Emily Tan
Jun 3, 2015

Stop talking about ‘digital strategy’, it's part of business now: PwC E&M Outlook

After over a decade of discussing digital strategies, its time companies move beyond thinking about digital as a separate entity and start to plot a business strategy fit for the digital age, according to Marcel Fenez, global leader of entertainment and media at PwC.

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“From the viewpoint of the consumer, it’s becoming quite clear that there is no distinction between ‘traditional’ and ‘digital’ media,” said Fenez in an interview with Campaign Asia-Pacific in conjunction with the launch of PwC’s Entertainment and Media Outlook 2015-2019 report. “For them, it’s all part of the same universe of content. The question is access and that is what they pay for.”

This has resulted in a rather dramatic shift from the content industry viewing itself as a B2B business to one that has direct relationships with consumers across multiple platforms. Businesses have to stop focusing on ‘digital innovation’ and look closer at ‘relationship innovation’.

“The empowered consumer can now choose what they wish to see and have suggested to them, and make demands on how they can access it,” Fenez said. The opportunity therefore, noted Fenez, comes from entertainment and media companies finding ways to get content they will like to the consumer via every channel and device rather than making the consumer go on a hunt.

“Contrary to popular opinion, when we ask consumers if they will pay for content, the resounding answer is, “yes”. But, and there is always a but, they only want to pay for the content they want on the platform they want. What this means is they don’t want to pay for a bundle,” said Fenez. This, he continued, is not new at all. “It’s as old as the digital disruption to music. People didn’t want to pay for an entire album to get two songs they liked. The value equation wasn’t there.”

As an indicator, the report found that online TV advertising in Asia-Pacific is the fastest-growing sub-component of TV advertising in the region, with a CAGR 45.8 per cent, albeit from a low base.

Mobile to overtake display advertising by 2018

“Mobile, and increasingly video, is at the centre of everything the consumer does. This means thinking mobile-first—not just repurposing content,” said Fenez

Globally, mobile advertising is expected to grow at a CAGR of 23.1 per cent to US$55 billion globally in 2018 vs $51 billion for display.

In Asia-Pacific, mobile advertising was $5 billion in 2014 and is expected to grow to $10.6 billion in 2019. Overall, combined internet advertising in the region grew by 19.5 per cent year-on-year to $36.6 billion in 2014 making it the third-largest region globally. The market is forecast to rise at a CAGR of 14.1 per cent, and total Internet advertising revenue will hit $70.7 billion in 2019.

The Chinese market, globally the second-largest individual national market for Internet advertising, dominates Asia-Pacific with 2014 revenues of $16.62 billion ($1.8 billion of which was mobile advertising). At the same time, Japan still contributes significantly to revenue in the region.

Currently, paid search is the most popular Internet advertising sub-component in Asia-Pacific, worth $12.96billion in 2014, having surpassed display in 2011. Search is expected to grow by a CAGR of 16.6 per cent to reach $27.87 billion in 2019, with its share of the online advertising market increasing from 35.5 per cent to 39.4 per cent over the forecast period.

Global internet advertising growth map

 

TV, Print and Outdoor advertising

“While digital will take up to 39 per cent of the ad spend pie, we shouldn’t forget that non-digital still holds more than 60 per cent, which is by no means small,” commented Fenez. “TV isn’t going away, OOH if still very resilient and has gained new life from digital billboards. Print, particularly newspapers, are suffering the most while magazines are more resilient.”

TV

Asia-Pacific’s total TV advertising revenue is expected to grow at a 5.7 per cent CAGR between 2014 and 2019, rising from $40.16 billion to $52.96 billion. Terrestrial TV advertising revenue is the largest contributor, making up 82.4 per cent of total TV advertising revenue in 2014, although this will drop to 75.6 per cent in 2019. Indonesia, India, Pakistan, Vietnam and the Philippines will be the fastest-growing territories in terms of total TV advertising revenue, all with a CAGR of 8 per cent or higher.

