• by Jack Loechner , Staff Writer, June 24, 2010

According to PricewaterhouseCoopers'Global Entertainment and Media Outlook: 2010-2014, global entertainment and media spending is expected to rise from $1.3 trillion to $1.7 trillion by 2014, growing at a compound annual growth rate of 5.0%.  The US E&M market is expected to grow at 3.8% CAGR reaching $517 billion in 2014, from $428 billion in 2009. Fast changing consumer behavior is expected to be the catalyst of the entertainment and media industry change over the next five years,

Ken Sharkey, US leader, entertainment, media & communications practice, PricewaterhouseCoopers, notes that "... the digital pace of change has proven to be even quicker than anticipated with consumers embracing new media... and digital downloads at often-unexpected speeds... the continued fragmentation of the E&M sector will fuel greater experimentation by both established industry giants and niche players... "

Digital services continue to be the primary growth engine, but traditional revenue streams are expected to remain significantly larger throughout the forecast period.  The industry will need to embrace digital not as a competitor to traditional services, but as a complement. Digital spending in the US is expected to account for 26% of all E&M spending in 2014, up from 19% in 2009.     

While there are signs of a rebound, advertising is unlikely to return to former levels. By 2014, the US advertising spend is expected to still be 9% below its level in 2007.  Overall US advertising is expected to increase at a 2.6 % CAGR from $159 billion in 2009 to $180 billion in 2014.  In the US, Internet advertising is expected to surpass newspaper advertising spend in 2010. 

Advertising spending for Internet, television, radio, out-of-home, and video games are expected to be larger in 2014 than in 2009, while consumer magazines, newspapers, directories and trade magazines are expected to be smaller. These projections reflect the market fragmentation and consumer behavioral changes. The advertising industry is responding to consumers' shifting attention and migrating towards total marketing or total brand communication.  Brands are changing their focus from advertising on a medium, to marketing through, and with, content.  

Consumer feedback and usage provides the only reliable guide to the commercial viability of products and services, and the global consumer base is being used as a test-bed for new offerings and consumption models.  PwC has identified three themes that are expected to emerge from changing consumer behavior and the industry must anticipate and pre-empt the needs and wants of consumers.  

• Rising power of mobility and devices: Advances in technology are expected to see increasingly converged, multi-functional mobile devices come of age as a consumption platform by the end of 2011. By 2014, US mobile Internet access subscribers are projected to increase to 96.1 million, a 40% CAGR from 2009. 
• Growing dominance of Internet experience over all content consumption: Increasingly, the consumer has moved beyond thinking of the Internet as an end in itself, and expects all forms of media to embed the convenience, immediacy and interactivity of the Internet. People are already consuming magazines and newspapers on Internet-enabled tablets, and streaming personalized music services in preference to buying physical CDs.
• Increasing engagement and readiness to pay for content-driven by improved consumption experiences and convenience: Consumers are more willing to pay for content when accompanied by convenience and flexibility in usage, personalization and a differentiated experience that cannot be created elsewhere. Local relevance is also expected to enhance the content providers' ability to charge.  

Digital migration and consumer behavior changes have put extreme pressure on existing business models.  The proliferation of platforms and rising consumer expectations mean companies can no longer ‘be everything.'

"The industry must radically rethink its approach to monetizing content in capturing new revenue sources, from transactions or from participation with others operating in the evolving digital value chain... " added Ken Sharkey.   

Segment highlights In the US:

• Internet access and Internet advertising is expected to continue to outperform the other E&M segments, with 8.8 % and 7.7% CAGR, respectively 
• Video games (6.4% CAGR)
• TV subscriptions (6.5% CAGR)
• TV advertising (5.3% CAGR)
• Radio (4.6% CAGR),
• Filmed entertainment (3.6% CAGR)
• Out-of-home advertising (3.2% CAGR)
• Consumer and educational book publishing (2.5% CAGR)
• Business-to-business publishing (0.9% CAGR)
• Recorded music (-2.4 CAGR)
• Newspaper publishing (-2.8 CAGR)
• Consumer magazine publishing (-0.5 CAGR)
• Overall, US consumer/end-user spending is expected to grow by 3.7% CAGR

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