Global Entertainment And Media Industry To Reach $1.2 Trillion By 2005.

Buoyed by the growing importance of the Internet as a distribution medium, and overcoming the 2001 U.S. economic slowdown, the global entertainment and media industry will reach $1.2 trillion by 2005, growing at a 7.2 percent compound annual rate. These predictions will be published on June 6th in the latest edition of the annual PricewaterhouseCoopers Global Entertainment And Media Outlook: 2001-2005. Growth by Region: While the current U.S. economy and concerns about its effect on other markets may have dampened growth predictions for 2001, long-term spending prospects remain bright. Overall, the U.S. economy has experienced consistent annual increases despite the quarter-to-quarter volatility that has become a main feature of the new economy. In fact, the U.S. entertainment and media marketplace will expand at a 7.1 percent compound annual growth rate (CAGR) through 2005. During the forecast period, Television Content (comprised of broadcast and cable networks) will be the only other U.S. segment to experience double digit growth. It will expand at a 10.3 percent CAGR on the strength of digital cable and DBS, which are expected to reach 42 million and 26 million subscribers respectively by 2005.

Latin America will have the fastest growing entertainment & media market of any region, with a CAGR of 12.5 percent over five years. Economic stabilization and foreign investment are key drivers for the region, with consumer and advertising spending being boosted by a growing economy. It is expected that the resulting increase in Web penetration will cause Latin American Internet advertising spending alone to surge at a CAGR of 47.2 percent by 2005. Western Europe is rebounding after adjusting to the monetary union, which will make the Europe, Middle East and Africa (EMEA) economy more efficient and productive overall. Eastern Europe is also achieving a stronger economic footing, and is expected to grow rapidly through better utilization of its resources. The EMEA market will be propelled by a 17.4 percent compound annual growth rate in Internet Advertising and Access Spending, as well as high single-digit growth in the Television Content, Theme Parks, Sports and Radio and Out-of-Home segments. Through 2005, entertainment and media spending in Asia/Pacific will grow at a compound annual rate of nearly 7 percent, with double-digit growth from Internet Advertising and Access Spending and Television Distribution (satellite, cable and DBS) being the main drivers. Sluggish near-term spending growth in Japan will offset double-digit increases in most other countries.

Industry Consolidation: After a year of old economy mergers and new economy shut-downs, consolidation within the entertainment and media industry – along with digital technology and global economic growth — will be the other principal driver underlying the forecast through 2005. The benefits to the survivors of industry consolidation will continue to be substantial. The ability of global media players to distribute their product and content throughout the world will make media companies stronger and better able to provide advertisers with efficient and cost-effective platforms to reach consumers – particularly valuable niche audiences. Expanded reach of operations across different types of media, industry segments and national boundaries has positioned these companies to attract more advertising, and will benefit advertisers who have historically paid a premium for extended reach.

Key findings concerning the future of the entertainment and media industry, by segment, include:

Filmed Entertainment – Spending worldwide will rise at a 6.6 percent CAGR, reaching $93 billion by 2005 from $68 billion in 2000. Expect Latin America to be the fastest-growing region, posting a 10 percent CAGR, as theater expansions and modernizations fuel double-digit growth in box office spending. The U.S. market should reach $55 billion by 2005, as home video sell-through and increases in television program spending offset modest box office growth. A reduction in the number of screens, the result of oversaturation, will hurt admissions in the near term. Explosive growth in DVDs will fuel both the sell-through and the rental home video markets in all regions.

Television Content (Broadcast and Cable Networks) – The market will reach $168 billion in 2005 from $107 billion in 2000, growing at a 9.4 percent compound annual rate. Overall television watching has actually increased, attracting advertising dollars to the market and dispelling reports that the Internet has cut into television viewing. Interactive television will gain a foothold in the market, but it will be used in conjunction with scheduled programs rather than as a substitute. Digital and satellite television will become a factor in many of the markets in 2001.

