PricewaterhouseCoopers Forecasts Entertainment and Media Growth

Posted on June 28, 2002

Despite the combined "triple whammy" of spillover from dot-com failures, a global economic/advertising market downturn, and the impacts of the 9/11 tragedy, global entertainment and media (E&M) industry spending grew in 2001 -- rising by 1.5 percent and exceeding the $1 trillion mark. Forecasting continued growth, PricewaterhouseCoopers anticipates that global E&M spending will reach $1.4 trillion in 2006, for a 5.2 percent compound annual growth rate (CAGR) over the next five years. These predictions were published in the latest edition of the annual PricewaterhouseCoopers Global Entertainment and Media Outlook: 2002-2006 -- a global five-year industry forecast.

On a global basis, notwithstanding the entertainment and media industry's resilience in 2001, weak economic conditions will continue to dampen spending in 2002 and 2003, but faster growth will resume in 2004-2006. Digital distribution, piracy and a rebounding global advertising market will be three main factors impacting the industry's growth over the next five years.

Principal Drivers of Growth

Digital distribution of content, aided by rising broadband penetration, will be the greatest driver of new entertainment and media spending in 2005-2006. For example, broadband connections in the U.S., driven by music and video-on-demand content that require high-speed connectivity, will surge from 9.4 million households in 2001 to 35.3 million in 2006 -- nearly equaling the narrowband sector at 38.2 million households.

Piracy and unauthorized use of copyrighted material will continue to limit growth throughout the forecast period, especially in recorded music. Unless an industry-wide solution is reached, piracy issues will begin seriously affecting other major E&M sectors, including filmed entertainment, home video and consumer book publishing.

Despite the near catastrophic year the global advertising market had in 2001, the Outlook forecasts a gradual rebound with the ad market beginning to re-solidify in 2002, gaining strength in 2003, and turning out strong single digit growth during 2004-2006. Global advertising spending is predicted to increase at a 4.8 percent CAGR, reaching a total of $405 billion in 2006, compared to $321 billion in 2001.

"The E&M sector's promising future is coming -- it's just taking a longer and more circuitous path than initially expected," said Kevin Carton, Global Leader of PricewaterhouseCoopers' Entertainment & Media Practice. "To see where the 'digital evolution' is headed, take a look at the surge in spending for digital cable and broadband Internet access. Consumers who've demanded a more diverse entertainment experience are leading the charge by subscribing to these upgraded distribution platforms, and new and more diverse content offerings will follow."

Growth by Region

At $438 billion in 2001, the United States was the largest market in terms of overall entertainment and media spending. It is projected to expand at a 5.5 percent CAGR through 2006.

Internet Advertising and Access Spending will enjoy significant growth, due mainly to broadband and subscriber upgrades to higher-priced access packages. This segment will experience double-digit compound annual growth of 10.8 percent in the U.S., with spending jumping to $40 billion by 2006. Increased channel capacity, coupled with a 'fatter pipe,' will not only drive Internet access spending in the U.S., but also television distribution spending. With digital cable and DBS comprising 73 percent of multichannel subscribers, TV Distribution spending will soar to $100 billion in 2006.

Europe, Middle East and Africa (EMEA) is the second largest region with 2001 E&M spending of $339 billion. Once again, the Internet will be the fastest growing segment, followed by Sports, which will be bolstered by the 2006 World Cup in Germany and its associated television rights. EMEA will continue to experience moderate growth for the duration of the forecast period, with spending reaching $426 billion by 2006.

Commented Robert Boyle, European leader for PricewaterhouseCoopers' Entertainment & Media Practice, "EMEA will continue to grow at a pace reflecting consumer demand for new entertainment and information options. We project strong growth in Internet and TV Networks and Distribution, fueled by consumer desire for digital technology and multi-platform access to premium content such as sports, movies, news and business information."

Asia/Pacific's E&M industry will be fueled by telecommunications deregulation, low Internet penetration levels that leave room for substantial growth (a 17.3 percent CAGR is expected), as well as government initiatives to promote Internet usage. In addition, the 2002 World Cup in Japan and Korea will bolster the Sports market.

PricewaterhouseCoopers' Asia/Pacific Entertainment & Media Practice Leader, Marcel Fenez, notes that, "Despite the sluggish Japanese economy and lost revenues due to piracy, the Asia/Pacific market has a promising future, with strong consumer markets for Internet and multichannel television and DVD offerings."

Growth in the Latin American market will continue through 2006. Low Internet and Television Distribution penetration rates have left significant room for expansion and will be the main reasons these sectors will be the fastest growing over the forecast period, with compound annual increases of 24.3 percent and 9.0 percent, respectively.

