Irish entertainment & media market to grow 4.2% annually to 2017
Constant digital innovation becomes the new licence to operate as entertainment and media businesses raise their game in agility and customer insight.
PwC projects revenue growth for the Irish entertainment & media (E&M) market to be 4.2% compounded annually (CAGR) over the next five years to €4.6 billion by 2017. This growth is primarily driven by digital sectors. According to PwC’s Global entertainment and media outlook: 2013-2017, the global entertainment and media market is set to grow over the next five years fuelled primarily by increasing internet access and the growing population of smartphones.
Speaking at the launch, Susan Kilty, Partner, PwC entertainment & media practice, said:
“In Ireland it is evident that digital is beginning to displace the traditional media forms. Digital revenue is growing at a rate of 13.2% CAGR and is helping to absorb a marginal decline of 0.3% for the non-digital forms of media”.
Digital revenue includes consumer spending on internet access, digital content, and digital advertising with the ratio of digital revenue to non digital revenue steadily increasing over the five years, representing 42% or €1.9bn of the Irish market by 2017. In response, E&M businesses are continuing to raise their game in terms of customer insight and in business and operating model agility. Constant digital innovation is the new license to operate.
Internet access and technology market:
Mobile internet access currently accounts for less than half of 2013 Ireland revenues Ireland at €416m but this will rise to €865m in 2017 or almost double fixed broadband access revenues within five years.
Internet infrastructure in Ireland is also improving with higher data speeds on mobile network services and increased penetration of high bandwidth fixed line broadband services helping Irish businesses and consumers better engage online. The recent successful spectrum auction in Ireland should further improve online access as mobile operators start to roll out 4G services (fourth generation mobile) offering greatly improved data speeds.
Amy Ball, PwC entertainment & media practice, added:
“This may not necessarily translate into increased ARPUs (average revenue per users) in the long term for communications providers as internet access is now seen as a utility rather than a luxury in both advanced and emerging markets. Mobile operators may be able to command a premium for 4G or next generation network services temporarily, but pressure to migrate customers will lead to intense price competition and will limit ARPU growth. It is expected that the proliferation of 4G services will drive mobile internet adoption and will lead to an increase in overall subscriber numbers across a greater geographical reach”.
The increased reach offered by enhanced networks should offer mobile operators and retailers alike the opportunity to gain greater insight into how consumers consume their products and services. Consumers willing to collaborate and share information in exchange for discounts or deals i.e. enhanced experiences, will help companies tailor their offerings so that the consumer can achieve a desired lifestyle and retail outcome via customised experiences and offers.
With global internet advertising revenue exceeding newspaper advertising revenues for the first time in 2012, online is becoming a more dominant format and is now the second highest advertising revenue generator behind television at a global level, and second to newspaper locally. In Ireland, internet advertising revenues are projected to double from €213m in 2013 to €347m in 2017, representing a CAGR of 14.4%. Wired internet advertising will continue to dominate the market rising to €334m however mobile will grow by 23.2% CAGR. Video advertising and mobile advertising will start to play a significant role in the online ad market by the end of 2017 with online video game advertising showing growth of 17.4% annually from almost €10m in 2013 to €18m in 2017. Mobile devices are starting to become the primary rather than secondary way to reach internet which opens up new opportunities for advertisers such as app and location based advertising. Advertisers need to target and engage consumers at an ever more personal level and they need new measurement techniques to ensure relevance and demonstrate returns on ad spend. Audiences increasingly consume media across multiple screens, devices and platforms. “Search” remains the dominant form of online advertising globally. The Irish online market is boosted by the presence of many of the largest web companies located in Dublin including Facebook, Google, Microsoft, Twitter and LinkedIn.
