Traditional media companies should quickly digitalise as online spending will increase sharply in the coming four years, a research by Arthur D. Little shows. By 2017, online media revenues will reach €46 billion, which is more than a quarter of all media spending, up €15 billion compared to 2013.
Management consulting firm Arthur D. Little recently released its ‘EU5 Media Flow of Funds 2014 - Digitization: DO or DIE!’ report, for which it researched the recent evolution of the Media & Entertainment sector in Germany, France, Italy, Spain and the United Kingdom (‘EU5’) between 2007 and 2017. Based on the observed market trends in this period, the consulting firm also provides a forecast of consumer spending and advertising revenues until 2017.
This forecast shows that the EU5 media industry sector is expected to head back to a small growth of 1.1% CAGR (which is €7.4 billion) until 2017. This growth will be generated by consumer and advertising spending, as public spending is assumed flat given pressure on federal budgets in the period 2013-2017. Consumer spending is expected to reach €91 billion, which is an increase of €3.8 billion compared to 2013. Advertising spending will increase by €3.6 billion, from €53.8 billion in 2013 to €57.4 billion in 2017. Of the €171 billion to be spent by 2017, €46 billion (27%) will be generated by online spending, which is an increase of €15.1 billion.
According to the research, consumer spending will be the main absolute contributor to the Media & Entertainment sector growth. The net growth €3.8 billion is a result of the strong online revenue growth over-compensating the decline in traditional media. While in 2013 online accounted for 11% of the consumer spending, this number is expected to increase to 19%. Of the EU5, the UK is leading the pack in online share of consumer spending, with an expected share of 27% in 2017, followed by Spain (24%). Germany stays behind with an estimated share of 13%, and will, according to Arthur D. Little ‘still need to catch-up’.
In the period 2013-2017, advertising spend is expected to grow by €3.6 billion, mainly driven by the expected growth from Italy and Spain, where a recovery is expected after a collapse between 2007 and 2013. Online spending has taken a much bigger role in the advertising industry, and it is expected that as much as 49% of all advertising spending will be done online by 2017. A share that is even higher for some countries. In the UK, 60% of all advertising revenues are expected to come from online funds, and in Germany half of the spending will be done online by 2017.
According to the firm, traditional media players should respond to these developments and forecasts by embracing the digitalisation. This process is advancing fast and will boost and challenge the offline world. As the window of opportunity is closing up for traditional businesses, it is “do or die”. “Traditional players have to enter boldly, and learn how to disaggregate, reaggregate and accelerate their organisational transformation,” says Clemens Schwaiger, Global Head of Digital Media at Arthur D. Little.