Mumbai: According to PricewaterhouseCoopers’ Global Entertainment and Media Outlook: 2008-2012, digital and mobile distribution that comprised 5 percent of global E&M spending in 2007, will account for 24 percent of industry growth during the next five years.
The report also underscores the importance of continuing to extract revenues from traditional business segments while emerging technologies continue to solidify their consumer position. PwC’s annual report pegs global compound annual growth rate (CAGR) at 6.6 percent for the sector, anticipating it reaching $2.2 trillion in 2012. The US E&M market will grow at 4.8 percent CAGR reaching $759 billion in 2012.
"In the US, consumers are showing a preference for free, or heavily discounted, ad-supported content and services in the new digital and mobile environment," said PricewaterhouseCoopers global chairman, entertainment & media practice Jim O’Shaughnessy. "This ensures that the importance of advertising will continue to grow — both to entertainment and media companies themselves and to their customers."
Strategic Alliances Will Replace Vertical Integration:
According to the Outlook, entertainment and media companies hoping to drive growth during the next five years will need to accommodate dramatic changes in devices, market and consumer behavior through strategic business alliances.
Several critical technologies are now reaching tipping points that will deeply influence both the pace and direction of entertainment and media growth during the next five years.
Broadband penetration continues to accelerate globally. Mobile is gaining ground quickly — adding subscribers and upgrading infrastructure to enable the next wave of mobile expansion, driven by Internet access, advertising and television. Modern movie houses, digital cinemas and 3-D upgrades are enhancing the cinema-going experience, while high-definition television subscriptions and a resolution of the high definition DVD format wars will invigorate digital living rooms.
The global broadband boom continues unabated, fuelling overall growth, and more than doubling again to 661 million households in 2012, a 16.4 percent compound annual increase. According to the Outlook, US broadband households will reach 101 million households in 2012, a 10.5 percent CAGR.
While digital and mobile are driving growth, according to the Outlook, established and traditional business segments will continue to dominate revenues, with the exception of recorded music, where digital distribution will surpass physical distribution in 2011. By 2012, digital and mobile revenues will account for just 11 percent of total E&M spending, or $234 billion of the $2.2 trillion global market. In comparison, by 2012, digital and mobile revenues will account for 10 percent of total E&M spending in the U.S., or $75 billion of the $759 billion US market.
"We’re seeing a new business model solidify for entertainment and media companies," said PricewaterhouseCoopers managing partner, global entertainment & media practice Marcel Fenez. "Some, such as the film industry, have dabbled in this in the past, but those will be small movements compared to what lies ahead. No single company will be able to successfully go it alone over the next five years. The challenges are too significant and the demand for innovation too complete."
Health of media is driven by the Net Generation and maintained by consumers over the age of 50
The Net Generation continues to set the pace and direction of change in the entertainment and media industry while exhibiting an influence that is driving new business models that are revolutionizing the relationship between companies and their customers. As they make these technologies regular components of their everyday lives, the Net Generation is also driving the technology engagement of prior generations, connecting older generations with the latest trends in emerging media technology.
What is more, this is truly a global phenomenon to which companies are increasingly paying attention. Consider: In the BRIC countries, people under the age of 25 comprise at least 31 percent of the countries’ total populations — 43 percent in Brazil, 31 percent in Russia, 50 percent in India and 38 percent in China.
Meanwhile, in the United States, people under the age of 25 represent 34 percent of the total population. The imperative, then, is that companies must expand their global reach to young people who will propel spending on Internet access and digital entertainment and media during the coming years.
Meanwhile, consumers over the age of 50 are creating a balance in the industry by devoting significant amounts of attention to the more traditional media of their generation as the Net Generation drives growth in digital and mobile entertainment. In every region of the world except EMEA (Europe, Middle East, Africa), the 50+ population will see double digit growth rates and globally, this population will increase from 1.1 billion to 1.25 billion, a 13.1 percent rise through 2012. This growth will help sustain traditional formats even as this generation becomes increasingly interested in the platforms embraced by their children and grandchildren.