Indiantelevision.com Team

(22 June 2007 9:30 pm)

MUMBAI: Entertainment and media (E&M) spending in BRIC (Brazil, Russia, India and China) countries will account for 24 per cent of global growth in the sector during the next five years with increase at a 14.7 per cent CAGR (compound annual growth rate), says a study released on Thursday.

Led by India and China, the E&M spending in BRIC is expected to expand from $127 billion in 2006 to $251.5 billion in 2011. That gain will be nearly three times the projected 5.5 per cent compound annual increase for the rest of the world.

The global entertainment and media (E&M) industry is estimated to increase at a 6.4 per cent compound annual growth rate (CAGR) to $2 trillion in 2011, according to PricewaterhouseCoopers' Global Entertainment and Media Outlook: 2007-2011. This is the eighth annual edition and contains forecasts of 14 major industry segments across five regions of the globe - the United States, EMEA (Europe, Middle East, Africa), Asia Pacific, Latin America, and Canada - plus a Global Overview.

Digital and mobile spending in each territory during the next five years is set to see double-digit growth, rising to $153 billion by 2011.

Spending related to the distribution of E&M on convergent platforms (convergence of the home computer, wireless handset and television) is also growing at double-digit rates and will exceed 50 per cent of global spending by 2011,

Nearly half of the total industry growth is expected to be generated through online and wireless technologies within the next five years. Broadband households will grow by 300 million to 540 million subscribers and wireless subscribers will increase by 1.1 billion to 3.4 billion, the study says.

The migration to digital formats is having an adverse impact on competing revenue streams while consumer-generated media is accelerating content fragmentation.

"Content, distribution and technology companies need to aggressively seek out new relationships to accommodate the shift towards convergence. Furthermore, companies will need to test new business models to address increased fragmentation and intellectual property in a digital era," says PricewaterhouseCoopers global chairman, E&M practice, Jim O'Shaughnessy. "Deal activity across the entertainment and media sector is accelerating, driven by the migration to digital formats."

Global advertising is set to increase at a 5.4 per cent CAGR during the forecast period, rising to $531 billion in 2011 from $407 billion in 2006. "Internet will remain the fastest growing advertising medium, with a projected 18.3 per cent CAGR to $73 billion in 2011. Advertising on the internet has truly come of age, and by 2011 will comprise 14 per cent of the global advertising market.

Out-of- home will be the second fastest growing advertising medium, with a projected 6.5 per cent CAGR," the report says.

Spending on convergent platforms will outpace other E&M platforms and will account for 72 per cent of the total E&M growth during the next five years. Asia Pacific will be the fastest growing convergent platform region, with a projected 13.5 per cent increase and double-digit growth is expected in Latin America as internet and broadband penetration gains momentum.

"The surge in broadband and wireless adoption is generating new digital revenue streams across multiple segments," says PricewaterhouseCoopers global managing partner, Entertainment & Media practice, Marcel Fenez. "Broadband growth is driving online advertising while the proliferation of next- generation wireless devices designed to play digital music, video games and receive TV programming is fueling mobile distribution. For example, Asia Pacific spending on distribution of television programming on mobile phones is expected to reach $6.5 billion in 2011 from just $26 million in 2006."

Region-wise Growth

Asia Pacific will have the fastest-growing region during the next five years, with double digit increases in internet, TV distribution, casino and other regulated gaming and video games. Spending in Asia Pacific will average 9.6 per cent annual growth, increasing from $297 billion in 2006 to $470 billion in 2011. India will be the fastest growing during the next five years at 18.5 per cent CAGR while China will continue to record double-digit annual gains that will average 16.8 per cent CAGR.

According to the study, the US at a 5.3 per cent CAGR remains the largest but slowest growing E&M market, reaching $754 billion in 2011. US spending on internet advertising and access is going to surpass spending on newspaper publishing in 2009.

EMEA, the second largest market, will expand at a 5.5 per cent CAGR to reach $617 billion in 2011. Led by Saudi Arabia/Pan Arab and South Africa, Middle East/Africa will continue to be the growth region, averaging 8.5 per cent CAGR during the forecast period. TV distribution, Internet advertising and access spending and video games will be the fastest growth segments for EMEA, averaging double-digit CAGR during the next five years.

