Last year's PwC New Zealand entertainment and media outlook said conservatism needed to be shed if media businesses wanted to make hay in the rapidly changing modern era. And, according to the second edition, what previously looked like a wide gap between old and new operating models is now being bridged and the New Zealand market is finally starting to embrace the new ways in which punters consume content, with revenues in the sector growing four percent to $5.2 billion in 2011, PwC tipping an average of five percent percent growth throughout the 2012-2016 forecast period, and mobility seen as the biggest driving force of change.
“Organisations now have a better understanding of how to not only engage with, but also make money from today’s digital consumer, and to date, the industry held its ground over the past year and has an encouraging future," says PwC partner Keren Blakey (check out an interview with her and fellow partner Grant Dennis here). "Consumers are continually evolving in their preferences on how to consume content and as a result, sales of tablets and smartphones are rocketing and fuelling growing revenue opportunities in the digital delivery of advertising, entertainment and media content."
According to Blakey, digital is moving towards the heart of many media companies and presents the greatest opportunities for growth.
Last year Kiwis spent more than $500 million on broadband, while dialup spending is declining rapidly, amounting to $25 million in 2011 and projected to fall below $1 million in 2016. Mobile broadband, on the other hand, cost us $260 million last year, which will double by 2015.
Gaming is on the up, too: 93 percent of households own a device capable of playing video games (including PCs and mobile devices) and consumer spend on video games is expected to increase at a compound annual growth rate of six percent to 2016. According to the study, the average age of the New Zealand gamer is 33, and 47 percent of them are female.
Pay TV continues to enjoy high uptake in more than half of households with televisions. According to the study, 40 percent of these subscribers have taken up MySky, an increase of 45 percent since last year.
"With average revenue per user under pressure, in part due to subscribers downgrading their packages and the continued reduction in purchases of pay-per-view programmes, the rising penetration of MySky helped Sky improve its overall average revenue per user by three percent, to $71.81 per month."
That said, PwC is forecasting diluted revenue alongside increasing pay TV penetration, particularly once Igloo launches, and until IPTV picks up momentum.
'As for free-to-air broadcasters, the challenge lies in how to make the transition to a multimedia model in the face of the trend towards mobile, digital and, increasingly, social viewing.
According to Sky TV chief executive John Fellet: “Many customers are interested in watching content on multiple devices, but prefer to use the best and biggest screen available. The exception is information deemed urgent, such as the rugby score, where people are happy to use a small screen."
While we're currently muzzled by ungenerous data caps, PwC says video-on-demand could get a boost from the UFB initiative. Obviously that would depend on uptake (largely driven by pricing – Orcon is promising free fibre for the rest of 2012, though its plans only start from 30GB a month).
But the report does hint at a future shift to unlimited data: "A move to the all-you-can-eat-charging model, expected by many industry participants we have spoken to and supported by the ultra-fast broadband rollout, could lead to an increase in video-on-demand viewing."
In the music world, digital sales are growing quickly and show "no sign of abating" and services like Spotify and Rdio offer all-you-can-eat streaming, while simultaneously tapping into the mobile movement.
Traditional radio is still holding strong as a media channel, but given the recent renewal of analogue licences, the study says it is unlikely digital audio broadcasting will be introduced in the near future.
"Australia and the UK continue to drive digital radio but there seems very little appetite for it in New Zealand, and it seems possible digital audio broadcasting could be leapfrogged by internet radio."