global entertainment and media practice
DESCRIPTION
Global entertainment and media practice Presentation by Price White House Coopers. Marcel Fenez, global leader of the entertainment & media practice, talks about why there's nowhere to hide from the migration to digital, and how the economic crisis is accelerating this process.TRANSCRIPT
The E&M landscape in 2013:“no hiding place” from the migration to digital
Release of Global Entertainment & Media Outlook 2009-2013
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Presentation Notes
FYI: This is the slide that is on the screen as people walk into the room pre-event. Global note: Please customize to the theme/date/location of your event or simply begin with slide four—the image on the cover of this year’s Outlook book.
Welcome
Nicklas KullbergPartnerPricewaterhouseCoopers
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Presentation Notes
Global note: Please customize to your presentation. It’s my pleasure to welcome you all to ….
PricewaterhouseCoopers Slide 3
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Presentation Notes
Global note: Please customize to your event guests. Every year we undertake this endeavor…looking out over the future of entertainment and media over a five-year period…by category…and by region and nearly five dozen individual countries. We’ll give you a brief overview today of the major findings and trends we see. Then, we’ll have conversations with an extraordinary line-up of guests, including…. The Outlook reflects the collective wisdom of our teams and their work with entertainment and media companies around the world. Whether your question is consumer spending in Columbia or advertising revenues in Pakistan, we have answers, along with insights into the technology, government, political, consumer and business trends driving these forecasts. We encourage you all to explore further around your own businesses and markets and strategies. All tallied this is a more than 600-page effort covering 48 countries segregated into 4 regions. We are pleased to offer this resource to the industry, so that amid the rapid pace and scope of change today, whether you have a question about the state of broadband deployment in the Philippines or the size on the online advertising market in the UK, we can place at your fingertips data that can help you make informed decisions.
PricewaterhouseCoopers Slide 4
Outlook coverage
Internet Access Spending: Wired and Mobile
Internet Advertising: Wired and Mobile
TV Subscriptions and License Fees
Television Advertising
Recorded Music
Filmed Entertainment
Video Games
Consumer Magazine Publishing
Newspaper Publishing
Radio and Out-of-Home Advertising
Consumer and Educational Book Publishing
Business-to-Business Publishing
Slide 4PricewaterhouseCoopers
Presenter
Presentation Notes
This year, we’ve made the decision to focus our Outlook on these 12 segments where digital migration is at the heart of industry transformation. Across the industry, as you know, we measure both consumer spending in these categories as well as—where applicable—advertising revenues. As the industry continues to evolve, so does the Outlook. We are this year providing for the first time full country-by-country breakouts for mobile television, video-on-demand, online rental subscriptions, digital music downloads and vastly expanded coverage of video games (consoles, PCs, online and wireless video games as well as video game advertising). So whether you are interested in the United States or China, Romania or Vietnam, you can drill down to the same level of detail. SEGUE: The common thread running through all of these industry segments?
PricewaterhouseCoopers
No place to hide from the digital transformation
Slide 5PricewaterhouseCoopers
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Presentation Notes
The digital transformation is here. Nothing is safe. There’s no place to hide. There’s only pushing forward. Beyond the individual dynamics of your businesses, in our view, there are three primary external and inter-related dimensions driving change in our industry today. The first is economics. The current downturn will accelerate and intensify the migration to digital technologies—for consumers and companies alike. The second is consumer behavior, which clearly relates to the economy and consumer’s quest for value…but also encompasses the longer term trend of consumers wanting greater control and flexibility in their entertainment and media experiences. The third is advertising and the urgent need today for a new generation of revenue models to sustain this fast-expanding digital universe…models that will need to be diverse and innovative…providing greater accountability and advertising that is more targeted and relevant to specific audiences. SEGUE: Let’s start with the economics…and the big picture.
