Strong growth in the internet and the interactive gaming industry is expected to help push total revenue in Australia’s media and entertainment sector up by 28% to $36.2 billion, according to a new report by accounting firm PricewaterhouseCoopers.
The firm’s annual Entertainment & Media Outlook report, which charts the growth of the sector between 2010 and 2014, also shows that the sector came through the GFC in far better shape than the rest of the world, with 1.1% growth in revenue in Australia compared with a 1.8% fall in the rest of the world.
PwC forecasts the internet sector will grow from just over $7 billion in 2009 to just under $8 billion in 2010 and $10.6 billion – a compound annual growth rate (CAGR) of 8.7% over the next four years.
That will be driven largely by an increase in internet advertising, which is tipped to grow to $3.9 billion by 2014, at an annual growth rate of 15.4%.
PwC’s head of technology, information, communications and entertainment, David Wiadrowski, says the ability for online publishing companies to offer more tailored offerings for themselves and for advertisers.
“The media companies are getting better information about consumers. They know where they are, what they do on line and what they want,” he told SmartCompany.
“They can now be a bit more focused with online advertising and that is the opportunity for the whole online world.”
In comparison, the report suggests traditional media players will see only sluggish growth between now and 2014.
The free-to-air television sector is tipped to grow at an annual growth rate of 3.9% to $3.8 billion by 2014, while radio is expected to see annual growth of just 1.7% to just over $1 billion.
The consumer magazine sector is expected to see revenue rise at a rate of just 1% to $1.7 billion, while newspapers can expect growth of just 1.1% to $5.1 billion.
Despite these relatively low growth rates, Wiadrowski says Australia’s big media companies, News Limited and Fairfax, are doing a reasonable job of running print and online platforms, particularly when compared to their overseas counterparts.
“We are seeing our newspaper sector continue out-do the global industry,” he says. “The local companies are strategically building a long-term sustainable business where they have managed to get the print and the online working pretty well together.”
However, the big message from the PwC report is that advertising spending is no longer driving the growth of the media business.
Instead, it is direct spending by consumers (on items such as movie tickets, games and subscription TV) that will underwrite the sector’s future growth.
Wiadrowski says consumer spending grew by around 8% in 2009, compared to an 8.3% fall in advertising spending.
He points to the fact a staggering 2.3 million television sets were sold in Australia in 2009, as proof of Australian’s love of media consumption.
“I think the consumer is really starting to show that provided the choice is there…consumers are rightly or wrongly willing to spend money.”
Where this is particularly borne out is in the hottest sector of Australia’s media industry: interactive gaming. PwC is forecasting the sector will enjoy annual growth of 9.4% to 2014, taking total revenue to $2.5 billion.
Between 2010 and 2014, online games sales are tipped to rise by a 20.4%a year o $534 million, while mobile games will increase by 15.7% to $496 million.
Wiadrowski says recent growth in the sector reflects strong content and the rise of the smartphone and social media, which have become increasingly important gaming platforms.
Another key difference is that unlike many other forms of media, games are re-usable, which means consumers are willing to spend up to $100 on a new game that will provide entertainment for weeks or months.
In the United States, companies such as Disney and Google have made acquisitions or formed joint ventures in the gaming sector, and Wiadrowski says that strategy could be replicated here.
“The barriers to entry and relatively high, but that’s not to say we won’t see some of the media companies and some of the communications companies come into this more in the future.”
Wiadrowski says another surprise in the survey was the relatively strong performance of the book sector, which is tipped to defy the supposed death of the printed word as post annual growth of 4.6% between now and 2014, taking total revenue to $2.3 billon.
He says the success of the fantasy genre, led by the Twilight series of books, is driving growth and says this underlines the fact that great content remains the key to the fortunes of all media sectors.
“It is great content, at the right price, and at the convenience of the consumer,” Wiadrowski says.
“This is where mobility is going to really drive the media industry.”
| PRICEWATERHOUSECOOPERS AUSTRALIAN ENTERTAINMENT & MEDIA OUTLOOK: 2010 – 2014 | ||||
| INDUSTRY SEGMENT KEY FINDINGS TOTAL MARKET (Consumer spending plus advertising) |
||||
| 2009 ($ millions) |
2010 ($ millions) |
2014 ($ millions) |
Compounded annual growth rate | |
| Internet | 7, 027 | 7, 984 | 10,645 | 8.7% |
| Subscription television | 2,878 | 3, 034 | 3, 881 | 6.2% |
| Out-of-home | 400 | 416 | 478 | 3.6% |
| Interactive games | 1,625 | 1,787 | 2,545 | 9.4% |
| Recorded music | 600 | 624 | 776 | 5.3% |
| Books | 1,879 | 1,940 | 2, 355 | 4.6% |
| Free-to-air television | 3,152 | 3,366 | 3,811 | 3.9% |
| Radio | 936 | 950 | 1, 017 | 1.7% |
| Magazines* | 1,589 | 1,582 | 1,672 | 1.0% |
| Filmed entertainment | 3, 373 | 3,554 | 3,979 | 3.4% |
| Newspapers* | 4, 818 | 4, 922 | 5,086 | 1.1% |
|
*Note: Digital advertising figures for newspapers and consumer magazines have been excluded from each segment’s totals, as they are included in the internet advertising figures |
||||
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
