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10th annual edition

Global entertainment and media outlook 20092013

10th annual edition

Global entertainment and media outlook: 20092013

Each year, PricewaterhouseCoopers global team of entertainment and media experts generates unbiased, in-depth forecasts for 12 industry segments. Incorporating data from 4 principal regions comprising 48 countries and areas around the world, Global entertainment and media outlook: 20092013 combines deep knowledge of local markets with a truly global perspective a powerful tool for understanding critical business issues. To learn more about the challenges and opportunities ahead for the entertainment and media industry, please visit pwc.com/e&m.

Global entertainment and media outlook: 20092013

Prepared and edited by:


PricewaterhouseCoopers, which provides industry-focused assurance, tax, and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our network share their thinking, experience, and solutions to develop fresh perspectives and practical advice. PricewaterhouseCoopers LLP 300 Madison Avenue New York, NY 10017 +1-646-471-4000 www.pwc.com

Outlook editorial board:


For the PricewaterhouseCoopers Entertainment & Media Practice: Deborah Bothun, Principal Bill Cobourn, Partner James DePonte, Partner Marcel Fenez, Partner Stefanie Kane, Partner Alexandra Maclean, Global E&M Marketing Manager Pauline Orchard, Global E&M Marketing Leader James OShaughnessy, Partner Phil Stokes, Partner Many other professionals from the PricewaterhouseCoopers Entertainment & Media Practice reviewed and added local expertise to this publication. For Wilkofsky Gruen Associates Inc.: David Wilkofsky, Partner Arthur Gruen, Partner Norman D. Eisenberg, Vice President

Authored by:
Wilkofsky Gruen Associates Inc., a provider of global research and analysis of the media, entertainment, and telecommunications industries. www.wilkofskygruen.com

Use of Outlook data


This document is provided by PricewaterhouseCoopers for general guidance only and does not constitute the provision of legal advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided as is, with no assurance or guarantee of completeness, accuracy, or timeliness of the information and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

Permission to cite
No part of this publication may be excerpted, reproduced, stored in a retrieval system, or distributed or transmitted in any form or by any means including electronic, mechanical, photocopying, recording, or scanning without the prior written permission of PricewaterhouseCoopers. Requests should be submitted in writing to Radhika Nanda at radhika.nanda@uk.pwc.com outlining the excerpts you wish to use along with a draft copy of the full report that the excerpts will appear in. Provision of this information is necessary for every citation request to enable PricewaterhouseCoopers to assess the context in which the excerpts are being presented. Without limiting the foregoing, you may not use excerpts from the publication in financial prospectus documents, public offerings, private placement memoranda, filings with the US Securities and Exchange Commission, annual reports, or similar financial, investment, or regulatory documents.

Copyright 2009 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

ISBN 978-1-931684-19-4 Global entertainment and media outlook: 20092013, Executive summary ISBN 978-1-931684-20-0 Global entertainment and media outlook: 20092013

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Contents

Executive summary
PricewaterhouseCoopers Entertainment & Media PracticeCountry contacts . . . . . . . . . . 4 Introduction letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Viewpoint: the global entertainment and media outlook


Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 The economic crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 The E&M landscape in 2013: no hiding place from the migration to digital . . . . . . . . . . . 11

Summaries by segment and region


Global industry summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Global market by segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Global market by region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Forecasts and economic analyses of 12 industry segments


Internet access: wired and mobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Internet advertising: wired and mobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 Television subscriptions and license fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Television advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 Recorded music . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 Filmed entertainment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 Video games . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349 Radio and out-of-home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395 Consumer magazine publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431 Newspaper publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 Consumer and educational book publishing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 505 Business-to-business publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543

Index of tables and charts . . . . . . . . . . . . . . . . . . 607 To order further copies of this publication, please visit: pwc.com/outlook

Key to symbols used in the tables and charts


p = preliminary NA = not available = no spending that year Totals in tables and charts may not total arithmetically due to rounding.

Executive summary

PricewaterhouseCoopers Entertainment & Media Practice Country contacts

Global North America


United States Canada

Marcel Fenez

marcel.fenez@hk.pwc.com

Bill Cobourn Tracey Jennings

william.cobourn.jr@us.pwc.com tracey.l.jennings@ca.pwc.com

EMEA
Western Europe
Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Johannes Mrtl Eddy Dams John Gabriel Srensen Harri Valkonen Franois Antarieu Frank Mackenroth Dinos Michalatos Susan Kilty Andrea Samaja John Middelweerd Bjrn Leiknes Jos Vitorino Manuel Martn Espada Nicklas Kullberg Patrick Balkanyi Phil Stokes johannes.moertl@at.pwc.com eddy.dams@be.pwc.com john.gabriel.sorensen@dk.pwc.com harri.valkonen@fi.pwc.com francois.antarieu@fr.pwc.com frank.mackenroth@de.pwc.com dinos.michalatos@gr.pwc.com susan.kilty@ie.pwc.com andrea.samaja@it.pwc.com john.middelweerd@nl.pwc.com bjorn.leiknes@no.pwc.com jose.vitorino@pt.pwc.com manuel.martin.espada@es.pwc.com nicklas.kullberg@se.pwc.com patrick.balkanyi@ch.pwc.com phil.stokes@uk.pwc.com

Central and Eastern Europe


Czech Republic Hungary Poland Romania Russia Turkey Petr Sobotnik Manfred Krawietz Pawel Ozarowski Dinu Bumbacea Chris Monteleone Coskun Sen petr.sobotnik@cz.pwc.com manfred.h.krawietz@hu.pwc.com pawel.ozarowski@pl.pwc.com dinu.bumbacea@ro.pwc.com chris.monteleone@ru.pwc.com coskun.sen@tr.pwc.com

Middle East/Africa
Israel Saudi Arabia/Pan Arab South Africa

Joseph Fellus Ian Sanders Vicky Myburgh

joseph.fellus@il.pwc.com ian.sanders@ae.pwc.com vicky.myburgh@za.pwc.com

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates.

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Asia Pacific
Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Steven Bosiljevac Marcel Fenez Marcel Fenez Timmy Kandhari Nita Ruslim Hideaki Zenba Uthaya Kumar Grant Dennis Sohail Hasan Irene Vallestero Boon Chok Tan Kwang-Ho Kim Han Wu Kajornkiet Aroonpirodkul David Fitzgerald steven.bosiljevac@au.pwc.com marcel.fenez@hk.pwc.com marcel.fenez@hk.pwc.com timmy.s.kandhari@in.pwc.com nita.ruslim@id.pwc.com hideaki.zenba@jp.pwc.com uthaya.kumar@my.pwc.com grant.a.dennis@nz.pwc.com sohail.hasan@pk.pwc.com irene.vallestero@ph.pwc.com boon.chok.tan@sg.pwc.com kwang-ho.kim@kr.pwc.com han.wu@tw.pwc.com kajornkiet.aroonpirodkul@th.pwc.com david.fitzgerald@vn.pwc.com

Latin America
Argentina Brazil Chile Colombia Mexico Venezuela Ariel Vidan Estela Vieira Rafael Ruano Diego Henao Luis Roberto Martnez del Barrio Luis Rincon ariel.vidan@ar.pwc.com estela.vieira@br.pwc.com rafael.ruano@cl.pwc.com diego.henao@co.pwc.com luis.roberto.martinez@mx.pwc.com luis.rincon@ve.pwc.com

Executive summary

June 2009

To our clients and friends both in and beyond the entertainment and media industry:

Welcome to the 10th annual edition of PricewaterhouseCoopers Global entertainment and media outlook, covering the forecast period of 20092013. Our forecasts and analyses for this edition focus on 12 major entertainment and media (E&M) industry segments. To reflect the ever-changing nature of the industry, as well as ever-emerging digital revenue streams, we have increased the depth of data for each of the 48 countries and areas covered in the Outlook. Although the global economy was showing signs of weakness, the performance of many of the E&M sectors in the first nine months of 2008 was helped by spending associated with the Beijing Olympics and elections in a number of key markets. However, in the fourth quarter, the negative impact of the economic downturn on the E&M industry was becoming clear. The prevailing unprecedented economic conditions will significantly impact prospects in the near term and may expose weaknesses in some sectors. Against such a backdrop, we believe there will be nowhere to hide from the implications of digital migration. The pace of change is likely to increase with the greater economic pressure, as consumers seek higher value from the content they consume and as advertisers seek more accountability. We see that the impact of digital migration will differ between segments and geographies during the forecast period, in reflection of varying economic conditions as well as the availability and affordability of broadband and mobile infrastructure. The emerging-market growth story remains as valid an opportunity as ever. While a range of short-term challenges have been posed by the economic downturn, the real challenge lies in how to take advantage of the digital reality. Monetizing the increasing demand for entertainment and media content, capitalizing on evolving consumption habits, and developing diverse new advertising revenue models are challenges that companies will need to address. We believe this is a time to differentiate through innovation of and capitalization on new forms of collaboration across the entertainment, media, and communications value chains. All of us at PricewaterhouseCoopers continue to stay on top of trends and developments that may impact your business now and in the future, and we look forward to further sharing our thoughts with you. We appreciate your feedback and ask that you continue to tell us what we can do to make the Outlook more useful to you. If you wish additional clarification on any matters included in the Outlook or you believe we can be of service to your business in any way, please either contact one of the PricewaterhouseCoopers E&M professionals listed opposite or visit our Web site (www.pwc.com/e&m) for details of the contact in your territory. Finally, we thank you for your support and wish you an exciting and rewarding year ahead.

