Consumer behaviour will drive change and the digital transformation, Growth to be led by mobile, Internet, TV, film and video games, Advertising spending to rebound
While the Canadian entertainment and media (E&M) market declined by 2.7% in 2009, PricewaterhouseCoopers (PwC) expects a rebound in 2010 and beyond, with growth averaging 5% compounded annually through 2014, according to the PwC report Global Entertainment and Media Outlook: 2010-2014, which provides forecasts and analysis on 13 major E&M industry segments in 48 countries. The global E&M industry will also grow at a compound annual growth rate (CAGR) of 5% over the forecast period to 2014, reaching US$1.7 trillion, up from US$1.3 trillion in 2009. However, Canada will grow faster than the US with a 5% CAGR, compared with a 3.8% CAGR in the US.
– In Canada, Internet access spending at a 12% CAGR (compared to 8.8% in the US and 9% globally) and Internet advertising at a 11.7% CAGR (compared to 7.7% in the US and 11.4% globally) will be major drivers for the industry.
– TV subscriptions will grow at a 6.8% CAGR (6.5% in the US and 6.8% globally), and consumer spending on video games will increase by a 6.6% CAGR (6.4% in the US and 10.6% globally).
– Overall consumer end-user spending on media, excluding internet access spending, will increase in Canada at a rate of 4.3% CAGR (3.7% in the US and 4.1% globally), while advertising will rise at a 3.1% CAGR (2.6% in the US and 4.2% globally).
“The next five years will see digital technologies increase their dominance across all segments of entertainment and media as digital transformation accelerates says Jerry Brown, an associate partner in the Canadian Entertainment & Media (E&M) practice for PwC. “While the industry has a long history of experimenting and adding formats which have offered consumers new choices, the current advances in technologies and consumer behaviour are unprecedented in both their speed and their simultaneous impact across all segments.”
The fastest growing region throughout the forecast period is Latin America growing at a 8.8% CAGR during the next 5 years to US$77 billion in 2014. Asia Pacific is next at a 6.4% CAGR through to 2014 to US$475 billion. Europe, Middle East and Africa (EMEA) will grow at a 4.6% CAGR to US$581 billion in 2014.
Advertising on the rebound
Overall, global advertising will increase at a 4.2% CAGR from US$406 billion in 2009 to US$498 billion in 2014. Internet advertising will join television advertising in 2014 as the only media with spending in excess of US$100 billion.
The Canadian advertising market will continue to recover. While PwC sees growth in digital platforms, traditional media, including television and publishing continues to attract the majority of advertising spending. Indeed, TV advertising in Canada will increase at average annual growth of 3.8% to US$3.4 billion in 2014. The demise of the conventional television advertising market appears to have been exaggerated with US$2.1 billion of expected advertising revenue in 2014, increasing at a CAGR of 2.4%. Speciality television growth will be slightly stronger at a CAGR of 4.8%
“The big story in 2009 was the recession’s impact, which led to a broad pull back in advertising spending. The exception was internet advertising, which grew at a double digit pace,” says Michael Paterson, partner and Canadian co-editor of the Global Entertainment and Media Outlook at PwC. “As Canada’s economy is recovering ahead of the US economy, we expect that the Canadian advertising market will rebound more quickly. Increased demand and opportunities for Internet and mobile advertising along with sustained spending on traditional advertising platforms will drive growth.”
Consumer spending in Canada remains strong
Global consumer/end-user spending fell by 0.5% 2009 as declines in recorded music, consumer magazines, newspapers, consumer and educational books, and business-to-business publishing offset the gains in TV subscriptions and license fees, filmed entertainment, and video games.
In Canada, consumer spending on digital media will grow quickly, complimenting spend on traditional forms of media. However, in the music, newspaper and magazine publishing industries, digital media is presenting new business challenges as overall traditional revenues are slowly declining. However, Canadian consumers will still spend over US$3.3 billion on these segments which is a substantial part of the total spend.
– Subscription fees in Canada will increase at a CAGR of 6.8% to US$9.1 billion by 2014, driven by the expansion of digital cable, Video on Demand (VOD) offerings and Internet Protocol TV (IPTV).
– Canadian box office spending will continue to grow at a CAGR of 5.3%. Higher growth will occur in paid online rentals and digital downloads to own, which will contribute to a US$4.1 billion Canadian film entertainment market in 2014.
– After a decline in 2009, video game spending by Canadian consumers will grow at a CAGR of 6% to US$1.7 billion in 2014. The strongest growth will in online and wireless games where convenience and interactivity enhance the consumer experience.
The rising power of mobility and the Internet
Mobile Internet access will expand dramatically in Canada and spending will grow at a CAGR of 45% from US$238 million to over US$1.55 billion in 5 years, driven by a 48% annual increase in mobile Internet subscribers as the number of smartphones increases.
In 2014, as the proliferation of smartphones and other connected devices continues, 10 million Canadians will have access to the Internet via their mobile devices including readers such as the iPad. This will put continued pressure on providers to support all of these new data demands.
“Using the Internet is now one of the great unifying experiences of the current era for consumers everywhere-and their expectation of Internet-style interactivity and access to content will continue to expand, especially mobile content,” says Brown.
Brown concludes, “Creativity and innovation have always been associated with entertainment and media and now is the time for the industry to embrace new and emerging opportunities. However companies develop their future visions they will need to deliver an ever expanding customer experience and be flexible to capture revenues across all platforms. Those who do will be the leaders in this exciting but challenging industry.”
For more information and to obtain copies of the Global Entertainment and Media Outlook, which includes summaries by region and segment, including Canada, please contact Kiran Chauhan, 416-947-8983, [email protected].
For more information, please visit www.pwc.com/ca/entertainmentandmedia.
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