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Advertising to outpace consumer spending in digital media migration

As the entertainment and media (E&M) industry continues its digital shift, advertising growth is outpacing consumer spending, according to Global Entertainment and Media Outlook 2014-2018, PwC's annual in-depth five-year outlook for global consumer spending and advertising revenues directly related to entertainment and media content - just released.

PwC forecasts that global E&M spending is expected to rise from $1.8 trillion in 2013 to $2.3 trillion by 2018, growing at a compound annual growth rate (CAGR) of 5%. The US remains the largest E&M market, growing at a 4.8% CAGR and reaching $724 billion by 2018, from $573 billion in 2013.

Globally, digital E&M spending (excluding Internet access spending) is expected to grow at a 12.2% CAGR between 2013 and 2018 and account for 65% of global entertainment and media spending growth by 2018 - almost two out of every three dollars. Digital spending in the US is expected to grow at an 11.2% CAGR over the next five years and account for 45% of overall US E&M spending growth, up from 33% in 2013. US digital advertising is leading the way; 40% of total advertising growth is expected to be digital by 2018.

Mobile Internet penetration is expected to reach 86% of the US population in 2018, which will help drive digital advertising to increase its share from 17% of total advertising revenue in 2009 to 40% by 2018. With Internet advertising in the US growing at a 9% CAGR (compared to a total advertising CAGR of 3.7%), the industry is approaching a significant tipping point.

Spending on digitally-delivered content will only account for 16% of US consumer spending in 2018 (excluding spending on Internet access), compared to 40% of total advertising spending. In PwC's analysis, the growth of '24/7 access' and micro-transactions indicates that the key to monetizing the digital consumer will require E&M companies to be innovative in offering more consumer choice and experiences.

Notable fast-growing US consumer sub-segments to watch

- Electronic home video over-the-top (OTT)/streaming is one of the fastest-growing consumer sub-segments and is projected to reach $10.1 billion in 2018, up from $3.3 billion in 2013, at a 24.8% CAGR in the US.

- Box office resilience underscores the continuing popularity of the cinematic experience. US box office revenue will exceed revenue from physical home video in 2015 and grow over the forecast period to $12.5 billion by 2018, from $10.8 billion in 2013, at a 3.1% CAGR.

- Electronic home video revenue will exceed physical home video revenue in 2016. Total electronic home video revenue, driven primarily by SVOD rather than through-TV subscriptions, will surge from $7.34 billion in 2013 to $17.03 billion in 2018, a CAGR of 18.3%. Furthermore, by 2018, the electronic home video segment will be the main contributor to total filmed entertainment revenue at 43%, overtaking the box office in 2017.

- Advertising-supported and paid-subscription streaming music services rose 48.5% in 2013 as streamed offerings gained significant traction for US consumers and were wholly responsible for taking the steam out of digital music and single sales. There were a total 118 billion music streams in the US in 2013, representing significant year-on-year growth of close to one-third. Digital music streaming revenue is forecast to increase at a CAGR of 14.5% from $848 million in 2013 to $1.7 billion in 2018, when it will account for 37% of total digital recorded music revenue.

- Mobile video gaming continues to drive uninterrupted growth in the US and is forecast to grow at a CAGR of 6.9% to reach $1.84 billion in 2018, up from $1.32 billion in 2013.

- Online video gaming is widening user participation and micro-transactions are boosting revenues. Online video gaming is forecast to grow at a CAGR of 7.4% to reach $3.60 billion in 2018, up from $2.51 billion in 2013.

- Consumer books electronic revenue will reach $8.7 billion in 2018, up from $4.5 billion in 2013, a CAGR of 14%. Digital revenue will overtake consumer books print/audio revenue in 2018 with growth in tablets encouraging digital consumption of books.

US launch video presentation

Story filed 06.06.14

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