Sincerely,

Marcel Fenez Global Leader Entertainment & Media Practice

Bill Cobourn US Leader Entertainment & Media Practice

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Viewpoint: the global entertainment and media outlook


Introduction The economic crisis The E&M landscape in 2013: no hiding place from the migration to digital

Introduction
We are pleased to present the 10th annual edition of the PricewaterhouseCoopers Global entertainment and media outlook, containing five-year forecasts of annual revenues and industry trends for the 20092013 period across 12 major segments in 48 countries and regions. As we prepare the Outlook, the full extent of (1) the impact of the international financial crisis on the economy, (2) the shortage of credit, and (3) cutbacks in consumer spending has yet to be determined. Neither is it clear whether and to what degree the various stimulus packages and bailout plans will halt, slow, or reverse the slide. We do know that the global economy is more interrelated than ever and that developments in one country or region can quickly affect others. Historical precedentthe benchmark from which forecasts are developedis now a less reliable guide because the economic climate in most countries is more volatile than at any time in recent history. While it is clear that changes in the economic environment in 2009 could significantly affect the projections, we believe that many of the underlying trends we identify in the Outlook and that are driving change in the industry will remain on course. The information in this publication reflects the collective wisdom of our large team of professionals who work with entertainment and media (E&M) companies around the world. It is a unique resource for the industry, offering a five-year outlook for global consumer spending and advertising revenues, along with insights into the technology, government, political, consumer, and business trends driving these forecasts. The purpose of this Executive Summary is to provide a brief overview of the data presented in the Outlook for 20092013 and to present a thought piece on ideas generated by the data in the full book. also enable us to include, for the first time, full breakouts on a country-by-country basis for mobile television, videoon-demand, video console games, PC video games, online video games, wireless video games, video game advertising, online rental subscriptions, and digital downloads. Every revenue stream is now included in country totals. We have also added digital directory advertising as a new revenue line in the Business-to-Business Publishing chapter. We believe that this additional analysis will ensure greater consistency between countries. Due to the importance of access to the Internetbe it wired or wirelessas a driver of many of the developments in the industry as a whole, we have continued to dedicate a chapter to that area. Finally, we are now combining the United States and Canada into a regionNorth Americawhich provides better balance with our treatment of other regions. We still provide full breakouts for both the United States and Canada.

Categories covered
Internet access: wired and mobile Internet advertising: wired and mobile Television subscriptions and license fees Television advertising Recorded music Filmed entertainment Video games Radio and out-of-home Consumer magazine publishing Newspaper publishing Consumer and educational book publishing Business-to-business publishing

New additions to the Outlook


On the occasion of the 10th anniversary of this annual publication, we have taken the opportunity to refocus our analysis on 12 segments. As such, this years Outlook excludes coverage of previously included chapters called Casino and Other Regulated Gaming, Theme Parks and Amusement Parks, and Sports. In addition to making it a more friendly and more compact publication, the exclusions

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Regions/countries covered
North America Canada United States EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Latin America Argentina Brazil Chile Colombia Mexico Venezuela

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates.

Executive summary | Introduction

The economic crisis


Financial crises in each region during the latter part of 2008 sharply curtailed access to credit and led to steep declines in consumer confidence, which in turn led to a drop in consumer spending. In North America and EMEA (Europe, Middle East, Africa), financial institutions with toxic assets on their books were forced to sharply reduce their lending, which slowed or reduced economic activity. With consumers spending less, export-driven economies in Asia and Latin America experienced declining sales and slower economic growth. Advertisers experiencing a drop in sales responded by cutting their discretionary advertising outlays. Meanwhile, businesses that rely on credit lines had to cut back on production, which led to layoffs and contributed to an accelerating downward spiral. The result was a very weak fourth quarter, which is a key quarter for advertising and for certain end-user categories. The current recession differs from previous downturns in that credit is not available and consumer spending is falling at a much steeper rate than in the past. We expect a 12.1 percent decrease in global advertising in 2009 followed by a further, 2.7 percent decline in 2010 and a modest, 1.4 percent improvement in 2011. Global advertising in 2011 will be 13.3 percent lower than in 2008. In the current downturn, consumers represent a key cause of the decline. Consumers are rebuilding their savings while substantially reducing their spending, and those cutbacks are major causes of the decline in gross domestic product (GDP). Consumer spending in entertainment and media will fall by a projected 1.2 percent in 2009 and will remain weak in 2010, with a modest, 0.6 percent advance. Growth in 2011 also will be relatively low, at 3.2 percent. Consumer spending on entertainment and media in 2011 will be only 2.6 percent higher than in 2008. The global entertainment and media market as a whole will post a 3.9 percent drop in 2009 and a bare, 0.4 percent advance in 2010, with a 3.8 percent increase projected for 2011. Spending in 2011 will be only 0.2 percent higher than in 2008. Recessions reflect adjustments to previous imbalances in the economy. During the past few years, excess real estate lending in a number of major countries boosted real estate values beyond what could be supported by population and income growth. Financial institutions were burdened by loans that were no longer performing, pushing some to the brink of insolvency or beyond and leading to severe cutbacks in lending. With access to credit now greatly reduced and with trillions of dollars of wealth eliminated, consumers are responding by increasing their savings. As consumers build up their savings, they will become less reluctant to spend, which in turn will boost trade and benefit export-driven economies. As real estate prices decline, real estate sales will begin to pick up and a viable market for real estate transactions will reemerge. As financial institutions rebuild their assets, they will become able to resume lending. Meanwhile, governments are taking a more proactive stance than they have in the past in providing liquidity for the financial markets and direct stimulus for the economy. All of these developments are putting the global economy on a path to recovery. Prior recessions generally lasted from 9 to 18 months. While it is difficult to precisely predict how long it will take the current recession to run its course, we believe it will take longer than in the past24 to 36 monthsbecause the downturn is steeper. We expect the global economy to begin to recover in 2011 and to return to healthy growth during 201213. Responses will vary from country to country and region to region, with some territories showing few ill effects from the global recession and others experiencing steep declines. While the impact of the current economic crisis on advertising and consumer/end-user spending is deservedly making headlines, the underlying effect on how media and entertainment will be consumed over the long term is equally significant. The following section outlines how we expect the entertainment and media landscape to look in 2013.

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PricewaterhouseCoopers | Global Entertainment and Media Outlook: 20092013

The E&M landscape in 2013: no hiding place from the migration to digital
Over the next five years, digital technologies will become increasingly pervasive across all segments of entertainment and media, as the digital migration seen to date continues to expand and accelerate. As a result, throughout our forecast period to 2013 there will be no hiding place from the impact of new models and new dynamics across the industry. The change will occur and manifest itself across three parallel dimensions: Economic: The current economic downturn will accelerate and intensify the migration to digital technologies among both providers and consumers of content. Consumer behavior: The accelerating digital transformation will in turn reinforce and proliferate new consumption habits and so-called digital behaviors, as consumers seek (1) more control over where, when, and how they consume content and (2) higher value from their entertainment and media choices. Advertising: As digital behaviors become more widespread and embedded, a new generation of adfunded revenue models will emerge, aiming to reflect and capitalize on the evolving consumption habits by delivering advertising that is more targeted and relevant to the specific audience. By 2013, the combination of the aforementioned three change dimensions will have created an even more fragmented E&M landscape, characterized by a wide divergence of revenue models. Traditional revenue models in segments such as TV and magazines will be replaced by more-targeted and more-tailored models that will differ widely within and across segments. In the rest of this Executive Summary, we examine these three change dimensions in greater detaildrawing on the findings from our analysis for the PricewaterhouseCoopers Global entertainment and media outlook: 20092013 together with other insights from our varied experience and ongoing research across the industry.

