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ENTERTAINMENT & MEDIA OUTLOOK

Irish Entertainment & Media to grow by a billion dollars over the next five years to 2014 – says PwC at the launch of its 11th Entertainment & Media Outlook

Overall, Irish E&M will grow by 4.1% compounded annually over the next five years to 2014 reaching US$5.6 billion.

Over the next five years digital technologies will progressively increase their impact across all segments of entertainment and media(E&M) as digital transformation continues to expand and escalate. The uncertain economic background has done nothing to slow the ever advancing digital transformation or the rapid consumer uptake of new media experiences.

Winning sectors for Ireland: Many of the traditional entertainment and media sectors continue to struggle, in particular those dependent on advertising spend. However, a number of sectors will continue to grow over the 5 year period including – Internet access, internet advertising, TV subscriptions and video games – as below:

Internet access will grow by 11.7% compounded annually to US$728m;

Internet advertising will grow by 16.3% compounded annually to US$243m;

TV subscriptions and Licence Fees will grow by 7% compounded annually to US$990m, and

Video games will grow by 7% compounded annually to US$647m.

Much of this Irish growth will be driven by continued changing consumer behaviour. Following a year of stagnation, overall consumer demand is expected to return to modest growth of around 1.2% in 2010.

By 2014 overall consumer demand in Ireland will have shown annual compound growth of 3.8% over the forecast period, reaching US$3.5 billion.

IRISH ADVERTISING

Irish advertising revenues have been particularly hard hit by the turbulent markets and while there are signs of stabilisation, the market remains fragile.

The Irish advertising market is expected to fall by 5.1% in 2010. This is expected to stabilise in 2011 with a return to growth from 2012.

Overall, the Irish advertising market is expected to grow 1.8% compounded annually over the forecast period to reach US$1.4 billion by 2014. Key components are:

Internet advertising showing growth of 12.2% in 2010 and 16.3% compounded annually over the five year forecast.

TV advertising is expected to decline by 5.8% in 2010. This is expected to stabilise in 2011 with growth resuming from 2012. Overall, TV advertising is expected to grow 2.6% compounded annually over the five year period reaching US$310m. Free digital terrestrial TV and high definition (HD) penetration growth will expand audiences and boost broadband, while new online streaming sites and web enabled TV sets will drive online TV advertising.

Other traditional advertising channels will continue to be severely impacted, for example radio advertising, outdoor advertising and newspaper advertising which will decline over the five year forecast period.

CONSUMER BEHAVIOUR DRIVING CHANGE

Consumers are embracing new media experiences with staggering speed.

The key consumer trends noted by PwC are:

The rising power of mobility and devices: Advances in mobile technology and products will see increasingly converged and multi-functional mobile devices come of age as a consumption platform by the end of 2014.Wireless network upgrades are facilitating faster transmission speeds which is enticing users to access the internet via their mobiles. In addition, the proliferation of smart phones, with touch screens and large displays, make it easier to get online this way. These factors plus customised mobile sites suitable for access by smart phone with dedicated advertising, are encouraging the advertising world to focus on mobile.

The growing dominance of the internet experience in content

consumption: Using the internet is now one of the great unifying experiences of the current era for consumers everywhere – and their expectation of the internet-style interactivity and access to content will continue to expand across media consumption in every segment.

This trend is initially at its clearest in television. Equally, people are already consuming magazines and newspapers on internet-enabled tablets, and streaming personalised music services in preference to buying physical CDs or even digital downloads.

Increasing engagement and readiness to pay for content – driven by improved consumption experiences and convenience: Ongoing fragmentation means that media offerings will need greater consumer engagement and quality to get themselves heard – and paid. Consumers are more willing to pay for content when accompanied by convenience and flexibility in usage, personalisation, and/or a differential experience that cannot be created elsewhere.

Speaking at the launch, Susan Kilty, Partner, Entertainment & Media Practice, PwC said:

“The trends in Ireland are similar to what is happening worldwide. The advancing digital transformation is driving audience fragmentation to a level not previously seen. Companies perceive the continuing fragmentation of the market as a threat but it should be seized as an opportunity. The consumer base is now a huge test-bed for new products – a trend reflected and supported by the rise of social networking.

This is not just a profound behavioural shift but also a dramatic illustration of the power of shared information and communication. It is imperative that companies capture the hearts, minds and money of these consumers.”

REVOLUTIONISING THE BUSINESS

Digital migration and the changes in consumer behaviour have put extreme pressure on existing business models and caused the industry to radically rethink the monetisation of content. Inevitably this results in individual companies repositioning themselves as they strive to capture new sources of revenue.

Partnerships (through which to share cost and risk) are becoming increasingly more important as are strategic flexibility, economies of scale and scope and the ability to monetise brands/rights across all platforms.

Not surprisingly, digital services will provide most of the industry’s future growth – a prospect reflected by the fact that digital technologies are now effectively a given in all segments. But it is vital to remember that legacy off-line revenue streams are still significantly larger than digital revenues.

Bartley O’Connor, Senior Manager, Entertainment & Media Practice, PwC concluded:

“The challenge is to identify advertising business models that are able to withstand the continued pressure on advertising rates in the digital environment and on subscription models that capture the consumers’ preferences for premium content.

The industry needs to ensure it embraces digital not as a competitor to traditional, physical analogue but as a compliment. Over the next five years it will become apparent where consumer absolute loyalty lies: brand, device or content. The answer will be driven by consumers and the companies who meet their needs. Irish companies who grasp the full potential of new revenue models will emerge as the strong survivors in the new environment.”

Launching the report, Eamon Ryan, T.D., Minister for Energy, Communications and Natural Resources said:

“This is an important time in the development of media and internet globally and in Ireland. The continuing evolution of the internet and digital media, as outlined in PwC’s Outlook publication, presents Ireland with an immediate opportunity to develop a global market in the trade of digital services and to harness the wider economic, social and cultural benefits of these technologies. The Government is committed to engaging with Irish companies operating in this dynamic landscape to ensure the right regulatory and policy framework is in place.”

Photo of Convention Centre by Seanky www.pix.ie/seanky

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