Despite progress being curbed by lack of access to broadband technology, South Africa's E & M industry is one of the fastest-growing in the Europe, Middle East, Africa (EMEA) region. It is anticipated that it will grow by 9% between now and 2009. Hungary (10.6%) and Russia (13.3%) are the only EMEA countries predicted to experience faster growth rates.
The local growth momentum will also be accelerated dramatically a year later with the hosting of the 2010 Soccer World Cup.
The potential impact on the South African E & M scene of the 2010 Soccer World Cup is, however, not included in the survey. Yet, recent trends would be "insignificant" by then, compared to the dramatic growth expected, according to Paul Badrick, Southern African E & M leader at PwC.
The situation regarding access to broadband technology is expected to change dramatically in South Africa and the rest of the world. Outlook predicts that broadband Internet will be the major growth catalyst in all global regions, enhancing overall Internet access spending and facilitating new opportunities for online advertising and conducting online transactions.
New spending streams triggered by broadband Internet and wireless technologies should account for a substantial portion of total growth in global spending. "Revenue from new spending streams will increase significantly from $11.4 billion last year to nearly $73 billion worldwide by 2009," says Badrick.
Agreeing with the Outlook prediction regarding broadband technology's affect on growth in the industry, he adds, that South Africa "has not even scratched the surface of the potential" of this new technology. "When broadband does become affordable and ubiquitous, the impact on our E & M industry could be dramatic."
PwC's global leader in E & M, Wayne Jackson, says this industry has "an extraordinary ability to reinvent itself" and opening new avenues for generating revenue through "innovative offerings that barely existed" five years ago.
These include online and wireless video games, online film rental and licensed digital distribution of music. "The rapid adoption of ring tones and mobile music downloads are becoming critical components of the industry and are driving significant revenues across all regions."
Jackson is confident that Asia/Pacific will remain the fastest-growing region for the next four years. This is being boosted by phenomenal growth in China, which should overtake Japan as the region's largest market already by 2008.
At 14.2% CAGR, without accounting for Internet access spending, China's spending growth will be the highest in the world. This should grow to 25.2 % after the anticipated explosion in Internet access spending is accounted for.
Up to 2009 and afterwards, double-digit increases in Internet, video games, casino gambling, TV distribution and recorded music segments will dominate growth in the region.
Outlook finds further that the global E & M industry will increase at a 7.3 % CAGR to $1.8 trillion in 2009. This is attributed to "improved economic conditions and an advertising upswing, combined with expanding online distribution of music, films, books and video games".
Among the key findings of some of the different E & M industry segments covered in the survey are:
1. Filmed entertainment: DVD household penetration and DVD sell-through will continue to rise and drive home-video spending, but at the expense of in-store rentals. Spending should, however, increase at a 7.1 % CAGR, rising to $119 billion in 2009.
2. Internet advertising and access spending: During the next four years, broadband will be the main driver of access spending and leave the dial-up market in its wake. Internet advertising will grow rapidly, fuelled by an expanding broadband subscriber base. Spending is expected to more than double and increase to $289 billion at a 16.9 % CAGR;
3. Television networks (broadcast and cable): The number of outlets will increase because of digital television and fuel multi-channel advertising, the principal driver of this segment.
4. Television distribution (station, cable and satellite): Subscription TV household growth will drive spending in certain regions, while pay-per-view will contribute to growth in other regions. Piracy will, however, remain a major problem, particularly in Asia/Pacific and Latin America. The market will achieve a CAGR of 7.4 %, reaching $210 billion, compared to $146 billion last year.
5. Recorded music: The recorded music market started showing growth last year, increasing by 5.7 % to $38 billion. Globally, recorded music spending will rise by an 8.3 % CAGR to $56 billion in 2009.
6. Video games: With the current generation of consoles entering its last year, this segment dropped to single-digit growth in 2005, but growth will be revamped next year with the introduction of the next generation console hardware.
Outlook also includes in-depth global analyses and market forecasts for the period for other industry segments, including: newspaper, magazine and book publishing; business information; radio and out-of-home advertising; theme and amusement parks; casino gaming (covering gross gaming revenues generated on-site at casinos); and sports.
For more: www.pwc.com.
