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Global entertainment, media industry spend to reach $1.4 trillion in 2007 :PwC

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NEW YORK: The global entertainment and media industry spending will surpass $1.1 trillion this year, 3.7 per cent higher than its 2002 level, according to PricewaterhouseCoopers (PwC).

 

This will happen despite the softness in the world economy, increased military and security spending, the prolonged lead-up to conflict followed by the war in Iraq and the SARS epidemic.



PricewaterhouseCoopers forecasts that global entertainment and media spending will reach a record $1.4 trillion in 2007 for a 4.8 per cent compound annual growth rate (CAGR) over the next five years.



These predictions were published in the latest edition of the annual PricewaterhouseCoopers Entertainment And Media Outlook: 2003-2007, North America (with a global overview).



PricewaterhouseCoopers' entertainment and media practice global leader Kevin Carton says, "Essentially, digital adoption both give and take away. New products and services generated by digital technology and broadband will drive market growth. However, in the near term, digitisation will cannibalise existing revenues and piracy threatens new digital content business models."



Defense spending and ad growth: The report states that several key drivers will affect the industry worldwide during the next five years. Specifically, increased investment in defense and security will bring an end to the so-called "economic peace dividend" that has benefited advertising growth and consumer industries such as entertainment and media. New global realities will result in ad spending growing at a slower rate than Gross Domestic Product (GDP) as more financial and manpower resources are digested by defense needs.



With military costs beginning to account for a larger slice of the GDP pie, consumer costs will be driven higher throughout the global economy, and content producers will find it easier to pass along price increases. The resulting higher spending rates will boost global consumer/end-user spending on entertainment and media to nearly $1.4 trillion in 2007.



Industry rebound forecasted: The resiliency of the entertainment and media sector is evidenced by the global advertising's rebound from recent weakness, boosted by solid category increases in television, radio and out-of-home advertising.



Also contributing to the turnaround will be: a resurgence of Internet advertising as new metrics offer "reach-and-frequency" figures that empower media buyers to increase spending; and, a significant boost in ad dollars generated by the 2004 Olympics. In fact, global advertising spending in entertainment and media will soar to $375 billion in 2007, increasing at a 4.1 per cent CAGR for the 2003-2007 period covered by the Outlook survey.



PwC forecasts that spurred by broadband, next-generation technologies will significantly strengthen growth opportunities for television distribution, video games, Internet access and home video (bolstered by the DVD format). The firm sees the broadband universe experiencing unprecedented expansion -- nearing 30 per cent compound annual growth -- as penetration more than triples during the five-year period. Globally, more than 153 million households will be broadband-enabled by 2007.



PwC also forecasts double-digit CAGR increases for video games, Internet access and satellite radio. In fact, video games will emerge as the fastest growing industry segment -- outpacing Internet advertising and access spending.



US continues to lead in entertainment and media spending : Overall, the US marketplace -- at $479 billion, representing 44 per cent of global spending -- will continue to be the industry's largest.



In terms of category shifts, the current economic environment favours media with a broader demographic audience reach. This factor makes broadcast television networks more attractive to advertisers who will move some resources away from cable even though collectively, cable now attracts a larger audience. However, as cable networks begin to produce more original programming, they will draw larger audiences and vie for greater advertising dollars.



By the end of the five-year period, cable operators and telephone companies will have emerged as the dominant Internet service providers (ISPs). Evolution in the Internet advertising and access spending marketplace will continue. In the US, Internet advertising will rebound from its 23 per cent decline over the past two years and grow at an average annual rate of 8.1 per cent through 2007.



US broadcast and cable television advertising will grow at a 5.7 per cent average annual rate, reaching $37.4 billion by 2007. The growth of direct broadcast satellite (DBS) households continues to be one of the biggest stories for the television distribution category. Digital cable, which grew on the strength of attracting "early adopters," has been levelling as consumers resist higher priced subscriptions. Aggressively offering lower prices, free dishes, and carriage of major market local stations, DBS is poaching cable subscribers leading to an 8.4 per cent average annual increase in satellite TV households during the next five years.

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