Multichannel TV advertising revenue is expected to see solid increases of 9 per cent or more each year until 2019, with its share of total TV advertising revenue growing from 17 per cent in 2014 to 21 per cent in 2019. The South East Asian markets are among the fastest-developing multichannel markets in the world, with Indonesia, Thailand, Philippines and Vietnam expanding at a CAGR of at least 14 per cent. The shift from terrestrial to multichannel is particularly notable in Vietnam, with its multichannel TV advertising revenue growing from 13.2% of total TV advertising revenue in 2014 to 18.3% in 2019.

Japan remains the largest market with total TV advertising revenue of $13.16 billion in 2014, 32.8 per cent of the region’s total. China is the second-largest at $6.9 billion in 2014, while the fastest-growing market in terms of TV advertising in the region, and one of the fastest-growing globally, is India. The country’s total TV advertising revenue in 2014 of $2.96 billion is forecast to increase to $5.27bn by 2019, growing at a CAGR of 12.2 per cent.

Print

Asia-Pacific is the highest-grossing of all four regional news publishing market. The region’s total newspaper revenue of $53.3 billion in 2014 is 1.6 per cent up from a year earlier, and 7 per cent up from 2010.

Asia Pacific’s total newspaper revenue is forecast to grow at a 2.1 per cent CAGR, the second-fastest regional growth in the world behind Latin America. Total newspaper revenue is expected to reach US$59.2 billion by 2019, the largest amount of any region. By then, around three-quarters of the planet’s newspapers will be circulated in Asia Pacific. China and India are the engines of the region’s growth and both free and paid newspapers are forecast to continue to grow in popularity. By 2019, the region’s average daily unit circulation total will be 465.9 million, having grown at a CAGR of 3.9 per cent between 2014 and 2019.

As for magazines, digital magazines will not have as much of an effect on the magazine market in Asia-Pacific as they will in North America and EMEA, with print revenues falling at a slower rate. Print has remained important in many countries such as Japan and Singapore, as well as taking precedence in emerging markets, where poor broadband penetration hinders take-up of digital magazines.

Total magazine revenue in Asia Pacific, comprising total consumer magazine revenue and total trade magazine revenue, had reached $20.1 billion in 2010. This rose to $20.5 billion in 2014 and will see further growth to $22 billion in 2019, a CAGR of 1.5 per cent. Asia-Pacific is a diverse market for magazines, with a mixture of mature markets such as Japan and Australia and emerging markets such as India and China. Overall, mature markets can expect to see growth in digital and a drop in print.

Out-of-Home

The market for OOH advertising in the Asia-Pacific region was US$15.2 billion in 2014, a rise of 6.1 per cent compared with 2013. The market is forecast to record a CAGR of 5.6 per cent and reach $20 billion in 2019. This will see the region’s share of the global OOH market grow from 42 per cent to 44 per cent from 2014 to 2019.

The relatively affluent city states of Hong Kong and Singapore are set to remain key markets for advertisers in the region, said the report. Despite the small size of these countries, in terms of revenue, Hong Kong’s total out-of-home (OOH) advertising revenue is in the top 15 worldwide, at $505 million in 2014. Singapore, similarly, generates high per capita revenue, at $142 million from a population of just 5.6mn.

Airport OOH will be a particular focus in the Philippines, South Korea and Vietnam as each of these countries doubled their volumes of airline departures between the years 2006 and 2010, found the study. Anther key area of growth will come from investments made in public transport, with cities such as Bangkok looking to ease congestion on their roads. The Chinese cities of Suzhou, Kunming and Hangzhou opened their underground system in 2012, while Beijing has expanded its metro system with 70km of new lines.

Conclusion

“Life is about mix. The consumer isn’t saying they want their content delivered only one way, they’re saying they want choices,” concluded Fenez.

From the findings of the study, Fenez has three recommendations for entertainment and media companies:

·       Innovate around the product and the user experience

·       Develop seamless consumer relationships across distribution channels

·       Put mobile (and increasingly video) at the centre of their consumer offerings

“In advertising, we’re seeing a blurring of the traditional boundary with content, and major steps forward in addressability, programmability and audience metrics that measure depth of engagement,” wrote Fenez in the report. “And industry-wide, we’re seeing ongoing jockeying for position in readiness for opportunities ranging from the connected home to the expanding middle classes in emerging markets.”

The full report can be found here

Read about the 2014 report

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