US Traditional Media Advertising Outlook, 2013-2018

June 9, 2014

PwC-US-Traditional-Media-Outlook-2013-2018-June2014PwC has issued its latest annual “Entertainment & Media Outlook” report, which contains projections for online and offline media markets through 2018 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 newspapers is dim.

The following is a look at some of the highlights for each of the major traditional media markets (note that all figures are constant to 2013):

  • Consumer magazine publishing: Advertising CAGR = 0.5%

The consumer magazine market in the US is estimated to be valued at $24.6 billion as of 2013, and will remain essentially flat through 2018, when its value is projected to be $24.7 billion.

Advertising accounted for about two-thirds of the market’s value last year (the other third is circulation revenue), up from 62% in 2009. Advertising revenue is expected to increase at a 0.5% compound annual rate from 2013 through 2018, compared to a -0.9% CAGR for circulation revenue. Not surprisingly, print ad revenues are expected to fall (-6.9% CAGR), although digital ad revenues will offset those losses, as they grow at an annual rate of 19.2% to reach almost $7.6 billion in 2018, not far behind print’s forecast $9.4 billion.

  • Trade magazine: Advertising CAGR = 0.9%

The trade magazine market in the US is estimated to be valued at $5.9 billion as of 2013, and will grow slowly, at a CAGR of 1.2%, to $6.3 billion in 2018.

Advertising accounted for three-quarters of the market’s value last year, up from 70% in 2009. Advertising revenue is expected to increase at a 0.9% compound annual rate from 2013 through 2018, compared to a 2% CAGR for circulation revenue, which will be driven by a huge 45.4% CAGR for digital circulation (though starting from an extremely small base). As expected, print ad revenues are projected to fall (-4.4% CAGR), although digital ad revenues will again offset those losses, as they grow at an annual rate of 12.8% to reach almost $2 billion in 2018, closing in on print’s total of $2.7 billion.

  • Filmed entertainment: Advertising CAGR = 2.4%

Boasting the world’s biggest filmed entertainment sector, the US market’s value is expected to grow from $31.1 billion last year to almost $39.2 billion in 2018.

Cinema box office revenues are projected to increase at a faster compound annual rate (3.1%) than cinema advertising revenues (2.4%), with the former a much larger revenue driver ($12.5 billion in 2018) than the latter ($0.9 billion).

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 24.1% between 2013 and 2018, at which point their combined value will exceed $14 billion – larger than the cinema market.

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: Advertising CAGR = -5.8%

The total newspaper publishing market is forecast to decrease to a value of $25.9 billion in 2018, from an estimated $32.5 billion last year.

Advertising revenue has dropped sharply in the past 5 years and those losses are expected to continue: by 2018, ad revenues will total $16.6 billion, representing a CAGR (from 2013) of -5.8%.

Print advertising’s forecast CAGR is a dim -8.8%, with the 3.7% CAGR for digital advertising not enough to act as a buffer.

While digital circulation revenues are expected to increase at an annual rate of 15.3%, they will still be dwarfed by print circulation, which is expected to decrease by an annual rate of 2.5%. As a result, overall circulation revenues are projected to decrease by 1.5% per year.

  • Out-of-home: Advertising CAGR = 4.7%

The US out-of-home advertising market was valued at roughly $7.9 billion last year (22% of global spend), and is projected to grow to a value of almost $10 billion by 2018.

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.

Digital out-of-home (OOH) advertising is expected to account for 42% of overall OOH in 2018, maintaining a strong 10.2% CAGR in comparison to a 1.6% CAGR for physical OOH advertising.

  • Radio: Advertising CAGR = 1.2%

The US is easily the world’s biggest radio market, accounting for about 45% of global revenues. Last year, radio revenues in the US were estimated to be roughly $20 billion, and that figure is expected to increase to $22.1 billion by 2018.

Satellite subscriptions are projected to be a key driver of radio revenue growth, with a predicted CAGR of 6.1%. In fact, US satellite radio subscribers generated more than $3 billion in radio revenue last year. Satellite radio’s growth (from advertising and subscriptions) means that it is expected to increase from 16% of all US radio revenue last year to 20% by 2018.

Overall radio revenues have rebounded after bottoming out in 2010. Advertising revenues are projected to increase at a compound annual rate of 1.2% from 2013 through 2018, growing from $16.7 billion to $17.8 billion.

  • TV: Advertising CAGR = 5.1%

TV advertising spending is projected to grow from $65.8 billion last year to $69 billion this year and $83.7 billion in 2018.

TV is the largest advertising medium in the US. The multichannel sector represented 35% of TV advertising revenues last year, higher than in most global markets.

The researchers note that “Advertisers have a more positive view of the potential for targeted and personalized advertising that has been opened up by advanced TV services delivered to set-top boxes and Internet-connected devices. The growing ‘second-screen’ activity ”“ the use of companion devices in front of the TV ”“ also offers advertisers the ability to reach TV viewers via an additional medium.”

Broadcast networks are forecast to see a higher advertising CAGR (5.4%) than cable networks (3.5%). While online ad revenues will grow at a fast rate (16% through 2018), they will remain only a fractional portion ($5.8 billion) of the massive TV advertising market.

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

Meanwhile, the US market for TV subscriptions and license fees was estimated to be worth $93.3 billion last year, and is predicted to reach $102.8 billion by 2018.

The number of cable households is expected to slightly drop from 54.8 million last year to 53.9 million in 2018, but that decline will be offset by growth in the number of satellite households (from 34.4 million to 36.2 million) and IPTV households (from 11.4 million to 16.8 million). The total number of households will therefore increase from 100.6 million at the end of 2013 to 107.9 million at the end of 2018, a CAGR of 1.4%. Overall pay TV penetration will likely decline from its peak of 81.7% reached in 2009 to 77% in 2018.

The researchers note that “OTT’s disruptive potential in the longer term is becoming more apparent.”

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