• by Jack Loechner , Staff Writer @mp_research, June 19, 2014

According to PwC’s Global entertainment and media outlook 2014-2018, total entertainment and media spending on digital services is forecast to grow at a 12.2% compound annual growth rate between 2013 and 2018 and account for 65% of global entertainment and media spending growth, excluding spending on Internet access. In 2018, 33% of total advertising revenue is forecast to be digital, compared to 17% of consumer revenue, applying a digital mindset advancing from a digital strategy to a business strategy, fit for a digital age.

Marcel Fenez, PwC’s Global leader, entertainment & media, says: “… digital mindset: getting ever closer to the customer across the entire organization, and in everything it does… adopt more flexible business models… exhibit three behaviors: forging trust with consumers; creating the confidence to move with speed and agility; and empowering innovation… an important step in monetizing the digital consumer… ”

Mobile Internet penetration will reach 55% in 2018, which will help drive digital advertising to increase its share of total advertising revenue. With Internet advertising growing at a 10.7% CAGR (compared to a total advertising CAGR of 4.4%), the industry is approaching a significant tipping point: in 2018, Internet advertising will be poised to surpass TV advertising, when it will trail TV advertising by just US$20bn. Mobile Internet advertising is forecast to grow at a CAGR of 21.5%.

Spending on digitally delivered content will account for only 17% of total consumer spending in 2018 (excluding Internet access), compared to 33% of total advertising spending, says the report. The growth of ‘24/7 access’ and micro-transactions suggest that the key to monetizing the digital consumer is to adopt business models that offer more choices and better experiences. Electronic home video over-the-top (OTT)/streaming, and digital music streaming, are two of the fastest-growing consumer sub-segments cited in the study, set to rise at annual rates of 28.1% and 13.4% respectively.

Internationally, says the report, nine high-growth markets are powering global entertainment and media revenue. China, Brazil, Russia, India, Mexico, South Africa, Turkey, Argentina and Indonesia collectively are forecast to account for 21.7% of global entertainment and media revenue in 2018. And, China will overtake Japan as the world’s second-largest entertainment and media market, behind only the US. 

Marcel Fenez, PwC’s Global leader, entertainment and media, says: “… all these markets have… a growing middle class boosting spending in entertainment and media… domestic organizations are in prime position to realize the opportunity of the emerging middle class… optimal approach for international players will… be to collaborate with local partners.”

Advertising is spearheading migration to digital, says the report:

• Internet TV advertising will double its share of total TV advertising revenue in the next five years. Internet TV advertising revenue from traditional broadcasters will increase from US$3.7bn in 2013 to US$9.7bn in 2018, and more than double its share of total TV advertising from 2.2% in 2013 to 4.5% in 2018. Traditional broadcasters still dominate and are adapting to the Internet video opportunity, creating a significant new revenue stream despite competition from Internet rivals.
• Mobile advertising will overtake classified Internet advertising in 2014. Global mobile Internet advertising revenue is forecast to leapfrog classified Internet advertising to become the third-largest Internet advertising channel with revenues of US$18.9bn in 2014.
• Global digital consumer magazine advertising revenue will be US$12.4bn in 2018, rising at a 17.6% CAGR; digital circulation revenue will be just US$5.7bn in the same year. This compares to a decline of -3.9% CAGR for consumer magazine print advertising revenue.
• DOOH advertising is driving overall OOH advertising growth globally at a CAGR of 16.2%. In some fast-growing markets, DOOH advertising revenue is forecast to grow with CAGRs in excess of 30%. China is set to become the largest DOOH advertising market in the world by 2017.

Concluding, the report provides some digital data dollar forecasts:

• Subscription TV will not be daunted by the rise of OTT as it grows across global markets. Global subscription TV revenues (excluding license fees) will grow at a CAGR of 3.5% over the next five years to US$236bn in 2018.
• Global box office revenue will exceed revenue from physical home video in 2014 and grow to US$45.9bn by 2018, from US$36.1bn in 2013, a 4.9% CAGR. In many growth markets, cinemas are being built to cater to the growing middle class.
• Digital newspaper circulation revenue grew by 66.2% through 2013. Digital circulation will make up just 8% of total circulation revenue globally by 2018.
• Digital music streaming revenue will grow at a 13.4% CAGR, and electronic home video OTT/streaming will rise at a 28.1%.
• Globally, the total combined revenue from OTT/streaming services and broadcasters’ video on demand services will grow at a CAGR of 19.9%. This will overtake physical home video revenue (DVDs and Blu-ray discs) in 2018.
• Global total digital recorded music revenue of US$10.18bn will exceed physical recorded music revenues of US$10.17bn for the first time in 2014.  

For additional information from PwC, please visit here.