The internet and new technologies are set to power growth in the global entertainment and media industry, according to a new report from the influential consultants PricewaterhouseCoopers.
Entertainment and media industry spending will increase at a 6.3 percent growth rate of $1.7trillion in 2008, sparked by an impressive growth in the Asia/Pacific region and improved by economic conditions and online distribution.
After three years of sluggish growth, said the acountancy firm, the media sector has “begun a solid upturn”.
In particular, it said Internet advertising spending rebounded strongly in 2003, growing by whopping 22.9 percent, after a weak 2001-2002.
And other forms of media not geared to younger people, such as print, will lose out as digital media continues to attract younger audiences attractive to advertisers.
Wayne Jackson, global leader of PricewaterhouseCoopers' entertainment and media practice, said: “Paid-search and rich media propelled spending in 2003, and the growing number of broadband households along with expanding e-commerce makes the Internet more attractive to advertisers.”
Despite being the smallest of the six advertising media tracked by PricewaterhouseCoopers, the firm believes the Internet will remain the fastest-growing advertising medium, growing to a projected $18.9 billion in 2008 with a 12.7 percent growth.
PricewaterhouseCoopers said the media industry is experiencing a “major shift in the way entertainment is distributed, with new distribution channels, such as broadband Internet access and wireless communications, driving significant growth in the industry.
It predicts that during the next five years, the number of broadband households will grow by over 31 percent annually, surpassing the 300 million mark for the first time in 2008.
This shift will impact music, although it thinks legal measures against piracy, lower prices, and an improved economy will help start turning the music industry around in 2005, with a projected 2 percent growth for the 2004-2008 period.
Spending in the media sector rose 4.2 percent in 2003 to $1.2 trillion, while “growth prospects looking brighter now than they have since the late 1990s”. Growth looks set to pick up to 5.7 percent globally in 2004 and sustain faster increases through 2008, according to the firm.
Jackson added: “After a few years of economic uncertainty, our projections for industry growth are encouraging across the board, highlighted by particularly swift gains in the video games and Internet advertising and access spending segments.
“However, while the global outlook is stronger than in the previous few years, budgetary pressures such as rising energy costs and increased defence and domestic security spending will limit the resources available to the entertainment and media industry.”
The firm said the Asia/Pacific region will be a key driver in this growth, fueled largely by the highly populated China and India, both of which are investing heavily in communications and media infrastructure and opening up their markets.
The video games and Internet segments there “will be the world's largest and fastest-growing,” despite the threat of piracy.
In Europe, PricewaterhouseCoopers said the next five years look good, driven by the penetration of new technologies like the DVD, mobile communications and broadband and an average of double-digit growth through to 2008.
The firm also gave the thumbs-up for the prospects for digital distribution, which could even aid the recovery of CD sales.
Furthermore, as digital television replaces analogue, the market for advertisers and subscribers will expand.
Digital audio broadcasting (DAB) and satellite radio will help attract new advertisers. DVDs are set to revitalised the home video market, although rental will get killed-off by cheap DVDs.
Overall global advertising spending will increase at a solid 5.3 percent during the 2004-08 period, rising to $412 billion in 2008 from $318 billion in 2003.
TV advertising is projected to expand by 6.5 percent during 2004-2008, boosted by new channels as well as advertising associated with the 2004, 2006 and 2008 Olympic Games, and the 2006 FIFA World Cup. Television remains the largest advertising medium, rising to $164 billion in 2008.
Print advertising will improve slowly – by a 4.3 percent for magazines and a 3.3 percent for newspapers – and will continue to lose share to electronic media such as TV, which will have younger demographics.
The U.S. looks set to remain the largest entertainment and media market reaching a size of $680 billion in 2008, followed by Europe and the Middle East on $549 billion and Asia/Pacific on $366 billion.
The video games market will be the fastest-growing segment during the next five years, increasing to a size of $55.6 billion in 2008, at a 20.1 percent rate of growth.
Online and wireless will be major distribution channels, spurred by broadband penetration and new mobile phones which will be used as much for entertainment as for communication, said the firm.
This means bad news for the PC games market however, as console gaming will grow faster than PC gaming.