The four-year-old recession has rocked the traditional media ivory towers and, even though internationally advertising is showing signs of a return to growth, the traditional pillars of media are now at the mercy of a potent new force: the digitally empowered consumer.
According to the latest PricewaterhouseCooopers (PwC) analysis of the Global Entertainment & Media market, globally this market will grow at a compound rate of 5.7pc a year for the next five years. In Ireland, the market is expected to grow at a rate of 3.5pc over the next five years.
PwC forecast that aggregate E&M global spending will rise from USUS$1.4trn in 2010 to US$1.9trn in 2015, a 5.7pc compound annual advance driven by economic growth, but masking the accelerating shift of spending from traditional to digital platforms. Currently, digital accounts for 26pc of all spending but by 2015 we expect digital’s share to rise to 33.9pc.
Advertising, the most cyclically sensitive of the three E&M spending streams, recorded the largest year-on-year swing, rebounding at 5.8pc in 2010 from an 11pc slump in 2009. Overall global advertising will increase at a 5.5pc compound annual rate from US$442bn in 2010 to US$578bn in 2015.
Consumer/end-user spending also improved, rising 2.2pc in 2010 after a fall of 0.4pc in 2009. In contrast, internet access spending was barely affected by the economic cycle, growing at 9.2pc in both 2009 and 2010 and is expected to rise from US$270bn in 2010 to US$408bn in 2015, an 8.6pc compound annual increase.
Irish entertainment and media industry to lag global recovery
The year 2010 saw a further decline in the overall value of the entertainment and media market, albeit at a lower rate than in 2009.
When the recession hit in late 2008 and into 2009, traditional reliables like property and job advertising plummeted and newspapers in particular, locally and worldwide, were sent reeling. The shocks were also palpable in other departments of the media, namely broadcasting.
The overall market in 2010 was valued at US$4.26bn, a slight decline from US$4.3bn in 2009. The market is expected to return to 2009 levels in 2011, and continue to grow in 2012 and thereafter. Over the five-year period 2011-2015, the overall market is predicted to show a compound growth rate per annum of 3.5pc, bringing the total value to just over US$5bn by 2015.
The advertising market in 2010 was valued at US$1.23bn, a decline of 7pc from 2009. The market is expected to be flat in 2011, before returning to modest growth in 2012. Overall, the advertising market in Ireland is expected to grow at a compound average growth rate (CAGR) of 2.3pc over the next five years, to bring it to US$1.38bn in 2015, less than the highs of 2006-2008.
Growth in spending on internet access has not been impacted by the recession and is expected to continue growing at double-digit growth over the next five years. The internet access market in 2010 was valued at US$421m, and, with increasing broadband penetration and more wired mobile devices becoming the norm, the market is predicted to grow to US$692m by 2015, representing a compound average growth rate of 10.4pc.
The rest of the consumer spending market grew slightly in 2010 and is expected to remain flat at US$2.6bn in 2011 before returning to modest growth next year. Over the five-year period to 2015 it is expected to achieve a compound average growth rate of 2.8pc to bring it to just under US$3bn.
Serving the digitally-empowered consumer
Bartley O’Connor, a senior manager with PwC in Ireland, explained that in most countries broadband and smartphone-enabled consumers are emerging as the new powerbrokers on the media landscape.
“This is giving people undreamed of choice in what they consume and is affording switched-on media players opportunity if they focus on services that can be offered.
“It’s no longer about having the content and putting it out in a newspaper or over the TV or radio. You have to look at a whole bunch of things around that content and how you deliver it.”
O’Connor says publishers and broadcasters are learning valuable lessons about digital consumers. In the past, newspapers were produced and it was assumed a certain amount would be sold. Now, through a digital lens, the relationship is different.
“If you did what you always did in the past you’re going to be out of business and more brands will continue to go. This is a huge challenge for traditional media companies to grasp. But it’s great for consumers who can choose what content they want to read on their smartphones, tablet computers, PCs and digital, web-connected TVs.
“For content owners facing the reality that most content out there is free, the key will be to add other aspects to differentiate and add quality and convenience. The battle is deciding how to provide something that customers are willing to pay for,” O’Connor said, pointing to niche publications like the Financial Times which succeed by offering quality content to a captive audience willing to pay for it.
