PwC: ad spend up but 'urgent' need for traditional media to embrace new models

By Rosie Baker | 7 July 2014

The Australian ad market is set to reach $14.4 billion in 2018, that's a compound annual growth rate of 3.4%, according to PwC's latest media and entertainment outlook, but the shifting sands of marketing budget allocation will continue to have a dramatic impact on traditional media channels and they must “urgently” embrace new revenue models.

Alongside the annual media outlook, PwC partnered with the Australian Marketing Institute (AMI) to publish a report on how the changing nature of marketing budgets and allocation is impacting media channels.

Social and digital, the AMI report said, is continuing to “dilute reach” of traditional channels and fragment audiences forcing media owners to create new income streams and distribution channels “to supplement their threatened advertising revenues”.

More than two thirds (67%) of marketers are shifting their spend from bought to owned channels and a quarter of marketers spend between 20% and 30% of their budget building their own media channels. Budgets are being shifted into CRM, shareable content and video.

Megan Brownlow, editor of PwC’s Australian Entertainment and Media Outlook, said: “The reorientation of marketing spend will have the greatest impact on the media, entertainment, and advertising industries, with deteriorating spending on traditional platforms prompting greater urgency to embrace new revenue models.

“Digital and social media channels have driven this trend by diluting the reach of traditional platforms, and making it easier for brands to access their audience directly.”

Almost two thirds of marketers expect to increase their investment in data and data analytics in the next two years and PwC claims marketers that do so are more likely to see an organisational shift moving marketing from a functional approach to a “whole of business” approach.

“Brands can no longer afford to hold onto the same old assumptions about consumer behaviour and preferences,” said Brownlow. “Data is the key to understanding and targeting today’s diverse customer base. Data analytics can also deliver ‘real-time’ customer insights, meaning companies can be much more responsive to their customer’s needs and more agile in their strategic decision making.”

Media Outlook:

Papers and magazines continue their decline while digital, radio, TV and outdoor are forecast to grow.

Internet advertising will be largest advertising sector, reaching $5.7 billion by 2018. The outlook for printed mags and newspapers is set to continue its decline with the newspaper market expected to shrink 3.2%, annually (compound growth rate) between now and 2018 and consumer magazines 2.1% (compound annually) to a $1.22 billion market.

Within newspapers, digital circulation growth is “impressive” while total circulation spend (consumer spend) on digital newspapers is forecast to grow from $37 million to $380 million by 2018. Digital advertising, although increasing, is expected to account for just a third of ad revenue at newspaper publishers by 2018, demonstrating the diversification of revenue streams forced by shifts in the media landscape.

Consumer spending on printed mags is set to decline but spending on digital magazines is expected to grow from $19 million to $104 million.

Radio and out of home are forecast to see compound annual growth of 3.4% to $1.3bn and 3.2% to $779m in 2018 respectively.

PwC forecasts the Australian entertainment and media market will grow to $39.8 billion by 2018, with a compound annual growth rate of 3.4% between now and then. Consumer spending on entertainment and media is expected to grow 3.5% to $25.4 billion.

The report takes in 11 media and entertainment segments including online, free-to-air and subscription TV, radio, outdoor, film and music.

2013 performance:

Entertainment and media spending in Australia grew by 4.5% - under the global rate of 5.2% and 7.1% in APAC.

Consumer spending grew 4.4%, driven by interactive games sector, internet, mobile and subscription television, including IPTV.

The advertising market enjoyed better growth than the previous two years, growing 4.8% on 2012. But, PwC warned the spend is spread over more channels.

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