New Zealanders told online needs to pay its way

Monday 1 August 2011, 9:55AM
By PwC

The New Zealand entertainment and media industry held its ground during the recession, with revenues growing a healthy 3% during 2010, according to the inaugural PwC New Zealand’s Entertainment and Media Outlook 2011-2015 report released today.

The report predicts growth rates will rise 5.9% by 2015 as new technologies and faster and cheaper broadband change the way people consume and pay for entertainment. Yet, spending is not expected to return to pre-recession levels in the short term as growth shifts to the low-cost online space.

“Traditional business models are challenged and this impacts our local players in the entertainment and media industry,” says PwC Assurance Partner Keren Blakey. “The industry needs to prepare now so it can capitalise on the opportunities ultra-fast-broadband and digital technologies will give,” she adds.

New Zealand magazine and newspaper publishing revenues have held up reasonably well during the economic downturn.

“We are not predicting the imminent demise of traditional media but change is happening. Online advertising grew at almost 388% during the same period and is now the third largest earner of advertising revenue in New Zealand. The move from traditional to digital will only accelerate providing new opportunities for emerging and agile companies,” says Mrs Blakey.

“The biggest challenge for the industry is figuring out how to introduce new business services and models monetise the online space. At the moment, audiences aren’t willing to pay for online content, while advertisers won’t spend the same amount online,” adds Mrs Blakey.

Yet, it’s a golden age for the empowered consumer and businesses need to be ready to embrace this demand.

“Understanding the dynamics of digital and recognising the importance of innovation is critical to success,” says Mrs Blakey. “We recommend media and entertainment organisations partner with others who can help them execute innovative ideas and compete globally. A closer collaboration between advertisers, entertainment and media businesses and technology providers is essential for engaging empowered but time-poor consumers.

“Innovative organisations that embrace change and look for new growth areas will expand beyond New Zealand’s borders. The digital shift means our industry’s revenue possibilities are no longer contained by seas, countries and time zones. This is very exciting for our industry and good news for consumers,” adds Mrs Blakey.

Globally, overall entertainment and media spend rose by 4.6% during 2010 and is predicted to rise by 5.7% over the next five years. This increase is driven by economic growth, but the trend masks the accelerating shift of spending from traditional to digital platforms.

The PwC Entertainment and Media Outlook found some countries - particularly China, India and Latin America with their large populations and rising middle classes - were largely unscathed by the recession and continue to surge ahead with their entertainment and media spend. Our neighbour across the ditch, Australia, has its entertainment and media growth profile closer to mature economies than faster-growing Asia Pacific economies.

Key findings:

Entertainment and media revenues grew 3% during 2010 and are expected to rise 5.9% by 2015.
Between 2006 and 2010, New Zealand magazine and newspaper advertising revenues declined 22%, while online advertising grew 388% (according to the Interactive Advertising Bureau).
In 2010, total advertising revenue rose 3.4% and now accounts for 39% of the entertainment and media market.
The number of New Zealand households able to access a broadband connection is expected to reach more than 1.3 million by 2015.