Digital Market Update
THUNDER BAY – The world keeps changing. “Canadians have a large appetite for digital media, and this trend has brought the market to a turning point. Advertisers looking to grow in the digital market will be wise to look to Canada as a leader in online consumption,” states Lisa Coulman, Partner, PwC Canada and Co-Editor, Entertainment and Media Outlook.
Shifting markets are seeing changes that business must work to keep abreast of to maintain a competitive advantage in the ever changing marketplace.
“The consumer migration to digital presents businesses with a lot of opportunities but also some challenges—organizations must create a consumer-centric approach and a strategy that encompasses all facets of the customer experience, including digital,” adds Coulman. “Businesses must no longer see a traditional strategy and a digital strategy, but an overall business strategy that focuses on customer relationships and personalized content”.
Internet Changing the Paradigm
By 2018, internet advertising spending will be well ahead of spending in other channels and will reflect an overall shift to digital amongst Canadian consumers, says a PwC report released today.
According to PwC’s Global Entertainment and Media Outlook, which projects spending from 2014-2018 in the entertainment and media market, advertising in Canada is at a tipping point. Internet advertising is growing at a pace far faster than other media, and in four years revenues will reach nearly $7.2 million, with a CAGR of 13.9%. Mobile advertising is growing at particularly rapid rate, with an expected CAGR of 21.8%.
The growth in internet advertising comes as little surprise given that Canadians are some of the most active internet users in the world, and are thus a ripe market for advertisers. Furthermore, as services like Netflix gain in popularity, revenues from physical home videos and cable subscriptions are slowing, along with those from book and magazine publishing and the sales of music CDs. Globally, traditional channels still sit ahead of digital in many areas, but in Canada the trends show an overall consumer migration to digital that advertisers are capitalizing on.
Looking towards traditional channels, television broadcast advertising revenue is back in black. Although revenues fell in 2009 when the recession hit, they returned to growth in 2010, faced a temporary decline in 2012, and since rebounding last year are expected to increase in the years leading up to 2018, when net revenues will rise to $3.9 billion.
However, on the print side, the picture is much grimmer. Newspaper print advertising revenues will fall—from $1.6 billion in 2014 to $1.2 billion in 2018, representing a Compound Annual Growth Rate (CAGR) of -7.9%. Although digital newspaper revenues continue to grow, this is not expected to cancel out the freefall on the print side.
Additional Canadian highlights from the Outlook
E-books on the rise: Revenue from electronic books will see a significant increase by 2018, with a CAGR of 12.3% and 37% of the total book market. E-readers also tend to consume more, reading an average of 4.5 books a month, compared to 2.8 overall when factoring in print books.
Music to my ears: Digital recorded music revenue overtook physical recorded music in 2013, and is forecasted to account for 79% of total recorded music revenue by 2018. CD sales may be falling, but concerts are still popular amongst consumers, as live music ticket sales will bring in nearly $77 million in 2018, up more than $10 million from 2014.
Movies, movies, movies: Canadians are still heading to the cinema—box office revenue will see a 3.2% CAGR between 2014 and 2018. In the home video market, over-the-top streaming services will see their profits more than double, going from $34 million in revenue in 2014 to $73.6 by 2018. Physical rentals and sales will both decline, though not at a freefalling rate, with a CAGR of -6%.
Global highlights from the Outlook
Countries to watch: Nine high-growth markets are powering global entertainment and media revenue. China, Brazil, Russia, India, Mexico, South Africa, Turkey, Argentina and Indonesia are markets to watch, collectively forecast to account for 21.7% of global entertainment and media revenue in 2018, up from just 12.4% in 2009.
TV subscriptions continue to thrive: Despite a CAGR of -0.1% in Canada by 2018, globally TV subscriptions are proving to be resilient. Global subscription TV revenues will grow at a CAGR of 3.5% over the next five years to US$236bn in 2018. This growth demonstrates that subscription TV is in a healthy position, assisted by the initiatives it has implemented to counter the impact of OTT.
China in the game: China will overtake Japan as the world’s second-largest entertainment and media market, behind only the US. China is driving online and mobile gaming growth and surpassed Japan to be the largest gaming market (by revenue) in the Asia Pacific region in 2013. Its mobile games revenue will grow by a CAGR of 12% to hit US$2.5bn by 2018, while the country’s online games revenue is set to reach US$6.1bn by 2018.
“In the overall global market, the shift to digital has been slow and steady, and hasn’t had a significant impact on traditional media. However, in Canada we are seeing large gains in areas like e-books, OTT services and digital advertising, at the expense of television subscriptions, print books and newspaper publishing and advertising.”