TV Advertising Gets Healthy Prognosis

LOS ANGELES Reversing a two-year trend in which ad expenditures lagged behind consumer spending, advertising outpaced end-user spending in 2003, said a PriceWaterhouseCoopers study, “Global Entertainment and Media Outlook: 2004-08.”

Advertising worldwide grew at a 4.8 percent pace, compared to spending’s 4.1 percent last year. “This is particularly impressive because the even years tend to spike because of regular events such as elections, Olympics and World Cup matches,” said Pete Winkler, managing director of entertainment and media practice, PWC, New York. “We project television advertising to be quite healthy for the next five years.”

Total U.S. broadcasting and cable ad expenditures, marked at $31 billion in 2003, are projected to be $44 billion in 2008. “Rumors of the death of TV advertising have been greatly exaggerated,” said Winkler.

The study projects global advertising to increase at a compound annual rate of 5.3 percent through 2008, rising from $318 billion in 2003 to $412 billion in 2008. Winkler said the U.S. entertainment and media market, now at $523 billion, should reach $680 billion by 2008, a compound annual growth rate (CAGR) of 5.4 percent. “The most surprising region is the Asia/Pacific region,” he said. “At a compound annual growth rate of 9.8 percent, it’s one of the highest five-year predictions we’ve ever made.”

“The most dramatic turnaround is in [global] Internet advertising,” said Winkler. “After the terrible 2001 and 2002, there was a 23 percent increase worldwide in 2003.” Winkler said the growth was driven by increased paid-search advertising and “an uptick in rich-media advertising, which we correlate with broadband penetration.”

“We will continue to see innovation with Internet advertising,” Winkler said. Currently a $10.4 billion industry globally, PWC projects spending of nearly $19 billion by 2008. “The big advertisers are using the Internet as a regular part of advertising,” he said. “But there’s more confidence in it. They’ve seen the bubble burst and they regard the survivors as stronger.”

Winkler said the industry is “still in the early days of advergaming,” but that game ad sales should enjoy at 20 percent CAGR. “That will be driven by broadband and mobile technology,” he said. “We see online gaming growing much faster than console gaming, even with console gaming growing at a 6.8 percent CAGR.”

Cinema will continue with “modest but steady growth,” said Winkler. “But admissions will be fairly flat. Hollywood films will drive revenue in other markets, such as in DVD sales.”