Worldwide spending on entertainment and media will grow from $1.4 trillion in 2010 to $1.9 trillion by 2015, according to Pricewaterhouse Coopers' "Global Entertainment & Media Outlook" for 2011-2015.
PwC expects the entertainment industry's post-recession upswing to continue over the next five years, with consumer spending and advertising revenue related to entertainment and media content (E&M) growing at a compound annual growth rate of 5.7% globally. In the United States, E&M-related spending is expected to grow at a 4.6% CAGR to $555 billion in 2015 from $443 billion in 2010.
Digital platforms are driving future operating models, consumer relationships and revenue growth, PwC found. Consumers in today's tech-laden world feel more empowered, and the E&M industry is being forced to create multi-purpose/multi-platform experiences, which also create additional money-making opportunities. The report states that digital is expected to account for 58.7% of all growth by 2015.
"Triggered in large part by the device revolution, the consumer migration to digital has continued at an even faster pace," said Ken Sharkey,PwC entertainment, media and communications U.S. practice leader, in releasing the data. "At the same time advertisers are responding by seeking a greater involvement with the consumer's media and entertainment experience."
In a world where digital is king and pirates are out to overthrow the monarch, PwC predicts that the biggest challenge for entertainment and media companies over that time frame it so leverage five key consumer attributes--convenience, experience, quality, participation and privilege--into a sustainable business model by offering "advantages that outweigh the attractiveness of free or pirated content."
Advertising revenue has shown the strongest growth year-over-year, PwC said; U.S. advertising revenue rebounded at a 5.4 percent growth rate in 2010 from a 14.4 percent slump in 2009. By 2015, U.S. advertising is expected to reach $208 billion, increasing at a 4.2% CAGR overall. The key sectors driving ad revenue include include Internet advertising, expected to increase at a 12.2% CAGR; TV (4.9% CAGR); video games (8% CAGR) and cinema (6.7% CAGR). Directories (-1.8%) and newspaper advertising (-0.2%) are the only advertising categories expected to decline, PwC said.
In a good-news, not-as-good-news scenario for cable operators, PwC projects that consumer spending in the U.S. on combined wired and mobile Internet access will grow at a healthy pace, but expects the cable subs universe to continue to decline to just a hair above half of all TV households. Nonetheless, cable will remain "the dominant television subscription service in the United States," the report states.
Wired and wireless broadband spending is expected to increase by a CAGR of 7.8% to $63.1 billion in 2015 from $43.3 billion in 2010, according to the report.
The number of cable households in the U.S. will decrease by 0.7% annually over the next five years, slipping to about 60 million homes by 2015, or about 50.3% of total TV households, PwC said. In the same timeframe, phone company TV subs will rise to about 15 million, from 7 million in 2010, while satellite will level off a little north of 32 million homes by 2015.
Subscription spending is projected to jump by 5.9% in 2011, driven principally by rising prices, according to PwC.