Change dimension 1: economic


Accelerating the migration to digitalfor both consumers and businesses Across the entertainment and media industry, the current global economic slowdown will have the effect of accelerating the ongoing migration to digital by both consumers and providers. With companies being forced to strive for greater efficiencies in activities ranging from distribution to advertising, and with consumers seeking higher value from their buying decisions, the tough economic conditions have reinforced the existing drivers behind the digital revolution. Hindsight may indeed show that the strong advertising markets of the previous two years have cushioned the impact of a fundamental change that started a number of years ago. Over the next five years, the digital acceleration will combine with the uneven economic impact of the downturn to drive divergences in revenue performance between different segments and geographies. The entertainment and media landscape that emerges from the downturn will be one in which some segments have reshaped themselves successfully for the digital future. However, others will undoubtedly face significant structural challenges as they continue to find their place in the digital world. The current slowdown is the first cyclical slump in consumer confidence and spending to take place in an environment where consumers and businesses have the option to respond with new buying, spending, and investment decisions based around opportunities for digital migration. Our research suggests that both groups will seize those opportunities. On the consumer side, the acceleration of the migration to digital will be partly a function of digital services higher quality and flexibility, partly a result of those services competitive price-value offer, partly a response to expanding choice, and partly an outcome of the fact that many recession-linked consumer behaviorssuch as staying home in the evening to save moneycan actually be positive for certain E&M spending.

Executive summary | The E&M landscape in 2013

11

The shifting revenue balance

The overall impact of the current downturn will be to speed up the move to digital rather than slow it downpartly by creating an unarguable case in favor of digital migration across the industry.
In terms of providers, the successful players in the entertainment and media landscape of 2013 will share a number of characteristics, as described in a recent PricewaterhouseCoopers publication, A brand new era: The winners from this downturn will have the confidence, agility and quality of decision-making to do what is required to survive, whilst adapting to the new environment in which they operate. The downturn provides the burning platform for change. This means a change in managing brands, characters, titles and talent across distribution platforms supported by new commercial models. Media companies which emerge from the downturn with a lower cost base and a differentiated business model will redefine the competitive dynamics in those sectors subject to changing consumer behavior.

The companies that emerge as the winners in the new environment will do so by embracing digital migration. Digital spending will be the industrys main engine of growth over the next five years, making further major inroads into all segments and claiming a rising share of overall industry revenues. In some segmentssuch as TV subscriptions and license fees, filmed entertainment, and video games digital spend will help drive continuing expansion in the segments overall revenues. Even in segments where overall revenues are falling, such as business-to-business publishing, rising digital spend will help partially offset the ongoing wider decline. However, even though digital will dominate the growth agenda, it is worth noting that the bulk of all E&M spending globally will remain nondigital throughout the forecast period, driven by the four largest sectors by revenueTV subscriptions and license fees, TV advertising, newspaper publishing, and business-to-business publishingwhich continue to be dominated by nondigital revenues. But the momentum will be with digitaland will remain there. And to a large extent, the continued existence of significant nondigital revenues presents the emerging digital revenue models with an untapped opportunity to seize. Meanwhile, the need to retain traditional spend while tapping into the growth offered by digital is a major strategic consideration, as providers create and refine their revenue models. To strike the right balance, providers need to expand their share of digital revenues while ensuring they do not undermine or cannibalize their legacy nondigital spend. For all E&M companiesand especially for global players

Digital versus nondigital spend, 2008


Nondigital 79% Digital 21%

Digital versus nondigital spend, 2013


Nondigital 69% Digital 31%

The global economic downturn does not change the underlying drivers for digital but may influence their pace and power and therefore the timing of industry change.
Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

managing across various geographiesthis task is made all the more complex and difficult by the stark differences between markets worldwide, affecting key factors such as economic growth rates, local cultures, lifestyles, consumer spending, and communications infrastructures. The impact on entertainment and media spending Given the combination of a global economic downturn and accelerating migration to digital revenue models, what will be the impact on overall spending on entertainment and media during the five-year forecast period? While the global entertainment and media market as a whole will grow by 2.7 percent compounded annually for the entire forecast period, it will include a period of much faster growth during 201113, when the aggregate rate of expansion globally will leap to 5.9 percent compounded annually. The accompanying chart compares the relative growth rates we are forecasting for the various industry segments during both the downturn of 200910 and the anticipated recovery in 201113. As this comparison shows, the growth rates of more digitally driven segments such as Internet access, Internet

advertising, and TV subscriptions will outperform the industry as whole during both the downturn and the recovery. For others, such as newspaper publishing, the upturn will coincide with a return to growth, albeit from a lowered base for newspaper publishing. However, the underlying message is that while the downturn clearly impacts the pace of growth in each segment of the industry, it does not alter the underlying pattern of digital revenues expanding at the expense of nondigital revenues. During our five-year forecast period, these contrasting growth rates and digitals rising share of spend will drive an ongoing rebalancing of the industrys overall revenues between the segments. The accompanying pie charts compare the relative revenue shares between the various segments for 2008 and 2013, excluding Internet access spending. Segments such as business-to-business publishing, newspaper publishing, and consumer magazine publishing will have suffered ongoing reductions in market share, with revenues falling not just relative to the marketplace but also in absolute terms, reflecting the inability of digital revenue streams to offset declines in revenues from traditional, nondigital sources. However, substantial gains in market share will be achieved by such segments as Internet advertising, video games, TV subscriptions and license fees, and filmed entertainmentreflecting the successful capitalization of digital strategies.

Spending growth by segment


15 12 9 CAGR (%) 6 3 0 3 6
Consumer magazine publishing Radio and out-of-home Consumer and educational book publishing Business-to-business publishing Internet access Internet advertising TV subscriptions and license fees TV advertising Recorded music Filmed entertainment Video games Newspaper publishing Total

200910 201113

PricewaterhouseCoopers 12th annual global CEO survey, conducted in late 2008 among more than 1,100 CEOs worldwide, casts further light on attitudes to the downturn. It found that a financial downturn is nothing new for technology, communications, and entertainment and media companies, with many of todays senior executives being veterans of the dot-com crash in 2001. Yet the research revealed a general feeling among CEOs that the current crisis is differentlargely because this time not only their own industry sectors are suffering; their financiers, suppliers and customers are struggling too.

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | The E&M landscape in 2013

13

Market share by segment, 2008


(Note: Does not include Internet access spending.)

Market share by segment, 2013


(Note: Does not include Internet access spending.) Internet advertising: wired and mobile

14% 10% 6%

5% 16%

12% 9% 6%

7% 18%

Internet advertising: wired and mobile TV subscriptions and license rees TV advertising Recorded music Filmed entertainment Video games Consumer magazine publishing

TV subscriptions and license rees TV advertising Recorded music Filmed entertainment Video games

14% 2% 7% 4% 7%

Consumer magazine publishing Newspaper publishing Radio and out-of-home Consumer and educational book publishing Business-to-business publishing

16% 6% 6% 8% 2%

14%

Newspaper publishing Radio and out-of-home Consumer and educational book publishing Business-to-business publishing

15%

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Nominal GDP growth by region (%)


Region North America EMEA Asia Pacific Latin America Total 2004 6.6 6.6 7.6 15.6 7.2 2005 6.3 6.3 7.3 21.6 7.2 2006 6.0 7.0 8.2 17.0 7.5 2007 4.9 7.4 7.3 17.2 7.2 2008 3.3 6.3 8.2 11.1 6.2 2009 2.1 0.2 1.7 4.9 0.1 2010 2.5 2.7 5.9 6.7 3.7 2011 3.5 4.2 8.0 7.6 5.2 2012 4.7 5.4 8.4 8.2 6.2 2013 5.5 5.8 8.5 8.5 6.6 200913 CAGR 2.8 3.5 6.5 7.1 4.3

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

A global downturn with varying impacts at a local level In addition to growing divergence between the performance of different sectors, the next five years will see widening gaps between different geographic entertainment and media markets worldwide. One reason is that, while the downturn will tend to accelerate digital migration globally, its effects on GDP growth will be far from uniform. Even within regions there will be major disparities at the country level. For example, in Japan in 2009 we project a 7.4 percent drop in nominal GDP, but across Asia Pacific, this will coincide with an 11.5 percent increase in GDP in India, an 8 percent increase in the Peoples Republic of China (PRC), and gains of 6 percent or more in Indonesia, Pakistan, and the Philippines.