2009-10 CAGR2011-13 CAGR2009-13 CAGR
Global E&M Outlook
Slide 6PricewaterhouseCoopers
North America
Latin America
Europe, Middle East, Africa (EMEA)
Asia Pacific
-4.2%
0.4%
-1.9%
1.5%
5.1% 5.8%
6.5%8.4%
1.3%
5.1%
2.7%
4.5%
2009-13: 2,7% CAGR, $1.6 trillion
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[CLICK ONE: FOUR TERRITORIES] This is our version of Google Earth. Here you see the four regions. Overall we’re projecting 2.7% CAGR through 2013. The current recession differs from previous downturns in that credit is not available and consumer spending is falling at a much steeper rate than in the past. So it is hardly a slow and steady climb over the next five years. SEGUE: Let’s start by looking at this year and next. 2009-2010 CAGR We appear to be in the worst of it right now, with the U.S. the clear laggard—down 7.1% this year and another 1.2% next year. Everyone is impacted, but Asia-Pacific and Latin America clearly are faring much better today. Generally, what we are finding is that unlike the US and UK, which are mature economies facing a credit crunch, developing countries are impacted primarily by a decline in exports, rather than underlying structural issues. SEGUE: As a result, we expect that these export-crunched markets will generally recover more quickly. [CLICK TWO: 2011-2013 CAGR] Moving out further in time, we plainly see the continuation of a years-long trend: The United States will remain by far the largest E&M market, but other parts of the world will lead the growth…a theme we will return to in a few moments when we look more closely at GDP in specific countries. SEGUE: Now let’s see the full five-year forecasts. [CLICK THREE: 2009-2013 CAGR] Again the U.S. share of the global E&M pie remains substantial—nearly $1 out of every $4 in 2013. But it is continuing to shrink as markets around the world grow at a much faster rate. As a result, at the end of our forecast period, for example, another $1 of every $4 spent on entertainment and media will be spent in Asia. So we continue to see a steady rebalancing away from North America and Europe and toward emerging markets. The fact that this trend appears to be unaffected by the downturn underlines the degree to which some longstanding shifts—globalization, digital migration—still hold sway. SEGUE: Now let’s break things down by industry segment.
Nordic E&M Outlook
Slide 7PricewaterhouseCoopers
Norway
Denmark
Finland
Sweden
-1.5%
-0.8%
-0.6%
-0.5%
3.9% 4.6%
3.8%4.3%
1.7%
2.2%
2.5%
2.0%
2009-10: 2.1% CAGR, $42 billion
2009-10 CAGR2011-13 CAGR2009-13 CAGR
Presenter
Presentation Notes
[CLICK ONE: FOUR TERRITORIES] This is our version of Google Earth. Here you see the four regions. Overall we’re projecting 2.7% CAGR through 2013. The current recession differs from previous downturns in that credit is not available and consumer spending is falling at a much steeper rate than in the past. So it is hardly a slow and steady climb over the next five years. SEGUE: Let’s start by looking at this year and next. 2009-2010 CAGR We appear to be in the worst of it right now, with the U.S. the clear laggard—down 7.1% this year and another 1.2% next year. Everyone is impacted, but Asia-Pacific and Latin America clearly are faring much better today. Generally, what we are finding is that unlike the US and UK, which are mature economies facing a credit crunch, developing countries are impacted primarily by a decline in exports, rather than underlying structural issues. SEGUE: As a result, we expect that these export-crunched markets will generally recover more quickly. [CLICK TWO: 2011-2013 CAGR] Moving out further in time, we plainly see the continuation of a years-long trend: The United States will remain by far the largest E&M market, but other parts of the world will lead the growth…a theme we will return to in a few moments when we look more closely at GDP in specific countries. SEGUE: Now let’s see the full five-year forecasts. [CLICK THREE: 2009-2013 CAGR] Again the U.S. share of the global E&M pie remains substantial—nearly $1 out of every $4 in 2013. But it is continuing to shrink as markets around the world grow at a much faster rate. As a result, at the end of our forecast period, for example, another $1 of every $4 spent on entertainment and media will be spent in Asia. So we continue to see a steady rebalancing away from North America and Europe and toward emerging markets. The fact that this trend appears to be unaffected by the downturn underlines the degree to which some longstanding shifts—globalization, digital migration—still hold sway. SEGUE: Now let’s break things down by industry segment.
PricewaterhouseCoopers
-10.0 -5.0
Slide 8
Global: a fragmented road to recovery
2009-10 CAGR2011-13 CAGR
% % % % %
2.4
2.0
3.1
1.5
2.8
8.0
5.4
-0.2
4.0
8.3
12.9
11.8
-8.8
-1.6
-4.4
-7.1
-6.2
6.6
1.9
-5.9
-5.8
3.4
0.3
5.4
0.0 5.0 10.0 15.0
B2B Publishing
Cons. & Edu. Book Pub.
