Ireland’s entertainment and media (E&M) market will grow at an annual compound growth rate of 4.2pc a year for the next five years to reach €4.6bn in 2017, driven primarily by the growth in digital media and fuelled by better quality internet access among consumers. That’s according to the latest PricewaterhouseCoopers (PwC) study, which predicts paywalls will go mainstream in Ireland’s newspaper industry.
Digital revenue includes consumer spending on internet access, digital content, and digital advertising, with the ratio of digital revenue to non-digital revenue steadily increasing over the five years, representing 42pc or €1.9bn of the Irish market by 2017, according to the 14th PwC Entertainment & Media Outlook.
In Ireland, internet advertising revenues are projected to double from €213m in 2013 to €347m in 2017, representing a CAGR of 14.4pc. Wired internet advertising will continue to dominate the market, rising to €334m, however, mobile will grow by 23.2pc CAGR.
Video advertising and mobile advertising will start to play a significant role in the online ad market by the end of 2017, with online video-game advertising showing growth of 17.4pc annually from almost €10m in 2013 to €18m in 2017.
Mobile devices are starting to become the primary rather than secondary way to reach the internet, which opens up new opportunities for advertisers, such as app and location-based advertising.
Consumer spending on traditional media will dominate in the near term as PwC recognises the clear and ongoing challenge in converting digital consumption into digital revenues.
Digital paywalls will become mainstream
However, consumers have become more accustomed to purchasing digital media and have become more digitally advanced.
Digital access to newspaper content is increasing rapidly while at the same time print circulation is decreasing. A long-term decline in newspaper advertising revenues means that circulation will represent an increasing percentage of overall revenues. While the newspaper industry in Ireland will register a decline of 3.3pc CAGR or €93m, digital circulation spending will increase by 36.4pc CAGR over the five-year period. In mature markets, including Ireland, digital paywalls will become mainstream.
Digital advertising revenues in the newspaper sector are forecast to increase to €60m from a base of €46m in 2013 with print advertising revenues declining by €69m to €270m in 2017. PwC’s Outlook for the E&M sector finds the industry at a tipping point.
The physical home video market in Ireland, including sales/rentals of DVDs and Blu-ray, will be worth less than the box office for the first time in 2013. PwC expects that DVD and Blu-ray rentals in Ireland will be worst hit with a decline of 28.6pc CAGR to €4.8m over the next five years. Back in 2008, the rental market was a €68m business.
Outlets for legally buying DVDs and Blu-rays are experiencing difficulties, as evidenced by the decline of Blockbuster, Xtravision and HMV locally, partly because of piracy, and partly because of the popularity of online retailers.
The rollout of Netflix in Ireland is leading the way for OTT (over the top) movie-streaming services, with Netflix now investing in its own content.
More than a third (43pc) of all recorded music sales in Ireland are in a digital format and this is expected to rise to 64pc by 2017 to €38m. Irish revenue from spending on tickets to live concerts as well as concert sponsorships is expected to rise annually in the years to 2017 to €160m.
Constant digital innovation is the new licence to operate, says Susan Kilty from PwC’s Entertainment & Media practice.
“In Ireland, it is evident that digital is beginning to displace the traditional media forms,” Kilty explained.
“Digital revenue is growing at a rate of 13.2pc CAGR and is helping to absorb a marginal decline of 0.3pc for the non-digital forms of media.”
Mobile internet access currently accounts for less than half of 2013 revenues at €416m but this will rise to €865m in 2017 or almost double fixed-broadband access revenues within five years, driven by the growth and explosion in 4G services.
“This may not necessarily translate into increased ARPUs (average revenue per users) in the long term for communications providers as internet access is now seen as a utility rather than a luxury in both advanced and emerging markets,” explained Amy Ball of PwC’s Entertainment & Media practice.
“Mobile operators may be able to command a premium for 4G or next-generation network services temporarily, but pressure to migrate customers will lead to intense price competition and will limit ARPU growth. It is expected that the proliferation of 4G services will drive mobile internet adoption and will lead to an increase in overall subscriber numbers across a greater geographical reach,” Ball said.
Digitally adrift image via Shutterstock