Such divergences reflect the differing dynamics of the slowdown in different markets. In some countriesnotably developed economies with high levels of consumer debt, such as the US and the UKaccess to credit became sharply curtailed, resulting in the housing and consumer sectors being hit by a squeeze or so-called credit crunch. In contrast, in other territoriessuch as Chinathat are major exporters to those credit-crunched markets, the slowdown was driven by a fall in exports rather than a credit squeeze. The export-crunched markets will generally recover more quickly, because their underlying economies are likely to be more robust than those in which the downturn has sprung from internal structural issues around lending risk and the supply of credit.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

GDP and entertainment and media spending: An indirect relationship The growth or decline in GDP at regional and local levels will not translate directly into E&M spending patterns. In combination with the impact of the global economic downturn at local and regional levels, markets differ in terms of both legacy and new entertainment and media offerings, regulation, culture, infrastructure, and consumer demand, not to mention economic maturity and the socioeconomic measures of GDP per capita and per household. These embedded structural differences can make for dramatic differences to the performance of similar services in different geographies. For example, mobile Internet access revenues in Asia Pacific will overtake wired access in 2010 and will account for over 53 percent of overall Internet access spending in 2013. In contrast, mobile access spending in every other region will still represent only a fraction of overall Internet access revenue throughout the forecast period. The link between GDP and E&M spending is also less than straightforward at the global level. Historically, the entertainment and media market globally has tended to be income elastic, meaning that it grows faster than the economy in times of economic expansion and slower than the economy when the economy is sluggish or contracting. In line with those trends, overall entertainment and media spending has lagged nominal GDP growth during the past two yearsother than in emerging markets, where E&M growth has well exceeded GDP growthand will grow at a slower rate than the overall economy during the three

years to 2011. However, it will then leapfrog GDP as the recovery gathers pace and consumer spending picks up. While the income-elastic pattern of overall entertainment and media spending in relation to GDP may reflect previous recessions, other findings in the Outlook suggest that that relationship with GDP is changing, especially in economies characterized as emerging. In previous editions of the Outlook, we noted the tendency for growth in spending on entertainment and media to outpace GDP growth in emerging markets. However, the accompanying chart shows a comparison between GDP growth and E&M revenue growth split out between the downturn phase (200910) and the recovery phase (201113) for selected territories. The chart shows that in both India and China, entertainment and media revenue growth compounded annually from 2011 to 2013 will lag behind compound GDP growth for that period. In contrast, entertainment and media spending in most developed markets in 201113 will rebound more quickly to outpace the corresponding compound GDP growth rate. The entertainment and media markets in India and China are beginning to mature while experiencing rising competitive pressures. Consequently, these countries are entering a period of slower revenue growth against GDP. Also, differences in GDP growth between 200910 and 201113

Long-term regional spending shift continues unabated


Varying growth rates in different regions will see their respective shares of global entertainment and media spending continue to change over the five years. Put simply, the storyas in previous yearswill be one of continuing growth in the share held by Latin America (up from 4.0 percent of total revenues to 4.5 percent) and, even more significant, Asia (up from 23.5 percent to 25.6 percent). This represents a continuation of the steady long-term rebalancing of global spending away from North America and EMEA and toward newer and evolving markets. The fact that this trend appears to be unaffected by the downturn underlines the degree to which the underlying drivers of the entertainment and media marketespecially digital migrationare still holding sway.

Global E&M and nominal GDP growth (%)


10 8 6 4 2 0 2 4 6 2004 2005 2006 2007 2008 2009 2010 Global nominal GDP Global E&M spending 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | The E&M landscape in 2013

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are relatively modest compared with growth in other countries. Consequently, India and China will suffer less during the next two years from a slower economy but will also experience less of an incremental rebound during the subsequent years. This is a shift we will watch with interest and comment on in future editions.

Change dimension 2: consumer behavior


Consumers seeking more control As the economic environment fosters and accelerates digital migration, key effects will be to reinforce the emerging digital behaviors that have been coming to the fore in recent years and to embed them even more deeply in consumers lifestyles and consumption habits. The core driver of the new behaviors is consumers growing demand for greater control over the content they want. From mobile Internet to online communities and from movies-on-demand to the uploading of selfgenerated content, advances in digital technology are increasingly enabling that control. These changes go much further than simply how people consume digital content, reaching into social interaction and relationships. Instant messaging and communications services such as Twitter are now a part of everyday life. And more than 200 million people worldwide are active Facebook users, with more than 100 million users logging on to it at least once every day. The impact of the behavioral changes driven by digital opportunities extends well beyond the use of Web sites. During the alarm over a potential flu pandemic in April and May 2009, the spread of the symptoms was tracked in some countries by monitoring the frequency of search terms used on Google. A blogger who recently reviewed a television program after its scheduled airing found himself heavily criticized for giving away the ending before the time-shifting members of the online community had watched it on their personal video recorders. And tapping into the massive collective buying power of online communities is an increasingly central focus of consumer marketing campaigns globally. These trends highlight a development that we noted in last years Outlook: the ongoing emergence of the so-

Spending/GDP growth comparison


India China Vietnam Indonesia Saudi Arabia/Pan Arab South Africa Turkey Russia Brazil Hong Kong South Korea Poland Spain Australia Canada United States United Kingdom Netherlands France Germany Italy Singapore Japan 10 5 0 5 10 15 20
E&M spending growth 200910 GDP 200910 E&M spending growth 201113 GDP 201113

CAGR %
Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Consumers will continue to want more say in when, how, and where they consume content.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

called Net Generationthe global, connected youth cohort born from 1977 to 1997, who represent the first generation to grow up digital. For these young people, new media technologies are intuitively familiar components of everyday life. One major impact of those in the Net Generation is that they are collectively driving the industry toward new business models that emphasize a more personal two-way relationship between companies and customers. Another is that they are influencing their parents and grandparents to take a growing interest in new and emerging platforms. In our view, the downturn will increase that influence still further, since it will make the older demographics more value conscious and therefore more willing to listen to their children and grandchildren. New consumption habits feeding through to revenues Each of these developments involves consumers obtaining entertainment and media directly or indirectly through digital and/or mobile platforms. Put simply, consumers want to decide for themselves what they consume, as well as how, when, and where they consume itincluding the ability to sideload: consuming the same digital content on several different platforms. Several developments reflect this profound behavioral shift. And their overall impact will be to drive an ongoing rise in spending on digital/mobile platforms throughout and beyond the five-year forecast period, thereby enabling these platforms to gain an ever-higher share of total consumer end-user and access spending on entertainment and media. To date, recorded music has led this transformation, and we expect that within the forecast period a majority of music will be purchased through digital channelsthe first segment to cross this divide. Other segments are heading down the same path, at different speeds, and in different geographies. Our projections for global recorded music revenues underline those regional variations. In each region, gains in digital music distribution will ultimately offset continued declines in physical formats, driving overall revenues back upward. Asia Pacific will be the first region to experience the turnaround, with overall spending beginning to increase in 2011, followed by Latin America in 2012 and North America in 2013. In EMEA, spending will continue to fall until 2013, when it will stabilize.

Consumers taking control: key indicators


Time shiftingGrowth in take-up and usage of digital video recorders and video-ondemand, both of which free up consumers from the television schedule and allow them to watch what they want when they want. Broadband penetrationGrowth in broadband, which facilitates the ability of consumers to get what they want when they want from wherever they want. Improvements in broadband allow for easier downloading and streaming. MobilityGrowth in mobile access, as consumers refuse to be tethered to a wired connection and choose to access the Internet from any location through mobile devices. This includes an emerging mobile TV market and the rising popularity of high-end devices such as the smart phone, the iPod, and the Kindle, which serve to combine mobility and access. Digital musicThe purchase of songs not sold on an individual basis in physical format through digital channels. There is also growth in side loading, which enables consumers to buy music less expensively online than through mobile carriers and to transfer that music to mobile devices. GamesGrowth in wireless video games that let consumers play wherever they want; growth in online games that allow consumers to compete with people all over the world. Online access to traditionally print contentUse of the Internet to access newspapers, magazines, and classified advertising; growth in electronic book sales. Online communities and user-generated contentGrowth of social networking and readiness to conceive, produce, and share consumer-generated content across the Internet.

