Spend on traditional media advertising will continue to slide as companies direct more of their marketing budgets online, including their own internal direct-to-consumer channels, PricewaterhouseCoopers has predicted.
The move is putting increasing pressure on already-struggling media owners, with two out of three marketers saying money is being switched from ‘bought’ to ‘owned’ channels.
PwC’s Megan Brownlow
According to PWC’s annual Australian Entertainment and Media Outlook report, one in four marketing departments are now spending between 20 per cent and 30 per cent of their cash “building and maintaining their own channels”.
The report’s editor, Megan Brownlow, said firms are becoming advertising and media companies in their own right and producing “high quality content”.
Print advertising is forecast to fall from $1.9b in 2013 to $1.30b in 2018, an average annual decline of 7.2 per cent, while advertising through media companies’ digital platforms will rise from $418m to $627m, growth of 8.4 per cent. But digital will still only represent a third of advertising revenue for publishers by 2018.
“The reorientation of marketing and spend will have the greatest impact on the media, entertainment and advertising industries, with deteriorating spending on traditional platforms promoting greater urgency to embrace new revenue models,” Brownlow said.
“Digital and social media channels have driven this trend by diluting the reach of traditional platforms and making it easier for brands to access their audience directly.”
Media firms have responded by creating new revenue streams and “building new distribution channels to supplement their threatened advertising revenues”, Brownlow added.
In further grim tidings for media owners, consumer revenue from circulation sales will continue to head south, from $1.32b in 2013 to $824m 2018, an average annual fall of more than nine per cent, said the report.
Magazine advertising will follow a similar pattern, according to the study, with print expected to fall from $480m last year to $335m in 2018 with digital channels climbing from $57m to $100m over the same period.
Revenue from circulation sales are forecast to drop from $808m in 2013 to $686m in four years’ while digital circulation will generate $104m, up from just $19m in 2013.
“Total consumer magazine revenue will continue to fall over the forecast period as consumers turn to the wealth of free or cheaper content online,” PwC said in the report.
The shift towards digital, as with newspapers, comes amid “increasing broadband penetration, increasing tablet sales and Australia’s improving telecommunications networks”.
Brownlow told Mumbrella that the next five years will see accelerated growth of native advertising in particular.
“Native advertising is a bit of a blunt expression. What I mean by that is really high quality integrated content that is created by professional content makers,” she explained. “The key thing is that content can sit in the digital publishers channel or in the marketers own channels.”
Radio advertising meanwhile is forecast to rise 3.4 per cent over the next four years, hitting $1.3b by 2018.
Free-to-air TV will see advertising growth of 1.4 per cent each year to $4.1b by 2018 with subscription TV increasing from $527m in 2013 to $763m.
Overall, advertising spend in the entertainment and media markets is forecast to rise from $12.3b in 2013 to almost $14.4b, an average annual increase of 3.1%, according to PwC.
Consumer spending is expected to rise 3.4 per cent, from$21.3b to $25.4b.
Here is the summary of the 11 sectors studies by PwC:
The Australian newspaper market is forecast to shrink at a compound annual rate of 3.2 percent from 2014 to 2018.
The sector is trying to balance impressive growth in digital circulation against continuing declines in total circulation.
Total circulation spend on digital newspapers is forecast to grow from $37 million in 2013 to $380 million in 2018.
As high-profile titles begin to lose the readers of their print editions, publishers have taken serious measures to adjust, including downsizing print editions and enacting cross-platform newsroom integration to improve digital propositions.
While digital advertising has been more encouraging, it is expected to represent only a third of advertising revenues for newspaper publishers by 2018.
Australian publishers will also continue to face increased competition from overseas English-language publishers, such as the UK’s Guardian and Mail Online which have launched Australian online editions.
The Australian filmed entertainment market is forecast to grow by a compound annual rate of 1.1 percent from 2014 to 2018.
Box office revenue is expected to rise over the forecast period, overtaking total physical home video revenue by 2015.
Revenue from electronic home video will post strong gains from 2014 to 2018, and these gains will be most pronounced for over-the-top (OTT) video providers such as Quickflix and streaming services.
Spend on video on demand via OTT and streaming services is forecast to grow from $103 million in 2013 to $255 million in 2018.
It is likely that bigger foreign players in the video-on-demand space will enter the Australian market, to compete against Quickflix and other OTT services such as Foxtel’s Play and Presto.
The Australian radio advertising market is forecast to grow by a compound annual rate of 3.4 percent to 2018, which represents an increase from $1.13 billion in 2014 to $1.30 billion in 2018.
The growth in smartphone adoption coupled with the rise of streaming music services will increase pressure for traditional broadcasters – cannibalising listening hours and advertising spend.