Latin America's E&M market, the second fastest growing region, is projected to rise at an 8.9 per cent CAGR to $68 billion in 2011. Canada is projected to expand at a 5.6 per cent CAGR to $47 billion in 2011, with double-digit growth projected for internet and radio/out-of-home advertising.

Segment Highlights

Television Distribution: The global television distribution market, the second fastest growing segment, increased by 9.4 per cent in 2006, an improvement compared with the 6.5 per cent increase in 2005. Aggressive roll-out of internet protocol television from telephone companies is stimulating competition and fueling subscriber growth.

Cable operators are migrating their subscribers to digital platforms that not only boost monthly subscription revenues but also expand the market for video-on-demand. Mobile television is emerging as an important distribution channel, particularly in Asia Pacific, boosted by new service rollouts and enhanced wireless devices. Globally, the television distribution market is going to increase from $161 billion in 2006 to $251 billion in 2011, a 9.3 per cent CAGR.

Television Networks (Broadcast and Cable): The TV network market rose 6.2 per cent in 2006, as against the 6.3 per cent gains in 2003 and 2005, but significantly less than the growth in 2004, which had been driven by the Summer Olympics advertising.

Multi-channel advertising, according to the study, will be the fastest-growing sector in each region, buoyed by large increases in digital households. High-definition television (HDTV), new channels, and economic expansion will also boost advertising on free-to-air channels. Globally, spending will increase from $172 billion in 2006 to $228 billion in 2011 at a 5.8 per cent CAGR.

Sports: Sports increased 12 per cent in 2006, the largest increase during the past five years, buoyed by the FIFA World Cup, the Winter Olympics, and the return of the National Hockey League (NHL) in North America. Competition in the TV distribution market is fueling demand for TV rights fees, leading to record deals. Spending in the sports segment is expected to increase from $96 billion in 2006 to $124 billion in 2011, at a 5.2 per cent CAGR.

Filmed Entertainment: Filmed entertainment rebounded in 2006 with a 2.9 per cent advance following a 2.6 per cent decline in 2005. A strong slate of films boosted the box office market in each region while supporting the home video market. Digital download-to-own streaming services will generate incremental revenue in the United States and EMEA. Box office will be enhanced by digital cinemas in the United States, EMEA, and Asia Pacific and by modern theatres and more screens in Central and Eastern Europe, Asia Pacific, and Latin America. Globally, filmed entertainment spending will rise from $81 billion in 2006 to $103 billion in 2011 at a 4.9 per cent CAGR, the study says.

Radio and out-of-home advertising: The radio and out-of-home market rose 4.5 per cent in 2006, down from the 5.2 per cent annual gains during 2004-05 although an improvement compared with the 2.7 per cent annual gains during 2002-03. Out-of-home was the faster-growing component with a 6.3 per cent increase while radio rose by only 3.6 per cent.

"Out-of-home will be fueled by digital billboards. Improved out-of-home audience measurement systems will attract advertisers, and the expansion of captive video networks will also fuel growth. Globally, the radio and out-of- home advertising segment is expected to increase from $69 billion in 2006 to $89 billion in 2011, a 5.2 per cent CAGR," the study says.'

Internet advertising and access spending: The global Internet market rose 21.8 per cent, the fastest-growing segment in 2006 and the fourth consecutive increase in excess of 20 per cent. Advertising rose 37.9 per cent and access spending increased 18.8 per cent. "The migration of internet subscribers from dial-up to broadband is the principal driver. Cable operators and telephone companies have introduced triple play packages that combine broadband with television and telephone service. Globally, internet advertising and access spending is expected to grow from $177 billion in 2006 to $332 billion in 2011, a 13.4 per cent CAGR," according to the study.

Video Games: The introduction of the new generation of video game consoles and the associated increase in video game software purchases for those consoles boosted spending by 14.3 per cent in 2006. New Internet-enabled consoles and growing broadband penetration will spur growth in the online game market while next-generation wireless devices will drive demand for wireless games. Globally, video game spending is expected to rise from $32 billion in 2006 to $49 billion in 2011, a 9.1 per cent CAGR.