pwc entertainment & media outlook 2010-2014

Global entertainment and media outlook 2010-2014

Towards 2014: the search for positionin the digital value chain

pwc.com/outlook | 2PricewaterhouseCoopers LLP pwc.com/outlook | 2PricewaterhouseCoopers LLP

Presenters

Jerry Brown

Associate Partner, Entertainment & Media Practice

Michael Paterson

Partner, Entertainment & Media Practice


Consumer and advertising spending forecasts in 48 countries

• Internet access spending

• Internet advertising

• TV subscriptions and license fees

• Television advertising

• Recorded music

• Filmed entertainment

• Video games

• Consumer magazine publishing

• Newspaper publishing

• Radio

• Out-of-home advertising

• Consumer and educational book publishing

• Business-to-business


Towards2014:

the searchfor positionin the digitalvalue chain

• 2009: the economy took center stage

• The Outlook to 2014

Part one


2009: the economytook centre stage

pwc.com/outlook | 6PricewaterhouseCoopers LLP

Pace of change faster than expected

Projected and Actual Global Growth by Segment - 2009

2009 Projected2009 Actual

-15 -10 -5 0 5 10

Video Games

Filmed Entertainment

TV Subscriptions and License Fees

Internet Access

Consumer and educational books

Recorded music

Radio

TV Advertising

Business-to-business

Consumer magazine publishing

Newspaper publishing

Out-of-home

Internet Advertising

% Growth


-20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0

Video Games



Internet Access

2009 Actual 2009 Projected

Projected and Actual Canadian Growth by Segment – 2009


Consumer / Educational Book Publishing

Recorded Music

Radio

TV Advertising

Business-to-Business

Consumer Magazine Publishing

Newspaper Publishing

Out-of-Home Advertising

% Growth


The Outlook to 2014


%G

row

thDigital dampens spending growth; E&M lags behind GDP


Canada - Digital dampens spending growth; E&M lags behind GDP%

Gro

wth

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Canadian Nominal GDP Canadian Internet Access Spending

Canadian Advertising Canadian Consumer/End-User Spending


E&M market growth 2010-2014

2010-14 CAGR

North America

3.9%

Latin America

8.8%

Europe, MiddleEast, Africa (EMEA)

4.6%Asia Pacific

6.4%

USA

3.8%

Brazil

8.7%

China

12.0%

UK

3.7%Germany

3.3%

India

11.8%

Russia

9.3%

Saudi Arabia/Pan Arab

16.5%

Global:

5.0% CAGR, $1.7 trillion

Canada

5.0%


Component share of Canadian E&M spend

2009 2014

Internetaccess12%

Consumer/end-user

52%Advertising

29%

Consumer/end-user

50%

Internetaccess16%

Advertising26%

Total spending 2009: US$36.77 billion Total spending 2014: US$47.52 billion


Component share of global E&M spend

2009 2014

Total spending 2009: US$1.32 trillion Total spending 2014: US$1.69 trillion


Global growth by segment


Canadian growth by segment

1.2

-0.7

0.7

-1.1

3.1

4.1

4.0

4.4

3.8

6.8

12.0

6.6

11.7

-2 0 2 4 6 8 10 12 14



Consumer and Educational Book Publishing

Radio

Out-of-Home


TV Advertising


Internet Access

Video Games


Recorded Music


% CAGR 2010 2014


Advertising spending – selected territories

0

20

40

60

80

100

120

140

160

180

200

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

United States

Russia

Germany

Canada


China

India

Japan

Brazil


Global advertising spending by segment

CAGR

US$ billions

5.1%

0.1%

11.4%

-4.6%

3.9%

0.1%

4.5%

-0.9%

12.9%


Canadian advertising spending by segment

0 500 1000 1500 2000 2500 3000 3500

Video Games

Trade Magazines - print

Out-of-Home

Consumer Magazines - print

Radio

Directories - print

Internet advertising

Newspapers - print

Television - excl. mobile and online

2009

2014

US$ millions

3.8%

1.0%

-0.4%

11.7%

-0.2%

2.7%

4.0%

1.8 %

12.0%

CAGR


Global advertising spending by segment

2009 2014


Canadian advertising spending by segment

2009

Television -excl. mobileand online

30%

Newspapers– print18%

Internetadvertising17%

Directories -print10%

Radio13%

Television -excl. mobileand online

30%

Newspapers– print15%

Internetadvertising

25%

Directories - print7%

Radio11%

Video Games1%

Trade Magazines – print2%

Out-of-Home4% Consumer

Magazines – print5%

Video Games2%

Trade Magazines – print1%

Out-of-Home4% Consumer

Magazines – print5%

2014


Global consumer/end-user spending

CAGR

10.5%

6.8%

4.8%

2.9%

1.9%

1.5%

1.1%

0.8%

0.3%


Canadian consumer/end-user spending

-5 0 5 10 15 20


Consumer and Educational Books

Satellite Radio



Video Games

%

Recorded Music

Newspapers

Consumer Magazines

6.0%

6.8%

4.4%

17.4%

3.1%

0.8%

-1.1%

0.7%

0.8%

CAGR


Internet Access – wired and mobile households

562 million


Digital migration

Digital share of Canadian E&M spending

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Excluding Internet Access Including Internet Access