Canada, the smallest region with $24 billion in entertainment and media spending in 2001, is expected to be the fastest growing, at 5.7 percent CAGR. Primary drivers have been an advertising market that has held up relatively well despite the global economic downturn; a healthy home video and film production business; and the establishment of new digital channels.

Key Findings By Segment

Educational and Professional Books and Training -- Near-term economic weakness and slow labor force growth in EMEA and Asia/Pacific will hold growth to low single-digit rates. The market, already the largest on a global basis, will expand from $208 billion in 2001 to $261 billion in 2006, averaging 4.7 percent compound annual increases.

Filmed Entertainment -- Spending worldwide will be fueled by strong box office receipts, boosted by the expansion of local productions. DVDs will continue to boost the home video market, but the category will be adversely affected by piracy. The filmed entertainment segment will expand at a 5.7 percent CAGR, increasing from $59 billion in 2001 to $79 billion in 2006.

Television Networks (Broadcast and Cable) -- Projected advertising rebound, teamed with new channel launches, will drive growth. Canada will experience greatest growth rate -- 8.7 percent -- while U.S. spending is expected to reach more than $54 billion by 2006. Globally, television networks will peak at $144 billion in 2006.

TV Distribution (Station, Cable and Satellite) -- "Digital evolution" will positively affect this sector for the length of the forecast period, with upgrades to digital cable and satellite boosting subscription spending, especially in regions where cable and satellite penetration are already high. Subscriber growth will also drive spending in regions with low multichannel penetration. Global spending will rise to $210 billion by 2006, growing at a 6.9 percent CAGR.

Recorded Music -- This sector will be most vulnerable to piracy and unauthorized use of copyrighted material and will be the slowest growing, averaging only a 1.6 percent gain through 2006. By 2004, an improving economy and rising digital subscriptions will begin to offset declines in traditional music sales, with global spending reaching $38.5 billion in 2006.

Internet Advertising and Access Spending -- Fastest growing segment over the next five years, expanding by 12.1 percent CAGR to total $94 billion in 2006, up from $53 billion in 2001. The principal drivers will be increased broadband availability and rising online penetration, while a strong ecommerce market will lead to a rebound in online advertising.

Magazine Publishing -- Awaiting a global advertising and economic rebound, magazines will be hurt in the near term. The Internet will help publishers attract subscribers and a faster growing economy will boost advertising in 2005 and 2006. For the five-year forecast period, global growth will average 2.7 percent, with spending reaching $88.4 billion by 2006.

Newspaper Publishing -- Newspapers will grow slowly over forecast period due to the weak economy. Recruitment advertising, particularly sensitive to economic conditions, will lead to a further drop in spending in 2002, but will pick up as the economy improves, leading to a return to mid-single-digit growth. Market will reach $186 billion in 2006.

Consumer Book Publishing -- Digital distribution will develop slowly but will begin to have a real impact on the market in 2006. Lower prices will boost unit sales in EMEA and Asia/Pacific, but piracy will remain a problem in Latin America. Consumer book market spending will expand from $45 billion in 2001 to $51 billion in 2006, growing at a 2.6 percent average rate.

Radio and Out-of-Home Advertising -- Out-of-of home will be boosted by new technologies that create additional venues and make displays more attractive. Digital broadcasting will increase radio audiences and advertising, with consolidation making it easier for advertisers to buy both media. The market will grow from $46 billion in 2001 to $59 billion in 2006.

Sports -- The biggest driver over the forecast period will be The World Cup in 2002 and 2006, and rising television rights fees. However, financial problems for European rights holders will result in a decrease in rights fees in non-World Cup years. The segment will grow at a 6.6 percent average rate, rising to $50 billion in 2006 from $36 billion in 2001.

Theme Parks and Amusement Parks -- Weak economy and lower attendance following September 11 continue to dampen near-term spending, but park discounts will begin to lure customers back. New openings will draw more visitors in the next few years, while enhancements will make existing venues more appealing, and help attract repeat visitors. Market will grow to $23 billion in 2006 from $18 billion in 2001.

Business Information -- The economy will dampen near-term spending, with an uptick expected in 2005-2006. The development of new products, facilitated by enhanced distribution through broadband access, will contribute to growth once economic conditions improve. Spending will increase to $88 billion in 2006, a 5.0 percent CAGR.

The PricewaterhouseCoopers Global Entertainment and Media Outlook: 2002-2006 is available for $995. Individual segment chapters are available electronically, accompanied by the Executive Summary, and can also be purchased for $200 each.



More from Writers Write


Writing Contests
upcoming contests
Write Jobs
find a job
Writing Memes
funny writing-related memes
Stephen King Quotes
quotes from the master
Grammar Tips
improve your writing
Writing Prompts
spark your creativity