Broadcasters are responding by forming partnerships with streaming music businesses which should put them in good stead for integrated advertising sales.
Audience measurement for online and mobile listening is a crucial issue facing the industry in the next five years.
The Australian consumer magazine market is forecast to decline at a compound annual rate of 2.1 percent from 2014 to 2018. In Australian dollar terms the market will go from $1.34 billion in 2014 to $1.22 billion in 2018.
While print circulation spending is forecast to decline, spending on digital consumer magazines is set to grow from $19 million in 2013 to $104 million in 2018.
Single sale copies through retail, rather than subscriptions, dominate circulation revenue making competition from online content fierce and the consumer magazine market highly susceptible to changing consumer tastes.
Advertising revenue is migrating towards digital media – the trend towards digitisation is supported by increasing broadband penetration, increasing tablet sales, and Australia’s improving telecommunications networks.
The Australian subscription television market is forecast to grow by a compound annual growth rate of 4.6 percent from 2014 to 2018. In Australian dollar terms the market will grow from $3.38 billion to $3.89 billion.
Foxtel has secured a near monopoly in the subscription TV market. Competition will continue to grow from internet protocol television (IPTV) players such as Apple TV which will increase the overall subscription TV market.
Anti-siphoning legislation will continue to limit the number of subscribers and exclusive sports broadcasting on premium subscription television.
Content and lower price points for internet-delivered offerings will be the keys to subscriber growth. Opportunities to source exclusive content may be triggered from future changes to the output agreements that free-to-air TV networks have with major studios.
Spend on free-to-air advertising is forecast to grow from $3.85 billion in 2013 to $4.13 billion in 2018. This represents a compound annual growth rate of 1.4 percent.
The regulatory environment will play a prominent role in the competitive landscape as the proposed abolition of the ‘75 percent reach’ and ‘two out of three’ rules has encouraged consolidation talks between players in the market.
The popularity of ad-skipping video recorders continues to prompt innovation in integrated advertising and also to increase the desirability of live sports broadcasts free-to-air.
The Australian interactive games market is forecast to grow from $1.75 billion in 2014 to $2.29 billion in 2018. This represents a compound annual growth rate of 7.7 percent.
The digital console games segment will experience the greatest revenue increase, from $315 million in 2013 to $807 million in 2018.
The push towards greater digital distribution continues, tightening the integration of next-generation consoles with cloud games services and online shops.
Mobile gaming is developing as a distinctly separate market from traditional console and PC gaming. The dominant ‘freemium’ revenue model will increasingly be supplemented through advertising and sponsorship revenue.
The combined internet access and advertising market is forecast to grow from $13.8 billion in 2014 to $17.7 billion in 2018.
Total fixed broadband revenue is expected to flatten over the forecast period as the bulk of new revenue moves to the mobile internet access market, driven by increased penetration of connected devices.
Spending on mobile internet access is forecast to grow from $4.18 billion in 2013 to $6.75 billion in 2018.
On the internet advertising front, growth in search and display will continue, with mobile and in particular video, taking larger shares of the market.
The Australian music market is forecast to grow from 2014 to 2018 at a compound annual growth rate of 0.6 percent.
Of the three market segments – physical distribution, digital distribution, and live music, digital will experience the greatest growth, from $498 million in 2013 to $658 million in 2018.
The strong growth in the music market is driven by a plethora of entrants into the digital music space – particularly US companies looking to establish a global footprint, including Spotify and Beats Music.
Australia’s live music sector remains active, however a fluctuating dollar and cooling festivals market means that international touring is no longer a guaranteed success.
The Australian OOH advertising market is expected to reach $779 million by 2018, which represents an annual compound growth rate of 3.2 percent from 2014.
Growth in the Australian OOH advertising market will continue to be hindered by high capital expenditure costs and a lack of uniform regulations for large-scale digital and roadside billboards.
The OOH market will benefit over the forecast period from the incorporation of new technologies into digital panels. Rising smartphone ownership and technologies such as near-field communications will aid creativity in OOH advertising in retail and transit environments.
Consumer and educational books
The Australian consumer and educational book market is expected to increase at a 0.9 per cent compound annual rate from 2014 to 2018.
In Australian dollar terms the consumer and educational books market is forecast to grow from $1.81 billion in 2014 to $1.93 billion in 2018.
Publishers have become more risk-averse; cutting back on the number of home-grown books they invest in as a result of fewer physical book stores and reduced income.
Despite declines in consumer books in print and audio format, Australia’s book industry will see a positive turnaround from 2016 onwards, with the rise of consumer e-books.
The Australian digital/electronic consumer books market is forecast to grow from $229 million in 2013 to $456 million in 2018.