Consumer spending on traditional media will dominate in the near term as PwC recognise the clear and ongoing challenge in converting digital consumption into digital revenues. However, consumers have become more accustomed to purchasing digital media and have become more digitally advanced. The physical home video market in Ireland, including sales/rentals of DVDs and blu-ray, will be worth less than the box office for the first time in 2013. PwC expects that DVD and Blu-ray rentals in Ireland will be worst hit with a decline of 28.6% CAGR to €4.8m over the next five years. Back in 2008, the rental market was a €68m business. Outlets for legally buying DVDs and Blu-rays are experiencing difficulties as evidenced by the decline of Blockbuster, Xtravision and HMV locally, partly because of piracy, and partly because of the popularity of online retailers.
The rollout of Netflix in Ireland is leading the way for OTT (over the top) movie streaming services with Netflix now investing in its own content.
Globally, new digital services, notably music subscriptions, have become successful in their home markets and are becoming the driving force behind digital growth in an increasing number of developed countries at the moment. Over a third (43%) of all recorded music sales in Ireland are in a digital format and this is expected to rise to 64% by 2017 to €38m. Irish revenue from spending on tickets to live concerts as well as concert sponsorships is expected to rise annually in the years to 2017 to €160m.
Digital access to newspaper content is increasing rapidly while at the same time print circulation is decreasing. A long term decline in newspaper advertising revenues means that circulation will represent an increasing percentage of overall revenues. While the newspaper industry in Ireland will register a decline of 3.3% CAGR or €93m, digital circulation spending will increase by 36.4% CAGR over the five year period. In mature markets, including Ireland, digital paywalls will become mainstream. The huge increase in ownership of connected devices has provided an immediate way for newspaper publishers to adopt their core product to target customers with content where and when they want it. Yet a printed edition will remain a central part of that proposition for now. Thanks to free dailies and digital editions, newspaper readership, if not circulation, is actually increasing. Market research conducted in late 2012 reported that 86% of the population of Ireland regularly read a printed or online newspaper. Digital advertising revenues in this sector are forecast to increase to €60m from a base of €46m in 2013 with print advertising revenues declining by €69m to €270m in 2017. PwC’s Outlook for the E&M sector finds the industry at a tipping point.
Susan Kilty concluded:
“Drivers for future growth in Ireland include higher broadband penetration – estimated to be at 80% in 2017 – and increased usage of the web. By creating a personalised, relevant experience to the connected consumer, businesses will benefit from greater customer insight and can harness the benefits that the digital age will bring. In addition, by leveraging the power of “Big data and analytics” to better understand consumer’s current patterns and predict future buying behaviours, firms can adapt their operating model to deliver sustainable profits”.
Notes for editors:
Additional key statistics from PwC’s Global entertainment and media outlook: 2013-2017:
- Mobile broadband will be a key driving force
Growth in E&M revenues will be driven by digital services enabled through both fixed and increasingly mobile broadband. Household broadband penetration globally is forecast to increase by 11 percentage points to 51% in 2017. However, that growth will be dwarfed by growth in mobile broadband, whose penetration will rise by 31 percentage points from 2012 to 2017 to reach 54%
- Consumer spending on E&M: traditional media will dominate in the near term
There is a clear and ongoing challenge in converting digital consumption into digital revenues. The 9% of overall consumer E&M spend on digital content in 2012 will rise to just 16% of total spend even by 2017
- Consumer E&M content spend will increasingly shift to digital formats
Consumer spending on E&M content is continuing to shift away from items that would traditionally be physical purchases - such as boxed video games, DVDs and music CDs - and which have traditionally represented the majority of the market. Indeed, in 2008 spending on physical constituted 88% of total spending, which has dropped to 73% today and which will continue falling as consumers become more accustomed to purchasing digital media and become more digitally advanced. By 2017, physical purchases will represent just 53% of spend
- Growth in advertising E&M spend: Internet and video games set the pace
