Digital to Drive Entertainment, Media Growth

NEW YORK: The latest edition of PwC’s Global Entertainment and Media Outlook predicts that digital entertainment and media (E&M) spend will account for more than 40 percent of all E&M spend in mature markets by 2017.

The Global Entertainment and Media Outlook 2013-2017 predicts $2.2 trillion in global E&M spend in 2017, up from $1.6 trillion in 2012, reflecting a compound annual growth rate (CAGR) of 5.6 percent. Driven by smart-device ownership, digital E&M spending is expected to account for 44 percent of all spending in mature markets by 2017. This is up from 34 percent in 2012. In the U.S., digital will account for 43 percent of E&M spend, which is expected to hit $632 billion in 2017, a 4.8-percent CAGR. The U.S. remains the world’s largest E&M market.

“The E&M industry is undergoing a significant shift as digital disruption across every segment is accelerating and as digital media remains the clear driving force behind E&M revenues over the next five years,” said Ken Sharkey, PwC’s U.S. entertainment, media & communications practice leader. “To drive growth and compete effectively in the future, E&M companies must invest in constant innovation that encompasses its products and services, operating and business models and, most importantly, focus on customer experience, understanding and engagement.”

To succeed in this changing landscape, PwC notes that understanding the consumer is essential. Those companies with the "speed, flexibility and insight" to monetize diverse connected consumers across the globe with "personalized, relevant and ultimately indispensable content experiences" will be the most likely to develop profitable businesses. The consumer, who is increasingly confused by the "blizzard of consumption choices" it faces, is moving increasingly to "my media"—highly personalized content experiences. The phenomenon of "my media" is driving cord-cutting, the need for more on-demand content and the growing use of the second screen. As consumers have embraced digital platforms, so too have advertisers; in the U.S., digital advertising is expected to account for 34 percent of advertising revenues by 2017, up from 22 percent in 2012.

In this fragmented market, "content’s central role in attracting, engaging and retaining consumers has been strengthened," PwC says. This has "fired the starting-gun on an industry-wide race to acquire" content. Companies will need to ensure their content remains relevant and valuable by tapping into second-screen opportunities, optimizing windowing strategies, bundling services, targeting consumers’ personal references while respecting their privacy, and providing strong recommendation and navigational functionality so consumers can easily find the content they want.

To tackle piracy, consumer education and government regulation and enforcement are not enough. Digital content distributors "must deliver a differentiated experience"—delivering the right content to the right people at the right time, place and price, in the right environment. Better systems are also required to help consumers differentiate between legitimate and pirated content sites.

"Connected consumers are clearly in control and an even greater portion of viewing and interaction of TV and film content will take place on multiple screens and devices," said Deborah Bothun, PwC’s U.S. advisory entertainment media & communications leader. "E&M companies have the opportunity to deepen engagement with consumers by trying different business models for delivering content and experimenting with price points and offerings."