Recession is accelerating the migration to digital media

8 Jul 2009

The global advertising business will fall 12.9pc in revenues this year, but the decline will slow to 2.7pc in 2010 and return to 2008 levels in 2013 as new formats such as video game ads outpace the rest of the advertising industry.

PricewaterhouseCoopers’ (PwC) senior manager Bartley O’Connor told that the Irish entertainment and media market will experience a 3.3pc revenue decline to US$4.9bn, which will be followed by a bottoming out in 2010 and a return to modest growth in 2011.

Overall, the Irish entertainment and media industries will grow by 2.7pc compound annual growth rate (CAGR) to reach US$5.9bn by 2013.

PwC’s Entertainment and Media Outlook for 2009 and Forecast to 2013 points out that locally and internationally digital migration to new advertising platforms and content delivery channels will be the evolution that will return traditional media industries like newspapers, TV and radio to growth.

O’Connor predicts that internet access in Ireland will achieve a 13pc CAGR growth rate over the next five years to reach a market worth US$759m a year. Video games will grow by 7.5pc CAGR to US$709m a year.

Internet advertising will grow by 6.9pc CAGR to reach US$155m a year by 2013 and TV subscriptions will grow by 6.4pc CAGR to US$982m.

Much of the growth will be driven by changing consumer behaviour. Overall consumer demand will stagnate in 2009 and 2010, but will return to modest growth in 2011. By 2013, overall consumer demand will have shown 3.1pc CAGR by 2013.

Across the world, media houses have been bruised by the recession, particularly in the US where newspapers with up to 150 years’ heritage have been closing due to a falloff in advertising, especially property and recruitment advertising.

The Irish advertising market is expected to fall 13.7pc in 2009, with a further decline of 4.5pc in 2010. Traditional advertising channels will be the most severely impacted, but internet advertising will also be down in 2009.

2011 will see a slight recovery, but overall the advertising market will show CAGR decline of 1.3pc over the five years to 2013 when the industry will record revenues of US$1.57bn.

“The recession is accelerating the migration to digital channels. Firstly, broadband penetration is increasing, opening up great potential in the whole area of access, spending and advertising. But for the traditional advertising business, it’s a whole different story.

“Unlike the US and UK, Irish people are still very loyal to their newspapers, and spending on this media is only marginally down.

“Across overall media, cinema and DVD rentals are likely to increase. Instead of going to an expensive restaurant people are likely to go to the movies or entertain themselves at home. In a recession, for example, sales of chocolate biscuits go up!  We see media revenues returning to growth in 2011.”

On the question of consolidation as various titles fight for survival, O’Connor predicts a dramatic change.

“Newspaper publishing is already down 11pc this year, led by the falloff in property and jobs advertising. Consumer magazines are down 12pc, so that’s an extremely tough business to be in right now.

“But newspapers in Ireland have a strong following. Newspapers in Ireland enjoy above-average readership. There’s a lot of brand loyalty there and that will stand to the industry even in these tough times.”

Digital television is one of the sectors still enjoying exponential growth with subscriptions up 3.6pc and internet access subscriptions up 16pc this year.

The other trend Bartley points to that budding media moguls can’t ignore is the continuing growth of video games, up 7.6pc this year. “This is entertainment media 21st-century style. Video games are the new Hollywood and, from a very low base, video game ads are expected to grow 13.8pc CAGR to 2013, while overall advertising grows 0.6pc globally.”

The proportion of internet and mobile advertising in the overall global advertising mix is forecast to rise from 12pc in 2009 to 19pc in 2013.

By John Kennedy