TORONTO – With consumers getting used to spending some money on content they source online – from an ever-growing slate of digital platforms in which media and entertainment companies are investing – the five-year spending growth curve looks pretty good from here, says consulting and research firm PricewaterhouseCoopers (PwC).
Entertainment and media (E&M) spending rose by 4.8% in Canada in 2010 and 3.2% for Canada and the U.S. combined, the first increase in North American spending since 2007, according to PwC’s Global Entertainment and Media Outlook 2011-2015, which provides forecasts and analysis on 13 major E&M industry segments in 48 countries.
"The entertainment and media industry is highly motivated to create experiences that engage today’s consumer, across multiple-platforms, which in turn is creating multiple opportunities for companies to profit," said Jerry Brown, associate partner in the entertainment and media practice for PwC.
Canada will grow faster than the U.S. through 2015, with an expected 6.1% compound annual increase compared with a 4.6% compound annual growth rate (CAGR) for the U.S., the report predicts. Gains in Canadian spending will be due to double-digit growth in Internet advertising (almost 15% CAGR) and increases of almost 12% for Internet access payments (both high speed and mobile), TV subscriptions (7.4%), trade magazines (6.9%) and out-of-home advertising (6.4%). Both advertising and consumer/end-user spending will also grow in Canada by 5.2% compounded annually.
Currently spending on digital platforms accounts for 26% of all global spending on entertainment and media, but by 2015 PwC says that share will rise to almost 34%, as more consumers access content online and through other non-traditional methods.
PwC notes these new platforms will largely be complementary to the traditional media business models. “Internet and TV advertising will grow by over 50% by 2015 (from US$5.6 billion to US$8.6 billion in Canada) while mobile apps, the spread of tablets and smartphones will mean a more than three-fold increase in mobile TV advertising (from US$77 million to US$241 million by 2015 in Canada),” reads the report.
"Video-on-demand, new streaming services and ‘cloud’ based digital storage solutions like digital lockers are going to feed Canadian consumers spending on TV and movies over the next five years," says Michael Paterson, partner in the entertainment and media practice of PwC. "At the same time, more consumers using smartphones and tablets, together with the increased downloading of video games and the growth of social network games will expand the online and wireless game market."
And while the newspaper market in Canada, forecasted to be US$3.1 billion in 2015, will be over 10% smaller than it was in 2006, paid online content and distribution to mobile devices will begin to offset ongoing decreases in print circulation spending. By 2015 newspaper publishing spending will edge up by 1.5% compounded annually.
"Innovative approaches have supported an unexpectedly strong recovery in advertising led by online and TV. This has helped restore the attractiveness of advertising-funded models for all media types and formats, which are blended with a subscription revenue stream," adds Brown.
The report also cautions that many consumers have learned to expect a lot of content to be free so convincing people to pay where they have not previously done so will be difficult and require a deep understanding of what consumers’ value.
"Consumers have never had it so good when it comes to accessing premium content over a variety of devices," added Paterson. "E&M CEOs need to adapt their business models to continue to meet what the consumer’s demand. The bottom line is that in order for business to continue to create quality content, someone has to pay."
"The challenge for Canadian entertainment and media companies will be to turn what consumers want and expect into sustainable, profitable and engaging relationships, by offering them advantages which they value,” added Brown. “As the digital market evolves and technologies and legislation mature, these factors will reduce the ubiquity of pirated content."
