OREANDA-NEWS. June 21, 2012. According to the latest Global Entertainment & Media Outlook 2012-2016 from PwC. despite ongoing economic uncertainty, the past year has seen global sales of tablets and smart devices reach record levels once again, underlining the growing revenue opportunities from digital delivery of entertainment and media (E&M) content and advertising to increasingly connected, and particularly mobile, consumers, reported the press-centre of PwC.

However, behind the headlines, an even more important milestone for the E&M industry is being passed: the onset of the digital “new normal”. Digital is now embedded in business as usual, as digital moves to the heart of many media companies, and presents the greatest opportunities for growth going forward.

Evgeny Klimenko, Partner, Communications, Technology, Entertainment & Media Advisory services, PwC Russia, commented:

“During the next five years, our projected CAGR of 5.7 percent for overall E&M spending lags some way behind below the projected 6.6 percent compound annual increase in nominal GDP. This lag will reflect the ongoing shift from higher-priced physical distribution to lower-priced digital distribution.”

According to the Outlook, over the next five years, global spending on E&M is projected to rise from USD 1.6 trillion in 2011 to USD 2.1 trillion in 2016.

Overall global advertising will increase at a 6.4 percent compound annual rate from USD 486 billion in 2011 to USD 661 billion in 2016. Internet advertising will be the fastest-growing category of advertising with a 15.9 percent compound annual increase.

Russian E&M industry key trends

In 2011 Russia's entertainment & media (E&M) market grew by 12% (up to USD 24.1 billion), paralleling the growth levels seen in 2010. By market volume, in 2011 Russia ranked seventh in EMEA (Europe, Middle East and Africa), and over the next five years we expect Russia to remain one of the most dynamic E&M markets, demonstrating a compound annual advance of 10.1%.  By 2014, the Russian market should overtake Spain to place sixth among leading EMEA markets, while by 2016 it should grow up to nearly USD 39 billion.

Growing consumer spending on entertainment & media in 2012–2016 in Russia promises to be the most substantial across the entire EMEA region at 36%.

Regarding the advertising market, Russia occupies fifth place in ЕМЕА after Germany, Great Britain, France and Italy, with a volume of USD 9 billion. On PwC forecasts, the Russian ad market is expected to grow at a faster pace than peers, surpassing Italy by 2016 to become EMEA's No. 4 major advertising market.

All segments in Russian E&M displayed marked growth in 2011. The most dynamic segments, as expected, were Internet advertising (up 56%) and pay TV (up 31%). Several segments that had posted 20%-plus increases in the previous year showed a somewhat slower growth rate in 2011. For example, the film industry grew only 6% (versus 26% in 2010), while video games posted 12% growth (versus 25% in 2010) and the Internet access segment rose 14% (versus 22% in 2010).

The undisputed leader on the E&M market remains the television advertising segment, which in 2011 grew 20% to reach a volume of USD 4.5 billion. By 2016, Russia should overtake Great Britain, Germany, Italy and France to become EMEA's top-ranked TV ad market.

The second largest segment in Russia is Internet access, which grew 14% in 2011 to reach USD 3.8 billion. Even though TV advertising grew more rapidly than Internet access in 2011, in 2012-2016 the Internet access market is expected to grow at a faster pace and by 2016 to overtake the TV ad segment, knocking it out of its traditional leadership position to become Russia's premier E&M market segment.

The Internet ad segment is expected to show the most dynamic growth in 2012–2016. According to PwC data, it will post stable growth at an average annual rate of 29%. As a result, this segment's share in the overall E&M market volume will expand from 7% up to 13%, making it the third major segment in Russian E&M (although it ranked only seventh in 2011). The second most dynamic industry will be pay TV, with expected annual growth of 15%. By 2016 pay TV should rank as the fifth major segment in Russian E&M (versus 10th place in 2011).

By 2016, the three largest E&M market segments in Russia will be Internet access, television advertising and Internet advertising. Taken together, their share is set to increase by roughly 10% to reach nearly 50% of the market overall.

Within the next five years, the Russian market of outdoor advertisement is to be the most dynamically developing in EMEA and one of the fastest growing globally with its average growth rate reaching 11.0% (along with Indonesia - 11.2%, and India - 10.9% with their outdoor advertisement markets to show the highest growth rates in the world in 2012-2016).

In the face of sweeping change and uncertainty, the E&M industry has spent the past few years seeking effective business and operating models for the new world, through a cycle of constant experimentation, ongoing innovation and targeted analysis of the results. This will continue. But with digital now at the core of business-as- usual, PwC believes that experimentation and execution are no longer sequential but will proceed in parallel, enabling E&M companies to press ahead into the ‘new normal’ with confidence.

Ekaterina Terentyeva, Director, Communications, Technology, Entertainment & Media Advisory services, PwC Russia, commented:

“As digital becomes the standard, its rising penetration ceases to be a topic for discussion in itself.  What matters now is how companies capitalise on it and operate within it.”