Within the E&M sector as a whole, internet advertising will be the fastest-growing segment, with a 13.1% CAGR during the forecast period. The segment is currently worth US$100.2 billion and set to reach US$185.4 billion by 2017. Video games at a 6.5% CAGR and TV advertising at a 5.3% CAGR are also showing strong growth
- In advertising spend, China will overtake Japan in 2016
In terms of the largest markets for advertising spend, China will surpass Japan to become the second-largest market in 2016 as the Japanese advertising market matures and begins showing less room for growth
Additional notable segment statistics and tipping points:
- Online TV advertising revenues will triple between 2012 and 2017, but will remain a fraction of traditional TV revenues. In Japan and South Korea, online TV advertising will, on average, more than double every year until 2017. Such aggressive growth will see Japan become the third largest market for online TV advertising globally, behind only the US and the UK. South Korea’s emergence will see it move up to number eight
- The US will still dominate global TV advertising revenues, accounting for 39% of the global total in 2017, which is only a modest drop from 2012’s 39.4%. But the fastest rates of growth will be in other markets, including Kenya (16% CAGR), Indonesia (15% CAGR), India (12% CAGR), Nigeria (11% CAGR) and Brazil (10% CAGR)
- In out-of-home advertising there will be double-digit CAGR growth in two countries—India (11% CAGR) and Brazil (10% CAGR), fuelled by a trend towards urbanisation and investment in transport infrastructure
- Mobile will be the fastest-growing video games sector over the next five years, with revenues increasing from US$8.8 billion in 2012 to US$14.4 billion in 2017 by a CAGR of 10% as an increasing number of consumers turn to smartphones for entertainment
- Revenues from the worldwide physical-home-video market – sales and rentals of DVDs and Blu-ray – will be worth less than box office for the first time in 2014. In 2014 the physical home video market worldwide will be worth US$36 billion compared to worldwide box office of US$38 billion
- Consumer spend on console games will increase by a CAGR of 5% from US$24.9 billion in 2012 to US$31.2 billion in 2017 as new consoles reignite interest in console gaming. This growth will lead to North America overtaking Western Europe to regain its number one position for console sales in 2014
- The online video advertising market boomed in 2012, with an increase in the annual revenue of approximately US$1 billion, representing year-on-year growth of 33%. This growth is set to continue over the forecast period with revenues reaching US$12 billion in 2017, boosted by 26% CAGR
- Live music is continuing to grow, with sales of tickets and sponsorship forecast to generate revenues of US$30.9 billion in 2017, up from US$26.5 billion in 2012, a CAGR of 3%. This growth will more than offset continued decline in recorded-music revenues
Opportunities and challenges vary by market and industry segment:
As digital innovation and growth continues to dominate the E&M industry landscape, so new trends will emerge in the coming years. The impact of these trends are forecast to vary by market and by segment, and are reflected in this year’s Outlook as tipping points or contrasting market rates. The more mature markets of North America, Western Europe and Asia Pacific will be instrumental in driving the global shift towards digital consumption of E&M services.
- In 2014, mobile Internet revenues, at US$259 billion will account for more than 50% of total Internet access spend, overtaking those from fixed-broadband. Mobile internet spend is expected to exceed fixed spend in the US and South Korea in 2013 and the UK in 2015. For some markets like South Africa and Indonesia, mobile Internet spend is forecast to be higher than fixed across the whole forecast period
- Digital E&M spend, encouraged by widespread ownership of smart devices, will constitute 44% of all spending in the mature markets by 2017, which is almost double the level in 2008 and up from 34% in 2012
- Every territory is showing double digit growth in the online TV category (from a low base) with the mature markets clearly leading the way. The top 5 in 2012 were the US, the UK, Germany, France and Canada
- The annual value of North America’s electronic home video market - both pay-TV and over-the-top streaming services - will surpass box office for the first time in 2017. North America’s electronic home video market will be US$14.78 billion in 2017 compared to box office US$13.5 billion
- Mobile advertising is becoming a reality, with growth forecast across all regions over the next five years. A 27% CAGR will ensure mobile advertising revenues will be in excess of US$27 billion in 2017, comprising 15% of Internet advertising revenues
China, Brazil, India, Russia, the Middle East and North Africa, Mexico, Indonesia, and Argentina will see the most growth and will challenge the existing ranking of markets by revenue.