Radio/Out-of-Home
Newspaper Pub.
Consumer Mag. Pub.
Video Games
Filmed Entertainment
Recorded Music
TV Advertising
TV Sub. and Lic. Fees
Internet Ad: Wired & Mobile
Internet Access
Presenter
Presentation Notes
Global: Please discuss categories most relevant to your region. Here are the categories once again. SEGUE: Let’s look first at 2009 and 2010. Faring best: Video games, Internet access and TV subscriptions. Doing relatively OK: Filmed entertainment. Treading water: Internet advertising. Feeling the squeeze of the digital migration and a down economy the most: Magazine and newspaper publishing, television advertising, recorded music. Internet access we include because it’s a key underlying driver of our industry’s growth. So its continued growth in the near term and robust longer term double-digit expansion is encouraging. Mobile Internet access is the smaller category, but the fastest growing. One big breaking story: We are projecting that mobile Internet access revenues in Asia will overtake wired access next year--the first and only region to break that barrier during our forecast period. SEGUE: But the bigger story lies in the recovery period. [CLICK ONE: 2011-2013] Simply put: Some industry segments bounce back and some do not. Thus, our title: Fragmented road to recovery. Internet advertising breaks stride for a couple of years as advertising stalls alongside the economy, and then it resumes the top spot, leading our industry’s growth. TV subscriptions and license fees also are doing well globally….6.3% CAGR for the five years overall. Roughly 80% of the market is subscriptions, which is showing near-term economic sensitivity, but overall continues to see robust growth, led by Asia. Video games-This is the strongest and most recession-proof segment of the industry right now…6.6% near-term growth…surging to 8% in the recovery. Filmed entertainment, we see, holding up reasonably well, too. The box office is going strong. 3D is helping…as is the expansion of theaters in many fast-emerging markets. Box office is growing at roughly twice the rate of home video…5.9% CAGR compared to 3% CAGR. But both are in the black. In fact, film will be the ONLY segment to experience faster growth in 2009—a 1.1% bump —than in 2008, when the market was flat. At the other end of the spectrum, with the exception of books, no segment that goes into the red this year and next regains its footing. They all will end the forecast in 2013 behind where they were in 2008. Later in the presentation we will talk about the consumer behaviors behind these forecasts and tackle advertising. But right now, we are looking at a much more fragmented marketplace in 2013…and a growing digital divide—between those segments that are finding success with their digital monetization strategies—and those that are still struggling to face this challenge and make this all-important transition in a sustainable way. SEGUE: How does the global picture compare to the (insert region here) picture?
PricewaterhouseCoopers Slide 9
Sweden E&M Outlook 2009-2013: $13,8 billion (2.0% CAGR)
1,4
3,0
1,9
1,4
1,7
8,1
4,1
2,3
3,5
4,3
10,8
6,0
-1,3
-4,3
-1,9
-2,8
1,0
7,8
0,4
-7,8
-5,9
2,9
5,1
0,6
-10,0 -5,0 0,0 5,0 10,0 15,0
Radio/Out-of-home
B2B Publishing
Cons. & Edu. Book Pub.
Newspaper Pub.
Consumer Mag. Pub.
Video Games
Filmed Entertainment
Recorded Music
TV Advertising
TV Sub. & Lic. Fees
Internet Ad: Wired & Mobile
Internet Access
% % % % % %0.0
2009-10 CAGR2011-13 CAGR
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Presentation Notes
Global Note: Please replace with country-specific data/discussion most relevant to your audience. It’s very similar across the board. Internet adoption—very robust. 80 million broadband homes and counting…one-third of all broadband connections around the world. The same three industry segments on the medal stand: Internet advertising, TV subscriptions and video games…followed closely by movies. Publishing…music…TV advertising…radio…all struggling with their digital futures…not necessarily due to waning consumer interest…so much as the challenge they continue to face in monetizing their content in the digital environment. SEGUE: All of which, to varying degrees, illuminates a central yet counter-intuitive truth:
PricewaterhouseCoopers Slide 10
Slow economy, faster digital migration
Slide 10PricewaterhouseCoopers
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Presentation Notes
A slow economy is leading to a faster digital migration. Companies need the greater efficiencies and cost-savings that digital so often provides. And, consumers want the higher value and control that digital typically offers. The digital future is arriving in a blur, and we’ve got to pick up the pace or risk being passed by. SEGUE: Here’s how it plays out over the next few years.
