It’s increasingly clear that consumers see no significant divide between digital and traditional media: what they want is more flexibility, freedom and convenience in when and how they consume their preferred content.
Canadian entertainment and media revenues will rise at a compound annual growth rate (CAGR) of 5% over the coming five years, from CDN$47.9B in 2014 to CDN$61.2B in 2019, according to PwC’sGlobal entertainment and media outlook 2015–2019. Canada is in step with the global industry which is expected to grow at a rate (CAGR) of 5.1% over the same period.
While the pace of industry growth will vary widely in different markets—with Japan seeing the slowest growth at a CAGR of 0.9%, and Nigeria the fastest at 15.1%—it’s apparent that when consumers around the world become connected their behaviour becomes more similar, subject to two differentiators. The first is the quality of the available infrastructure for consuming content. The second is consumers’ common desire for content experiences that are relevant to them personally – which is why, even in a globalized world, meeting community preferences remains critical.
Consumers call the shots, as content experience trumps delivery platforms
Overall, what’s emerging is an environment where consumers regard any distinction between ‘digital’ and ‘non-digital’ as irrelevant. Instead of favouring one or the other, they’ve taken on board the proliferation of content and access options enabled by digital, and are exploiting it to seek more flexibility, freedom and choice in what, when and how they consume. In making these choices, they’re migrating to offerings that combine relevance and convenience—attractive content, easy discovery, social community—with an inspiring, personalized experience, however it’s delivered.
As a result, while global revenue from digital media will continue to exhibit stronger growth, non-digital media will still contribute 88% of Canadian consumer revenue in 2019, indexing higher than the 80% expected globally. A key feature of this multifaceted environment is the resilience—and in some cases resurgence—of aspects of ‘traditional’ media, including the shared, live experiences that consumers still love. Spending on live music ticket sales and cinema box office will rise by (CAGR) 3.5% and (CAGR) 3.4% in Canada respectively, outpacing overall consumer spending at 1.9%.
The second is consumers’ common desire for content experiences that are relevant to them personally – which is why, even in a globalized world, meeting community preferences remains critical.
Lisa Coulman, Partner, Audit and Assurance, PwC comments: “Canadians want choice when it comes to how they consume media and the type of media they consume. The user experience is as important as compelling content – it’s about the ability to personalize and consume content that is relevant to them on their terms.”
Advertising growth is primarily digital—driven by mobile and video
Turning to advertising, Canadian advertising revenues will rise at a CAGR of 3.6% to 2019, compared to a CAGR of 4.7% globally. There will be wide variations by territory, with Indonesia the fastest-growing ad market at a CAGR of 12.9% to 2019, and Greece the only one to decline at a CAGR of -0.3%. Like consumer revenues, advertising will see digital growth and non-digital resilience: while global digital advertising revenue will rise at a 12.2% CAGR, Canada will also rise by a slightly lower 10.7% CAGR against just o.6% for non-digital advertising, non-digital will still contribute 55% of Canadian ad spend in 2019.
There is a clear move towards digital—a fact underlined by Internet advertising’s position as the fastest-growing segment of advertising through to 2019, overtaking global broadcast TV advertising. By that year, digital advertising as a whole—including digital out-of-home—will account for 44.5% of total Canadian advertising revenue, up from just 19.2% in 2010. A primary driver of digital advertising throughout the forecast period will be rapid rises in mobile and video Internet advertising.
Several other trends will continue to reshape the global advertising landscape. One is the rapid expansion in over-the-top (OTT) video services—which are familiarizing users with a video experience free from advertising, supporting a shift from ad-supported to subscription-based consumption. This will help to limit the US’s total broadcast TV advertising revenue to a CAGR of just 2.5% to 2019, compared to 1.9% CAGR in Canada, while in a market such as Egypt, where OTT has gained less purchase, the CAGR will be 14.7%. And as viewers migrate from traditional networks to digital alternatives, advertisers will follow.
Alongside Internet advertising, digital out-of-home advertising (DOOH) will be another high-growth area, with revenues rising at a 10.9% CAGR in Canada. Given the high costs of upgrading OOH to digital formats, the most lucrative markets for DOOH advertising will be major cities. By 2019, Canada will see DOOH advertising account for 45.6% of total OOH advertising revenue, while exceptional growth in London will help DOOH’s share in the UK reach 53.7%.
Looking across all segments and territories to 2019, overall global advertising revenues—rising at a 4.7% CAGR and 3.6% CAGR in Canada—will outpace consumer spending at a 2.9% CAGR, 1.9% CAGR in Canada. This means we’re presented with the prospect of a global entertainment and media industry that’s increasingly dependent on ad revenues. Significantly, the growth differential varies widely between countries, tending to be narrower in ‘mature’ markets and wider in ‘growth’ territories. While consumer and advertising revenues in the US will grow at CAGRs of 2.9% and 3.5%, respectively, in Indonesia they’ll be 5.2% and 12.9%. The industry globally will need to keep a close eye on this divergence in its revenue streams.
Consumers migrate to new media consumption behaviours
Underlying the trends in entertainment and media spending detailed in the Outlook is the migration by consumers worldwide to new ways of consuming content. One of the clearest shifts is in TV and video consumption, with consumers increasingly demanding high-quality original programming in a flexible, on-demand manner across numerous devices—thus enabling ‘binge viewing’ and greater convenience. OTT services offer the best outlet for this type of consumption, helping to explain why Canadian traditional TV penetration is forecast to fall from 75% in 2012 to 64.5% in 2019.
Three actions for success in the evolving industry landscape
Lisa Coulman, Partner, Audit and Assurance, PwC comments: “As the landscaped continues to shift and evolve, media companies need to continue to focus on the user experience as well as delivering community based relevant content rather than taking a global “one-size-fits-all” approach.”
“In order to meet the changing needs of consumers, companies need to be focused on innovation when it comes to the user experience, facilitate consumer relationships across distribution channels and increasingly focus on mobile in keeping with the migration of consumers to that platform.”
To see the full PwC Canada report, please visit www.pwc.com/ca/outlook.
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