NEW YORK -- Led by surging growth in the online sector, global entertainment and media will expand into a $1.83 trillion industry in 2010, up from an estimated $1.33 trillion last year, making for a compound annual growth rate of 6.6%, according to an annual study from PricewaterhouseCoopers.
Consumer/end-user spending gains will outpace advertising growth as PwC estimates compound annual increases of 6.8% and 6.2%, respectively, during the next five years.
The biggest global industry engines during that time frame will be Internet advertising and access spending, for which PwC projects a compound annual growth rate of 12.9%, and video games, with an estimated 11.4% compound gain. Filmed entertainment will expand at a rate of 5.3%, according to PwC.
The projected 6.6% compound annual growth rate for the latest five-year frame compares with 7.3% in last year's report, with PwC having brought down its 2009 entertainment market revenue estimate from $1.78 trillion to $1.73 trillion.
For the U.S., the latest annual "Global Entertainment and Media Outlook: 2006-2010" predicts the entertainment economy to expand from an estimated $553.49 billion in 2005 to $726.22 billion in 2010. That would mean a compound annual gain of 5.6%.
In terms of geographical entertainment and media industry hotbeds, the Asia Pacific region will see the strongest five-year growth spurt at a 9.2% compound annual rate -- driven by China and India, followed by Latin America at 8.5% and Europe/Middle East/Africa at 6.1%.
The U.S. market will remain the largest worldwide, with PwC's growth estimates through 2009 virtually unchanged from last year's report at slightly more than $690 billion.
The strongest gainers in the U.S. will be video games at 8.9%; the Internet sector, set for a five-year compound boost of 8.4% that is below PwC's double-digit five-year prediction from last year and driven by online ads, radio/out-of-home media, which PwC expects to grow 7.6%; and TV networks, for which it estimates a 7.4% annual growth rate. Filmed entertainment will expand at a compound rate of 5.1%, PwC predicts.
The digital revolution will remain a key theme for the entertainment economy, the PwC report predicts.
"Virtually every segment of the entertainment and media industry is shifting from physical distribution to digital distribution of content," said Wayne Jackson, global leader of PwC's entertainment and media practice. "While physical distribution of content is declining, that decline will be offset somewhat by digital distribution, which is driving and creating new growth opportunities."
Digital, mobile and broadband will become "increasingly lucrative distribution channels," according to the company.
Overall, the industry "is well into a recovery pattern with increases during the past two years exceeding growth during 2001-2003," Jackson said in the introduction to the "Outlook" report.
Globally, advertising is expected to grow from $383 billion last year to $521 billion, with all ad categories set to enjoy modest growth. Internet advertising will see the largest five-year surge -- at an 18.1% compound rate -- from an estimated $22.45 billion last year to $51.6 billion in 2010.
In the U.S., total advertising will increase at a below-average compound annual rate of 5.4% through 2010, with online ads set to expand 15.2% and TV network ads rising 7.1%. This will leave total ad spending in the U.S. at $230.44 billion in 2010, compared with an estimated $177 billion last year. TV network ad revenue will increase to $51.95 billion in 2010, and online ads to $25.5 billion.
The filmed entertainment category -- consisting of boxoffice, home video sales and rentals, as well as online rental and download models -- will expand at a compound annual rate of 5.3% through 2010 to reach $104.06 billion on a global basis, led by 5.9% gains in the EMEA region, with the Asia Pacific market coming in at the lowest growth rate (4.9%).
For the U.S., PwC predicts boxoffice revenue to climb at a 4.3% compound annual growth rate to $11.1 billion in 2010 thanks to ticket price increases and "modest" admission gains after a "relatively flat" 2006. According to the firm, the boxoffice could in 2007 beat its '02 and '04 records and edge up further from there.
The home video business will expand at a 5.4% average rate to $33.08 billion as 6.9% sell-through growth and a 26.4% online rental/digital streaming increase will more than offset an estimated 4.1% rental decline. "DVD growth slowed markedly in 2005," according to the PwC report. But "the advent of high-definition (DVDs) should stimulate the market in a manner similar to the way DVDs" did upon their introduction.
Online subscription rentals, including DVD-by-mail and broadband delivery services, will grow from virtually nothing in 2002 to $3.62 billion in 2010, compared with the then-estimated $6.18 billion in-store rental market.
This year, PwC for the first time divided its predictions for the DVD-by-mail and broadband categories, projecting 23.5% and 231.4% compound gains, respectively, to $3.22 billion and $400 million in 2010.
For the long-suffering recorded music space, PwC predicts a 5.2% global compound annual growth rate, with the U.S. set to expand at 3.7%. Key engines will be digital distribution and mobile music, which will offset further declines in spending on physical formats, the firm said. This will leave the global music market at $47.9 billion in 2010, with the U.S. contributing $14.7 billion.
The latest "Outlook" includes some compound annual growth predictions for the 2006-10 time frame that are very different from the 2005-09 forecasts. Filmed entertainment last year was eyed for a stronger 7.1% compound global increase, while recorded music was pegged at 8.3%, while Internet advertising and access estimates are down from 16.9%. Radio/out-of-home is up from the previous 5.1% estimate though.
