June 20, 2006

Media spending to reach $1.8 trillion in 2010: report

By Gina Keating

LOS ANGELES (Reuters) - Global entertainment spending will
reach $1.8 trillion in 2010, fueled by the spread of broadband
and wireless technology, according to a PricewaterhouseCoopers
report released on Tuesday.

Consumer spending on entertainment through online and
wireless channels will more than triple to $67 billion by 2010
from $19 billion in 2005 , the report, "Global Entertainment
and Media Outlook: 2006-2010," said.

PWC analysts said entertainment spending in the Asia
Pacific region would grow fastest, with double-digit increases
on Internet, television distribution, video games, and casino
and other regulated gaming.

By 2009, China is expected to surpass Japan as the largest
market for media and entertainment in Asia, the report said.

The United States will remain the largest though
slowest-growing global media consumer. U.S. media spending will
increase by 5.6 percent a year, on average, to reach $726
billion in 2010. That growth will be led by video games and the
Internet, the report said.

The spread of digital distribution combined with stepped-up
government enforcement and improving economic conditions in
developing markets will mute the effects of piracy on the
overall industry, the report said.

Current growth rates in advertising will stay constant
through 2008, but will slow in 2009 and 2010 as the ongoing
economic recovery in some countries falters, the report said.

Internet advertising will continue to grow the fastest of
all advertising modes, racking up $521 billion in sales from
$385 billion in 2005 and capturing nearly 10 percent of global
advertising dollars, compared with 3 percent in 2002.

Michael Kelley, a partner in PricewaterhouseCoopers'
entertainment & media practice, said PWC analysts expect a
rebound in box office and home video spending driven by digital
upgrades in both industries, as well as the modernization of
theaters in developing nations.

The U.S. movie theater industry this year began converting
its 37,000 screens from 35-millimeter projectors and prints to
digital equipment, a change that will improve the movie-going
experience and bring down distribution costs, Kelley said.

Digital systems also allow studios to easily distribute
several versions of films to capture a larger swath of an
increasingly fragmented market.

"You're looking at about 10,000 screens converted by end of
the decade in the U.S., then we will start to see an uptick in
that impact," Kelley said.

The home entertainment market will benefit from the
introduction this year of high-definition DVD formats, the
rising popularity of the DVD format in Latin America, and the
growth of broadband penetration that allows consumers to buy
movies online, Kelley said.