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Digital and Mobile TV to Dominate Growth in Entertainment Spending

Services Like Netflix Lead the Way

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U.S. consumer spending on media and entertainment will increase 4.8% a year through 2017, with digital consumption finally rivaling physical sales, according to a new report.

Online purchases of movies, music and other forms of entertainment on services such as Netflix will rise to 43% of consumer media spending in 2017 from less than a third in 2012, the accounting firm PricewaterhouseCoopers said in a report. Total U.S. spending on entertainment and media will reach $632.1 billion by then, according the report said.

Watching the NFL online using Aereo's mobile TV service
Watching the NFL online using Aereo's mobile TV service Credit: Aereo

Most forms of media will weather the transition to the digital age quite well, according to Deborah Bothun, advisory leader for the firm's media and entertainment practice. Companies in film and TV are adapting to changing viewing habits, she said.

"We've had a lot of speculation about TV going away, many segments crashing and burning," Ms. Bothun said. "That hasn't been the case. There's a lot of innovation going on."

Music is farthest along in the transition to digital, with worldwide electronic sales forecast to exceed physical by 2016, the firm said. Globally, recorded music sales dropped for a decade before stabilizing last year, the International Federation of the Phonographic Industry said in February.

Music purchases in the U.S., including tickets to live performances, are reversing the multiyear slide caused by illegal downloads and collapsing compact disc revenue. Domestic purchases will rise to $16 billion by 2017 from $15.1 billion this year, driven by digital downloads, streaming services and higher ticket prices, Bothun said.

"Because music went digital early and suffered early, they've had the time to figure it out," she said.

Filmed entertainment will see digital sales increase faster than any other segment, with the share almost doubling to 25% in 2017 from 13% in 2012.

U.S. TV advertising will rise 5.1% annually to $81.6 billion in 2017, PricewaterhouseCoopers said, with more consumers watching on iPads and smartphones.

"There's no less video consumed," Ms. Bothun said. "It's just happening on different screens."

Increased internet access will remain a major force behind the growth in entertainment and media, reflecting expanded broadband service and more use of smart devices, PricewaterhouseCoopers said. Household broadband penetration globally will rise to 51% in 2017 from 40% in 2012, with Asia and Latin America leading the growth.

Online advertising will be fastest-growing segment of the U.S. ad industry, climbing 14% annually to $69.4 billion by 2017, at which point it will exceed newspapers, radio and magazines combined, the report projects. Only TV will be larger.

Print media will continue to struggle. The newspaper industry has the lowest digital adoption, with just 5% of newspapers' consumer revenue coming from digital last year. Uptake will increase slowly, with digital reaching only 11% of the total by 2017, Pricewaterhouse Coopers said. Magazine spending will shrink over the next five years, while book publishing grows only modestly.

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