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THE END OF THE DIGITAL BEGINNING: CHALLENGE FOR MEDIA COMPANIES NOW LIES IN HOW TO IMPLEMENT THEIR DIGITAL STRATEGIES

Digital migration is increasingly playing out differently across the various segments and geographies of the entertainment and media industry says PwC’s Global Entertainment and Media Outlook 2012-2016. Despite ongoing economic uncertainty, the past year has seen global sales of tablets and smart devices reach record levels once again, underlining the growing revenue opportunities from digital delivery of entertainment and media (E&M) content and advertising to increasingly connected, and particularly mobile, consumers.

According to PwC’s annual Global Entertainment and Media Outlook 2012-2016, released today, digital opportunities are now well understood by media companies, advertising agencies and advertisers themselves: the industry is approaching the ‘end of the digital beginning’ as rising comfort levels with digital mean that it is becoming business-as-usual. Although the ‘fog’ experienced in the past few years around strategic options is lifting, there is more to be done: today’s challenge is in the implementation of those digital strategies.

A world of difference

PwC believes that though the focus may still be on digital migration, challenges for E&M companies differ according to diverging market pictures across segments and geographies.

Tipping points and contrasting market development rates highlighted by this year’s Outlook data and analysis show:

• Global entertainment and media spending on digital advertising and consumer formats increased by 17.6 percent in 2011 compared with only a 0.6 percent rise in non-digital spending. Digital’s share of total spend will grow from 28 percent in 2011 to 37.5 percent in 2016, and digital spending will account for 67 percent of total E&M spending growth to 2016.
• Digital maturity varies widely at a segment level. For example, global spending on digital recorded music formats will overtake physical distribution in 2015, reaching 55 percent of total revenues in 2016. And global spending on online and wireless video games will overtake console and PC games revenues in 2013. By contrast, the digital component of consumer magazines will account for only 10.4 percent of spending by 2016, up from 3.1 percent in 2011.
• Global spending on music rose 1.3 percent in 2011, the first gain in many years, thanks to growth in the concert and music festival market and a slower decline in recorded music. Rises in digital music spending mean that overall, global spending on recorded music will finally begin to increase in 2013.
• Mobile internet access subscriber numbers, a key driver of digital spending, will more than double during the next five years to 2.9 billion by 2016, of which almost 1 billion will be in China. In India, mobile internet subscribers will increase from a low base at a compound annual rate of 50.8 percent to 2016, making it the fastest growth market for mobile internet in the world.
• By 2016, global mobile internet advertising revenues of $24.5 billion will grow at 36.5 percent compounded annually, to almost match the size of the classified internet advertising market. However, paid search at $78.1 billion and banner/display at $46.6 billion will retain the lion’s share of the market in 2016. China’s mobile internet advertising market will grow at a compound rate of 68.4 percent to reach $6.2 billion in 2016, making it the second largest market in the world behind the United States at $9.4 billion.
• The newspaper publishing segment illustrates diverging trends across mature and growth economies. There will be ongoing declines in some territories such as the United States (declining 1.4 percent compounded annually to 2016, and expected to be worth 43.8 percent less in 2016 than 2007), but strong growth in countries where the digital infrastructure is less mature, such as Argentina (11.9 percent growth compounded annually to 2016), Indonesia (11.2 percent), and India (9.6 percent).
• France passed the United Kingdom and Germany in 2011 to become the second largest TV subscriptions market in the world behind the United States, driven by a 76 percent rise in IPTV households. In the TV advertising segment, spending in Russia surged by 20.2 percent in 2011; by 2016, Russia will overtake the UK, Germany, Italy, and France to become the largest TV advertising market in EMEA (Europe, Middle East and Africa).
• In the worldwide filmed entertainment market, over-the-top/streaming services will grow at a 21.0 percent CAGR to $11 billion in 2016, and will overtake spending through TV subscription providers in 2012.