- While there is no change in the markets in the top 10, there is considerable reshuffling. Looking solely at consumer spending on E&M, China will rise from fifth in 2012 to third in 2017, surpassing the UK in 2013 and Germany in 2016. Brazil will also grow, surpassing Canada in 2014 and South Korea and Italy in 2016 to reach number seven. India will pass Australia in 2014 but remain just outside the top 10 consumer spending markets.
- Brazil will surpass UK, Canada and India in 2013 to become the third largest market for TV subscriptions (excluding licence fees). Brazil is one of the fastest growing markets for consumer spending within the subscription segment at 13% CAGR
- When including all TV revenues China surpasses both UK and Japan in 2014 to reach the third spot (behind the US and Germany). China will also jump beyond Germany in 2015 to become the second largest TV market
- Indonesia will be the fastest-growing TV market with 21% CAGR in revenues and a market set to be worth US$1.7 billion in 2017, while Kenya, Thailand and Vietnam also all show impressive growth (13%+ CAGR). In the mature markets of Europe growth will generally be limited to 1-3%
- The global trade-show business will be worth in excess of US$36 billion in 2017, up from approximately US$29.4 billion in 2012. The US, Germany, France, the UK and Japan will again be the key markets. However, China can expect to surpass the UK and Japan in 2014 to reach number four
After a period of decline a number of segments will start to stabilise or see modest growth, fuelled in-part by the spending power of a growing middle class in a number of the fast growing markets.
- Following a fall in spending towards the end of the last decade, the out-of-home (OOH) advertising market will enter a sustained period of growth as expenditure increases from US$33.8 billion in 2012 to US$42.8 billion in 2017 representing 5% CAGR. This is helped by innovative technologies and infrastructure improvements
- Global newspaper publishing revenues from sales and advertising were US$164 billion in 2012, down from US$187 billion in 2008. However, after a period of decline revenues will stabilise and remain at 2012 levels for the forecast period. Globally, continued expansion in growth markets will offset the longer-term declines in mature markets. A similar trend will also emerge in Consumer magazine publishing
Industry trends are having profound effects on key stakeholders:
To harness growth and turn it into rising digital revenues, E&M companies of all types are evaluating their competitive advantages and redefining their positions in the evolving ecosystem - with the connected consumer at its core. To achieve this successfully, every industry participant will need to invest in constant innovation that encompasses its products and services, its operating and business models and - most importantly - its customer experience, understanding and engagement.
Outlook findings showcase how current industry trends are impacting consumers, advertisers, content creators and digital distributors.
- Understanding new consumers is key
Over the next five years and beyond, all E&M businesses will increasingly engage with a new and more diverse global customer base, with different needs and expectations. According to this year’s outlook, a new middle class is emerging that increasingly accesses the internet via mobile devices. Outlook predicts that Brazil, China, India and Russia alone will account for 45% of fixed-broadband subscriptions and 50% of mobile - internet users by the end of 2017. Going forward, the E&M companies that seize a profitable position will be those with the speed, flexibility and insight to engage and monetise an ever more diverse global base of connected consumersby delivering personalised, relevant, and ultimately indispensable content experiences
- Consumers are increasingly in control but also increasingly confused
Over the past five years, consumers have seen an explosion in their media choices. This year’s outlook highlights that this blizzard of consumption choices is creating confusion in the minds of the consumer and this extends to the legitimacy of the content they access.
