The digital revolution, coupled with renewed advertiser confidence, is driving the Australian entertainment and media industry into a new and exciting growth era. However, piracy continues to threaten industry expansion, according to the latest Australian Entertainment and Media Outlook 2003 – 2007.
The latest PricewaterhouseCoopers Outlook reveals the Australian industry will grow at a 5.5 per cent compound annual growth rate (CAGR) in the 2003-2007 forecast period, to $22.1 billion. Growth in Australia will be slightly higher than the 4.8 per cent CAGR for the global industry. Australian consumer-user spending is predicted to rise by 6.7 per cent, to $12.6 billion. Advertising spending will grow by 4.0 percent CAGR to $9.5 billion.
Growth in the Australian sector will be concentrated in the entertainment driven industries, bolstered by consumer shifts to new digital technologies and distribution.
Internet, broadband, pay TV
PwC predicts consumer spending in Internet access to grow by 14.6 per cent, buoyed by the uptake in broadband technology; interactive games should increase by 11.6 per cent, supported by competitive console prices and the introduction of online console gaming.
Subscription television is expected to grow by 9.4 per cent, off the back of the Foxtel/Optus agreement and the roll-out of digitised and interactive services; and filmed entertainment should increase by 7.0 per cent, driven by Australia’s ongoing conversion to a nation of DVD collectors.
Ongoing piracy issues
However, the Outlook shows piracy will increasingly plague the industry’s performance, and pose the most significant threat to sector growth.
The music industry has traditionally been the hardest hit by piracy. However, growing broadband penetration and a disconcerting willingness of many people to rationalise the theft of entertainment will see the impact of piracy significantly dampen consumer spending on all form of digitised entertainment.
By the end of the decade virtually all entertainment and media will be in digital format – which reinforces the urgency of developing an effective means to combat piracy’s impact.
While the sector is starting to take a stronger stance against piracy through prosecution of both commercial pirates and end users, entertainment and media organisations needs to approach this option with caution. Zero tolerance – particularly at a consumer level – has the potential to alienate customers, in turn doing damage to brand image.
New distribution models
In addition to vigilantly protecting their intellectual property, PwC recommends entertainment and media organisations look to developing their own digital distribution models in an attempt to encourage customers to buy from legitimate sources.
The upside of piracy is that it tells the industry about consumer demand and delivery preferences, but what it also says is that consumers will not want to pay if they do not perceive they are getting good value for money and service.
In the case of the music industry, the success of Apple iTunes Music Store has demonstrated that consumers are prepared to buy licensed product when the value-price equation is favourable. Added convenience, ease of use, superior content, and clever customer service, can improve value, while bundling products enhances the price side of the equation.
The Outlook reports that improved economic conditions, coupled with upcoming sporting events such as the Rugby World Cup, have renewed advertiser confidence, which will stimulate industry growth.
As advertisers return after the worst advertising slump in decades, they will first focus on free-to-air television. As economic conditions improve further, and world-class sporting events near, ad dollars will be shared amongst all traditional and new forms of advertising, with all achieving positive growth in each year of the forecast period.
Advertisers have emerged from the industry recession with a vigilant focus on accountability. They want hard proof of audience reach and return on their advertising investment. And the challenge for non-traditional formats, particularly out-of-home, cinema and Internet advertising, will be to prove their worth.
Until the newer technologies develop a generally-accepted audience measurement tool, traditional formats, such as television, newspapers and radio, with their reach advantage, will continue to capture the lion’s share of advertising.
PwC also noted how the Government’s failure to gain support to pass its Bill of media reforms will place Australia at a distinct disadvantage to a number of other countries, and will force Australian media organisations to revisit their strategies and objectives.
The rejection of the Government’s proposed deregulation of cross and foreign media ownership laws has held the local sector back at a time when many other countries are moving forward. The continuation of onerous cross media laws will force Australian media organisations to look offshore for growth.
As a result, funds that could have been used to improve Australians’ entertainment and media experience are instead benefiting people in other countries.
Furthermore, a few percentage points of Australian media ownership here, a couple of radio stations there simply holds no appeal for major foreign investors when compared to vastly more appealing opportunities in their home countries or larger international markets than our own.
Consequently, Australia will probably miss out on the fruits of international intellectual and investment capital which people in many other countries already enjoy.
Australia – Broadcasting – Analysis and Overview 2003
Australia – Radio – Overview and Statistics
Australia – Pay TV – Statistics – Industry Revenues and Analysis
Australia – Film Market
Australia – Broadband – Content