Media spending hits $1trillion

Despite the combined fall out from dot-com failures, an anaemic global economic/advertising market and the after effects of the 9/11 attacks, global entertainment and media (E&M) industry spending grew in 2001 by 1.5 percent to reach $1 trillion.

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By  Richard Brown Published  June 4, 2002

In its latest five-year report on the state of the global media and entertainment industry, PricewaterhouseCoopers expects worldwide E&M spending will reach $1.4 trillion in 2006, carried by a 5.2 percent compound annual growth rate (CAGR) during the next five years.

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.

Europe, Middle East and Africa (EMEA) is the second largest region with 2001 E&M spending of $339 billion. 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.

PwC warns that weak economic conditions will continue to limit 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 spurring the industry's growth over the next five years, according to the report.

Digital distribution of content, aided by rising broadband penetration, will be the greatest driver of new entertainment and media spending in 2005-2006, says PwC. Broadband connections in the US, driven by music and video-on-demand content that demand high-speed connectivity, will surge from 9.4 million households in 2001 to 35.3 million in 2006, almost matching 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.

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 US, 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.

The report notes that spending worldwide on filmed entertainment 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.

Meanwhile, growth in broadcast and cable television networks is projected to rebound with Canada set to enjoy the greatest growth rate at 8.7 percent, while US spending is expected to reach more than $54 billion by 2006. Globally, television networks will peak at $144 billion in 2006, says the study.

Upgrades to digital cable and satellite technology will drive 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.

Kevin Carton, global leader of PwC's Entertainment & Media Practice, remarks: “The E&M sector's promising future is coming - it's just taking a longer and more circuitous path than initially expected. 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.”

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