Media sector looks forward to better times

12 Oct 2004

The latest report on the entertainment and media market is forecasting a five-year growth period, which has positive implications for Irish companies serving the industry.

If hosting the launch of a major report into the entertainment and media sector might have been a risky undertaking for the Digital Hub, it must have been sighs of relief all round as the immediate and mid-term prospects for the sector now look very strong following several sluggish years. In a nutshell, things are looking up: in line with growth elsewhere the indigenous entertainment and media market is expected to show positive signs in the years ahead, a new report predicts.

Globally, this sector is forecast to grow to US$1.7trn in size by 2008; in Ireland it will account for US$2.33bn within four years. Both figures will be reached through impressive growth: the worldwide figures will show 6.3pc compound growth yearly to 2008 and Irish growth will be a healthy 5.2pc annually in the same time frame.

The findings are part of a new report from PricewaterhouseCoopers (PwC), entitled the ]itals[ Global Entertainment & Media Outlook 2004-2008 ]end itals[. Now in its fifth year, the document details in-depth industry figures that comprise consumer and advertiser spending. According to Peter Winkler, head of global marketing at PwC’s entertainment and media practice, these figures are set to grow again from mid-2004 after three years in the doldrums.

“The sector is poised for very strong growth over the next five years,” he said at the launch. Factors driving this growth will be a boom in broadband takeup, along with the video games and internet sectors, which represent the fastest growing segments of the entertainment and media industry.

The outlook for entertainment and media in Ireland is positive overall, with all bar one segment expected to grow over the coming years. That exception is the music business, which will show a decline both in volume terms and in value growth — that is, the price consumers pay for albums and singles.

“Piracy is continuing to impact sales in the near term,” commented Sinead Parker, director of PwC’s strategy advisory services. “We expect to see retailers discounting to counteract the effects of piracy and parallel imports.” Customer spending on albums and singles is declining overall, she added.

Films and TV are forecast to grow by 4.7pc and 6pc compound annual growth rate (CAHR) respectively. With 31pc of Irish homes now switched over to digital TV, this medium is making strides in the local market along the lines of elsewhere in the world. According to Parker, Irish consumers show a strong affinity for TV, despite representing less than 1pc of the total western European market.

PwC believes Irish cinema admissions are to remain relatively static over the next four years. In terms of market size, we are dwarfed by France, Germany and the UK. This makes it important for Irish companies to look abroad, Parker commented.

In addition, with just 38pc of Irish adults currently using the internet at home, this sector too represents an opportunity for growth, said Parker.

Unlike the global overview where video games are strongly in evidence, the Irish market figures do not cover this sector as there is currently no reliable data available. It’s an unfortunate omission, all the more so as anecdotal evidence points to a vibrant local games business, where consoles have traditionally sold extremely well on a per capita basis compared with elsewhere in Europe and beyond.

Appropriately for the indigenous sector, looking on to see what bread would fall from the table, the choice of Dublin’s Digital Hub as a launch venue proved appropriate. Philip Flynn, CEO of the Digital Hub Development Agency, welcomed the report’s findings. “Growth in the entertainment and media sectors is excellent news for both the companies and researchers here in the Digital Hub,” he said.

Introducing the report, Flynn spoke of the strong seed cluster now in place at the Digital Hub facility. Almost 40 companies comprising close to 400 staff are based in the development, the next phase of which is already being planned.

Encouragingly for digital media’s sponsors in Ireland, the report suggests there will be a buoyant market ready to be served by the companies being nurtured in the Liberties where the hub is based. Commenting afterwards, Flynn pointed out that the community of scientists, technologists and creative professionals were working to deliver their products and services to a global market. “I am particularly excited about the opportunities the report presents for the Digital Hub digital media cluster to develop and grow. I am confident the environment we are creating for enterprise and research will provide the best chance for Ireland to increase its international entertainment and media market share,” he said.

On a regional basis, the Asia-Pacific market is predicted to be the fastest growing worldwide, with China and India particularly expected to make huge strides thanks to their huge populations but as yet low penetration and usage of media such as the internet and satellite TV. The US, by contrast, shows the slowest growth in this area. “It’s the biggest and most mature market so it doesn’t have quite as much to gain,” explained Winkler.

One of the standout figures in the report is the performance of the video games market, which is predicted to show 21pc CAGR over the next five years. According to PwC, 2006 will be especially strong, thanks to new games console launches from Sony and Microsoft that will help to boost revenues in the sector. Internet access and advertising is the only other segment expected to show double-digit growth of 16.8pc CAGR, PwC found.

Globally, ad spending will improve noticeably during the 2004-08 period, rising to US$412bn in 2008 from US$318bn in 2003. Television remains the largest advertising medium and is projected to expand at a 6.5pc CAGR through to 2008. The internet will remain the fastest growing advertising medium, though technically the smallest in size. Online ad spending rebounded strongly last year, helped by paid searches and rich media. This sector will grow to a projected US$18.9bn in 2008 with a 12.7pc CAGR. Electronic media will continue to gain ground at the expense of print, said PwC.

Pictured at the launch of the launch of the PricewaterhouseCoopers (PwC) report were (from left): Peter Winkler, managing director, PwC global entertainment and media practice; Philip Flynn, CEO of the Digital Hub; and Sinead Parker, director, PwC Irish Strategy Advisory Services

By Gordon Smith