The latest Entertainment & Media Outlook report from PricewaterhouseCoopers illustrates much of what the industry already knows and expects: digital media is big and getting bigger. But it does add a sense of scale to this shift by predicting how many millions will slosh around the media world between now and 2016.
It characterizes digital’s role in media as “the end of the digital beginning”—no longer a revolution or experimental field, but an established and important part of the landscape:
Digital opportunities are now well understood by media companies, advertising agencies and advertisers themselves: the industry is approaching the ‘end of the digital beginning’ as rising comfort levels with digital mean that it is becoming business-as-usual. Although the ‘fog’ experienced in the past few years around strategic options is lifting, there is more to be done: today’s challenge is in the implementation of those digital strategies.
In the face of sweeping change and uncertainty, the E&M industry has spent the past few years seeking effective business and operating models for the new world, through a cycle of constant experimentation, ongoing innovation and targeted analysis of the results. This will continue. But with digital now at the core of business-as- usual, PwC believes that experimentation and execution are no longer sequential but will proceed in parallel, enabling E&M companies to press ahead into the ‘digital new normal’ with confidence.
PricewaterhouseCoopers (PwC) sees more or less the same trend across all major ad media: traditional forms still account for the biggest ad revenue makers, but digital channels are by far the fastest growing money-makers. Television typifies this: broadcast advertising is expected to bring in big bucks by 2016 – $4.56 billion – and has a compound annual growth rate (CAGR – an average of measured and predicted percentage change from 2007 to 2016) of 4.5%.
But TV’s online and mobile ad revenue (brought in through channels such as CTV Mobile or TSN Mobile) has a CAGR of 26.5%. It looks to grow at a faster rate than broadcast advertising, although it’s projected to bring in much less overall revenue – $321 million in 2016.
Here’s a breakdown of PwC’s predictions for each major advertising media sector between its 2011 findings and those projected to 2016. Note that all figures are in Canadian dollars.
Magazines
Consumer magazines, which saw 0.8% lower ad revenues in 2011 than the year previous, will bounce back a bit in 2012. Ad revenues are expected to go from $662 million to $691 million. Digital ad revenue is projected to reach $63 million – a drop in the bucket compared to the $628 million from print ads, but a 35.6% increase over last year. That higher print ad revenue figure is only 2% growth from 2011.
The compound annual growth rate (CAGR) between now and 2016 is predicted to be 3.7%, with annual ad revenues reaching $794 million in that year.
Trade (business to business) magazines should expect a 4.4% CAGR over the next five years. From the $217 million brought in in 2011, trade mags will see a 2.4% increase to $222 million this year. By 2016, that total revenue figure will steadily increase to $269 million.
Newspapers
Canadian newspaper should brace for steadily declining ad revenues over the next five years according to PwC. CAGR is –0.9%, with this year’s $2.35 billion in ad revenue diminishing to $2.28 billion by 2016.
Again, digital ad revenue is predicted to increase every year, though not as quickly as in the magazine sector. PwC data has single-digital percentage growth year over year for digital dollars.
However, the company does reveal some statistical hope in its findings. “Newspapers should benefit from favorable demographic trends,” the report said. “People 45 and older – the group with the highest incidence of newspaper readership – are growing faster than any other segment of the population. That cohort will expand by 7.9% in Canada during the next five years, twice the 3.9% growth in the entire population.”
Online
With the highest predicted overall CAGR for the next five years – 15.7% – internet advertising will see a 19.9% increase in revenue this year, reaching $3.48 billion from $2.9 billion last year and seeing double-digit percentage growth every year until 2016.
Mobile internet advertising will see a lot of growth (from $71 million in 2011 to $118 million in 2012, tracking up to $420 million by 2016). However, it still trails the internet’s big three ad revenue generators: search (2011 – $1.14 billion; 2012 – $1.33 billion; 2016 – $2.14 billion), display (2011 – $903 million; 2012 – $1.1 billion; 2016 – $1.97 billion), and classified (2011 – $704 million; 2012 – $809 million; 2016 – $1.19 billion).
Of this trio, display advertising is set to see the greatest CAGR at 16.8%. “As Canada catches up with the U.S. with respect to social networks and e-commerce, it will grow faster,” the report said. However, video advertising online, though small in comparison to the big three, stands to make the fastest headway. “By far the fastest-growing component of wired internet advertising is video advertising, which increased 28.8% in the United States in 2011 and by 91.9% in Canada. Online video advertising in the United States will increase from $1.8 billion in 2011 to $7.5 billion by 2016, a 32.9 percent increase compounded annually, while Canada will expand at a 31.9 percent compound annual rate to $283 million in 2016 from $71 million in 2011.”
Radio
Usually a steady performer, terrestrial radio is expected to see single digital growth year over year. The $1.67 billion it brought in in 2011 will increase 4.7% to $1.75 billion this year. With a CAGR of 4.3%, that figure is predicted to reach $2.05 billion by 2016.
The report cites the trend of broadcast radio stations streaming content online as a means of expanding their listenership, but sees the only significant gains in this field south of the border. “CBS, Cumulus (which acquired Citadel), Clear Channel, and Entercom have launched apps that enable their listeners with smartphones to listen to their programming while on the go,” it said. “Although for traditional broadcasters and web-only broadcasters online advertising represents a very small portion of terrestrial radio advertising, it is growing at a much faster rate and with time will prove more important to the industry. We expect that internet radio advertising will constitute 4 percent of total terrestrial radio advertising in the United States in 2016. In Canada, radio broadcasters such as Corus have experimented with apps, but the revenues generated are not expected to be significant in the forecast period.”
TV
At just less than $4 billion, TV will be the biggest fish in this pond in 2012. Its conventional channels will represent the largest part of that at $2.56 billion, specialty channels are the #2 revenue driver at $1.27 billion and online ranks third at $122 million.
Mobile television seems to face a slow road to growth between now at 2016. Its CAGR is high (99.4%), but starts from small totals ($2 million last year, $5 million this year).
The report sees Canada’s mobile TV arena as very young. “There were an estimated 100,000 users in 2011, a figure we expect will increase to 2.2 million by 2016 as distribution to mobile devices expands. In Canada, an emerging mobile TV advertising market will total an estimated $63 million by 2016.”
Out of Home
PwC doesn’t offer much depth of analysis on this sector, flatly reporting $505 million in 2011 revenues, and a 6.4% bump to $537 million in 2012. Its CAGR is 6% (higher than the U.S. industry’s), and projected 2016 revenue reaches $678 million.
The report does not break out OOH revenues by niche (traditional vs. digital), but paints a picture of a digital arena like a battleground – large numbers of players vying for dominance.
“Unlike the situation with traditional billboards, where three companies in each country – Clear Channel, CBS Outdoor, and Lamar in the U.S., and Pattison, CBS Outdoor, and Astral in Canada – control the bulk of the market, the digital network market is fragmented, with more than 200 network operators in the U.S. and around 45 in Canada. There are around 500 networks operating in North America, making it a very fragmented market with few national networks.”
