected to continue to be the fastest-growing segments over the next five years, with projected compound annual increases of 12.7%, 8.1%, and 7.8%, respectively, to 2019. Spending on cinema will expand at a projected 5.4% annual growth rate, followed by TV advertising at 5%. While today’s stronger segments will continue to maintain over the next five years, they will probably grow more slowly. Expenditures on the slower-growing or declining segments of 2014 are expected to grow more quickly or to decline more slowly over the next five years.

These patterns reflect two primary drivers of spending on media:

The Shift To Digital: Spending on media continues to move at a rapid pace from traditional to digital products and services. By 2019, digital will account for more than 50% of the overall total for media. Consumer spending on digital video will overtake spending on physical media, two years earlier than previously forecast. Digital, consisting of Internet and mobile ads, will become the largest advertising category by 2017, surpassing TV one year earlier than forecast. Mobile will more than double its share of the digital-ad market. This rapid shift to digital is driven in part by the growing number of connected consumers, the expansion of mobile phones, and higher rates of mobile-broadband adoption.:

Developing Markets: Increasingly, developing markets play a critical role in the growth of spending on global media. That’s true not only because traditional media remain strong in these regions but also because the markets, from MEXICO and CHINA to INDIA and MALAYSIA, anticipate healthy economic expansion and higher household incomes — particularly in the ASIA-PACIFIC and in CENTRAL and EASTERN EUROPE. This growth will boost spending on both ads and content across the region. In fact, the ASIA-PACIFRIC media market will be the largest source of absolute growth for the global industry during the next five years.

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