Media and entertainment spending to hit E1.5trn by 2006.

TV MEETS THE WEB-(C)2002 Van Dusseldorp & Partners - http://www.vandusseldorp.com/

Despite the glut of dot-com failures, the economic downturn and the impact of the September 11 terrorist attacks, spending by the global entertainment and media industries grew last year and is

On a global basis, the five-year report outlines that weak economic conditions will dampen spending in 2002 and 2003, but growth will pick up in 2004-2006. Digital distribution, piracy and a rebounding global advertising market will be three main factors affecting industry growth.

The report details that the distribution of digital content, aided by rising broadband penetration, will be the greatest driver of new entertainment and media spending in 2005 and 2006.

For example, broadband connections in the US, driven by music and video-on-demand content that require high-speed connections, will surge to 35.3m in 2006 from 9.4m households last year - nearly equaling the narrowband sector at 38.2m households, according to the forecasts.

Furthermore, the report contends that piracy and unauthorised use of copyrighted material will continue to limit growth, especially for music.

Unless the industry finds a broad solution, piracy issues will begin to seriously affect other major entertainment sectors, including film, video and books.

"The E&M sector's promising future is coming - it's just taking a longer and more circuitous path than initially expected," said Kevin Carton, head of PricewaterhouseCoopers' Entertainment & Media division.

"To see where the 'digital evolution' is headed, take a look at the surge in spending for digital cable and broadband internet access.

Consumers who've demanded a more diverse entertainment experience are leading the charge by subscribing to these upgraded distribution platforms, and new and more diverse content offerings will follow."

The report says that the US continues to dominate the sector with the highest spending at $438bn (E467bm) last year. This is projected to expand at a 5.5 per cent each year through 2006.

In addition, internet advertising and access spending will enjoy significant growth, due mainly to broadband and subscriber upgrades to higher-priced access packages. This segment will experience double-digit annual growth of 10.8 per cent in the US, with spending jumping to $40bn (E42.63bn) by 2006.

Increased channel capacity, coupled with a broadband technology, will not only drive internet access spending in the US, but also television distribution spending.

That is, with digital cable and DBS comprising 73 per cent of multi-channel subscribers, TV Distribution spending will soar to $100bn (E107bn) in 2006, according to the report.

Europe, the Middle East and Africa (EMEA) was the second largest region for entertainment and media spending last year at $339bn (E361bn).

Once again, the internet will be the fastest growing segment, followed by sports, which will be bolstered by the 2006 World Cup in Germany and its associated television rights. The region will continue to experience moderate growth, with spending reaching $426bn (E454bn) by 2006.

<b>Key Findings By Segment</b>

<b>Film</b> - Spending worldwide will be fueled by strong box office receipts, boosted by the expansion of local productions. DVDs will continue to boost the home video market, but the category will be adversely affected by piracy.

The filmed entertainment segment will expand at a 5.7 per cent annual rate, increasing to $79bn (E84bn) in 2006 from $59bn (E63bn) last year.

<B>Broadcast and Cable TV</B> - Projected advertising rebound, teamed with new channel launches, will drive growth. Canada will experience greatest growth rate - 8.7 per cent - while US spending is expected to reach more than $54bn (E58bn) by 2006. Globally, television networks will peak at $144bn (E154bn) in 2006.

<b>Station, Cable and Satellite TV distribution</b> -"Digital evolution" will positively affect this sector, with upgrades to digital cable and satellite boosting subscription spending, especially in regions where cable and satellite penetration are already high.

Subscriber growth will also drive spending in regions with low multi-channel penetration. Global spending will rise to $210bn (E224bn) by 2006, growing 6.9 per cent each year.

<b> Music</b> - This sector will be most vulnerable to piracy and unauthorised use of copyrighted material and will be the slowest growing, averaging only a 1.6 per cent gain through 2006.

By 2004, an improving economy and rising digital subscriptions will begin to offset declines in traditional music sales, with global spending reaching $38.5bn (E41bn) in 2006.

<b>Internet Advertising and Access Spending</b> - This will be the fastest growing segment over the next five years, expanding by 12.1 per cent a year to $4bn (E100bn) in 2006.

The principal drivers will be increased broadband availability and rising online penetration, while a strong e-commerce market will lead to a rebound in online advertising.

<b>Business Information</b> - The economy will dampen short-term spending, with an upturn expected in 2005 and 2006.

The development of new products, facilitated by enhanced distribution through broadband access, will contribute to growth once economic conditions improve. Spending will increase to $88bn (E94bn) in 2006, at five per cent annual growth.

<b>Magazine Publishing</b> - Awaiting a global advertising and economic rebound, magazines will be hurt in the near term. The internet will help publishers attract subscribers and a faster growing economy will boost advertising in 2005 and 2006.

For the next five years global growth will average 2.7 per cent, with spending reaching $88.4bn (E94bn) by 2006.

<b>Newspaper Publishing</b> - Newspapers will grow slowly due to the weak economy. Recruitment advertising, particularly sensitive to economic conditions, will lead to a further drop in spending in 2002, but will pick up as the economy improves, leading to a return to mid-single-digit growth. Market will reach $186bn (E198.5bn) in 2006.

<b>Books</b>- Digital distribution will develop slowly but will begin to have a real impact on the market in 2006. Lower prices will boost unit sales in EMEA and Asia/Pacific, but piracy will remain a problem in Latin America. The consumer book market spending will expand at a 2.6 per cent average rate to $51bn (E54bn) in 2006 from $45bn (E48bn) last year.

<b>Radio and Out-of-Home Advertising </b>- Out-of-of home will be boosted by new technologies that create additional venues and make displays more attractive.

Digital broadcasting will increase radio audiences and advertising, with consolidation making it easier for advertisers to buy both media. The market will grow to $59bn (E63bn) in 2006 from $46bn(E50bn) last year.

<b>Sports</b> - The biggest driver over the forecast period will be the World Cup this year and 2006, and rising TV rights fees.

However, financial problems for European rights holders will result in a decrease in fees in non-World Cup years. The segment will grow at a 6.6 per cent average rate, rising to $50bn (E53bn) in 2006 from $36bn (E38bn) last year. ((Distributed via M2 Communications Ltd - http://www.m2.com))