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Golden Age of the Digitally Empowered Consumer
This report outlines a positive outlook for online consumer spending in Ireland, revealing that spending on internet access has not been impacted by the recession, and it is expected to grow at double digit growth over the next five years.
It’s the golden age of the empowered consumer, with the demand for digital experiences increasing and becoming the norm, according to the latest Global Entertainment & Media Outlook 2011-2015 from PwC. In many markets the Entertainment & Media (E&M) industry has been profoundly changed as the ongoing consumer migration to digital has accelerated due largely to the device revolution.
Global Entertainment and Media Industry
Over the next five years we forecast that aggregate E&M global spending will rise from US$1.4 trillion in 2010 to $1.9 trillion in 2015, a 5.7 per cent compound annual advance driven by economic growth, but masking the accelerating shift of spending from traditional to digital platforms. Currently digital accounts for 26 per cent of all spending but by 2015 we expect digital’s share to rise to 33.9 per cent.
Advertising, the most cyclically sensitive of the three E&M spending streams, recorded the largest year-on-year swing, rebounding at 5.8 per cent in 2010 from an 11 per cent slump in 2009. Overall global advertising will increase at a 5.5 per cent compound annual rate from $442 billion in 2010 to $578 billion in 2015.
Consumer/end-user spending also improved, rising 2.2 per cent in 2010 after a fall of 0.4 per cent in 2009. In contrast Internet access spending was barely affected by the economic cycle growing at 9.2 per cent in both 2009 and 2010 and is expected to rise from $270 billion in 2010 to $408 billion in 2015, an 8.6 per cent compound annual increase.
Irish Entertainment and Media Industry
While the economic conditions in Ireland remain uncertain, the Entertainment and Media industry here will lag the global recovery. 2010 saw a further decline in the value of the overall market in Ireland, albeit at a lower level than in 2009. This was driven by a further decline in advertising spending, while the other part of the industry, consumer spending, grew, driven largely by internet access spending.
·The overall market in 2010 was valued at $4.26bn, a slight decline from $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 3.5%, bringing the total value to just over $5bn by 2015.
·The advertising market in 2010 was valued at $1.23bn, a decline of 7% 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 2.3% over the next 5 years, to bring it to $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 5 years. The internet access market in 2010 was valued at $421m, and, with increasing broadband penetration and more wired mobile devices becoming the norm, the market is predicted to grow to $692m by 2015, representing a compound average growth rate of 10.4%.
·The rest of the consumer spending market grew slightly in 2010 and is expected to remain flat at $2.6bn in 2011 before returning to modest growth next year. Over the 5 year period to 2015 it is expected to achieve a compound average growth rate of 2.8% to bring it to just under $3bn.
Reflecting the global trend of digital experiences becoming the norm, the key areas of growth over the next 5 years in the Irish Entertainment and Media market will be on digital platforms. Both internet access and internet advertising spending will experience double digital compound average growth rates over the period 2011-15, 10.4% and 11.4% respectively. Video games (CAGR 6.5%) and TV Subscriptions (CAGR 5%) will also experience continued growth with ongoing platform innovations and a continuous flow of new content in each area.
The more traditional advertising platforms will experience lower levels of growth over the 5 year period, with some platforms, such as newspaper advertising, only returning to minor growth in 2013 and largely staying flat over the 5 year period to 2015.
The Digitally Empowered Consumer
The whole E&M industry is being driven to create experiences that engage today’s empowered consumer, by redesigning the content experience to be multi-purpose and multi-platform which, in turn, creates multiple opportunities for monetisation.
Susan Kilty, Partner, PwC E&M Practice, said:
“The coming five years will see digital technologies progressively increase their influence across the industry, and that rapid change in technologies and consumer behaviours will continue across all E&M segments.”
“Convenience, experience and quality are the key ingredients that matter to consumers when choosing from the menu of content and delivery channels available. Alongside these sit participation and privilege. Consumers enjoy playing an active role in shaping their content plus they are happy to pay for privileges which enable them to ‘jump the queue’ to get earlier access to content. The challenge for companies is to turn these five attributes – convenience, experience, quality, participation and privilege – into sustainable, profitable and engaged relationships with the consumer by offering advantages which outweigh the attractiveness of free or pirated content.”
The past year has seen the strategic focus of E&M executives switch positively from inward to outward, as companies embrace multi-partner collaboration along the value chain. Digital technologies provide the focus and opportunity for these collaborations and can be seen as the central driver of future operating models, consumer relationships and profitable revenue growth.
Bartley O’Connor, PwC E&M Practice, said:
“The continuing shift towards digital platforms and digital distribution of content at a global level presents considerable opportunities for Ireland and companies based here – from indigenous start-ups to multinationals. Disruptive technologies and innovative approaches to content generation and distribution will continue to emerge, and Ireland needs to do all it can to encourage and support companies and ideas in this area given the opportunities that exist on a global scale in this industry.”
