OREANDA-NEWS. June 18, 2010. Over the next five years digital technologies will progressively increase their impact across all segments of entertainment and media (E&M), as digital transformation continues to expand and escalate. The uncertain economic background has done nothing to slow the pace of change, which has been far quicker than was predicted twelve months ago. And according to the latest Global Entertainment & Media Outlook 2010-2014 from PricewaterhouseCoopers (PwC), it is clear that the consumer is firmly in the driving seat of these changes, reported the press-centre of PwC.

Following a year of decline in 2009, the global E&M market will as a whole grow by 5%, compounded annually for the entire forecast period to 2014 to reach USD 1.7 trillion – up from USD 1.3 trillion in 2009. The fastest growing region throughout the forecast period is Latin America, growing at an 8.8% compound annual rate (CAR) over the next five years, to USD 77 billion in 2014.

Consumers are embracing new media experiences with staggering speed, and at the same time the advancing digital transformation is driving audience fragmentation to a level not previously seen.  However, the current wave of change is of a different magnitude from previous ones, both in its speed and simultaneous impact across all segments.

Ilya Kurtov, Senior Manager, Communications, Technology, Entertainment & Media Assurance services PricewaterhouseCoopers in Russia, commented on the situation as follows:

“The development of the Russian E&M industry is in line with the global trends of the rising power of the Internet and digital migration. However, it should be noted that these processes in Russia are much slower than in other countries, owing to the specifics of the Russian market and short-term uncertainty with respect to the growth of consumers’ confidence.

The use of the Internet has become a great unifying experience for billions of people across the globe, and this is now causing a parallel trend with the “re-socialisation” of the media consumption experience. However, the combination of digital access, mobility and social networking is seeing consumption of all forms of media migrate from a solo activity towards being a social experience, with viewers using social media to discuss and share their views and content.

Currently we are observing a certain fragmentation of the market, which players should view as presenting an additional opportunity to interact with the customer. Companies have a chance to devise new ways of relating to their clients, in terms of both the content offered and the channels used to communicate with consumers”.

According to the Outlook, the compound annual growth rate of the Russian E&M market is expected to reach 9.3% as a result of two-digit growth rates in such sectors as Internet advertising, TV subscription spending and consumer spending on Internet access and video games. Consumer spending (excluding Internet access) will rise at a compound annual rate of 5.9%, while the advertising market will grow by 10.2% until 2014. Therefore, by 2014 the two segments will virtually even out, reaching USD 9.9 billion and USD 9.6 billion respectively. The Russian E&M market in 2009 is assessed at USD 16.38 billion, and by 2014 it is expected to grow to USD 25.58 billion.

The Internet
In 2009 Russia became the largest market for Internet access in Central and Eastern Europe (CEE), and the seventh among EMEA countries. Consumer spending on Internet access last year stood at USD 2.9 billion and the sector is expected to grow at a compound annual rate of 15% over the next five years. By 2015 the Russian Internet access market will be worth USD 5.9 billion – comparable to revenues generated by TV advertising. Russia will occupy third place among CEE countries in terms of households using telephone access, and fifth place in terms of households using broadband access. The Russian Internet and mobile advertising market in 2009 was worth USD 569 million. This segment is expected to witness an almost threefold increase: by 2014, the Internet advertising market will reach USD 1.69 billion, with a compound annual growth rate of 24.4%.

TV and radio
The Russian market occupies the leading position among CEE countries in terms of households with TV subscriptions (12.7 million subscribers). By 2014 this number is expected to rise to 19.7 million, placing Russia third among EMEA countries, after Saudi Arabia and Germany. However, in 2014 the penetration of TV subscriptions in Russia will remain relatively low – less than 40%. Although IPTV in CEE countries is rather underdeveloped – with the total number of subscribers in 2009 standing at 1.4 million – one million of those subscribers were attributable to Russia. In five years the number of Russian subscribers is expected to increase to four million.

Last year Russia joined the top five largest EMEA markets in terms of TV advertising market volume (USD 3.3 billion: 55% of the total Russian advertising market), and by 2014 the segment is forecast to rise to USD 5.1 billion. The compound annual growth rate during the forecast period is expected to be 9.5%. 

Due to the impact of the economic downturn, the Russian radio advertising market in 2009 fell by 35.7% to USD 283 million. By 2014 the market is forecast to recover to USD 429 million, with a compound annual growth rate of 8.2% – the highest in Central and Eastern Europe. As a result, the CEE radio market as a whole during the next five years is expected to grow at a compound annual rate of 4.4%, taking the segment from USD 982 million in 2009 to USD 1.2 billion in five years.

Filmed entertainment
Despite the aftermath of the global economic crisis causing the construction of new multiplexes in Russia to be suspended (multiplexes had been the key driver of box office receipts in previous years), in 2009 the Russian filmed entertainment market grew 4.5% to USD 1.2 billion. Although the 2009 value is not so high compared with the uninterrupted growth of the previous four years, this didn’t prevent Russia from becoming one of the largest filmed entertainment markets among EMEA countries (Russia became one of the six countries which last year accounted for 74% of total revenue in the region). Last year, box office receipts in Russian cinemas grew by as little as 5% – an insignificant figure when compared against the 2008 surge of 58.1%. PwC professionals forecast a high compound annual growth rate of box office receipts for the next five years, with Russia accounting for 63% of the total receipt growth in all CEE countries. The filmed entertainment market as a whole will reach USD 1.78 billion by 2014, at a compound annual growth rate of 9.4%.

Out-of-home advertising
Central and Eastern Europe will become the fastest growing region in the out-of-home advertising sector in EMEA, mostly due to the large revenues in the Russian market. The lack of economic stability in 2009 caused the market to fall by 40.5% to USD 858 million, which was the greatest decrease among all EMEA countries. Nevertheless, in 2014 the market is forecast to rise to USD 1.3 billion, with a compound annual growth rate of 9.5% (40% of total EMEA market growth).

Print newspapers and consumer magazines
The Russian newspaper market in 2009 was USD 1.6 billion, while as a result of the economic crisis the print newspaper advertising market was down 35% on previous years, to USD 280 million. By 2014 the print newspaper advertising market is forecast to reach USD 421 million. Advertisers will switch their attention to digital newspaper formats, and the compound annual growth rate for the next five years is forecast to be 23.6%, which will enable this market to reach USD 26 million by 2014.

The Russian consumer magazine market in 2009 was USD 908 million. USD 429 million was spent on advertising in print magazines last year, and a further compound growth rate of spending is expected to reach 4.4% per year. Spending on magazines in 2009 was USD 476 million.

Video games
The Russian market is forecast to demonstrate the greatest growth in the online games segment, increasing from USD 245 million in 2009 to USD 723 million in 2014 at a compound annual growth rate of 24.4%. By 2010, Russia is expected to become the third among EMEA countries in terms of online games market volume. The total volume of the video games market in Russia is forecast to rise from USD 760 million in 2009 to USD 1.3 billion in 2014, at a compound annual growth rate of 11.1%.