The UK ad market will grow by £3bn to £17bn in 2017, driven by strong internet advertising growth, according to a PwC report.
The fastest growing areas will be internet advertising, internet access, out of home advertising, video games and TV advertising.
According to PwC’s latest Global Entertainment & Media Outlook 2013-2017, growing digital revenues will power the entertainment and media industry’s overall growth in the UK.
PwC expects the UK entertainment and media (E&M) market to grow by 4% compounded annually (CAGR) from 2013 – 2017 to a value of £65.5 billion in 2017. In 2012, the UK had the second largest E&M market in EMEA at £54bn, behind Germany, and it will maintain this position to 2017.
Phil Stokes, head of UK entertainment & media at PwC, said: “Across the world, consumers’ access to entertainment and media content and experiences is being driven to new heights by our ever increasing access to the internet and the explosive growth in ownership of smart devices.”
In the UK, advertising will grow by £3bn over the period at a compound rate of 4.4% per annum to reach £17bn. Consumer spending on E&M will be slower-growing, adding £2bn at 1.8% compounded annually to reach almost £33bn.
Empowering both advertising and consumer spending is internet access spending, which will grow over the period to £15 billion, driven by access on mobile devices more than doubling to £9bn in 2017.
Stokes added: “Entertainment and media businesses have raised their game in agility and customer understanding and we see that a constant digital innovation has become the new licence to operate. Digital technologies are pervasive and, as a consequence, we believe it’s wrong to say that companies need ‘a digital strategy’: companies need a business strategy that’s fit for the digital age.”
The fastest growing areas will be internet advertising, internet access, out of home advertising, video games and TV advertising.
The UK is Europe’s largest online ad market and will continue to be for the duration of the forecast period. Its online ad market was worth £5bn in 2012 and will grow to £8bn in 2017, a CAGR of 9.9%.
The UK is the fifth largest out of home advertising (OOH) market in the world and Europe’s second largest, behind France, with revenues totalling £930m in 2012. This is forecast to grow at a CAGR of 6% to reach £1.24bn in 2017. The UK OOH market will overtake France in 2015 and by the end of the forecast period will become Europe’s largest single OOH market.
The market for video games in the UK was worth £3bn in 2012. Revenues are forecast to grow by a CAGR of 5.4% to reach £3.9bn in 2017.
TV advertising in the UK was worth £3.7bn in 2012. Revenues are forecast to grow by a CAGR of 4.7% to reach £4.7bn in 2017. PwC predicts the UK to be one of the global leaders in online TV advertising behind the US.
Newspapers, B2B publishing and consumer magazines will show a net decline in revenues over the period and subscription television revenues will overtake the newspaper industry in 2017.
The filmed-entertainment sector in the UK will be worth £4.3bn by 2017, up from £3.8bn in 2012, a CAGR of 2.7%. The UK is the third-biggest sector for movies and television in the world. UK box office revenue will grow at a CAGR of 3.0% between 2013 and 2017 to £1.2bn, up from £1.1bn in 2012.
PwC’s Outlook for the E&M sector finds the industry at a vital point, Stokes said. “While profitable growth is difficult to achieve in the current climate, digital technology has plenty of potential to help, both in the way that organisations are structured, and in generating new products and services that are centred on the needs and outcomes that really matter to customers.
“In amongst the big data, finding the ‘little data’ that allows informed management decisions will be key and new measurement techniques and models will give a competitive edge. The biggest challenge will be extracting the ‘little data’ that provides true understanding of consumers’ future behaviour, and striking the right balance between consumers’ desire for relevance, and their emotional and regulatory right to personal data privacy.
“Companies which can attract and retain the right workforce and which innovate in their products and the way they deliver them will survive and thrive. These companies, with real leadership, will remain relevant and for them, the outlook is bright.”
‘Consumer collaboration is key’
Commenting on the findings, Andy Hart, VP of Microsoft Europe Advertising and Online Europe, said:“According to a PricewaterhouseCoopers (PwC) report today, media spend is set to outstrip the rest of the economy over the next few years, with the UK’s Entertainment and Media Market set to grow to £65.6bn by 2017. But despite being a key factor in this success, digital advertising is still in its infancy. To be at the top table it’s time to grow up and demonstrate its effectiveness. With consumers now accessing multiple devices and services which include digital advertising new rules are required. It will only be really effective if it is useful, relevant and beautiful. To enable this, adverting must understand the context in which consumers are using their devices.
“The evolving digital landscape and adoption of new technology gives us the perfect opportunity to revolutionise how we target and engage with audiences, enhancing brands’ long-term reputation. We have entered an era where advertisers need to flip from traditional thinking to centralising their approach around consumer behaviours on each platform, using rich data streams to connect the analogue and digital world.
“Inviting people to take part through transparent, collaborative engagement will be key to driving the future growth of digital advertising, rather than interrupting consumer experiences at every turn. It’s up to the advertising industry now to serve seamlessly more relevant and useful messages that add real value for consumers, fusing technology and creativity to transform brand stories into online experiences – anytime, anywhere,” Hart concluded.
http://www.pwc.com/outlook.