Executive summary | The E&M landscape in 2013

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Growth of consumer spend on digital/mobile platforms


800000 800,000 US$ (millions) 600000 600,000 400000 400,000 200000 200,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Digital/mobile spend comprises wired broadband, mobile broadband access, online and wireless video games, video-on-demand, mobile TV, digital downloads of movies, online movie rental subscriptions, Internet music, mobile music, and electronic books.

disposable incomes made the price of genuine product more of a disincentive to buy. Similarly, 3-D films are selling at higher price points than standard films because comparable product is not available elsewhere. In general, the moviegoing audience has remained loyal to the movie theater experience despite the availability of movie content at lower cost elsewhere by means of quality improvements such as advanced sound systems, digital projection, and other packaging techniques aimed at improving the overall audience experience. Consumers also are paying premium fees for high-speed broadband, digital cable, video-on-demand, mobile Internet access, and the new console video games. The Apple iTunes/iPhone combination is playing a central role in driving home the benefits of mobility in content areas such as music, Web access, and video and is bringing the iTunes message of convenient, authorized, downloadable content to millions of consumers worldwide. In each case, the products or services gaining the greatest traction among consumers provide added quality or convenience that is not available elsewhere.

Other consumer/end-user/access spending Total spending on digital/mobile platforms

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Looking across entertainment and media as a whole, end-user spending through digital/mobile platforms totaled $218 billion in 2008, representing 23.4 percent of the overall consumer/end-user/access market. Those platforms will account for 78 percent of total consumer/ end-user/access growth during the next five years expanding at a 12.2 percent compound annual rate to $387 billion, compared with compound annual growth of only 1.3 percent for the nondigital/mobile marketplace. Seeking not just more control but also greater value In combination with greater control over content, consumers are also demanding higher value from the entertainment and media services they use. They are increasingly making cost-benefit judgments over the ways they consume media, in some cases opting for low-cost or free alternatives (often in return for accepting advertising) and in other cases paying premium fees for high-quality content. The key issue in these decisions is the availability of substitutes of comparable quality. For example, when legitimate digital services took hold in the music industry, they did so only at substantially reduced prices compared with physical product because of the availability of free alternatives. In the analog era, by contrast, copies of analog recordings via such formats as tape cassettes were often of noticeably poorer quality than their licensed counterparts, so they did not materially cut into legitimate salesexcept in emerging markets, where lower

Consumers increasingly base their choice of content experiences and consumption patterns on a cost-benefit judgment including whether the same experience is available more cheaply elsewhere.

At the same time, low price can be a compelling part of the value equation for many consumersand in many cases there are free close substitutes available over digital platforms. This poses particular challenges for traditional physical content providers such as newspapers and magazines. However, newspapers do have strengths they can bring to bear to open up digital commercial opportunities, not least their trusted news brands and proven expertise in sorting and sourcing the highest-quality data. The challenge facing newspapers is to turn that combination of brand strength and news expertise into revenues, and many are launching new strategies to do so.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

In April 2009, Pearsons Financial Times Group launched China Confidential, a premium, subscription newsletter and Web site providing exclusive predictive analysis on China. And in May 2009, News Corp. chairman Rupert Murdoch said he expected the group to start charging users for access to its newspaper Web sites within a year. In the same week, newspapers including the New York Times and Washington Post announced they would test the new, larger-screen version of Amazons e-book device, the Kindle, as a platform for subscriptions. Magazines are making similar moves while being careful to avoid cannibalizing their content by putting it online for free. The magazine publishers that have proved most successful in entering the digital space have leveraged strong brands across multiple media platforms and generated revenues from online advertising, search-engine marketing, and e-commerce.

Newspapers strengths in the digital era: trusted editorial and brand value
Consumers see breaking news and general interest news as commodities, but there is always a market for high-value online content in specific topics. Our consumer research indicates that consumers are willing to pay for such contentboth online and in print format such as specialist newsletters but newspapers need to develop strategies for monetizing their content and intellectual capital. Newspapers have been able to earn their readers trust and loyalty, giving newspapers the opportunity to both lead and follow audiences as the newspapers migrate online and into the use of portable electronic media. Indeed, with the core principles of deep analysis and trusted editorial, the medium is secondary to the brand.
Source: Moving into multiple business models: outlook for newspaper publishing in the digital age, PricewaterhouseCoopers

Change dimension 3: advertising


New ad-funded revenue models target consumers behavioral shifts As the emerging digital behaviors become more dominant among consumers, a new generation of adfunded revenue models will emerge, seeking to reflect and capitalize on the evolving consumption habits. Advertising is currently in broad decline, with global ad spend projected to be still below its 2008 levels in 2013. However, what will matter throughout the forecast period is not the overall size of an increasingly fragmented ad market but the ability to use relevance and personalization of advertising to boost share of wallet. Over the next five years, as consumers receive an increasing proportion of their entertainment and media through digital/mobile platforms, advertisers will shift their resources from traditional media to new media.

Magazines count the true cost of putting content online


In our multicountry research among magazine readers worldwide, respondents say digital content should cost less than half the price of printed magazines. Also, once theyre offered the same magazine content digitally, they expect to pay a maximum of two-thirds of the current hard-copy cover price to get both hard and soft copies of the same magazine. This explains why many magazine publishers provide digital content that differs from that of their print publications, since they might otherwise come under considerable pressure to reduce the prices of their printed versions.
Source: The medium is the message: outlook for magazine publishing in the digital age, PricewaterhouseCoopers

Despite the current advertising downturn, many of the emerging generation of revenue models are ad funded.

Executive summary | The E&M landscape in 2013

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Advertising going digital: key indicators


Video game adsAt a CAGR of 13.8 percent, an emerging video game advertising market willalbeit from a low baseoutpace the rest of the advertising industry, which will decline at an annual compound rate of 0.6 percent during the forecast period. Traditional advertising segments migratingThe migration from print to digital editions of newspaper advertising, directory advertising, and magazine advertisingboth consumer and trade Mobile adsThe emergence and rapid growth of a mobile advertising market, which will expand at a CAGR of 19.7 percent through the forecast period, compared with 6.7 percent for wired Internet advertising New out-of-home advertising offersThe growing appeal of out-of-home advertising, supported by new digital technologies in that segment that help advertisers multiply the impact of their ads and bypass the ad avoidance behavior of consumers Rising digital market shareThe growing proportion of Internet and mobile advertising in the overall global advertising mix, rising from around 12 percent in 2008 to 18 percent in 2013

In the mobile arena, opportunities across the advertising continuum will open up to grow the relationship between brands and consumers, ranging from click-through banner ads and pre-roll ads on video clips through coupons and online subscriptions. This will move mobile advertising beyond impressionsand onward to engagement, transaction, and relationship revenue opportunities. There are several developments that reflect the online/ mobile migration in ad dollars, and these are summarized in the accompanying information panel. As the emergence of ad-funded revenue models increases its pace, overall advertising spend will shift toward digital. The aggregate total of digital and mobile advertising accounted for 12 percent of total global advertising in 2008, up from 4 percent in 2004. During the five years to 2013, advertising that targets new consumer behaviors will grow by a cumulative 7.8 percent, and spending on all other forms of advertising will fall by 2 percent compounded annually. By 2013, advertising that targets new consumer behaviors will account for close to one-fifth of the total global advertising pie.

Advertising targeted to new consumer behaviors


80,000 60,000 40,000 20,000 US$ (millions) 10,000 8,000 6,000 4,000 2,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Video games Mobile Digital newspapers Digital consumer magazines Digital trade magazines Digital directories Wired Internet

Ungroup

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

80,000 60,000 40,000 20,000 20 US$ (millions) 10,000 PricewaterhouseCoopers | Global entertainment and media outlook: 20092013 8,000 Video games Mobile Digital newspapers Digital consumer magazines Digital trade magazines Digital directories Wired Internet

Editable

New models tackling the challenges The migration toward ad revenues derived from new behaviors will not be without its challenges. In the near term, the weak advertising market will make it difficult to finance content completely through advertising. The broad decline in ad revenues currently under way reflects a number of factors, including the economic downturn; related shifts in the trade-off between price, volume, and effectiveness; and a move toward more below-the-line activity to get closer to customers. Even over the longer run, when overall ad spend recovers, the economics of the advertising market may make the transition difficult. In newspapers and magazines, for example, the potential online advertising inventory is much larger than the potential print advertising inventoryso online ad rates tend to be lower than print rates. This means that shifting from print to digital may initially result in a significant reduction in ad revenues. Content providers are developing new approaches to deal with this dilemma. For example, TV programmers are putting their shows online with embedded ads that cannot be skipped, and theyre programming traditional shows in high definition. At the same time, advertising is also being introduced in media that previously were financed entirely by consumers. For example, when the previous generation of console platforms was introduced earlier in the decade, there was no video game advertising. But video games generated $1.4 billion in advertising in 2008, a total that will rise to a projected $2.6 billion in 2013. Meanwhile, in the recorded music segment, companies are eliminating copyright protection software, making authorized digital distribution sufficiently user-friendly to compete with pirated product. Ad-supported recorded

