Media industry placed at the forefront of digital revolution

The entertainment and media sector is at the forefront of today's digital revolution and many UK operations are leading the charge, according to PricewaterhouseCoopers.

Powerful TV: John Lewis' Christmas ad
Powerful TV: John Lewis' Christmas ad

According to PwC’s latest Global Entertainment & Media Outlook 2015-2019, the UK Entertainment and Media (E&M) market is expected to grow by 3.2 per cent compound annually (CAGR) from 2014-2019 to a value of £66.6bn in 2019.

Last year, the UK is reported to have hosted the second largest entertainment and media (E&M) market across Europe, the Middle East and Africa, valued at £56.9 billion, behind only Germany. The country is expected to maintain this second-placed position until 2019.

The report is conducted on the premise that understanding where consumers and advertisers are spending their money in the entertainment and media industry can help inform important business decisions.

By PwC's definitions, total revenue from E&M digital operations is forecast to reach a 50/50 share with revenue from non-digital activities in five years time, fuelled by increased internet speeds and online advertising.

However, it is notable that the fastest growing digital sectors are set to stem from the digitalisation of traditional media areas of TV advertising, out-of-home and book publishing.

The UK will maintain its position as the largest internet advertising market in Europe, with a compound annual growth rate of 10.6 per cent over the next five years, rising from £7 billion in 2014 to £11.7 billion in 2019.

The fastest growth will continue to be seen in mobile advertising. Last year, mobile reported a 58 per cent increase in revenues and looking ahead, a compound annual growth rate of 25.4 per cent is tipped, taking revenues to £5 billion in 2019.

Digital outdoor set to overtake traditional posters in 2019

Outdoor advertisingThe UK is the digital capital of Europe and London is the core of the UK’s OOH market, thanks to large players like JCDecaux, Clear Channel, Exterion and Primesight and the innovators Ocean, Outdoor+ and Amscreen.

In fact, the report notes London is the most valuable city for outdoor advertising in Europe and among the most important in the world.

Phil Stokes, UK entertainment and media leader, said: "London’s very large public transport network carries a great deal of OOH advertising.

"As a result, London alone has 170,000 OOH advertising sites, more than 40 per cent of the national total despite making up less than 15 pr cent of the population."

Digital outdoor advertising revenue is growing rapidly with a compound annual growth rate of 20 per cent between 2014 and 2019, to reach £729 million in 2019.

Traditional paper and paste outdoor advertising is expected to fall for the first time this year, and will then continue to decline over the next five years. In 2019, PwC expects the major tipping point to happen, when digital OOH overtakes physical OOH for the first time.

The largest internet ad market in Europe

internet advertisingThe UK is reported to be on track to maintain its position as the largest internet advertising market in Europe, with a compound annual growth rate of 10.6 per cent forecast over the next five years, rising from £7 billion in 2014 to £11.7 billion in 2019.

The fastest growth will continue to be seen in mobile advertising.

"Last year saw a 58 per cent increase in revenues and looking ahead, we will see a compound annual growth rate of 25.4 per cent taking revenues to £5bn in 2019.

Mobile internet access is set to overtake fixed broadband in 2017, increasing by an annual growth rate of 7.1 per cent to reach £7 billion by 2019, the highest in Western Europe.

Music to return to growth

StereophonicsFollowing a drop in total music revenues in 2014, music revenue is forecast to grow again with revenues expected to reach £2.69bn in 2019, a compound annual growth rate of 0.7 per cent. This is mostly attributed to the massive growth in digital music streaming.  

Last year, digital music streaming revenue was £124m, up 65 per cent on 2013 and almost six times the size it was in 2010 in value terms. Streaming accounted for 22 per cent of UK digital recorded music revenue in 2014, but this will increase to 49 per cent by 2019.

Stokes said: "With new subscription-based streaming services coming to market, UK music streaming is set for another strong year in 2015. It’s the music you want, when you want it and it’s more intuitive to your music taste.

"The growth is being driven by the internet and the consumers love of mobile technology – consumers want a social experience as well as a personal one.

"However in contrast, digital music downloading looks to have peaked. Last year digital music downloading started to decline and we forecast that this will continue to happen in 2015 and beyond."

Digital music downloading revenues fell from £516m in 2013 to £433m in 2014 and is forecast to decline further to £388m in 2019, when digital music downloading revenue will account for 51 per cent of total digital recorded music revenue, compared with 76% in 2014.

Total digital music revenues, which includes both streaming and downloading, are forecast to overtake radio advertising revenues in 2015.

Stokes noted: "The entertainment and media industry is at the forefront of the digital revolution. It’s time to embrace the fact that mastering the user experience is critical to success in this industry.

"In a world that’s in beta, today’s entertainment and media companies need to do three things to succeed: Innovate around the product and the user experience, develop seamless consumer relationships across distribution channels and put mobile (and increasingly video) at the centre of their consumer offerings."

Also in the report, consumer e-book revenues are forecast to grow at a compound annual growth rate of 20 per cent over the next five years, from £466m (26 per cent of total consumer book revenues) in 2014 to reach revenues of £1.2bn (57 per cent of the total) in 2019.

In 2014, e-books accounted for 22 per cent of total books revenue (consumer, educational and professional) and this will rise to 47 per cent by 2019. Meanwhile, consumer books print/audio revenue is expected to decline 8 per cent annually over the next five years, falling from £1.3bn in 2014 to £867m in 2019.  

Star Wars 7A blockbuster year for cinema

In British cinema, the UK box office revenue is tracked to have fallen last year, slipping to £1.16bn from £1.22bn in 2013, due to a drop in attendances to 179 million, from 187 million in 2013.

However, 2015 is expected to be a bumper year with 7 per cent growth in box office revenues resulting from big blockbusters such as Avengers: Age of Ultron, Jurassic World, Spectre and Star Wars. 

Box office revenues are expected to rise to £1.24bn in 2015 and increase steadily over the forecast period to reach £1.4bn by 2019, a compound annual growth rate of 3.8 per cent.

The average cinema admissions price is forecast to continue to rise over the next five years, reaching £7.02 by 2019, up from £6.50 in 2014.

Now in its 16th year, PwC’s annual global entertainment and media outlook (Outlook) provides a single comparable source of five-year forecast and five-year historic consumer and advertiser spending data and commentary, for 13 entertainment and media segments, across 54 countries.

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