Knowledge Bridge

//Kevin Anderson /June 25 / 2012

PwC announces “The End of the Digital Beginning” and predicts digital revenues will drive growth

We are at the end the digital beginning, global accountancy and professional services group PwC says in a report looking at the global entertainment and media business through 2016. Digital will be the main driver of growth globally, the report says, accounting for 67% of increase in entertainment and media revenue for the next four years. However, digital growth takes from some while it gives to others, according to a summary of the report from CNBC:

But digital growth is not incremental—it’s directly cannibalizing older types of content distribution—like traditional books or even TV subscriptions. One business that will unilaterally benefit from the rise of digital: broadband and wireless service providers.

And the report says that entertainment and media digital revenue will grow year-over-year by 12.1% compared to just 2.8% growth in non-digital spending. However, the report covers a wide range of businesses from wireless data and internet service providers to entertainment companies and media groups, so it is difficult to draw conclusions from this data that is directly relevant to news organisations.

The report does look at different entertainment and business segments including consumer magazines, newspapers, radio and television advertising. From these various segment reports, a few things to note for emerging media markets.

• “TV advertising spending in Russia surged by 20.2 percent in 2011, and by 2016 it will overtake the UK, Germany, Italy, and France to become EMEA’s [Europe, the Middle East and Africa’s] largest TV advertising market.”
• The prospects for newspaper publishers is starkly different in North America and Western Europe versus  Latin America and the Asia-Pacific regions. The report summed up the difference as between countries where broadband penetration is high and where it is low. In countries with high levels of broadband access, “newspapers face erosion in print unit circulation as readers shift from print to online for information. ” That will cut both circulation and advertising revenue. However, where rates of broadband access is low, newspaper circulation is rising. That begs the question of what will happen in countries where broadband access is rising quickly.
• The rise of the tablet and increased digital distribution will drive “an emerging digital circulation spending market” to support growth for consumer magazines, even while print circulation is declining.

One area that news groups will want to pay attention to as they make the digital transition is internet and mobile advertising growth. Both are growing, but as the report says from a low base. As we have pointed out several times here on the Knowledge Bridge, search and social advertising – benefitting companies such as Google, Yandex, vKontakte, Odnoklassniki and Facebook – are capturing much of that growth. News organisations will want to make sure that as digital advertising rises they are ready to offer the kinds of ad services that allow them to compete, especially locally.

For Central and Eastern Europe and Russia, internet advertising is growing at a quick pace, with Russia a key driver in the region. According to the report:

Spending in Central and Eastern Europe grew by 36.7 percent in 2011, led by a 56.4 percent rise in Russia, and will continue to grow at a 22.7 percent CAGR [compound annual growth rate] to $8.1 billion in 2016.

CNBC drew this conclusion from the report:

Professional content from the traditional media companies is still the most valuable, but it’s the companies that look at cross-platform distribution that will be the most successful. Companies that find every possible pathway to consumers—via subscription, digital download, traditional TV broadcast—will make the most money.

This is really key. Digital revenues are still growing quickly, but the key for news organisations and media groups is to develop an effective multi-platform strategy that plays to their strengths in existing media such as print, TV and radio and leverages those strengths in emerging digital markets.

Article by Kevin Anderson