US Traditional Media Outlook, 2013-2017

PwC-US-Traditional-Media-Outlook-2013-2017-June2013PwC has issued its annual “Entertainment & Media Outlook” report, which contains projections for online and offline media markets through 2017 across various components including advertising revenues and consumer spending. The outlook for traditional media markets is similar to previous forecasts in that TV and out-of-home advertising have the healthiest future, while radio continues to grow at a modest pace and the outlook for print continues to be dim, although losses may slow.

PwC-Traditional-Media-Market-Size-2012-v-2017-June2013The following is a look at some of the highlights for each of the major traditional media markets (note that all figures are constant to this year):

  • Consumer magazine publishing: CAGR = -1.3%

The consumer magazine market in the US is estimated to be valued at $24.55 billion as of 2012, but will decrease to $23 billion by 2017.

Advertising accounts for about two-thirds of the market’s value, up from 62% in 2009. But advertising revenue is expected to decline at a slightly faster rate than the overall consumer magazine market, with PwC projecting a -1.5% CAGR through 2017. By the end of the forecast period, consumer magazine advertising spend will equal roughly $15.2 billion, down from $16.4 billion last year. While print revenues will fall, digital magazine ad spending is expected to grow at an annual rate of 9.6% to reach almost $3.8 billion.

  • Filmed entertainment: CAGR = 3.4%

Boasting the world’s biggest filmed entertainment sector, the US market’s value is expected to grow from $30.7 billion last year to close to $36.4 billion in 2017.

Box office revenues will increase at a similar compound annual rate, of 3.3%, and are expected to reach $12.3 billion by the end of the forecast period, from an estimated $10.4 billion last year. Ticket prices (+2% CAGR) are projected to grow more quickly than admissions (+1.3% CAGR).

Within the filmed entertainment sector, over-the-top (OTT) streaming services (such as Netflix, Hulu) will boast the fastest growth, with a projected CAGR of 22.4% between 2012 and 2017, at which point their combined value will be $10.9 billion.

Notably, in 2016, revenues from electronic home video (including pay-per-view and video-on-demand services from pay-TV providers, as well as OTT subscriptions) will exceed revenues from physical home video for the first time.

  • Newspaper publishing: CAGR = -2.9%

The total newspaper publishing market is forecast to decrease to a value of $28.5 billion in 2017, from an estimated $33 billion last year.

Advertising revenue has dropped sharply in the past 5 years, though is expected to decline more slowly over the coming 5 years: by 2017, ad revenues will total $18.4 billion, representing a CAGR of -4.2%.

The researchers caution that the sector is not in “terminal decline,” at least in the near or medium term. In fact it has shown some resilience, and print circulation has stabilized even as newspaper websites attract an increasing number of readers.

  • Out-of-home advertising: CAGR = 5%

The US out-of-home advertising market was valued at roughly $7.5 billion last year, and is projected to grow to a value of almost $9.6 billion by 2017, with the increase in consumer mobility a factor driving that growth. The US OOH market value overtook Japan’s last year to become the world’s largest, at 22% of global OOH advertising spend.

The traditional roadside billboard remains the key component of the US OOH market, accounting for 65% of total annual revenues. Transit (17%), street furniture (6%) and alternative channels (12%) make up the remainder of the revenues.

  • Radio: CAGR = 2.5%

The US is easily the world’s biggest radio market, accounting for about half of global revenues. Last year, radio revenues in the US were estimated to be more than $19 billion, and that figure is expected to increase to $21.55 billion by 2017.

Satellite subscriptions are projected to be the key driver of radio revenue growth, with a predicted CAGR of 7.6%, compared to a modest 1.4% CAGR for radio advertising revenues. In fact, US satellite radio subscribers generated almost $3 billion in radio revenue last year. Satellite radio’s growth (from advertising and subscriptions) means that it is expected to increase from 15% of all US radio revenue last year to 20% by 2017.

Overall radio revenues have rebounded after bottoming out at $17.8 billion in 2009, but aren’t expected to reach 2008’s levels until 2016.

  • TV advertising: CAGR = 5.1%

TV advertising spending is projected to grow from $63.8 billion last year to $66.8 billion this year and $81.6 billion in 2017.
TV is the largest advertising medium in the US, accounting for 38% of total advertising revenues last year. Terrestrial broadcasting remains the domain of the big 4 networks (ABC, CBS, NBC, and Fox), but the multichannel sector (led by TBS, Discovery, and USA Network) represented 35% of TV advertising revenues last year.

The researchers note that “advertisers have a … positive view of the potential for personalized advertising opened up by advanced TV services delivered to personal computers and mobile devices as well as TV sets. Two-way networks open the door to targeted and personalized advertising, and the arrival of the so-called ‘second screen’ experiences offers advertisers the ability to reach TV viewers via an additional medium while they are watching programs and interacting on social media… Pay-TV operators are … in a position to sell advertising and sponsorship on their second-screen apps and, in some cases, provide purchase options to users within programs, which can generate a percentage commission of sales originating from operators’ apps. Although these monetization opportunities will be limited in the near term because advertisers will need assurances of scale before they commit significant resources to the second screen, in the longer term, these offer a good potential for significant growth.”

A detailed breakdown of the US TV advertising market can be found here.

  • TV subscriptions and license fees: CAGR = 2.2%

The US market for TV subscriptions and license fees was estimated to be worth almost $74.4 billion last year, and is predicted to reach $83 billion by 2017.

The number of cable households is expected to decline from 57 million last year to 55.9 million in 2017, but that decline will be offset by growth in the number of satellite households (from 34.6 million to 37.3 million) and IPTV households (from 10.1 million to 14.3 million). The total number of households will therefore increase from 101.7 million at the end of 2012 to 108.4 million at the end of 2017. Overall pay TV penetration will likely decline from its peak of 82% reached from 2006-2009 to 79% in 2014, maintaining that level for the following 3 years.

The researchers note that “while OTT viewing is rising each month, there is as yet little evidence that it is having more than a small impact on traditional TV viewing.”