Online advertising set for relative growth


Online advertising is expected to be hit by the downturn, although given ongoing structural trends it is likely to continue to grow relative to other advertising forms. The online search segment is likely to fare better than display and classified advertising, producing a more measurable return on investment for advertisers looking to trim advertising budgets. The largest players in the classified advertising verticals market are likely to continue to grow in relative importance. Slower display advertising growth is likely to be countered by new formats and technologies such as video/behavioral targeting.
Source: Media sector M&A insights: analysis & opinions on European M&A activity 2009, PricewaterhouseCoopers

music services are entering the market and could begin to provide a measurable revenue stream within the next five years. And subscription models are being introduced that provide users access to virtually unlimited amounts of music for a flat feeessentially converting music delivery from a product to a service. A recent entrant to the market, Spotify, has a hybrid business model that offers a free, advertising-supported service to a vast music library, as well as daily, monthly, and annual subscription options that allow ad-free listening. A common factor in many of the successful models of the future will be the ability to collaborate with partners. Such collaboration takes two forms: (1) collaboration on revenues to open up and exploit new areas and (2) ongoing cost sharing to operationalize the shared benefits. The key will be to find an equitable way of sharing both the risks and the rewards for mutual advantage while also keeping the cost/value equation positive for consumers. Going forward, we expect that the successful models will be those that provide enough product differentiation from free or low-cost substitutes to generate revenue either from consumers or advertisers ormore likelyfrom both.

Alongside new ad-funded models, existing ad models are adapting to resist downward pressure on ad rates in the digital environment.

Executive summary | The E&M landscape in 2013

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In PricewaterhouseCoopers 12th annual global CEO survey, 93% of respondents in the technology, communications, and entertainment and media sectors report that technological innovation is important or critical, compared with just 83% of the overall survey sample. Many of those respondents are also much more likely to collaborate with external organizations so as to improve their access to intellectual property, talent, sources of capital, and marketing channels.

restrictions. For example, personalized online video advertising, facilitated by the growth of Internet protocol (IP) platforms, is an as-yet largely untapped opportunity. It also requires clearer and more effective communication of the value of display advertising, with an emphasis on demonstrating the value of advertising on brand and longterm sales performance. To underpin that accountability and transparency and to help advertisers compare the effectiveness of their investment in digital advertising across segments, there is a need for the development of a common advertising currency both for digital media and out-of-home advertising. At the same time, there is a common requirement to educate both agencies and advertisers in how to make the most of the digital opportunity. This would serve to support the most-effective new ad models while also helping secure trust in different types of media. However, as the ad industry moves toward previously undreamed-of levels of targeting and effectiveness, this combination of selling points brings with it two challenges for new ad-funded models. One is tactical: a need to pay heed to privacy regulation and customers concerns over the confidentiality and integrity of their own personal data. The other is a more strategic issue for the ad industry as a whole. If the digital advertising offer of the future is increasingly effective, that means it offers advertisers the ability to reach their target audiences more accurately, with lower levels of wasteand therefore lower cost. So advertisers will be able to achieve the same or better reach and performance for a lower spend. The fact that overall ad spend will actually be lower in 2013 than 2008 may mean not that companies are advertising less but simply that they can do it more cheaply because of greater ad effectiveness. The outcome may be a structural reduction in ad spend globally, with the saving reallocated elsewhere. This is another long-term trend that we will watch with interest in future editions.

To attract advertising, digital channels need to accept accountability for audience and results.

The need for effectivenessand accountability More-accurate targeting and relevance of ads to the specific consumerthereby making advertising spend more effective will be critical to the success of emerging ad-funded models. To achieve this, the next generation of ad models will apply sophisticated customer data analytics to (1) target people who are actually interested in receiving ads and (2) make the ads more relevant to the individual consumer. However, to win ad spend from traditional channels, the new models will have to prove to advertisers that the digital alternative really is more effective. So providing transparency over audience metrics and even accepting accountability for ad results will become musts rather than luxuries. Already, technological changethrough new optimization models, usage metrics, and searchhas increased the expectation for accountability across the whole media sector. Over the coming years, effective management and analysis of customer datadrawing on lessons from the retail and financial services marketswill turn into a core competency in entertainment and media. In practice, this means acquiring the capability to use technology to its full potential and exploit consumer data to the fullest extent possible within regulatory and privacy

The rise of digital advertising may result in a permanent decline in overall global ad spend.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Success factors in the E&M landscape of 2013


The key to successful models: mobility, convenience, and quality Whatever the revenue modelad funded, subscription, or a combinationthe key to generating a sustainable revenue stream in 2013 will be to provide a content experience that cannot be readily duplicated elsewhere. Obvious examples might be mobile micropayments via a device such as the iPhone, and catch-up television services delivered on demand via the TV set. At the same time, affordable access will remain key for driving media consumptiona quality that boils down to the combination of availability and price. A lack of affordable access explains why some markets are slower to shift to digital revenues, such as Latin America and Africa. This factor can also influence the level of demand for particular services; for example, shortcomings in fixed broadband infrastructure in much of Asia Pacific are helping drive demand for mobile Internet access. More generally, consumers worldwide have shown they are willing to spend to get greater convenience, mobility, and quality, and their readiness to spend more to gain those benefits will drive consumer spending once the economy improves. The quality improvements demanded by consumers are requiring investment in the underlying wireless and broadband infrastructures. Wireless carriers are upgrading their networks to third-generation (3G) and higher speeds, with 100-megabits-per-second fourth generation on the horizon. Broadband carriers are deploying fiber to offer faster speeds. Cable operators are adding capacity and new services such as video-on-demand. Handset manufacturers are producing new devices that support Internet access, music, video games, and other entertainment applications. Touch-screen capabilities are enhancing the wireless experience. New electronic readers are transforming the electronic book market, andif trials of the large-screen Amazon Kindle are successfulthe newspaper market as well. Meanwhile, prices of high-definition (HD) TV sets are coming down, in turn driving demand for HD videos. And

movie exhibitors are transforming their screens to digital and 3-D, thereby helping sustain box office spending in the face of fierce competition from other choices. Investment in the new video game consoles is driving the video game marketa segment whose revenues in 2008 outperformed our forecast from last year. Indeed, it became the fastestgrowing segment in the global industry, with 18.2 percent year-on-year growth, thanks to high-double-digit increases across console, online, and wireless games, as well as in the small but fast-growing in-game advertising market. Looking across the industry more generally, micropayments represent a further high-potential area of investment for driving future spending. The iTunes application store for the Apple iPhone has triggered the emergence of a major market in impulsewear, with millions of consumers buying and downloading applications that are easy and cheap enough to buy on a whim. Anecdotal evidenceincluding our consumer focus groups and countless entries on blogs and chat sites suggests that consumers would spend a lot more if they could transact micropayments more readily, including from within applications. Going forward, the model for a quick, convenient, and easy micropayment system may well involve a stored-value approach, which is one of the solutions under consideration.

Meeting consumers demand for higher quality requires significant investment just to stay in the game.

Realizing the value of intellectual property by going cross-platform In combination, ongoing investments in the broad array of aforementioned areas will be crucial in driving spending on content. Such investments also underline the fact that companies in all entertainment and media segments currently face an absolute need to investigate the specific

Executive summary | The E&M landscape in 2013

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E&M companies need to invest now for the future environment despite limited forward visibility around economic conditions, consumer behavior, and revenue models.

implementation and embedding of the other IPInternet protocoland digital technologies, bringing crossplatform capabilities. Currently, most of the entertainment and media companies derive the majority of their revenues from a limited number of channels. As the migration to online and digital accelerates, effective cross-platform exploitation of brands, characters, titles, programs, or patents will become increasingly critical. In practice, it means investing in and managing assets across the portfolio in order to maximize overall profitability. This involves investment in digitization of the archive, rights negotiations, and search functionality to help consumers navigate their way through the mass of legacy content more easily and thereby monetize it more effectively. It also means driving new content hard for mass-market exploitation, including developing better back-end collections management capabilities and exploiting rights more vigorously. Industry players are increasingly seizing the opportunity to exploit their intellectual property across platforms and monetize it by building and maximizing the communities of interest around it. This is particularly prevalent in the area of sports rights. Many broadcasters who initially bought the exclusive transmission rights to specific sports content are now building multiplatform activities around it, including discussion groups, online competitions, and Web-based catch-up services. These activities simultaneously strengthen and capitalize on the communities of people interested in the particular sport.

risks and opportunities that digital migration open up in their particular segment of the value chain. By making the right responses, they will position themselves to ride the economic upturn and the accelerating migration to digital. In some cases, such as digital content distribution, that response will require investment, particularly in technology. In others, such as content production, the requirement may be more to forge a broader range of distribution and platform relationships. Whatever the right response may be, it must be made now, within an uncertain environment. In our view, the players who make the right calls will be characterized by rigorous focus on maximizing the monetization and profit generation from intellectual property (IP) across all channels. This in turn will depend on effective

Format convergence and the need for crossplatform reach are driving M&A Convergence remains an important driver of M&A activity in the entertainment and media space. The broad trend towards convergence of media formats and the need for E&M companies to provide content and services across multiple platforms has been a key driver of deal activity in the sector in recent times. E&M business models are evolving as companies continue to develop new capabilities and technological platforms to boost interactivity and deliver media more effectively to increasingly targeted audience segments.
Source: Insights: Entertainment & media: analysis and trends in US M&A activity 2009, PricewaterhouseCoopers

Building and monetizing communities of interest around content is an increasingly widely used strategy for releasing value from intellectual property.