PricewaterhouseCoopers
2009
Slide 11
Global nominal GDPGlobal E&M spending
Global E&M will leapfrog GDP with recovery
(% G
row
th)
-15
-10
-5
0
5
10
2004 2005 2006 2007 2008 2010 2011 2012 2013
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Presentation Notes
Here we see the textbook definition of “discretionary spending.” When we have more money in our wallets, we tend to spend more of it on entertainment and media. When the going gets tough, with some notable current exceptions like going to the movies and playing video games, entertainment and media understandably takes a back seat to putting food on the table and paying the mortgage. As GDP flatlines in 2009, we get pushed into the red. But as you see with recovery, entertainment and media will leapfrog ahead and emerge back on top by the end of our forecast period. Now let’s separate out advertising and consumer spend… [CLICK: DARK BLUE BECOMES ORANGE AND YELLOW] Here you see that advertising is extremely sensitive to GDP. Consumer spending which excludes internet access, will lead our industry out of the recovery…and advertising will lag. Note: Global E&M spending includes internet access revenue.
PricewaterhouseCoopers
2009
Slide 12
Global nominal GDPGlobal E&M spending
Global E&M will leapfrog GDP with recovery
(% G
row
th)
Global consumer/user-end spendingGlobal advertising
-15
-10
-5
0
5
10
2004 2005 2006 2007 2008 2010 2011 2012 2013
Presenter
Presentation Notes
Here we see the textbook definition of “discretionary spending.” When we have more money in our wallets, we tend to spend more of it on entertainment and media. When the going gets tough, with some notable current exceptions like going to the movies and playing video games, entertainment and media understandably takes a back seat to putting food on the table and paying the mortgage. As GDP flatlines in 2009, we get pushed into the red. But as you see with recovery, entertainment and media will leapfrog ahead and emerge back on top by the end of our forecast period. Now let’s separate out advertising and consumer spend… [CLICK: DARK BLUE BECOMES ORANGE AND YELLOW] Here you see that advertising is extremely sensitive to GDP. Consumer spending which excludes internet access, will lead our industry out of the recovery…and advertising will lag. Note: Global E&M spending includes internet access revenue.
Consumer behavior
Presenter
Presentation Notes
Customize We are in turbulent times. The pace of industry transformation is accelerating, but looking out to the horizon—the road ahead—remains relatively unchanged. The core, continuing trend each of us knows well at this stage of the game. It’s rising consumer demand for control and flexiblity in their entertainment and media experience. The economy is exaggerating this underlying trend… with consumers’ quest for value accelerating the ongoing digital migration. SEGUE: Why are our businesses in the midst of such fundamental transformation? Because consumers aren’t merely changing their media consumption. We’re changing how we live our lives.
