Digital distribution of content, aided by rising broadband penetration, will be the greatest driver of new entertainment and media spending projected to reach $1.4 trillion by 2006, according to a five-year media forecast.
Accounting and consulting firm PricewaterhouseCoopers, in its annual global entertainment and media spending outlook, said overall spending actually rose by 1.5 percent in 2001, exceeding the $1 trillion mark. This, despite the "triple whammy" spillover from dot-com failures, a global economic/advertising market downturn, and the impacts of the 9/11 tragedy.
Notwithstanding the entertainment and media industry's resilience in 2001, the report said, weak economic conditions are expected to weigh on spending this year and next, with faster growth expected to resume by 2004-2006.
The firm expects spending on media to continue growing at a 5.2 percent compound annual growth rate (CAGR) over the next five years, which would peg it at $1.4 trillion by 2006. When faster growth resumes by 2004, its main driver will be digital distribution of content, aided by rising broadband penetration, the report said.
Broadband connections are expected to more than quadruple from 9.4 million households this year to about 35.3 million by 2006, within striking distance of the narrowband sector which numbers about 38.2 million households. The main drivers: music and video-on-demand content that require high-speed connectivity.
Internet advertising and access spending may be in the doldrums now, but as subscribers upgrade to higher-priced Internet access packages, ad spending to reach them will hit double-digit growth. "We project spending (in advertising and accee spending) will increase from $53 billion in 2001 to $93.6 billion in 2006, a 12.1 percent compound annual rate." Media Outlook 2009::
and the shift in spending to the Internet, PwC states in its annual forecast. Cablevision Helps Fight Pancreatic Cancer. DIGITAL DOWNLOAD
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The forecast said ad and access spending in the U.S. would total $40 billion in 2006, up from $23.9 billion in 2001, averaging 10.8 percent growth compounded annually.
Principal drivers: increased broadband availability and rising online penetration, expected to help fuel a strong e-commerce market and a rebound in online advertising.
In other findings broken out by segment, spending on business information is expected to remain dampened by the uncertainty currently weighing on the economy. But the development of new business information products, helped by faster Internet connections, add up to a compound annual growth rate of 5 percent by 2006, or a sub-sector expected to see $88 billion in spending by then.
With digital cable and DBS comprising 73 percent of multichannel subscribers, the survey said TV distribution spending will soar to $100 billion in 2006.
Europe, Middle East and Africa (EMEA) comprise the second largest region (outside of the U.S.) with 2001 E&M spending of $339 billion. The region is expected to see spending reach $426 billion by 2006, a moderate outlook with, again, Internet access the main driver. The report named sports as the next factor of growth, as Germany would be hosting the 2006 World Cup.
PWC said the Asia/Pacific region forecast is expected to 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. The report expects a bounce from the 2002 World Cup in Japan and Korea.
But lurking next to the digital media outlook, like a yin to the growth numbers' yang, is the impact of piracy and authorized use of ed material.
"Piracy and unauthorized use of ed 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."
Overall, despite the collapse in advertising spending in 2001, the outlook calls for a gradual rebound. The report said the ad market would "re-solidify" in 2002, gain strength in 2003, and hit "strong single digit growth during 2004-2006." PWC's outlook said global advertising spending would increase at a 4.8 percent CAGR to hit $405 billion by 2006, compared to $321 billion in 2001.
"To see where the 'digital evolution' is headed, take a look at the surge in spending for digital cable and broadband Internet access," said Kevin Carton, Global Leader of PWC's Entertainment & Media Practice. "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."
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