Overcoming the tactical challenges of digital globalization: Rights, local regulation, and piracy We have already pointed out that the global downturn will increase the diversity in revenue performance between different geographies over the next five years. However,

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

that divergence will coincide with headlong technological convergence, as rising usage of digital technology across countries and segments progressively increases the ability to transfer and consume content across borders. This will create some operational challengesfor example, making it harder to stagger content release dates in different parts of the world or sustain differentiated pricing strategies. Platform- or country-based content rights deals may also become more problematic; for example, imagine the impact of being able to port a movie onto a standard chip that could be inserted into a laptop, TV, or mobile device. Also, while a world characterized by digital everywhere might make it appear easier to enter new markets directly and without a physical presence or local partner on the ground, the strength of local content production industries and differing consumer tastes means a local presence is still necessary; local content remains a cornerstone of global expansion. A further challenge of digital globalization is the nationbased and highly fragmented nature of media and privacy regulation. Regulation has always presented challenges, not least through ownership restrictions. Over the next few years, as ad-based models become more reliant on personal data to facilitate targeting and relevance, privacy regulation will come increasingly to the foreespecially in such areas as personal confidentiality and opt-in/opt-out ad models. Further regulation-related factors in the wake of the current downturn will be such issues as state support for broadband rollouts andless directlythe impact of state bailouts and economic revitalization packages. However, our view is that regulationrather like the economic downturn itselfwill have more of an impact on the timing and speed of the migration to digital content,

Robust regional industry in Europe Europes media sector proved its resilience in the wake of the technology media and telecoms (TMT) bubble-burst of 2001/2 and, despite todays challenges, remains a dynamic and innovative sector. With further scope for consolidation and growth and with the digital/online revolution still in full swing, it is unlikely to remain in the doldrums for too long.
Source: Media sector M&A insights: analysis & opinions on European M&A activity 2009, PricewaterhouseCoopers

new behaviors, and new ad models than on the shape of the emerging landscape. Regulation is a country issue and therefore a local matter. It will put bumps along the route but not roadblocks, and companies will address those challenges at the tactical level rather than having to form their strategies around them. Piracy is a further growth inhibitor where regulators have roles and which will again represent a tactical rather than a strategic challenge. The music and film industries are experimenting with new approaches to stem online piracy, including dropping copy protection software and requiring Internet service providers to act against persistent unauthorized downloaders. Legal remedies are also advancing, including a Swedish courts April 2009 landmark conviction of the individuals behind the filesharing service The Pirate Bay. Meanwhile, the television industry is making headway in providing licensed online product in a bid to replace unauthorized use, with Web sites such as Hulu in the United States proving successful in providing authorized access to television programs over the Internet. Generally, as the industry becomes more creative in dealing with piracy and as government strategies start to have an impact, copyright holders will be able to regenerate revenues, either directly or indirectly, from their intellectual property.

Like the global slowdown, regulation and piracy are tactical and region-specific challenges that will not deflect the industry from ongoing digital migration.

Executive summary | The E&M landscape in 2013

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In conclusion: entertainment and media is wellpositioned to exploit the coming economic upturn
By 2013, the industrys accelerating digitizationcoupled with the growing divergence between the revenue performance of different segments and marketswill create an E&M landscape characterized by a myriad of business models and a far more tailored approach. Put simply, a model that works with one particular type of consumer, one particular form of content, or one particular national marketplace may not work with others. The resulting fragmented landscape of specifically designed revenue models will be far from, for example, the globally generic ad-funded model that once served commercial TV so well. As entertainment and media companies migrate to new models, especially those based on an ability to serve up advertising more accurately to consumers, the challenge will lie in how to manage the transition cost-effectively.

As the reshaped landscape emerges, opportunities for entertainment and media as a whole are growing. Despiteand partly because ofthe immediate economic challenges, the momentum behind digital migration is growing. Media currently experiencing declining revenues are not doing so because of declining demand. In fact, demand for entertainment and media appears to be increasing. What has changed in some cases is the ability to monetize that demand. Recorded music is a good example: the content is more ubiquitous than ever, but revenues are falling. This is why there will be no place to hide from new models and dynamics across the industry. And the winners will be those players who focus on driving and leading change that delivers real value for consumers. The models that will emerge during the next two years should ensure that the entertainment and media segment is well positioned to exploit the economic upturn from 2011, albeit from a slightly lower base than in 2008. By 2011, segments will have consolidated, the least loyal customers will have already left, higher-quality product will be valued by both consumers and advertisers, and digital distribution will have become mainstream, commanding fees more in line with its value. At the same time, a growing economy will stimulate spending. But for each of the industrys diverse segments to participate fully in that growth, each will first need to embrace the digital future.

In the past, E&M was characterized by a handful of generic models. In the future, revenue models will be diverse, more targeted, and developed on a bespoke basis for the specific purpose and circumstances.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Summaries by segment and region


Global industry summary Global market by segment Global market by region

Global industry summary


The next three sections provide a brief overview of the overall entertainment and media industry, of spending by segment, and of spending by region. The sections summarize the data provided in the full Outlook but do not approach the depth or granularity of the full Outlook. For example, in the Filmed Entertainment chapter, we provide annual country-by-country data for the 200413 period for box office admissions, average box office prices, box office spending, home video sell-through spending, home video rental spending, online rental subscriptions, and digital downloads, where applicable. In the Newspaper Publishing chapter, we provide annual country-by-country data for the same period for print advertising, advertising on newspaper Web sites, unit circulation of paid daily papers, circulation spending, and, on a regional basis, unit circulation of free daily papers. A similar range of country-by-country data for the various revenue streams and related components is provided in each chapter. In addition to the full range of data not available elsewhere, each chapter in the full Outlook provides an analysis of the industry drivers for each region, including developments in selected countries that illustrate the drivers and trends.

Industry size and expected growth


We project the entertainment and media industry in North America, EMEA, Asia Pacific, and Latin America will increase from $1.4 trillion in 2008 to $1.6 trillion in 2013, growing at a compound annual rate of 2.7 percent. North America will be the slowest-growing region, with a 1.3 percent compound annual increase. Spending during the next two years will fall by 8.2 percent and then increase by 16.2 percent during the subsequent three years, rising to $532 billion from $499 billion in 2008. EMEA, the largest region, at $522 billion in 2008, will decrease by 3.7 percent in 2009, stabilize in 2010, and then rise by 18.4 percent from 2010 to 2013 to $596 billion. Spending in Asia Pacific will increase by 0.2 percent in 2009, the only region where spending will grow, and will average 4.5 percent compounded annually through 2013, rising from $331 billion in 2008 to $413 billion in 2013. The market in Latin America will fall by 1 percent in 2009, an 11.1-percentagepoint turnaround from the 10.1 percent increase in 2008. For the five-year forecast period, spending will expand at a 5.1 percent compound annual rate to $73 billion in 2013 from $57 billion in 2008.