PricewaterhouseCoopers Slide 14
Digital life
Slide 14PricewaterhouseCoopers
• Always connected
• Multi-tasking
• Our time vs. prime time
• Music crosses the threshold
• Games & movies
• Interactive & social
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Presentation Notes
Global note: This discussion is tailored to the U.S. market. Please customize discussion of trends above to pop culture references that will resonate with your specific audience. Broadband adoption is advancing at a furious pace…slowed but not stopped in the downturn…and recovering in robust fashion. Mobile adoption and penetration, while a smaller market, is advancing most rapidly as more of us turn to our smart phones for constant connectivity….multi-tasking our way through our daily lives. Yes, we know consumers want to control when, where and how they enjoy your products. Hulu is just one of the many compelling examples of our industry rising to the occasion. How many of us gingerly navigated the Internet or plugged our ears at the water cooler, until we had time to watch the our favorite season finales? Internet news sites know better than to post pictures of the winners of Survivor or Idol too quickly, or they’ll suffer the wrath of fans. There is extreme sensitivity to the fact that folks are watching their television on their time, and you have to be respectful of their experience. This tells me that quality entertainment will always have a passionate and engaged audience. One encouraging note in the U.S.: We are projecting that commercial-skipping will plateau as the DVR market matures, leading to improved broadcast network growth once the economy recovers. -Music will be the first segment to go ‘majority digital.’ In 2012, digital distribution will overtake physical distribution. An interesting divergence underway: In North America and Europe, the market will be dominated by Internet distribution. In Asia and Latin America, mobile music will dominate…in Asia because mobile will be the dominant Internet platform…in Latin America because the wired infrastructure will continue to lag behind much of the rest of the world. -Games and movies are connecting well with cash-strapped consumers today. For video games, the current generation of connected consoles and the rising number of broadband homes are a healthy combination—adding up to lots of bang-for-your-buck, quality, stay-at-home time. And, when consumers want to go out. They’re going to the movies and finding great value. Attendance is up about [10%] from this time last year. Movies are also benefiting from premium prices for 3-D. The success of Disney-Pixar’s Up is just the latest example. Amid the current box office boom, 53% of Americans say they’ve gone to the movies, while 63% say they’ve played a video game. That’s according to the NPD Group. So these are two thriving mediums that are making their connection with consumers today. Our modern digital lives are very social and interactive. The rapid rise of Twitter…life in 140 characters or less…is just the latest example…alongside the 100 million people around the world who log onto Facebook at least once a day. And, all of this connectivity is creating a more informed society. I suspect we’ll hear more about this from our guest today—Les Hinton, the CEO of Dow Jones. Print may be out of fashion, but people’s passion for quality journalism and discourse has never been stronger. The challenge is the business model to sustain it, particularly as consumers are doing more and different things, which is a topic we will certainly explore in greater detail in our conversations today. SEGUE: Those of us who are parents of young kids are fortunate to have a living laboratory, perpetual focus group and—let’s face it: free tech support—in our homes. We’ve had the opportunity to observe and learn from the so-called Net Generation up close and in their own natural habitat. The good news? Our kids have done a pretty extraordinary job of moving us all along.
PricewaterhouseCoopers
• Fastest growing Facebook demographic?
• Median age of a Twitter user:
• Largest demographic of U.S. women who engage with social media weekly:
Slide 15
Beyond the net generation
Slide 15PricewaterhouseCoopers
Presenter
Presentation Notes
Global note: These are U.S. statistics. Please highlight similar, relevant trends and services in your country. Potential sources for data: Global Social Networking (note from 2008): http://www.universalmccann.com/Assets/2413%20-%20Wave%203%20complete%20document%20AW%203_20080418124523.pdf Facebook: http://www.insidefacebook.com/facebook-global-market-monitor/ [note the full report is proprietary] Twitter: http://www.techcrunch.com/2009/05/20/twitter-surges-past-digg-linkedin-and-nytimescom-with-32-million-global-visitors/ We talked last year about the rise of the net generation…this new generation—and every subsequent generation—that is growing up digital…for whom new technologies are intuitively familiar and inherent parts of everyday life. We also talked about how they are influencing the behavior of their parents and grandparents. That, too, is accelerating today as more mature demographics tune in more closely to what their kids are saying and make more of an effort to learn new behaviors that might save them a buck or two and keep them in closer touch with their connected kids and grandkids. This, of course, means the impact of consumer spending extends across generations. Here you see the fastest growing demographic on Facebook—275% in the past six months. What’s the second-fastest growing group? 55+ has doubled in size in the last six month. The median age of a Twitter user? Don’t eye your teenager. Lots of folks commenting on the good grammar. These are grown-ups with limited time and lots of ideas…drawn to the appeal of micro-blogging. Attention advertisers: 42 million American women participate in social media on a weekly basis, according to a new study by iVillage. The largest demographic? Precisely those people who are, by and large, making the decisions and doing the purchasing for their households. SEGUE: Bottom line: We’re catching up with our kids. It may spark some eye-rolling when mom friends you on Facebook, but the impact of so many generations living more of their lives digitally is starting to add up to real and significant revenue.
