PwC: Internet ad spend to reach almost $1 billion by 2010; other mediums see slower growth
Canada's entertainment and media industries are now entering a more mature phase of growth according to PricewaterhouseCoopers' recently released Global Entertainment and Media Outlook: 2006-2010, the seventh edition of the annual report. This fact is attributed to the end of a rapid growth period that was driven by early adoption of new technology. Overall, the entertainment and media industries in Canada are projected to grow at a 5.9% compounded annual rate, which is steady but a lot less dramatic than in the past.
Canada’s entertainment and media industries are now entering a more mature phase of growth according to PricewaterhouseCoopers’ recently released Global Entertainment and Media Outlook: 2006-2010, the seventh edition of the annual report. This fact is attributed to the end of a rapid growth period that was driven by early adoption of new technology. Overall, the entertainment and media industries in Canada are projected to grow at a 5.9% compounded annual rate, which is steady but a lot less dramatic than in the past.
Internet advertising continues to be the fastest growing segment, followed by video games and then radio and OOH. Below is an overview of what to expect in each category.
PwC projects Internet advertising in Canada to increase by 18.8% annually. The report states that Canada has one of the most advanced Internet markets in the world with nearly three-quarters of all households online – and more than half of them access the Internet via a broadband connection. Broadband accounted for 71% of all Internet subscribers in 2001.
This fact is attracting advertisers, particularly since broadband user spend more time online. Keyword search is an important part of the market, accounting for one-third of spending last year.
|$390 million||$510 million||$923 million|
Viewership is expected to continue to shift to specialty channels with advertisers following the viewers. New channels and continued growth in digital households will continue to boost advertising on specialty channels, but increases will drop to single-digits in 2007 to 2010 as the market matures.
Increased funding of Canadian programs and increased inventory on those programs will sustain broadcast advertising.
However, conventional broadcast advertising will be the slowest-growing television sector, growing at 1.9% compounded annually, but it will continue to be the largest component of total television spending.
Advertising on conventional television:
|$2.11 billion||$2.14 billion||$2.32 billion|
Specialty channel advertising will grow at a much faster pace, projected at 8.4% compounded annually, with increases declining to single digits from 13.2% in 2005 and 11.2% projected for this year.
Advertising on specialty channels:
|$742 million||$825 billion||$1.11 billion|
The TV distribution market is where the expansion is expected in Canada. Cable and satellite basic subscriptions spending will grow at a 5.0% annual rate and premium subscriptions by 4.8%. Pay-per-view will increase by 7.9% annually to $330 million (2010). But PwC says VOD is really taking off in Canada and will be the fastest growing TV category with 33.8% annual hikes to a total of $400 million in 2010.
Growth for terrestrial radio advertising is expected to jump at an annual compounded rate of 4.7% to reach $1.47 billion in 2010. Last year, 77% or $910 million of radio advertising was local while national ads rose by 4.9% to $264 million.
Radio advertising (terrestrial):
|$1.18 billion||$1.23 billion||$1.47 billion|
PwC projects an average of 70,000 digital radio subscribers this year with a total of two million by 2010.
Radio advertising (satellite):
|0||$10 million||$311 million|
OOH can expect a healthy boost thanks to the renewed interest in the medium generated by new digital technologies. Advertising is expected to rise annually at a rate of 6.6%. As fragmentation cuts into ad growth of other media, the importance of OOH will increase because of its ability to reach people.
|$297 million||$316 million||$408 million|
Magazine advertising is expected to increase 2.9% compounded annually due to moderating economic growth that will soften ad demand in both consumer and business magazine sectors. Rising postal rates will continue to adversely affect unit circulation, but newsstand sales are expected to see modest growth in circulation during 2008 to 2010.
Consumer magazine advertising is projected to reach $733 million in 2010 compared to $622 million in 2005.
Magazine advertising (consumer and business):
|$831 million||$851 million||$960 million|
Newspaper advertising is predicted to grow 2.5%, compounded annually. Paid circulation will suffer from the competition from free papers but the overall decline will be tempered by the strength of smaller papers. Advertising in print editions will be dampened by the migration of readers to online newspapers. Online readership has increased, with 16% of adults reading an online paper in 2005 compared with 10% in 2001.
PwC expects retail advertising to continue to be the fastest growing ad component over the next five years at 2.8% annual growth with national ads increasing by 2.5%.
Classified advertising in print editions will be the slowest growing, 2.2% annually, and is the most likely ad category to move online.
|$2.46 billion||$2.55 billion||$2.80 billion|
Newspaper advertising (retail advertising):
|$1.09 billion||$1.13 billion||$1.25 billion|
Newspaper advertising (classified advertising):
|$812 million||$831 million||$905 million|
The desire of consumers to consume media when and where they want it – and in the format they want – is also expected to have a big impact on the recorded music industry. PwC says physical album sales in Canada will plummet by 2.5% each year from $748 million (2005) to $626 million (2010). The good news lies in the digital distribution side, which will rocket upwards at the rate of 45.3% each year from $44 million (2005) to $284 million (2010). Sales of mobile music will rise 34.1% annually from $59 million (2005) to $258 million (2010).
All 2006 and 2010 figures quoted are PwC projections. All dollar amounts have been converted to Canadian dollars from U.S. using Bank of Canada conversion rates as of noon, June 28. For 2001 through 2005, PwC quotes the CRTC, the Canadian Newspaper Association, and the Interactive Advertising Bureau of Canada as sources.