• by Jack Loechner , Staff Writer @mp_research, June 25, 2008

The recently released PricewaterhouseCoopers' Global Entertainment and Media Outlook: 2008-2012, underscores the importance of continuing to extract revenues from traditional business segments while emerging technologies continue to solidify their consumer position. The report shows global compound annual growth rate (CAGR) at 6.6% for the sector, anticipating it reaching $2.2 trillion in 2012.

But entertainment and media (E&M) companies hoping to drive growth over the next five years will need to accommodate dramatic changes in devices, market and consumer behavior.

Several critical technologies are reaching tipping points that will deeply influence both the pace and direction of entertainment and media growth over the next five years:

• 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% compound annual increase.

Although digital and mobile distribution comprised only 5% of global E&M spending in 2007, these revenues will account for 24% of all growth throughout the industry during the next five years. By 2012, digital and mobile revenues will account for just 11% of total E&M spending, or $234 billion of the $2.2 trillion global market. While digital and mobile are driving growth, 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.

The Net Generation, concludes the report, continues to set the pace and direction of change in the entertainment and media industry, driving new business models that are revolutionizing the relationship between companies and their customers.

This is a global phenomenon, says the report. In the BRIC countries, people under the age of 25 comprise at least 31% of the countries' total populations:

• 43% in Brazil
• 31% in Russia
• 50% in India
• 38% in China
• 34% of the total population in the United States

However, 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, 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% rise through 2012. This growth will help sustain traditional formats.

The US currently remains the largest but slowest growing E&M market, growing at a 4.8% compound annual growth rate reaching $759 billion in 2012. Internet advertising and Internet access spending will be the only two segments with double-digit growth during the next five years, boosted by continued growth in broadband.

While Internet advertising growth will moderate from that in recent years, it will see the most robust growth, at 19.5% CAGR (compound annual growth rate) through to 2012:

• Internet access (12.1% CAGR)
• Video games (10.3% CAGR)
• Television subscriptions and license fees (10.1% CAGR)

More established segments are all set to grow at between 5% and 7% compounded annually:

• Television advertising (5.9% CAGR)
• Theme parks (5% CAGR)
• Casino gaming (6.5% CAGR)
• Filmed entertainment (5.3% CAGR)
• Sports (6.5% CAGR)

The publishing segments face the stiffest challenges, where the declines in physical distribution are at their most significant,  and growth in digital distribution is struggling to make up for the shortfall including

• Newspapers (2.2% CAGR)
• Consumer Magazine (3.5% CAGR)
• Consumer & Educational books (2.8% CAGR)
• Business-to-business publishing (3.2% CAGR)
• recorded music (-0.6% CAGR)

Marcel Fenez, Managing Partner, Global Entertainment & Media practice, PricewaterhouseCoopers, concludes that "... By effectively managing emerging and traditional business lines, companies will be able to identify opportunities they can exploit so they can migrate to the new digital environment and meet the demands of the net-generation."

For more about this study, please visit PWC here.