Entertainment and media spending rose by 4.8% in Canada in 2010 and 3.2% for Canada and the US combined, the first increase in North American spending since 2007, according to PwC's Global Entertainment and Media Outlook 2011-2015 .
What's more, the report says, spending will continue its accelerating shift from traditional to new and emerging digital media platforms.
Digital spending on content acquisition and distribution covers a wide range of digital platforms, including broadband and mobile Internet access, online, out-of-home and portable media advertising, video-on-demand, online and wireless video games, digital and trade magazine circulation spending, electronic consumer, educational and professional books, and satellite radio subscriptions.
Presentations by PwC partners Jerry Brown and Michael Paterson identified key industry trends in the report, while a panel discussion was designed to help elaborate and provide first hand support for its conclusions, with participants IMAX CEO Gary Moss, BCE SVP Andrew Smith and RIM SVP Jeff McDowell and moderator Chris Dulny from PwC.
"The entertainment and media industry is highly motivated to create experiences that engage today's consumer, across multiple-platforms, which in turn is creating multiple opportunities for companies to profit," Jerry Brown, Associate Partner in the Entertainment & Media practice for PwC, noted as part of key industry trends he's tracking.
Canada will grow faster than the US through 2015, with an expected 6.1% compound annual increase compared with a 4.6% compound annual growth rate (CAGR) for the US. Gains in Canadian spending will be due to double-digit growth in Internet advertising (almost 15% CAGR) and increases of almost 12% for Internet access payments (both high speed and mobile), TV subscriptions (7.4%), trade magazines (6.9%) and out-of-home advertising (6.4%). Both advertising and consumer/end-user spending will also grow in Canada by 5.2% compounded annually.
Currently spending on digital platforms accounts for 26% of all global spending on entertainment and media, but by 2015 PwC says that share will rise to almost 34%, as more consumers access content online and through other non-traditional methods.
This will have impacts across all industries and result in new complimentary revenue streams for traditional business models, from Internet and TV advertising to video games, movies and music. Internet and TV advertising will grow by over 50% by 2015 (from US$5.6 billion to US$8.6 billion in Canada) while mobile apps, the spread of tablets and smartphones will mean a more than three-fold increase in mobile TV advertising (from US$77 million to US$241 million by 2015 in Canada).
"Video-on-demand, new streaming services and 'cloud' based digital storage solutions like digital lockers are going to feed Canadian consumers spending on TV and movies over the next five years," added Michael Paterson, Partner in the Entertainment & Media practice of PwC. "At the same time, more consumers using smartphones and tablets, together with the increased downloading of video games and the growth of social network games will expand the online and wireless game market."
And while the newspaper market in Canada, forecasted to be US$3.1 billion in 2015, will be over 10% smaller than it was in 2006, paid online content and distribution to mobile devices will begin to offset ongoing decreases in print circulation spending. By 2015 newspaper publishing spending will edge up by 1.5% compounded annually.
"Innovative approaches have supported an unexpectedly strong recovery in advertising led by online and TV. This has helped restore the attractiveness of advertising-funded models for all media types and formats, which are blended with a subscription revenue stream," said Brown.
Many consumers have learned to expect a lot of content to be free. Convincing people to pay where they have not previously will be difficult and require a deep understanding of what consumers' value and will pay for.
"Consumers have never had it so good when it comes to accessing premium content over a variety of devices," Paterson noted. "E&M CEOs need to adapt their business models to continue to meet what the consumer's demand. The bottom line is that in order for business to continue to create quality content, someone has to pay."
PwC believes that convenience, the consumer experience as well as overall quality are the key ingredients that matter to consumers when choosing from the menu of content and delivery channels available. Alongside these are participatio n and privilege - consumers enjoy playing an active role in shaping their content plus they are happy to pay for the privilege to "jump the line" to get earlier access to content.
Brown continued, "The challenge for Canadian entertainment and media companies will be to turn what consumers want and expect into sustainable, profitable and engaging relationships, by offering them advantages which they value. As the digital market evolves and technologies and legislation mature, these factors will reduce the ubiquity of pirated content."
"New ways to store and access user content like Apple's iCloud intend to be a more convenient, consistent alternative to peer to peer sharing and storing content on a device. Cloud based solutions will allow greater certainty that content has the appropriate rights assigned to the user which will further benefit rights owners over time."
In Canada, PricewaterhouseCoopers LLP and its related entities have more than 5,700 partners and staff in offices across the country.
"PwC" is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together, these firms form the PwC network.
PwC's Global Entertainment & Media outlook 2011-2015 , the 12 th annual edition, contains in-depth analysis and forecasts of 13 major industry segments across four regions of the globe: North America (USA and Canada), EMEA (Europe, Middle East and Africa), Asia Pacific and Latin America.
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