OREANDA-NEWS. July 01, 2011. It’s the golden age of the empowered consumer, with the demand for digital experiences increasing, according to the latest Global Entertainment & Media Outlook 2011-2015 from PwC.  In many markets the Entertainment & Media (E&M) industry emerging from the recession has been profoundly changed as the ongoing consumer migration to digital has accelerated due largely to the device revolution, reported the press-centre of PwC.

Marcel Fenez, Global Leader, E&M practice, PwC said:

“This is a golden age for consumers, who have never had it so good when it comes to accessing premium content (often free) over multiple devices.  E&M CEOs are having to adapt business models to capture the shifting nature of consumer demand.  The bottom line is that in order to continue to create quality content, someone has to pay.”

2010 saw the global economy begin to recover from its steep decline in 2009 and these improved economic conditions have played a major role in the recovery of overall E&M spending which rose by 4.6 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 USD 442 billion in 2010 to USD 578 billion in 2015. Across the world, there were 12 countries with advertising markets above USD 7 billion in 2010.With the exception of South Korea, the top 12 E&M markets were also in the top 12 advertising markets. Russia at USD 7.6 billion in 2010 is among the top 12 in advertising but ranked 13th in total E&M spending. Among the top 12 advertising markets, the PRC and Russia will be the fastest growing with compound annual increases of 14.1 percent and 13.9 percent, respectively, followed by Brazil at 9.6 percent.

According to our review of 13 Russian E&M market sectors, in 2010 most of them witnessed robust growth, with the exception of record industry (a 3% decline compared to 2009), consumer and educational books publishing (10% slump) and B2B sector (zero growth). Among the fastest-growing segments was Internet advertising (37% growth in 2010 compared to 2009), filmed entertainment (29% growth) and video games (23%). The Internet access market also grew significantly (24%), although it is not directly related to E&M industry but still it forms a solid basis for the latter's development.

Internet
Consumer spending on Internet access last year stood at USD 4.2 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 8.6 billion – comparable to revenues generated by TV advertising.

The internet advertising market in Central and Eastern Europe grew by 25.6 percent in 2010, led by a 37.5 percent rise in Russia. Growth in the Russian market during the next five years will average 20.8 percent compounded annually to USD 2.2 billion in 2015 from USD 873 million in 2010. The share of mobile advertising in Russia remains insignificant and by 2015 will account for 3% of the overall Internet advertising market. In 2010, wired advertising was on the upturn, with contextual advertising growing by an impressive 46%, with other types of advertising (banners, video advertising, commercials, etc) demonstrating a 24% growth. 

TV
Central and Eastern Europe was the strongest area in EMEA in 2010, posting a 9.8 percent advance as double-digit growth in Turkey and Russia offset a double-digit decline in the Czech Republic and single-digit decreases in Romania and Hungary. We look for another boost in 2014 related to the Winter Olympics in Russia.

As economic conditions improve, we look for the TV advertising market in each country to expand in beginning in 2011. Led by double-digit annual growth in Russia and Turkey, Central and Eastern Europe will continue to be the fastest-growing area in EMEA during the next five years. Russia and France were the 4-th and the 5-th largest markets in EMEA correspondingly, at USD 4.3 billion and USD 3.6 billion, respectively. Russia rose 14.6 percent in 2010. The compound annual growth rate during the forecast period is expected to be 15%, by 2015, the TV advertising market will reach USD 8.6 billion. Although spending began to increase in 2010, it remained below previous levels. With the Russian economy now showing strength, we expect continued double-digit growth through 2015.

Mobile TV market in Russia still remains a niche service and in 2010 consumer spending amounted to a mere USD 13 million. Despite this, Russia is among the top five major mobile TV markets in EMEA.

In Russia, all major mobile operators offer mobile TV, but this is still a niche service that is widespread mostly in major cities. Demand for mobile TV is not high in Russia, partly because subscribers have to buy expensive mobile equipment that supports the service.

