China set to fuel global media growth

16 June 2010

BEIJING: The Chinese ad market will become the second largest in the world by 2015, during which time the country will act as a key growth driver of the global media and entertainment industry.

PricewaterhouseCoopers, the consultancy, reported that advertising expenditure fell by 11.8% worldwide in 2009 to $405.6bn (€332bn; £276bn), compared with a decline of 0.5% in consumer spending.

More positively, it predicted advertising revenues will experience a compound annual growth rate (CAGR) of 4.2% from 2010 to 2014.

Television is likely to retain its role as the lead medium, with advertising sales of $195.7bn by 2014.

Elsewhere, online adspend jumped by 4.3% to $60.6bn in 2009, and should advance by a further 11.4% a year to 2014, when it total $103.8bn.

Figures for the media and entertainment sector as a whole are forecast to leap from $1.3tr to $1.7tr in the same period.

North America registered a drop of 6.8% to $461bn in this area in 2009, but is set to witness an uptick of 1.2% in 2010 and a CAGR of 3.9% to 2014, when returns will stand at $558bn.

However, the scale of the damage done by the recession is demonstrated by the fact that the region's M&E category will only surpass the takings of $500bn recorded in 2007 by 2012 at the earliest.

Europe, the Middle East and Africa surpassed North America in value terms last year on $490bn, having posted a slide of just 2.8%, and are in line for an improvement to $490bn by 2011.

Latin America, however, is anticipated to enjoy the most substantial growth rate of 8.8% a year to 2014, albeit to a relatively modest $77bn.

Thus pace of expansion is pegged at 6.4% in Asia Pacific, where the media and entertainment industry will be worth $475bn in 2014.

More specifically, totals in China are slated to climb from $95bn in 2009 to $134bn in 2014, with advertising being a major contributor to this trend.

"The power behind the growth in China is from within," Marcel Fenez, head of PwC's media and entertainment practice, said. "The demand from the consumer is to get high-quality content."

More specifically, the widespread take-up of new media platforms among all age groups in the country is helping to fuel this surge in revenues.

"The speed of migration to digital in China is ahead of established markets. Consumer adoption is one of the strongest we have seen, particularly among the age 15-29 demographic," said Fenez.

In contrast, Japan's M&E sector in its entirety will deliver an expansion from $171bn to $189bn, with advertising envisaged to be flat.

"Traditionally within the context of Asia, Japan was always the gorilla," said Fenez.

"But the Japanese advertising market has either been flat, marginally up or down. While I wouldn't use the word 'inevitable', the writing is on the wall for China to overtake Japan."

One area where Japan will remain pre-eminent is the mobile internet, where it generated 53% of all expenditure last year, while other countries remained "at the bottom of the curve".

However, thanks to the heightened popularity of devices like the iPhone, 1.4 billion people are expected to access the mobile web in 2014, compared with 500 million in 2009.

Indeed, this is indicative of the overall rise of digital platforms, which will take 33% of all media and entertainment revenues by 2014, measured against a total of 24% in 2009.

"Twelve months ago the story was whether the recession would pick up the pace of digital transformation," said Fenez. "It really did, and then some."

Data sourced from PwC, Financial Times, Associated Press; additional content by Warc staff