PwC: Romanian media and entertainment market to reach USD 3.4 billion by 2016

After a three year slump, the Romanian media and entertainment sector will grow from USD 2.7 billion in 2012 to USD 3.4 billion in 2016, with a compounded annual growth rate of 5.3 percent, according to this year’s edition of PwC’s Entertainment and Media Outlook report. Yet, in real terms, taking into consideration the inflation rate (estimated at an average of 3.3 percent over the analyzed period, between 2012 and 2016), the Romanian media and entertainment market will register a modest 2 percent compounded annual real growth rate.

Most of the growth will come from the growth of internet access expenditure (9.3 percent nominal CAGR rate), while advertising expenditure will register a moderate growth (4.8 percent CAGR up until 2016). As for end user spending on media products, the PwC reports estimates a negative real growth rate, with a nominal CAGR of 1.7 percent until 2016, under the projected inflation rate.

Although the new projections indicate a slowdown in the growth rhythm of the Romanian media and entertainment industry, the local market remains the third most dynamic in Central and Eastern Europe, after that of Russia (with a CAGR of 10.1 percent) and Turkey (9.8 percent), yet ahead of Hungary (5.1 percent), Poland (4.9 percent) and the Czech Republic (4.8 percent).

“It is clear that the media and entertainment sector was heavily affected by the global downturn. Yet this has overlapped with a more severe long term crisis of the sector itself, which is undergoing a radical transformation due to the growth in new digital technologies. These are turning media products into a commodity and are forcing media and entertainment companies to experiment with new forms of monetization for their products and services,” said John Webster, Partner, Assurance Leader, PwC Romania.

Despite ongoing economic uncertainty, the past year has seen global sales of tablets and smart devices reach record levels once again, underlining the growing revenue opportunities from digital delivery of entertainment and media (E&M) content and advertising to increasingly connected, and particularly mobile, consumers.

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Global entertainment and media spending on digital advertising and consumer formats increased by 17.6 percent in 2011 compared with only a 0.6 percent rise in non-digital spending. Digital’s share of total spend will grow from 28 percent in 2011 to 37.5 percent in 2016, and digital spending will account for two thirds of the total E&M spending growth by 2016.

According to PwC’s annual Global Entertainment and Media Outlook 2012-2016, 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.  Today’s challenge for E&M companies is in the implementation of those digital strategies.

“The various segments of the E&M sector are at different stages of digital development, but they are all embracing digital to meet the ever-changing demands of consumers effectively and profitably. Entertainment and media companies have reached what we’re calling the ‘end of the digital beginning’: they’ve made the commitment to a digital future, and are now striving to make the necessary changes to their products, distribution and organizations,” said Florin Deaconescu, Partner, Leader of the Assurance services team for the Telecom, Media and Entertainment Industry, PwC Romania.

Digital maturity varies widely at a segment level. For example, global spending on digital recorded music formats will overtake physical distribution in 2015, reaching 55 percent of total revenues in 2016. And global spending on online and wireless video games will overtake console and PC games revenues in 2013. By contrast, the digital component of consumer magazines will account for only 10.4 percent of spending by 2016, up from 3.1 percent in 2011.

Global spending on music rose 1.3 percent in 2011, the first gain in many years, thanks to growth in the concert and music festival market and a slower decline in recorded music. Rises in digital music spending mean that overall, global spending on recorded music will finally begin to increase in 2013.

Mobile internet access subscriber numbers, a key driver of digital spending, will more than double during the next five years to 2.9 billion by 2016, of which almost 1 billion will be in China. In India, mobile internet subscribers will increase from a low base at a compound annual rate of 50.8 percent to 2016, making it the fastest growth market for mobile internet in the world.

By 2016, global mobile internet advertising revenues of USD 24.5 billion will grow at 36.5 percent compounded annually, to almost match the size of the classified internet advertising market. However, paid search at USD 78.1 billion and banner/display at  USD46.6 billion will retain the lion’s share of the market in 2016. China’s mobile internet advertising market will grow at a compound rate of 68.4 percent to reach USD 6.2 billion in 2016, making it the second largest market in the world behind the United States at USD 9.4 billion.

The newspaper publishing segment illustrates diverging trends across mature and growth economies. There will be ongoing declines in some territories such as the United States (declining 1.4 percent compounded annually to 2016, and expected to be worth 43.8 percent less in 2016 than 2007), but strong growth in countries where the digital infrastructure is less mature, such as Argentina (11.9 percent growth compounded annually to 2016), Indonesia (11.2 percent), and India (9.6 percent).

France passed the United Kingdom and Germany in 2011 to become the second largest TV subscriptions market in the world behind the United States, driven by a 76 percent rise in IPTV households. In the TV advertising segment, spending in Russia surged by 20.2 percent in 2011; by 2016, Russia will overtake the UK, Germany, Italy, and France to become the largest TV advertising market in EMEA (Europe, Middle East and Africa).

In the worldwide filmed entertainment market, over-the-top/streaming services will grow at a 21.0 percent CAGR to USD 11 billion in 2016, and will overtake spending through TV subscription providers in 2012.