New York expected to overtake Tokyo as Top Spending Entertainment & Media City [REPORT]

Entertainment & media (E&M) momentum will remain in cities with a tale of two types of cities developing between the “fast growing” and “big spending,” according to a new PwC Cities of Opportunity: The Urban Rhythm of Entertainment & Media report. Buoyed by a strong overall economy, New York is projected to be the top E&M spender of all 30 cities as it overtakes Tokyo by 2018, whose 0.7 compound annual growth rate (CAGR) lags New York’s 4.5 percent.

The study is based on analysis from Cities of Opportunity 6 and the Global Entertainment & Media Outlook 2014- 2018. Cities of Opportunity offers a balanced, quantitative social and economic benchmarking of 30 of the world’s leading centers of business, finance and culture.  Outlook adds the worldwide E&M total spending perspective. The study blends the findings of the two reports, added complementary research on urban employment, output and productivity and projected near-term patterns.

While emerging cities represent the greatest growth potential, developed cities still dominate total spending. The study reveals that the top cities deliver the right attributes for a knowledge-based economy by ‘inspiring’ workers and offering businesses a solid footing in innovation, technology readiness, cultural assets and growth. They balance the creativity to generate content and desire to consume it. London, New York, Berlin, Los Angeles and Stockholm are prime examples.

“Entertainment and media plays a crucial role in the economy of the urban future with high productivity and strong share of jobs in many cities like New York, London and Berlin,” said Deborah Bothun, PwC’s U.S. entertainment, media & communications leader. “Knowledge of a city’s strengths and challenges will be vital for E&M companies in deciding the best cities to do business and how to attract talent in the local market. At the same time, companies will need to ensure that they understand the issues around tax policy and intellectual property protection.”

A clear divide between developed and emerging cities in E&M spending

E&M spending in the top 10 spending cities is estimated at $109 billion in 2014, rising to $126 billion by 2018. By 2015, New York’s strong overall economy is forecast to overtake Tokyo as the top E&M spending city overall, followed by London in third place.

While no city falls into the top quadrant of high spending and growth, Hong Kong comes closest, a developed city that sits in the heart of the fast-growing Asia.  All of the 10 fastest growing cities are represented by emerging economies. Nairobi, a young city with an average population age of 25, leads the pack with a 12.5 percent CAGR from 2013 to 2018.

In terms of absolute growth, New York, London, Hong Kong, Moscow and Los Angele combined will account for almost $2 in every $5 of the growth in E&M spending over the next five years, highlighting the stakes in both mature and emerging urban markets.

A creative industry wields economic power

Cities of Opportunity projects that E&M employment will grow 16 percent by 2025.  By 2025, PwC projects the 5.85 million E&M jobs in the 30 cities in 2013 will have grown to 6.8 million.

The E&M sector has become an important provider of high-quality employment and accounts for 6 percent of jobs on average across the 30 cities, and over 10 percent in some cases such as London (12 percent), Berlin (10 percent), Tokyo, Stockholm, Madrid and Istanbul (all at 9 percent). In some cities, E&M has grown to a scale comparable to traditional sectors such as construction and manufacturing.

E&M productivity outperforms its share of employment, showing real economic clout in cities, measured by GDP per employee, with productivity levels running higher than the ‘average urban job’ across 20 of the 30 cities.

PwC finds that the nature of E&M employment varies considerably across the 30 cities.  The more creative and technically specialized roles congregate in the wealthier cities while lower value-added jobs, such as in printing, are being priced out of developed cities and are represented in higher proportions in emerging cities.

Cities appear to be defining themselves as creative centers, content consumers or combinations of the two. New York, London, Stockholm and Berlin are big spenders and are building vibrant E&M generating economies based on their social and economic strengths. Chicago stands out as a strong E&M consumer but is among the lowest generator of E&M content, in part due to the city’s interest and economic strengths in other industries. Istanbul, Beijing, Shanghai and Mexico City are among the notable emerging cities distinguished by high content creation but lower consumption.

Cities of Opportunity offers a number of insights for entertainment and media companies, including:

•     Be open to new ideas from cities beyond the usual suspects. While urbanism is universal, the sights, sounds and ideas that animate creativity and business vary considerably among cities.
•     When making location decisions for headquarters, branches or operations, be aware of the urban traits that define a strong E&M city. These include a good foundation in education and knowledge-based skills, strong quality of life and engaging cultural attractions.
•     Don’t write off opportunities in traditional, non-creative sectors in emerging cities. Many times, room remains for short and medium-term growth.
•     Urban face time pays tangible dividends even in digital societies. The freedom of easy access to peers and open flow of ideas is a critical city advantage E&M companies can leverage in the workplace to attract and retain talent.
•     Be aware of the E&M sector’s contributions to the cities. Use the industry’s standing to explore opportunities such as tax incentives or enhanced intellectual capital protection.
•     Balance risk and reward in cities with strengths in E&M but also weak intellectual property protection. If the upside justifies the investment, companies should consider a variety of measures to combat piracy, including enforcement, education on the value of intellectual property, legislation or new technologies to enhance protection.
•     Think digitally, act locally. Knowledge of a city’s technology readiness, intellectual capital, innovation and growth in digital E&M content consumption will be important to steer investment decisions.

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