In response, PwC believes companies across the E&M industry are having to revisit their business and operating models. By innovating in agile ways and harnessing technologies to gain deep insight into consumers’ tastes and behaviours, E&M companies are starting to define a profitable, consumer-centric, multiplatform future. Smart and flexible distribution strategies based on consumer understanding will also help to deter piracy
- From ‘mass media’ to ‘my media’
As media consumption fragments across devices, consumers increasingly want personalised experiences: their content on their chosen devices when they want it. This move to ‘my media’ can be seen in ‘cord-cutting’where consumers abandon their pay TV subscriptions and instead access the content they want via cheaper, Internet - based content services. Although by 2017, revenues from OTT services are forecast to reach just 6% of overall pay-TV revenues, operators must adapt their services to changing consumer expectations for more on-demand content. A further manifestation of ‘my media’ is consumers’ growing use of the ‘second screen’smartphones and tabletsto comment on and share the experience of TV and other companion content with friends, often via social media
- Multi-platform analytics drive advertiser insights into the connected consumer
Outlook shows how advertising spending is continuing to migrate to new digital platforms. However, the traditional tendency to separate digital from other forms of advertising is arguably questionable. As audiences increasingly consume media across multiple screens, devices and platforms, advertising must also become platform-agnostic. The ability to attract advertising revenues in the future will depend on offering advertisers credible, cross-platform metrics that define and measure audience reach, engagement and relevance
- Content creators must have better insight into what content customers will pay for in order to engage
Like other industry participants, content creators need to adapt to the demands of connected consumers. This means getting closer to the behaviours and needs of those consumers than ever before. This includes harvesting data from social media, adapting the way products are created and distributed, and embracing new business modelsincluding partnerships. As they pursue these strategies, the good news for content creators is that content’s central role in attracting, engaging and retaining consumers has, if anything, been positively strengthened by the fragmentation of media choices
- The race for content
The rising value of content has fired the starting-gun on an industry-wide race to acquire it. Recent years have seen several major acquisitions of content assets, as consumers’ rising expectation of ubiquitous access to premium and library content drives companies to focus on licensing and/or acquiring content, as well as on developing deeper customer engagement and insights
- Characteristics of new business models for content creators to engage connected consumers
To ensure their content remains relevant and valuable to their audiences, content companies must build new business models around five imperatives:
- Harnessing the power of second screens exploiting connected portable devices to deepen engagement with, and access to, the primary content
- Continuing evolvement of the windowing of video contentto meet the needs of connected consumers
- Bundling, in order to add value for content providers, operators and consumerspeople still love a bargain, including a bundle of services for a ‘discounted’ rate
- Overcoming the challenges of personalisationby understanding consumers while respecting their privacy
- Encouraging and facilitating content discovery and recommendationconfused, connected consumers need help navigating to the content they want
- Digital distributors must deliver a differentiated experience to help deter piracy
Tackling piracy in the connected era cannot rely just on consumer education and tighter regulation and enforcement, important as those are. It means understanding consumers in order to deliver the right content to the right people, at the right time, place and pricevia the right experience. It’s also vital to sign-post where the legitimate content is available
Press access to outlook content online:
To request press access to the online Global entertainment and media outlook: 2013-2017, contact Johanna Dehaene. This will allow you to illustrate this and other media stories both by extracting detail from the outlook dataset and analysis at a segment and country level, and by creating charts on-screen that can be exported for use with your stories
About the outlook:
PwC’s 14th annual update of the Global entertainment and media outlook: 2013-2017, is a comprehensive online source of global analysis for consumer and advertising spend. With like-for-like, five-year historical and forecast data across 13 industry segments in 50 countries, the outlook makes it easy to compare and contrast regional growth rates and consumer and advertising spend. And new this year, it also contains individual country commentary for all segments. Find out more at www.pwc.com/outlook.
Segments covered by the outlook:
TV subscriptions and licence fees, TV advertising, internet access, radio, out-of-home advertising, video games, filmed entertainment, newspaper publishing, Consumer magazine publishing, business-to-business, internet advertising, consumer and educational book publishing and music.
About outlook insights:
Much of the content in this press release is taken from outlook insights, which is drawn from data in the online global entertainment and media outlook 2013 - 2017. PwC continually seeks to update the online outlook data, therefore please note that the data in outlook insights, and this press release, may not be aligned with the data found online. The online Global entertainment and media outlook: 2013-2017 is the most up to date source of consumer and advertising spend data.
Digital spending consists of fixed broadband and mobile internet access; satellite radio subscriptions; digital PC and console gaming; online and mobile gaming; electronic home video; digital newspaper circulation spending; digital consumer magazine circulation spending; digital trade magazine circulation spending; consumer, educational and professional eBooks; online and mobile Internet advertising and digital music.
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