Global Entertainment, Internet Advertising to Soar

Spending in the global entertainment and media (E&M) industry will hit $1.7 trillion in 2008, with swift gains in Internet advertising, according to a study released Tuesday.

Strength in the Asia/Pacific entertainment and media market will drive a global 6.3 percent compound annual growth rate (CAGR), compared to 4.2 percent in 2003, the study predicted. Other drivers of growth include Internet advertising, new distribution channels such as broadband and wireless communications, and video games. The predictions come from the annual PricewaterhouseCoopers Global Entertainment and Media Outlook: 2004-2008 forecast.

The Internet, the smallest of the six advertising media tracked, will remain the fastest growing, the study said. Internet advertising will grow to a projected $18.9 billion in 2008 with a 12.7 percent CAGR, according to PricewaterhouseCoopers.

“Paid-search and rich media propelled spending in 2003, and the growing number of broadband households along with expanding e-commerce makes the Internet more attractive to advertisers,” said Wayne Jackson, global leader of PricewaterhouseCoopers’ E&M practice in a statement.

The number of broadband households is predicted to surpass 300 million in 2008.

The report’s description of the Internet as the fastest-growing advertising medium is an indication that the medium has a long way to go, an analyst said.

“My 10-month old son is the fastest-growing member of my family, but that doesn’t mean I would trust him with the car just yet. That’s a bit how online advertising is seen right now,” said Gary Stein, analyst with Jupiter Research, which is owned by the parent of this publication.

“Internet advertising has been the ‘fastest growing’ category for a while now, but that’s in a large part to the fact that it was at zero in the very near past,” Stein said.

The report concluded that the E&M industry in general has begun a “solid upturn” after three years of sluggish growth. Spending increased 4.2 percent in 2003, to $1.2 trillion, and growth is predicted to increase to 5.7 percent globally in 2004. Faster increases are predicted through 2008, the study said, and the outlook is brighter than it has been since the late 1990s.

“Projections for industry growth are encouraging, highlighted by particularly swift gains in the video games and Internet advertising and access spending segments,” said Jackson.

Behind the growth is the Asia/Pacific region, fueled largely by the People’s Republic of China (PRC) and India, the report said. Both countries are investing heavily in communications and media infrastructure and opening up their markets. The countries’ huge populations and currently low media penetration provide great room for growth.

The report predicted that the region’s video games and Internet segments will be the world’s largest and fastest-growing. Television distribution will also benefit from the addition of 96 million multichannel households in India and the PRC, the report said.

“Right now, it’s [Internet ad spend] still a fraction of what’s spent on television and other, more traditional mediums, despite the fact that it is more targetable, more trackable and has enormous reach. We’re still in the run-up stage, though, as advertisers continue to not only buy online advertising space, but integrate the medium truly into their plans for selling their products,” Stein said.

In compiling its Entertainment and Media report, PricewaterhouseCoopers looks at filmed entertainment, television networks (broadcast and cable), recorded music, video games, radio and out-of-home advertising, Internet advertising and access spending, newspaper publishing, magazine publishing, business information, consumer book publishing, educational and professional books and training, theme parks and amusement parks, and sports.

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