(please note, figures in this post are taken from the slide deck as it was presented live, and need to be double-checked against the report)
I'm currently sitting in the audience for the launch of PricewaterhouseCooper's annual Entertainment and Media Outlook 2010-2014 report. Some of the findings were already released earlier this week, specifically that online advertising will overtake television as the largest media sector in terms of advertising spending by 2014. The main highlight from the report however is that it is categorically impossible to ignore both digital advertising and consumer spending on digital services - as indeed it has been for some time - but the huge influence of digital services is laid very plain within the predictions. Indeed, almost 33 percent of entertainment and media spending will be spent on digital services by 2014, up from around 23 percent today.
According to PwC the recession had a positive impact on the digital industry, and accelerated the pace of customer migration to digital services as they had less money to spend on consumables such as DVDs, and spent more time online (despite that however the film sector was the star performer, with strong box office receipts). Last year may in fact have marked the beginning of the end of the DVD.
Overall the media and entertainment market will grow globally by 5.0 percent CAGR from now until 2015, up to 16.5 percent in Saudi Arabia and 12 percent in China. Australia is expected to grow slightly ahead of other developed economies at 5.1 percent. Interestingly growth in the consumer books market is expected to grow at 4.8 percent in Australia compared to 1.7 percent in global markets, as Australia catches up in the migration to ebooks and ebook readers, and the recorded music industry will grow by 6.3 percent, about four times that of the global market, thanks to new music subscription services and greater use of paid music download services. Australia will see digital revenues overtake traditional revenues in recorded music by 2014, and will be one of the first countries where this happens.
The decline of traditional advertising is one of the stand-out predictions of the report. Advertising in the US in 2014 will still be below that of 2007, as brands look to different ways ot communicating their message to consumers. Globally there is expected to be minimal changes in total segment size over that period however, with a slight decline for print. However, the current strong performance of television is unlikely to be sustained, as it has been boosted by the recent release of funds for advertising at the end of the global financial crisis, with television being the easiest place to spend them.
For Australia, the standout prediction is that online advertising will grow from $1.8 billion to $3.89 billion by 2014, making it the biggest advertising category. Television will stay strong, while newspaper advertising will grow at 2.8 percent, thanks to digital advertising within newspapers and emergng opportunities for serving rich media products and advertising to mobile devices. As a sector however newspapers will decline in share from 32 percent to 27 percent, and consumer spending on newspapers will drop by 1 percent (compared to global growth of around 1 percent, thanks to growth in the Middle East and India).
Mobile will come of age in 2010-2011 as networks become more reliable, and the consumer obsession with devices rolls on. People will also remain loyal to content (if not to channels of distribution). The internet experience will increase its dominance of other media experiences such as television and recorded music, with a maturing of the social media side of the internet. Further, experiences drive revenue - such as how people will pay to see a concert but are less willing to pay for recorded music, and making services conventient actually does pay off.
There are four issues that traditional media companies need to keep a check on - IP rights, release windows, regulation and the need for significant operational step-changes in their business models. Each will hold back these companies' abilities to follow their consumers online, and hence threatening their long-term survival. For the latter it is important to ensure that staff are rewarded and motivated to go with the changes that are happening.