PricewaterhouseCoopers
• Fastest growing Facebook demographic? 35-54
• Median age of a Twitter user: 31
• Largest demographic of U.S. women who engage with social media weekly: 27-43
Slide 16
Beyond the net generation
Slide 16PricewaterhouseCoopers
Presenter
Presentation Notes
Global note: These are U.S. statistics. Please highlight similar, relevant trends and services in your country. Potential sources for data: Global Social Networking (note from 2008): http://www.universalmccann.com/Assets/2413%20-%20Wave%203%20complete%20document%20AW%203_20080418124523.pdf Facebook: http://www.insidefacebook.com/facebook-global-market-monitor/ [note the full report is proprietary] Twitter: http://www.techcrunch.com/2009/05/20/twitter-surges-past-digg-linkedin-and-nytimescom-with-32-million-global-visitors/ We talked last year about the rise of the net generation…this new generation—and every subsequent generation—that is growing up digital…for whom new technologies are intuitively familiar and inherent parts of everyday life. We also talked about how they are influencing the behavior of their parents and grandparents. That, too, is accelerating today as more mature demographics tune in more closely to what their kids are saying and make more of an effort to learn new behaviors that might save them a buck or two and keep them in closer touch with their connected kids and grandkids. This, of course, means the impact of consumer spending extends across generations. Here you see the fastest growing demographic on Facebook—275% in the past six months. What’s the second-fastest growing group? 55+ has doubled in size in the last six month. The median age of a Twitter user? Don’t eye your teenager. Lots of folks commenting on the good grammar. These are grown-ups with limited time and lots of ideas…drawn to the appeal of micro-blogging. Attention advertisers: 42 million American women participate in social media on a weekly basis, according to a new study by iVillage. The largest demographic? Precisely those people who are, by and large, making the decisions and doing the purchasing for their households. SEGUE: Bottom line: We’re catching up with our kids. It may spark some eye-rolling when mom friends you on Facebook, but the impact of so many generations living more of their lives digitally is starting to add up to real and significant revenue.
PricewaterhouseCoopers Slide 17
Digital/mobile to account for 78% of all E&M growth
Total spending on digital/mobile platforms
Other consumer/end-user/access spending
0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000
2004
2005
2006
2007
2008p
2009
2010
2011
2012
2013
(US$ Millions)
Presenter
Presentation Notes
You can see on the light blue line, the impact of the economic downturn on the more traditional aspects of our industry—print newspapers and magazines, television subscriptions and advertising, DVDs, music CDs—every aspect of your business that’s not connected. Revenues come down in the first two years and then renew a modest climb in the three outlying years of our forecast. This is in stark contrast to the relentless, virtually uninterrupted growth in the digital/mobile aspects of our business. Internet access, online and wireless video games, video on demand, mobile TV, digital downloads of movies and music, online movie rental subscriptions, mobile music and electronic books. As you might suspect, the bulk of digital and mobile revenues relates to Internet access—both wired and mobile. But the overall trend remains the same: For every additional $1 your customers spend on the traditional side of your business, they’ll spend another $11 enjoying your movies, your TV shows, your newspapers/magazines/books and other content on digital and mobile platforms. These platforms will expand at nearly 10 times the rate of the non-digital/mobile marketplace. Your customers like the flexibility…the value…the choice that digital delivers…and when they stay home to save money, they often actually wind up spending money on many of your products. So what is changing consumer behavior telling us? There’s no place to hide. We have to move forward into the digital future. But also: There’s no shortage of demand for quality entertainment and media. Where we fall short is in monetizing these dramatic shifts in consumer behavior. SEGUE: To do this, we’ve got to connect to consumers and how they want to experience entertainment and media. So before we move on to our next topic—advertising—I thought it might be useful to take a few moments to hear directly from consumers themselves.
Advertising
Presenter
Presentation Notes
We are in the early days of a remarkable transformation of this medium, and the stakes could not be higher for so much of our industry. SEGUE: Let’s take it from the top.
