Online advertising revenues will increase annually by 17.6 percent up to 2012
Advisors from Pricewaterhouse Coopers (PwC) are observing slowed growth in Germany’s media industry. In a current study, they still calculate an increase in revenue of 1.4 percent for the current year, after sales had increased by 2.5 percent in 2007.
“While consumer spending continues to rise moderately, the media industry is suffering from the slowdown in advertising activity. For the current year we are still expecting an increase in advertising revenue of two percent, but in the coming year revenues are likely to fall slightly by one percent,” expects Frank Mackenroth, partner and head of the Entertainment & Media industry group at PwC.
The consultants also see the medium-term prospects for the industry clouded over. According to their estimates, total revenue in Germany should increase by 2.0 percent annually to around 61.9 billion euros up to 2012 and thus grow less strongly than previously forecast. Advertising revenue is expected to increase by 2.2 percent per year to a good 15.6 billion euros and consumer spending by 2.0 percent to almost 46.3 billion euros.
The experts continue to expect above-average sales increases in the Internet and video games industry segments. Here, revenues could grow by an average of 4.9 percent to over 11 billion euros by 2012, primarily thanks to a sharp rise in advertising revenue. On the other hand, consumer spending on stationary Internet access is expected to increase more moderately by 3.4 percent per year to almost 9.5 billion euros, after two-digit growth rates were the norm between 2003 and 2006. “The market for broadband Internet connections is almost saturated. New customers have to be lured away by the competition more and more often, which puts pressure on prices,” explains Mackenroth.
The experts see potential for growth above all in mobile Internet. Although fast mobile radio standards such as UMTS and HSDPA are now available almost everywhere, at least in the metropolitan areas, consumers are only hesitant to use them. “High costs, inscrutable billing models and devices that are difficult to use have made many consumers shy away from being online while on the move,” comments Mackenroth. Apple was the first to demonstrate with the iPhone that there is a mass market for mobile Internet if the overall package is right.
For the video and computer games industry, PwC is forecasting average sales growth of 7.1 percent to a good 2.2 billion euros in 2012. Revenue from online games (up 14.6 percent to 227 million euros) and mobile games is likely to be particularly dynamic develop games (up 12.1 percent to 159 million euros). In the current year 2008, Germans are expected to spend more money on video games (a good 1.8 billion euros) than on CDs and music downloads for the first time.
Although advertising revenues are expected to grow steadily by an average of 2.2 percent over the next five years, the media segments are involved in this development to very different degrees. While online media advertising revenue is likely to increase by 17.6 percent annually to almost EUR 1.6 billion by 2012, PwC is only forecasting an increase of 0.7 percent to just over EUR 5 billion for newspaper advertising 1.2 percent annually to a good 4.4 billion euros.
This means that online media’s market share of total advertising revenues will increase from a good six percent at present to almost ten percent by 2012, while all other media, with the exception of out-of-home advertising, are seeing slight losses in market share. In terms of consumer spending, books remain the most important medium in Germany. With sales estimated at just under 10.1 billion euros in 2012, the book industry is ahead of the internet (almost 9.5 billion euros) and television (a good 9.1 billion euros).
Consumer spending on TV reception is expected to increase by an average of 3.6 percent to almost 4.4 billion euros over the next five years (excluding public broadcasting fees). A large part of this sum is accounted for by cable reception, which will be available in an estimated 16.8 million households in 2012. In contrast, Internet television (IPTV) will continue to play a subordinate role in the future with around two million user households expected in 2012. The number of households with a TV subscription should increase by an average of 1.1 percent to 19.9 million by 2012.
The music industry is the only industry that will have to reckon with declining revenues in the next five years. Sales will fall just below this mark from the current figure of a good 1.6 billion euros. However, the industry is likely to bottom out in 2010 with sales of EUR 1.57 billion before revenues start to rise slightly again.