TV Distribution (Station, Cable and DBS) – With a 7.8 percent CAGR, spending will reach $221 billion by 2005. Asia/Pacific ($36 billion in 2005) and Latin America ($9 billion in 2005) will be the fastest-growing regions, fueled by large increases in multichannel penetration. The U.S. will be the slowest-growing market, with a CAGR of 6.9 percent. Sluggish growth in television station advertising will offset rising DBS and digital cable subscriptions. Subscriber growth and household spending will be boosted in EMEA by the introduction of new services including digital cable, Internet access and telephony.

Recorded Music – Spending will grow at an estimated 5.1 percent compound annual rate over the next five years, reaching $49 billion in 2005. Latin America will be the fastest-growing region, with a CAGR of 11.8 percent, due to the economic recovery and successful efforts to stem piracy. In the U.S., fee-based online distribution of music, primarily through subscriptions, will become a significant factor in the market over the next two years, though physical distribution will remain dominant. The music business in the U.S. and European markets is relatively flat or growing slowly. Growth will come from new markets in Eastern Europe, Latin America and smaller Asia/Pacific countries, and from online digital distribution.

Internet Advertising and Access Spending – Double-digit growth is expected in all regions, with overall spending jumping from $40 billion in 2000 to $90 billion in 2005 for a CAGR of 17.5 percent. Latin America, the smallest market, will be the fastest growing, with a projected 40.6 percent CAGR, followed by Asia/Pacific at 26.3 percent CAGR. Streaming media will revitalize the Internet advertising market and online retailers will integrate their activities with catalog and brick-and-mortar outlets to incorporate the benefits of traditional retailing. The U.S. market will reach $38 billion by 2005, for a CAGR of 14 percent.

Magazine Publishing – Spending will grow at a 5.8 percent CAGR, increasing from $84 billion in 2000 to $111 billion in 2005. After a huge year in 2000, the U.S. market will grow by only 1.7 percent in 2001 due primarily to a slowdown in the economy and the loss of dot-com and tobacco advertising. Latin America will be the fastest-growing region, as big advertising and circulation gains push the market to an 11 percent CAGR.

Newspaper Publishing – Newspaper publishing globally will increase from $155 billion in 2000 to $197 billion in 2005, for a CAGR of nearly 5 percent. Mid-single-digit increases are anticipated in each region except Latin America, where growth will be at a 9.5 percent compound annual rate, boosted by an expanding economy and circulation growth stemming from rising literacy rates and employment. The Internet is proving to be an engine of growth and an effective companion for newspapers, attracting new readers and additional advertising, and driving print subscriptions. Favorable demographic trends in many regions will lead to a turnaround in overall circulation beginning in 2003.

Book Publishing – Across all regions, spending will expand at a 4.2 percent CAGR, rising from $85 billion in 2000 to $105 billion in 2005. Latin America will be the fastest-growing region – with a CAGR of 9.1 percent – as governments make a concerted effort to promote education and literacy. U.S. book spending will total an estimated $39 billion, compared with $35 billion in EMEA. Electronic books will become a significant component of the U.S. industry, accounting for 30 percent of spending on professional books by 2005, 28 percent of college textbooks, and 11 percent of consumer books.

Radio and Out-of-Home Advertising – This segment will see spending increase from $48 billion in 2000 to an estimated $69 billion in 2005, for a CAGR of 7.5 percent. The U.S. is expected to rebound from a lackluster 2001 with high single-digit increases over the 2002-2005 period as radio gains share from newspapers and television stations, and new digital billboards and signs boost out-of-home advertising. Latin America will be the fastest-growing region, buoyed by an improved economic climate and the lower cost of radio/out-of-home compared with television and print.

Sports – Across all regions, this category will increase from $35 billion in 2000 to $50 billion in 2005, for a CAGR of 7.4 percent. Despite generally falling ratings on U.S. television, sports often outperform regularly scheduled prime time shows, which is why TV rights continue to command large increases when they come up for renewal. Ticket price increases will fuel gate revenues without cutting into attendance, as consumers have shown they are willing to pay more to attend games. The emergence of digital television in EMEA is increasing the demand for sports programming – particularly the World Cup in 2002 and the Euro Cup in 2004 – and is causing a surge in rights fees.

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