In 2003, the Canadian media and entertainment industry grew at a faster rate than in any other global region included in the fifth edition of PricewaterhouseCoopers’ Entertainment and Media Outlook 2004-2008. The global study measures 14 major industry segments across five regions: the U.S., EMEA (Europe, Middle East and Africa), Asia/Pacific, Latin America and Canada.

The study looks at historical actual spending patterns and combines those patterns with industry knowledge and observable trends to make projections for the next five years. It measures advertising spend and consumer or user spending to determine amounts spent on all entertainment and media outlets.

Canada’s high growth rate over the past three years (6.2% compared to 3.4% for other regions collectively) can be partially attributed to Canadians having adopted emerging technologies such as high-speed Internet access, DVD and digital TV faster than other regions.

In addition, Canada is a world leader in terms of growth in advertising spend, particularly in TV, radio and newspaper advertising, which grew at rates of 5.9%, 8.3% and 1.4%, respectively, in 2003. Compared to the global average of 4%, Canadian advertising spending grew at an overall rate of 5%, double the increase recorded in 2002.

The study also points to anticipated growth explosions in the Asia/Pacific and Latin American markets, which could be good news for international sales of Canadian libraries.

‘If we look at the growth drivers being economy, technology and enabling next-generation platforms such as video games or wireless, each country is facing the same trends, so it’s really just a matter of pickup rates,’ says Gino Scapillati, PwC Canada’s entertainment and media practice leader. Canada’s high growth rates correspond to high pickup rates, meaning Canadians adopt and integrate new technologies more rapidly than many other countries.

In Canada, the home video business, now a $2-billion industry, has experienced an explosion in DVD sales, with a growth rate of approximately 25% in 2003. The growth rate in 2002, however, was 50%.

Early DVD adopters

‘The DVD and home video market will continue to grow, but it will be relatively slower compared to the phenomenal growth we’ve experienced lately,’ says Scapillati. ‘Canadians basically adopted the DVD format earlier than many other countries in the world.’

Canadians have also been early adopters of high-speed Internet access and have had a high pickup rate for digitally received TV by both cable and satellite. More than four million households in Canada are currently capable of receiving TV signals digitally, and the study projects that number will grow to exceed nine million five years from now.

‘What that has really resulted in is a greater demand for specialty TV channels, greater advertising dollars placed on those channels and greater subscription fees, which again results in Canadian growth rates exceeding other countries,’ says Scapillati.

Notably, advertising on specialty channels grew 18% in 2003 and currently represents 21% of all TV advertising in Canada, with that number expected to rise to 27% five years from now.

‘The primary driver in advertising spend is consumer spending and growth in the economy,’ says Scapillati. ‘Canada’s economy did not slide as far as the U.S. economy did a year or two ago and consumer spending continues to be very strong, so the advertising dollars continue to be spent.’

He points to strong growth in spending on Internet advertising, which is expected to continue to grow at 15.5% per year over the next five years, although it will only represent 3% of all advertising. In terms of consumer spending, Scapillati says higher growth areas will be in video games and Internet access spending.

The study also projects growth explosions in media and entertainment industries in the Asia/Pacific and Latin American regions over the next five years, which could lead to significant distribution increases on the international market.

The report suggests the Asia/Pacific entertainment and media markets, worth $229 billion, a 5% increase in 2003, will be the fastest growing region in the world over the next five years, with double-digit increases in Internet, video game and TV distribution markets.

In Latin America, the entertainment and media market rose 2.3% in 2003 to $32.6 billion, and is expected to rise to $44.7 billion by 2008. While TV distribution dipped slightly last year, the region experienced a 29.9% jump in its Internet market, a 15.5% increase in radio and a 14.3% rise in video games. The study projects a 9.2% growth in TV distribution over the next five years, with low Internet and multichannel penetration rates, leaving room for substantial expansion in those markets.

-www.pwc.com