Small businesses in the online sector would do well to grow scale and make their companies attractive to larger media businesses, which are diversifying their business models in light of falling revenue from advertising.
The latest PwC Entertainment and Media Outlook 2012-16 report has found that while the entertainment and media industry will grow 18% over the next five years, advertising revenue is only set to grow 13% due to economic uncertainty.
However, consumer revenue is set to take off by 21%, with internet businesses expected to take a huge chunk of growth, up from $6.4 billion to $10.2 billion.
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“For small businesses, they are a lot more agile, they are willing to take greater risk and they are the ones prepared to experiment,” says PwC technology, communications and entertainment leader David Wiadrowski.
“We’ve already seen some opportunities arise with small online players being bought by large media players.”
Wiadrowski says these are signs the market is maturing, and should serve as an opportunity for other media players.
“I think the major media companies have an appetite, and they’re looking to fund more internet businesses.”
Overall, entertainment and media is expected to see its revenue growth to $38.3 billion by 2016, with a compounded annual growth rate of 4.1% over the next five years.
Consumer demand is being driven in two other sectors – interactive games and subscription television.
PwC predicts that by 2016, 27% of Australians will have signed up to an internet protocol television subscription service. Recent research from within the company itself has already found that 52% of Australian homes contain a device that could enable IPTV.
“Consumers’ familiarity with internet connected devices that play video through their TVs will grow and, as it does, consumers will come to expect the increased programming choice that IPTV can deliver. As with all media however, a curated experience will still be important,” Wiadrowski says.
There is plenty of demand in the digital space for other products, too – printed books will fall by 2.7% to $1.1 billion, but digital demand will rise by 64% every year to $139 million, or 11% of the market.
Mobile commerce is also another huge growth area, PWC says, noting that internet connected mobile devices combined with social networking “is creating a compelling case for businesses to embrace m-commerce”.
“The long-term success of mobile commerce in Australia will be largely driven by two critical factors – increased consumer confidence and trust in mobile, and the emergence of a secure and accepted mobile wallet offering,” Wiadrowski says.
But overall, he says, businesses need to understand how advertising is changing. Major media organisations are seeing their advertising dollars “turn to pennies”, and their business models are being challenged.
Businesses that can tap into mobile commerce and social networking will do better than others in the next five years.
“Businesses can’t just look at consumers as viewers, or readers, or listeners, they need to view them in an overall point of view.”
“Advertising based businesses are going to be challenged, and their success is going to be dependent on their appetite to experiment with different models.”