Entertainment and media markets in Canada will stay vibrant, with steady revenues projected for the next five years, according to PricewaterhouseCoopers’ newly released ‘Global Entertainment Media Outlook.’ But the most money will be up for grabs by the segments that take advantage of digital and mobile opportunities.
The annual report gives analyses and forecasts for 15 major industry segments across five regions of the globe – the US, EMEA (Europe, Middle East, Africa), Asia Pacific, Latin America and Canada. (Note: All growth and decline rates are based on compound annual growth rates. All figures are in US dollars.)
As a whole, Canada’s entertainment and media market grew by 5.2% in 2007, down from the 8.6% rise in 2006. The market will expand at a 5.8% rate to $54 billion in 2012 from $41 billion in 2007. Globally, the industry will grow at 6.6%, reaching $2.2 trillion in 2012.
Tracey Jennings, leader of the PwC Canada entertainment and media practice, says the biggest movements and highest growth in ad spends ‘will come from those who leverage their existing consumers and advertisers and take them into the world of new media, enabling consumers to access content on any platform.
‘Yet we cannot lose sight of the growing 50-plus demographic, who will continue to consume the media in the format they have become accustomed to,’ says Jennings. ‘This older generation will balance out the new Net generation – meaning traditional media will continue to be significant. The question now is how advertisers are going to leverage all these different media, combined or stand-alone, to engage the individual customers and their unique media consumption styles.’
Here’s MiC‘s breakdown of the report by segment…
Internet:
In Canada, Internet advertising (both wired and mobile) grew 33.2% to $1.3 billion in 2007. By 2012, PwC reports Internet advertising will likely remain Canada’s fastest-growing segment at 21.1% (to $3.4 billion). That’s higher than the company’s estimate for global growth of 19.5% through to 2012.
Canada was the only region that did not record a double-digit gain in Internet access growth (wired and mobile). That segment slowed to 7.7% in 2007, but it is expected to grow by 10.6% by 2012 to $5.6 billion.
Jerry Brown, director responsible for PwC’s Canadian media and entertainment practice, says that with broadband penetration already very high in Canada, broadband access spending growth hit a moderated level. ‘However,’ he adds, ‘it is a key driver of the increases we are seeing in Internet advertising. Keyword search, classified advertising and online video advertising – full-motion video ads shown on the Internet – will be the fastest-growing components. In the mobile market, wireless network upgrades will similarly drive mobile advertising.’
Video games:
Video games on next-gen consoles and growth in online and wireless games will fuel the overall growth in gaming. Almost half of advertising and end-user spending will come from online and mobile by 2012, reports PwC. The overall video game market was the second fastest-growing segment, rising 26.5% to $1.3 billion. PwC states the segment will slow over the next five years, with a growth rate of 9.2% (to $2.1 billion). End-user spending on video games will increase from $1.2 billion in 2007 to $1.8 billion in 2012, growing by 8.3%. Advertising revenues in video games will more than double, from $104 million in 2007 to $237 million in 2012.
Console and handheld games will continue to be the dominant segments, growing at a 7% rate from $641 million in 2007 to $899 million in 2012. The PC game market will decrease from $124 million in 2007 to $117 million in 2012. Online games will grow from $335 million in 2007 to $484 million in 2012, reflecting a 7.6% annual growth rate. The largest growth will be in wireless games, which will increase from $138 million in 2007 to $346 million in 2012, a rate of 20.2%.
‘Canada is home to a number of top video game companies, and many of the provinces provide good digital media tax incentives,’ says Jennings. ‘These incentives – combined with the supply of talent – make Canada attractive to foreign developers and highlight Canada as a leading developer in the video game market. The growth in the sector in Canada, in particular in mobile and online gaming, should positively affect these developers.’
Television Advertising:
The television advertising market is projected to expand at a 3.6% rate to $3.4 billion in 2012 from $2.9 billion in 2007. Terrestrial advertising will grow 3% to $2.4 billion in 2012 from $2 billion in 2007. However, specialty channel advertising will be the faster-growing sector, with a projected 4.8% increase to $1.1 billion from $847 million in 2007.