Digital migration

Canadian digital and non-digital spending growth

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2006 2007 2008 2010 2011 2012 2013 2014

Digital Non-Digital

2009


0% 20% 40% 60% 80% 100%

India

Brazil


South Korea

United Kingdom

Canada

China

Japan

United States

Digital Non-digital

Geographical diversity – including Canada

Digital / non-digital share of total revenues – 2014:

including Internet Access


0% 20% 40% 60% 80% 100%

India

Canada


South Korea

United Kingdom

Germany

China

Japan

United States

Digital Non-digital

Geographical diversity – including Canada

Digital / non-digital share of total revenues – 2014:

excluding Internet Access


The enduring importance of non-digital revenues

Global segment revenues in 2014

US$ billions


The enduring importance of non-digital revenues

Canadian segment revenues in 2014

US$ millions0 2,000 4,000 6,000 8,000 10,000

Recorded Music

Out-of-Home Advertising

Radio


Video Games



Consumer and Educational Book Publishing



TV Advertising


Digital

Non-digital


Television Subscription Spending

• Overall spending will grow by 6.8% CAGR.Driven by a recovering economy andconsumer willingness to pay

• Within the overall growth the key driver will beVideo on Demand (16.0% CAGR) as anincreasing number of households move todigital services (9.5% CAGR for cable) andIPTV (45.5% CAGR) is rolled out..

• Mobile TV will also start to be rolled out. Paysubscription services have not worked welloverall in other markets but there is strongdemand from consumers


Television Advertising

• Overall TV advertising market will grow at3.8% CAGR

• Conventional TV advertising market willgrow at 2.4% CAGR to US $2,167 million.Continues to be the largest component ofthe TV advertising market by a widemargin.

• Specialty advertising market will grow at4.6% CAGR to US$1,086 million

• On-line and mobile TV advertising marketwill contribute US$169 million by 2014



• Overall Canadian film entertainment marketwill grow at 4.4% CAGR

• Box office revenues will grow at 5.3% CAGRdriven by 0.7% increase in attendance andremainder driven by price increases supportedby 3-D

• Physical sell through and rental market willgrow marginally as digital downloads and theon-line rental market takes off


Video Games

• Canadian video game market will grow at6.6% to US$1.953 billion.

• On-line and wireless game market will grow atfastest rates at 9.0% and 7.5% supported bysocial gaming and increased access to newgames via smart phones and other devices.

• Console games while more mature willcontinue to introduce new technology and willgrow at 5.7%. Consoles continue to innovateto attempt to take over our living rooms andbecome media centers.

• The PC based game market will bechallenged given competing technologieswhich are more interactive.


Towards2014:

the searchfor positionin the digitalvalue chain

• Consumer behaviour drives change

• Experimenting with business models

• Imperatives in the search for positionin the digital value chain

Part two


Consumer behaviourdrives change


• Mobile comes ofage in 2010-2011

• Mobile will bedriven further andfaster by NGNs

Mobile markets in selected countries

SaudiA

rabia

/Pan

Ara

b

United

Kin

gdom

Chin

a

Germ

any

Italy

Japan

South

Kore

a

United

Sta

tes

Theme 1:The rising power of mobilityAND devices


Theme 1:The rising power of mobilityAND devices

• Loyalty shifts from service provider todevice and content

• Open or closed systems?


Theme 2:The growingdominance ofthe Internetexperience

I love my TVseries, and weleave Facebookstatuscomments:‘Watch this,don’t watch that.’I’ve introduced alot of my friendsto the seriesCalifornication.

-- Capetown,19-year-old


I basically thinkthat movies aregoing to be storedin one location atyour home andyou can justtransmit them toany media thatyou own, whetherit be a laptop or aPC, or your TV oryour cell phone.You can just pusha button and themovie shows upon whatever yousend it to.

-- Los Angeles,28-year-old

Theme 2:The growing dominance

of the Internet experience


Theme 3:Increasing engagement andreadiness to pay for content…driven by improved consumptionexperiences and convenience

• Experience drives revenue

• Convenience pays off

• Going “hyperlocal” to boostengagement

• Media consumption returns to being acollective social experience


Theme 3:Media consumptionreturns to being acollective social experience

I’d rather chat onthe Xbox onlinewith friends.Sometimes, ifthere’s a TVprogram we like,we keep theXbox on, and wecan talk to eachother in thechatroom whilewe’re watching it

-- 14-year-oldLondon, UK


Experimenting withbusiness models


Experimenting with business models

• Future hope for digitalad revenues?

• Testing the limits ofpaid-for content

• From ad-supported to“hybrid”

Addressableadvertising?

Paywalls?

Micro-payments?

Freemium?


Imperatives in the

search for position

in the digital value chain


Four legacy challenges

IP RightsDigital rights are often uncertain, andat worst impossible to untangle 1

Operational stepchange

Delivery of strategic intent requiresdeep understanding of own operatingmodel

4

Release windowsGeography and platforms won’t workas basis for release windows in multi-channel world

2

RegulationPolicymakers struggle to keep pace,and E&M companies need a firmgrasp on trends

3


Redrawing the valuechain: where –and how – will you fit in?

www.pwc.com/outlook

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