PricewaterhouseCoopers Slide 19
2013 global ad spend still trails 2007 levels
Global advertising market
(US
$ M
illion
s)
400,000
425,000
450,000
475,000
500,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
8.1%
6.6%
5.5%
4.7%
1.4%
5.9%
6.1%
-1.1%
-12.1%-2.7%
Presenter
Presentation Notes
Simply put, it will not be an easy few years for this industry, which is so heavily dependent on advertising. Real, structural change is coming. Global advertising is in broad decline. Here we see the familiar dip and recovery we’ve talked about all afternoon—with one quite meaningful exception: Advertising does not make its way back to renewed growth. Global advertising will fall by 12.1% this year...by 2.7% next year…and slowly begin clawing its way back up in 2011. Nevertheless at the end of our forecast period, advertising still trails behind 2007 levels. These redistributions don’t necessarily mean that companies are advertising less. More likely they will find that they can achieve their objectives more cheaply because advertising will have grown much more effective. The cost of marketing—whether a movie, a car or a remarkable blanket with sleeves—will come down with the far greater inventory resulting from fragmentation…the significant shift in supply and demand…that an expansive digital environment creates. SEGUE: Let’s peel back the onion a bit further…
PricewaterhouseCoopers Slide 20
Global advertising by segment
4.3
2.5
4.8
1.3
1.9
5.1
11.8
4.0
12.9
-11.6
-12.5
-4.1
-8.9
-11.6
-9.7
16.8
-5.8
0.3
-20 -10 0 10 20
Trade Magazines
Directories
Out-of-Home
Radio
Newspapers
Consumer Magazines
Video Games
Television
Internet: Wired and Mobile
% % % %
2009-10 CAGR2011-13 CAGR
Presenter
Presentation Notes
Here we see the forecast broken out by segment. Of course, it’s no coincidence that the story here mirrors what we’ve just heard about shifting consumer behaviors. As consumer behavior fragments across entertainment and media…advertising revenues are following suit. They are spreading out over the digital landscape…in order to meet up with consumers in all of these new areas of their connected lives…and not necessarily regrouping around television and other traditional media with the recovery. A primary culprit is the simple shift in supply-and-demand dynamics. The print edition of a newspaper or magazine, for example, has only a limited number of pages available for advertising. The same is true of a 30- or 60-minute television program, when compared to the virtually limitless inventory of the online environment. Combine this with an increasingly fragmented audience—consumers spending more time with a wider range of entertainment and media—and the advertising market flattens out substantially. There are many, many different ways to reach your audience. And, the most effective solution—both in results and in cost-benefit—is less likely to be a return to the most expensive mass-media buys of what is rapidly becoming a bygone era. We see the implications of this new reality playing out in newspapers, magazines and television today, which is why we use the term “transformation.” The industry that emerges from this downturn will not be the industry that went into it. The business models must be different if they are to be effective with consumers who are engaging with media in very new and diverse ways. As a result, for example, the Internet will account for 19% of global advertising in 2013, compared with 12% last year and only 4% in 2004. Of course, to continue to win ad spend from traditional channels, new advertising models will need more accurate targeting and relevance to the consumers. They will have to clearly demonstrate to advertisers that the digital alternative truly is more effective. This will require greater transparency and accountability over audience metrics and clear returns on ad investment. SEGUE: Let’s take a closer look at our specific market.
PricewaterhouseCoopers
5,6
4,2
1,5
2,7
2,3
4,2
12
3,5
10,8
-7,3
-10
-7,3
-7,9
-4,6
-7,5
19,6
-5,9
5,1
-20 -10 0 10 20 30
Trade Magazines
Directories
Out-of-Home
Radio
Newspapers
Consumer Magazines
Video Games
Television
Internet: Wired and Mobile
Slide 21
Sweden advertising by segment
% % % %
2009-10 CAGR2011-13 CAGR
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Global Note: Please customize to your country. Television advertising…one big story very closely watched…overall flat through our forecast. Underneath the surface: Broadcast television we expect to be down 16.1% this year…and overall 2.7% lower in 2013 than it was in 2008—just under $36 billion. Cable network advertising growth will see a more robust recovery—driven both by viewership gains and the introduction of addressable advertising later in our forecast. We will hear more about the future of the news later in our program. Without question, the Internet is creating tremendous demand for information. But consumer behavior is moving far more quickly than the revenue models. The recession and ongoing migration of consumers and advertisers to the Internet will substantially reduce print advertising, which will decline by more than 35% during the next four years to $22.6 billion. Digital advertising on newspaper websites will decline during the next two years, but then emerge about $400 million ahead of 2008 levels in 2013. Unfortunately that growth to $3.5 billion is nowhere near enough to fill the gap in what’s happening on the print side. The good news? Internet advertising in this country is adding up to substantial revenues: Nearly $34 billion in 2013—more than half the revenues of the entire television advertising market. Specifically we see steep declines in display and classified offsetting continued growth in search advertising in the near-term, leading to a decline in wired advertising during 2009. As you see, we then expect a return to growth. Wired Internet advertising will expand by 5.7% CAGR to $31 billion. Mobile advertising is much smaller, rising to just $3 billion in 2013…but growing quite a lot faster at 14.8% CAGR. So we see overall here a very formidable picture. But also some rays of hope in the digital world. Internet advertising, for example, will end the forecast period the second largest generator of revenues in all advertising—over half the revenues of the dominant revenue provider—television.
