• by Gavin O'Malley  @mp_gavin, June 14, 2011

Digital has emerged as the central driver for media companies' operating models, consumer connections and revenues, according to PwC's Global entertainment and media outlook: 2011-2015.

Domestically, the E&M market is expected to grow at 4.6% compound annual growth rates -- reaching $555 billion in 2015 -- while online ad growth should average 12.2% annually through 2015.

Total U.S. advertising is expected to increase at a 4.2% CAGR -- from $170 billion in 2010 to $208 billion in 2015.

Emerging out of a prolonged recession, PwC predicts that global E&M spending will rise from $1.4 trillion in 2010 to $1.9 trillion by 2015, growing at a 5.7% CAGR.

According to the forecast, the entire E&M industry is being driven to engage today's "empowered" consumer by redesigning the content experience to be multipurpose and multiplatform. That, in turn, creates multiple opportunities for monetization.

"Triggered in large part by the device revolution, the consumer migration to digital has continued at an even faster pace, and, at the same time, advertisers are responding by seeking a greater involvement with the consumer's media and entertainment experience," said Ken Sharkey, entertainment, media and communications US practice leader, PwC.

"The biggest challenge for E&M companies is to turn five key attributes that matter to consumers -- convenience, experience, quality, participation and privilege -- into sustainable, profitable and engaged relationships by offering advantages that outweigh the attractiveness of free or pirated content."

While digital currently accounts for just over one-quarter of total industry revenues, it is expected to account for 58.7% of all growth in spending during the next five years, globally.

Domestically, digital spending is expected to account for 28.5% of all E&M spending in 2015 -- up from 20.6% in 2010.

Advertising, the most cyclically sensitive of the three E&M spending streams -- advertising, consumer and end-user spending -- recorded the largest year-on-year swing, rebounding in the U.S. at 5.4% in 2010 from a 14.4% slump in 2009.

According to PwC, as content providers leverage creative thinking and innovation to drive digital revenues, advertisers and agencies are becoming increasingly sophisticated in identifying and creating new brand opportunities and ways to engage with consumers on digital content services and platforms. They are also listening and engaging directly with consumers to a greater extent.

These new approaches are aiding the unexpected strong recovery in advertising and restoring the attractiveness of advertising-funded models, which are often blended with a subscription model.

Digitization is opening major opportunities for new types of services, business models, collaborative partnerships and consumer relationships across the E&M industry. It is happening alongside innovations in devices, delivery methods and pricing.