• by June 29, 2004

HERE'S THE LATEST OUTLOOK, ALL FIVE YEARS OF IT -- It's that time of year again: outlook season. And smack dab in the middle of a series of revised forecasts issued recently by Universal McCann, Monitor-Plus and CMR and ones later this year by Veronis Suhler Stevenson and MEDIA magazine, comes one released today by PricewaterhouseCoopers. Consistent with the other media industry seers, PwC anticipates a relatively healthy rate of expansion for the media industry overall and advertising in particular. PwC, which touts its version as the "industry's only five-year global forecast," now expects the worldwide entertainment and media industry to expand at a rate of 6.3 percent annually through 2008. Interestingly, the fastest growing medium in the mix isn't any of the traditional media, nor the Internet, or even wireless media technologies. According to PwC, it's video games, which will see spending increase at a rate of 20.1 percent over the next five years, compounded annually of course. In fact, the consultancy anticipates that the global video game marketplace will reach $55.6 billion by 2008, a point at which it will be poised for even bigger growth as new wireless and broadband distribution channels expand its marketplace, displacing the PC game marketplace, and slowing the relative growth of console-based games.

As vital as the video game forecast is, it's largely a non-advertising factor. And the fastest growing ad-supported medium, not surprisingly, is the Internet. Online ad spending will rise at an annual rate of 12.7 percent through 2008, when it will reach a projected $18.9 billion, according to the firm.

"Paid-search and rich media propelled spending in 2003," said Wayne Jackson, global leader of PricewaterhouseCoopers' Entertainment & Media Practice, noting that Internet ad spending actually rose 22.9 percent in 2003. "The growing number of broadband households along with expanding e-commerce makes the Internet more attractive to advertisers," he noted. By comparison, he said total worldwide ad spending would expand at a relatively modest rate of 5.2 percent annually, reaching $412 billion by 2008. That's considerably less than the half trillion mark Universal McCann forecaster Bob Coen projects the global ad economy would reach in 2005, but the two prognosticators likely are looking at different definitions of what constitutes advertising.

Advertising aside, PwC agrees with others forecasters that there are some fundamental changes taking place in the infrastructure of the entertainment and media industry, especially as new distribution channels such as broadband Internet access and wireless communications. The report projects that the number of broadband households will grown 31.3 percent annual to more than 300 million worldwide in 2008. This will in turn fuel growth in music download services and CD burning technologies, testing legal issues and business models for the recording industry.

"The Internet has evolved into a vital distribution channel, despite piracy issues faced by the music and movie industries. In 2003, licensed online music services began acquiring paying customers, showing that consumers will pay for high-quality entertainment that is easily accessible online. We expect to see the expansion of digital and online subscription services not only begin to lift the music industry later in the forecast period, but also positively impact segments such as film, video games and business information," projects PwC's Jackson.