Slide 22PricewaterhouseCoopers
E&M Outlook 2013: Positioning for the upturn
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Printing note: copy on this slide extends beyond one page. Consumers on the move…advertising revenues in hot pursuit. It all adds up to an inarguable case for digital migration. Where do we go from here? We get in the best position we possible can for the coming upswing. This is the first cyclical slump to take place in an environment where consumers and businesses have the option to respond with new buying, spending and investment decisions. We believe that both will seize the opportunity…one group in a quest for value and out of enthusiasm around all the new ways to enjoy entertainment and media…the other—that’s all of us—largely out of necessity. The race is on. By 2013, the result will be a more fragmented landscape characterized by diverse business models, each specifically tailored to work with particular types of consumers, forms of content and/or national marketplaces. What will it take to be successful. We’ve identified six common success factors in our forecast. 1-You need to have a unique offering. Whether the model is ad-funded, subscription or a combination of the two, you need to provide a content experience that cannot be readily duplicated elsewhere. Maybe you allow mobile micro-payments via an iPhone or you provide on-demand access to TV shows ON your TV to help fans catch-up with their favorite shows. It’s got to be unique…and exciting. 2- Be cognizant of where you’re doing business. The Outlook can be extremely helpful here. You want to know how many folks have a cell phone in Argentina? How many households have broadband in Russia? We have the answers—and projections moving forward. Stefanie mentioned that mobile broadband access will overtake wired broadband access in Asia next year. Marcel mentioned that many parts of the developing world are behind on their Internet infrastructure. These are essential pieces of knowledge as you build your global strategies. [CLICK TO DISPLAY NEXT TWO BULLETS] These next two we know…and are all very hard at work executing on today” Listen to your customers. Engage with them. Follow their lead. They are some of the most important partners you have today—with a make or break role in the ultimate success of your digital transformation. Bring them into your decision making. Next: Know what you can and cannot do. Focus on your core capabilities and make sure you have the right alliances and partnerships and acquisitions to fully and effectively exploit the digital opportunity. Entertainment and media companies….technology companies…local partners around the world. Everyone has a stake in working much more closely together. You need to be where your customers are. Innovative relationships help you get there fast. SEGUE: Last but hardly least… [CLICK TO FINAL TWO BULLETS] If you follow your customers…and build up your relationships and alliances…then you are well-positioned to exploit the heck out of your intellectual property. We know what consumers want? Mobility. Convenience. Quality. So deliver it. Invest NOW for the future environment, and you will be well-positioned to exploit the coming economic upturn. Today most companies derive the majority of their revenues from a limited number of channels. That has to change. Your customers are moving on. Take your brands…your characters…your titles…and you patents and get them out to consumers across the digital/mobile landscape. Does this present often extraordinary tactical and operational challenges? You bet. Release windows. Platform-specific rights. Piracy. Privacy. We know. We’ll help you work through it, but the change has got to come. There is no place to hide. This has to be a very active, robust and vigorous piece of your day-to-day life not in 2013, not next year, but right now. The industry that emerges from this recession will not be the industry that went into it. It will be a transformed industry. As you lead this transformation, we hope that the Outlook will be a tremendous resource helping you make informed decisions. SEGUE: And, because we are all going through this together, I’d like to turn to the part of this event that I look forward to the most each year, and that’s our conversations with all of you. [TRANSITION TO REST OF PROGRAM]
Global Entertainment & Media Outlook 2009-2013www.pwc.com/outlook
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Thank you.