Video games
Russia is by far the largest video games market in Central and Eastern Europe, with revenues of USD 1.0 billion in 2010. Additionally, Russia is projected to exhibit the highest growth rate of any country in EMEA, increasing at an annual rate of 10.8 percent compounded annually through 2015 and reaching USD 1.7 billion. Russia’s growth is being driven by its online game market, which in turn is being driven by the doubling of its broad¬band penetration.

As for the online games, Russia is second, at USD 486 million, and is expected to show the sharpest increase in EMEA, growing by 18.3 percent compounded annually to USD 1.1 billion in 2015. Russia is projected to have the fastest-growing economy in EMEA during the next five years, which will propel spending. Online games played on social networks have seen significant growth in Russia and accounted for around 10 percent of the market in 2010.

Russia, at USD 350 million in 2010, has the strongest PC game market in Central and Eastern Europe and is one of the major markets in all of EMEA, because its console game market is relatively weak. Similar to the situation in most other countries in EMEA, we expect Russia’s PC game market to decline during the next five years to USD 317 million in 2015 as attention becomes focused on other gaming opportunities.

Radio
Central and Eastern Europe will increase by 6.7 percent compounded annually from USD 898 million in 2010 to USD 1.2 billion in 2015, driven by an 11.2 percent compound annual increase for Russia, the largest country in the region.

In Central and Eastern Europe, we expect growth to average 8.0 percent compounded annually to \\$1.1 billion in 2015 from USD 726 million in 2010, driven by a double-digit increase in Russia, the major country in the region. After plunging by more than 40 percent from 2007 to 2009, radio advertising in Russia rose by 11.8 per-cent in 2010. With Russia now having the fastest-growing economy in EMEA and projected double-digit annual increases in nominal GDP, we expect radio advertising to continue growing at double-digit annual rates as it recovers the ground lost in 2009.

Filmed entertainment
Russia is the fifth largest filmed entertainment market in the region at USD 1.5 billion. The six territories (the UK, France, Germany, Italy, Russia and Spain) constitute 73 percent of filmed entertainment spending in EMEA. Russia recorded a 28.7 percent increase, by far the largest gain among the top six countries. Box office jumped 49.5 percent, boosted by the construction of new multi¬plexes and growth in the popularity of 3D films. Given that the aver¬age price of admission to a 3-D film is twice that of admission to a standard-definition movie, this will further stimulate box office growth. With more theaters planned, we look for box office spending in Russia to grow by 87.8 percent during the next five years as movies become available to more people. Russia will be the fastest-growing country in total filmed entertain¬ment during the next five years, with a projected 13.4 percent compound annual increase.

In Central and Eastern Europe, the average price jumped 17.8 percent in 2010 to USD 6.35, the result of a 25.0 percent increase in Russia and reflecting the large jump in share for 3D films. We expect Central and Eastern Europe to be the fastest-growing area by admissions in EMEA, with a projected 4.0 percent compound annual increase, led by continued healthy growth in Russia. Admissions in the country will increase to 215 million in 2015 from 116 million in 2010. In Central and Eastern Europe, by contrast, rising admissions fueled growth in cinema advertising through 2008. The recession led to a sharp cutback in Russia in 2009, but spending in Russia rebounded in 2010 and amounted to 26 million and to 33 million in 2011.

We project double digit box office growth in Russia. In 2015, box office spending will grow to USD 2 billion from USD 1 billion in 2010, which means a compound annual increase of 13.4%.

Out-of-Home advertising
Central and Eastern Europe will be the fastest-growing area, tracing its strength to large gains in Russia. Russia, which had been the second-largest OOH market in 2008, lost 40 percent of its value in 2009 due to severe economic conditions. It was the largest percentage decline in EMEA. OOH advertising in Russia rebounded in 2010, increasing 17.9 percent to USD 982 million. The USD 149-million increase constituted 48 percent of the total increase in EMEA in 2010. Overall, Russia is expected to grow 12.1 percent on a compound annual basis, reaching USD 1.7 billion in 2015.In Russia, digital indoor advertising recorded double-digit growth in 2010, making it one of the fastest-growing sectors of the advertising market. One of drivers of this growth was the rising popularity of digital indoor among small and medium-size advertisers.