‘What we are seeing in TV is that more people want content beyond what the basic cable providers package for them,’ says Brown. ‘Digital allows for time shifting, and the specialty channels cater to a very targeted audience – a winning combination for advertisers. It will be interesting to watch the mobile TV market and how that affects revenues over the long term.’
Television Subscription and License Fee Market:
With digital nearing saturation growth, subscription spending is projected to slow, but overall the subscription and license fee market is expected to expand at a 5.7% rate to $6 billion in 2012 from $4.6 billion in 2007. Basic subscription spending will grow at a 4.5% rate to $3.8 billion. Premium subscriptions will rise to $1.1 billion from $921 million in 2007, a 3.2% increase.
Newspapers and Consumer Magazines:
The newspaper industry in Canada is projected to expand at a 1.8% rate from $3.4 billion in 2007 to $3.8 billion in 2012. Print advertising will reach $2.61 billion in 2012, up 0.4% from $2.56 billion in 2007. Notably, digital advertising will rise at a 23.9% rate. Total newspaper advertising, including print and online, will reach $3 billion in 2012, up from $2.7 billion in 2007, growing by 2.1%. Circulation spending will increase at a 0.4% rate to $769 million in 2012 from $755 million in 2007.
The consumer magazine publishing market in Canada will climb from $1.2 billion in 2007 to $1.4 billion in 2012, increasing at a 2.7% rate. Print advertising will expand by 3.3% to $782 million from $665 million in 2007. Digital advertising on magazine websites and mobile sites will increase to $78 million in 2012. Overall advertising will reach $860 million in 2012 from $678 million in 2007, a 4.9% increase. Circulation spending will decrease from $530 million in 2007 to $518 million in 2012, a 0.5% drop.
‘For both newspapers and magazines, the migration of readers to the Internet will limit growth in print advertising but buoy related digital advertising,’ says Jennings.
Radio and OOH:
Radio and out-of-home advertising grew by 11% in 2007 to $1.7 billion, and is expected to continue at a good pace, even if it does move downward by 10.6% to $2.9 billion by 2012. OOH advertising will expand at a 6.6% rate, rising from $368 million in 2007 to $507 million in 2012.
‘A digital billboard that shows sequential ads that change every 8-10 seconds can generate 10 to 20 times the revenue of a poster that displays a single ad, and can be a key source of targeted advertising for companies,’ says Jennings. ‘It’s a way to reach customers that is very engaging and entertaining.’
Filmed Entertainment:
Filmed entertainment spending is projected to grow at a 4.9% rate to $7.5 billion in 2012 from $5.9 billion in 2007. People will still be going to the movies as box office spending is expected to expand by 3.4% to $922 million from $780 million in 2007. However, people will increasingly be watching movies at home as home video sell-through will grow to $4.4 billion in 2012 from $3.5 billion in 2007, a 4.7% increase.
Actual in-store rental growth will average 2%, increasing to $1.7 billion from $1.6 billion. Online rental subscriptions and digital streaming will rise to $402 million in 2012 from only $21 million in 2007, an 80.5% increase.
‘Modern movie houses, digital cinemas and 3D upgrades are enhancing the cinema-going experience, while the ability to watch a movie by downloading it from your Internet-enabled television without ever leaving your couch is going to be very popular,’ says Brown.
Recorded music:
Recorded music spending will decrease at a 1% rate from $694 million in 2007 to $660 million in 2012, reports PwC. Physical distribution will fall from $572 million in 2007 to $236 million in 2012, a 16.2% decline. Digital distribution will expand by 28.3% to $424 million from $122 million in 2007. Internet distribution will total $223 million in 2012 from $75 million in 2007, a 24.4% increase. Sales of music to mobile phones will rise by 33.7% to $201 million in 2012 from $47 million in 2007.
‘Again we see how new media is fuelling growth in some areas as a complement to traditional methods,’ says Jennings. ‘The market is shifting away from consumption of albums in the physical format and toward consumption of single-track downloads in the digital format. While consumers of physical products have little choice but to buy whole albums, the digital world allows the purchase of individual tracks, most of which are not available in a physical single format.’
More than 146,000 people in 150 countries across PwC’s network share thinking, experience and solutions to develop fresh perspectives and practical advice. In Canada (www.pwc.com/ca), PwC and its related entities have more than 5,200 partners and staff in offices across the country.
