Consumer spending to grow Australian entertainment & media industry - 2 August 2010

The Australian entertainment and media industry will grow 28 percent over the next five years, largely due to growth in consumer spending, especially on interactive gaming, internet access and subscription television according to a report released today.

The Australian PricewaterhouseCoopers' Entertainment & Media Outlook 2010-2014 says the forecast growth will increase the revenue of the entertainment and media industry in Australia to $36.2 billion by 2014.

As well as cumulatively growing the industry, each sector - interactive gaming, internet and subscription television - will grow faster than the industry's predicted compounded annual growth rate (CAGR). Over the next five years the CAGR is predicted to be 5.1 percent.

Consumer magazines, newspapers and radio aren't expected to fare as well with slower growth rates.

PricewaterhouseCoopers, head of technology, information, communications and entertainment David Wiadrowski says, "Consumers are the secret to success for individual businesses and the sector as whole. Empowerment is what consumers want and businesses who can deliver that will grow successfully in the future."

Mr Wiadrowski says, "The National Broadband Network should be an enabler for businesses to empower consumers through greater choice and more competitive broadband prices.

"With machines in homes becoming smarter, people sharing information through social networks and data being stored in clouds the appetite for content and speed strengthens.

High-speed broadband connectivity is an opportunity to satisfy consumers' growing appetites." In retrospect, the Australian entertainment and media industry grew by 1.1 percent in 2009 compared to a decline in the global market of 1.8 percent.

Mr Wiadrowski says, "The Australian market has proved it is a resilient one. In the face of the global slowdown, Australians kept the local sector fit and healthy, continuing to spend on filmed entertainment, interactive games, subscription television upgrades and increased internet access."

Interactive games

Interactive games are the standout performer of the entertainment and media industry. The strongest of the Australian industry sectors during 2009, interactive games defied the global financial crisis to grow 7.7 percent. Over the next five years, the sector will continue its stellar growth, expanding at a CAGR of 9.4 percent to reach $2.5 billion in 2014.

The growth of the interactive games sector is expected to be driven largely by the proliferation of the online and mobile games markets.

Over the forecast period (2010-2014), online games are tipped to rise by a 20.4 percent CAGR to reach $534 million. Mobile games will increase by a 15.7 percent CAGR to $496 million.

"Interactive games are a popular alternative to other entertainment because they are reusable. The appeal of mobile devices like smart phones, portable gaming devices and now tablets supports this growth," Mr Wiadrowski says.

Internet

The Australian internet industry (access and advertising) is expected to grow from $7 billion in 2009 to $10.6 billion in 2014.

"While the access market matured in 2009 to reach $5.1 billion, robust growth fuelled by wireless access spending is forecast between 2010 - 2014. We expect the total access market to reach $6.8 billion in 2014, a 5.7 percent CAGR.

"After the downturn of 2009, the online advertising market will accelerate its growth to reach $3.9 billion in 2014, a 15.4 percent gain, compounded annually," Mr Wiadrowski said.

Representing a quarter of all internet subscriptions, wireless broadband is the fastest growing mode of internet access. Online social networking is a major contributor to the growth, with a 2010 Nielsen global survey revealing Australians to be the biggest users of social networking sites globally, in terms of time spent.

Newspapers

In 2009 the Australian newspaper market contracted by 11.4 percent but improvement in 2010 due to the recovering economy, political and election spending should take revenue to $5.2 billion. It is expected that growth will be sustained to 2014 at a compound annual rate of 1.8 percent, including revenues from newspaper websites.

Ongoing migration to digital news and classifieds sites continues to erode the traditional newspaper model. A decline in both advertising revenues and unit circulation in 2009 reinforces this shift.

The spread of broadband internet and rising website traffic will drive digital advertising. Total spending on newspaper print advertising declined by 15.7 percent in 2009.

Australia's newspaper market however has proved to be more resilient than the United States or United Kingdom. The Australian industry is focused on a strategy for sustainability, with both print and digital models co-existing under single masthead brands. PricewaterhouseCooper's Outlook now forecasts newspaper revenues with and without advertising and subscription fees drawn by newspaper websites.

"If the sector is to retain readership and return to positive growth it will need to continue to invest in multi-platform delivery methods and business models to monetise online content. This will be assisted by the expected growth in net-enabled mobile devices," Mr Wiadrowski said.

Radio

Growing at a steady compounded annual rate of 1.7 percent, Australia's commercial radio sector will deliver revenues of $1 billion in 2014.

"Last year was difficult for all media but radio proved resilient, declining only 5.6 percent in advertising revenue as compared with an average decline of more than 8 percent across all other media segments.

"Part of radio's strength is advertisers' increased demand for value. Radio is seen as a less expensive medium than free-to-air television," says Mr Wiadrowski.

Radio had an average cumulative audience of 8.94 million people in 2009, up from 8.79 million in 2008.

Filmed entertainment

Spending on filmed entertainment will expand at a compounded annual rate of 3.4 percent to reach $4 billion in 2014.

"Filmed entertainment defied the economic slowdown to grow 7.1 percent during 2009, reinforcing the reputation of the sector for performing well during tough economic conditions.

"Box office spending is expected to grow at a solid 4.7 percent compounded annually over the next five years, spurred on by new technology such as 3D and record-breaking 'tentpole' films like Avatar.

"In-home digital downloading is forecast to grow at a staggering 117.8 percent per year to reach $126 million in 2014. Demand for rental DVDs is also expected to stay strong for a number of years as kiosks and online subscriptions proliferate and until we see an improvement in internet speeds and download limits," said Mr Wiadrowski.

Free-to-air television

Free-to-air advertising declined by 7.6 percent in 2009 and although hit hard by the global financial crisis it recovered quicker than anticipated.

"Free-to-air's resilience confirms its importance to advertisers as a communication tool. It is traditionally the first medium to recover after an advertising downturn and is the only medium with the ability to reach the whole of Australia's population - quickly.

"Media spending on free-to-air confirms that it remains an attractive advertising option for brand building and retail campaigns.

"The industry has adapted well to time-shifting and ad skipping technologies by offering more inprogram sponsorships, which are particularly suited to the reality genre. Furthermore, they are already adept at selling across their primary and digital platforms and continue to refine crossplatform opportunities for advertisers via television, online and through mobile devices.

"While the total audience will continue to fragment through multi-channelling, increased entertainment choices and the growth of Internet Protocol TV (IPTV), the premium attached to mass market reach will remain," says Mr Wiadrowski.

Subscription television

The total market for subscription television is expected to perform well, growing at a 6.2 percent compound annual rate to reach $3.9 billion in 2014.

Consumer spending on subscription television fees is expected to grow at a 6.4 percent compound annual rate to reach $3.5 billion over the same period.

Despite the launch of additional free-to-air digital channels, advertising on subscription television is expected to grow by a 4.1 percent CAGR reaching $407 million in 2014.

The effect on subscriptions during the global financial crisis and the launch of free digital channels was offset by the launch of next generation personal video recorder systems and high definition channels.

"Next generation products should boost retention and increased profitability.

"Although regulations continue to restrict the broadcasting of sporting events subscription providers are adapting by developing new products and striking deals with free-to-air providers to air key fixtures.

"Subscription providers must continue to offer quality content, including movies and original drama series, to underpin the value of their services," Mr Wiadrowski says.

Media Contact

Meghan Chalmers
Communications
PricewaterhouseCoopers
Tel: +61 2 8266 2174
Mob: 0412 716 186

PricewaterhouseCoopers (www.pwc.com.au) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 154,000 people in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

"PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.