Global entertainment and media market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 443,977 6.5 421,227 6.1 234,415 10.7 35,105 11.4 7.3 2005 462,345 4.1 444,387 5.5 260,153 11.0 39,791 13.3 6.3 2006 485,824 5.1 473,419 6.5 283,364 8.9 44,869 12.8 6.7 2007 504,346 3.8 508,003 7.3 310,236 9.5 51,356 14.5 6.7 2008p 498,748 1.1 522,403 2.8 331,264 6.8 56,535 10.1 2.5 2009 463,221 7.1 502,934 3.7 331,934 0.2 55,979 1.0 3.9 2010 457,753 1.2 503,230 0.1 341,522 2.9 56,990 1.8 0.4 2011 471,158 2.9 521,152 3.6 359,165 5.2 60,313 5.8 3.8 2012 501,737 6.5 554,791 6.5 384,149 7.0 65,732 9.0 6.7 2013 532,002 6.0 595,791 7.4 412,799 7.5 72,581 10.4 7.1 5.1 2.7 4.5 2.7 1.3 200913 CAGR

1,134,724 1,206,676 1,287,476 1,373,941 1,408,950 1,354,068 1,359,495 1,411,788 1,506,409 1,613,173

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Entertainment and media lagged nominal GDP growth during the past two years and will grow at a slower rate than the overall economy during the next three years. In general, the E&M market is income elastic, which means it tends to grow faster than the economy when the economy is expanding, and slower than the economy when the economy is sluggish or contracting. That pattern reflects the fact that E&M spending largely reflects discretionary spending, which rises more than proportionally to the economy as a whole when incomes rise but falls more than proportionally when discretionary income is squeezed.

Global E&M and nominal GDP growth (%)


10 8 6 4 2 0 2 4 6 2004 2005 2006 2007 2008 2009 2010 Global nominal GDP Global E&M spending 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet access
Internet access is not an entertainment and media segment in itself, but it is a key driver of entertainment and media spending in most segments. Figures do not include the purchasing of E&M content such as music. Spending on E&M content downloaded over the Internet or through mobile phones is included in the respective entertainment and media segments. The Internet access market rose by 12.7 percent in 2008, continuing its trend of double-digit annual increases. We expect growth to moderate during the next two years to 5.4 percent annual increases as the adverse economy slows take-up rates for broadband. Once economic conditions have improved, we look for a return to doubledigit annual gains during 201113. Increased broadband penetration will boost wired access, and wireless network upgrades and 3G rollouts will drive mobile access. Spending will rise from $215 billion in 2008 to $334 billion in 2013, a 9.2 percent compound annual increase.

Global Internet access market: wired and mobile (US$ millions)


Segment Internet access: wired and mobile % Change 2004 110,370 21.9 2005 136,588 23.8 2006 162,394 18.9 2007 190,425 17.3 2008 214,601 12.7 2009 226,221 5.4 2010 238,450 5.4 2011 262,360 10.0 2012 296,387 13.0 2013 333,628 12.6 9.2 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media industry summary

29

Advertising
We project global advertising to fall by 12.1 percent in 2009. Except for a fledgling video game advertising market, each segment, including Internet advertising, will decline in 2009. We expect decreases to extend to 2010 for consumer magazines, trade magazines, and out-of-home advertising, while declines will continue through 2011 for newspapers, radio, and directories. During 201213, each segment will expand as economic conditions improve. Internet advertising will return to double-digit increases during 201213 and will average 7.7 percent compounded annually for the five-year forecast period as a whole. The Internet will constitute 19 percent of global advertising in 2013 compared with 12 percent in 2008 and only 4 percent in 2004.

A small video game advertising sector will increase at a 13.8 percent compound annual rate to $2.6 billion in 2013. Out-of-home advertising will be the only other segment to be larger in 2013 than in 2008, growing at a 1.1 percent compound annual rate to $30.5 billion. Digital billboards are expanding the effective inventory by allowing the same display to be sold to multiple advertisers. Television will be flat, at $168 billion, which understates underlying growth because 2008 was boosted by advertising associated with the Beijing Summer Olympics, while 2013 will not have Olympics-related advertising. Consumer magazines, newspapers, radio, directories, and trade magazines will each be lower in 2013 than in 2008. Overall global advertising will decline at a 0.5 percent compound annual rate from $479 billion in 2008 to $467 billion in 2013.

Global advertising (US$ millions)


Segment Internet: wired and mobile % Change Television % Change Video games % Change Consumer magazines % Change Newspapers % Change Radio % Change Out-of-home % Change Directories % Change Trade magazines % Change Total % Change 2004 17,922 43.7 145,575 10.8 30 31,852 5.5 113,532 5.0 32,497 4.7 23,104 7.9 30,458 2.6 17,929 2.8 411,358 8.1 2005 26,795 49.5 150,555 3.4 177 490.0 33,301 4.5 117,931 3.9 33,353 2.6 24,705 6.9 31,672 4.0 19,175 6.9 433,922 5.5 2006 38,696 44.4 160,273 6.5 669 278.0 34,569 3.8 120,893 2.5 34,359 3.0 26,688 8.0 33,432 5.6 20,067 4.7 462,678 6.6 2007 51,813 33.9 166,268 3.7 1,044 56.1 36,083 4.4 120,333 0.5 34,558 0.6 29,028 8.8 34,642 3.6 20,532 2.3 484,516 4.7 2008p 59,873 15.6 168,342 1.2 1,373 31.5 35,173 2.5 110,822 7.9 32,546 5.8 28,810 0.8 34,694 0.2 19,622 4.4 479,317 1.1 2009 58,717 1.9 149,076 11.4 1,588 15.7 29,818 15.2 92,671 16.4 28,661 11.9 26,871 6.7 29,191 15.9 16,252 17.2 421,087 12.1 2010 60,241 2.6 149,507 0.3 1,874 18.0 28,651 3.9 86,673 6.5 26,997 5.8 26,518 1.3 26,588 8.9 15,350 5.6 409,873 2.7 2011 65,654 9.0 151,648 1.4 2,172 15.9 29,273 2.2 85,989 0.8 26,592 1.5 27,152 2.4 26,187 1.5 15,453 0.7 415,776 1.4 2012 74,972 14.2 162,520 7.2 2,418 11.3 30,731 5.0 87,919 2.2 27,109 1.9 28,543 5.1 26,910 2.8 16,044 3.8 440,265 5.9 2013 86,728 15.7 168,414 3.6 2,622 8.4 33,279 8.3 91,820 4.4 28,070 3.5 30,484 6.8 28,611 6.3 17,430 8.6 467,321 6.1 0.5 2.3 3.8 1.1 2.9 3.7 1.1 13.8 0.0 7.7 200913 CAGR

Note: Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Consumer/end-user spending
Global consumer/end-user spending will decline by 1.2 percent in 2009 as decreases in recorded music, consumer magazines, newspapers, consumer and educational books, and business-to-business publishing offset gains in TV subscriptions and license fees, filmed entertainment, and video games. Newspapers and consumer and educational books will continue to decline through 2010. Consumer magazines and business-tobusiness publishing will continue to fall through 2011, while recorded music, which has been declining since 2004, will continue that trend through 2012 before finally posting an increase in 2013. Video games will be the fastest-growing segment during the next five years, with a 7.2 percent compound annual increase, boosted by growth in online and wireless games

and in the next generation of consoles. TV subscriptions and license fees will be the next fastest, with a projected 6.3 percent increase compounded annually, fueled by growth in subscription households, the entrance of telephone companies into TV distribution, and an expanding video-on-demand market once the economy improves. Filmed entertainment will grow at a 4 percent compound annual rate, boosted by the proliferation of digital cinemas and 3-D films and by an emerging HD video market. Radio will rise at a 3.3 percent compound annual rate, the result of an expanding satellite radio market in North America and growing public radio license fees. The remaining segments will each grow by less than 1 percent compounded annually or will decrease. Overall spending will rise from $715 billion in 2008 to $812 billion in 2013, a 2.6 percent compound annual increase.

Global consumer/end-user spending (US$ millions)


Segment TV subscriptions and license fees % Change Recorded music % Change Filmed entertainment % Change Video games % Change Consumer magazines % Change Newspapers % Change Radio % Change Consumer and educational books % Change Business-to-business publishing % Change Total % Change 2004 134,396 8.3 37,328 0.1 82,834 6.8 27,777 13.4 43,965 3.3 68,610 1.3 12,120 5.4 103,113 1.5 102,853 3.7 612,996 4.6 2005 146,286 8.8 36,173 3.1 80,633 2.7 29,638 6.7 45,232 2.9 69,499 1.3 13,174 8.7 108,235 5.0 107,296 4.3 636,166 3.8 2006 158,598 8.4 34,943 3.4 82,233 2.0 33,835 14.2 45,303 0.2 69,940 0.6 14,202 7.8 109,539 1.2 113,811 6.1 662,404 4.1 2007 172,843 9.0 32,804 6.1 83,896 2.0 42,416 25.4 45,649 0.8 71,135 1.7 15,273 7.5 115,514 5.5 119,470 5.0 699,000 5.5 2008p 186,065 7.6 29,593 9.8 83,925 0.0 50,017 17.9 45,143 1.1 71,606 0.7 16,178 5.9 115,266 0.2 117,239 1.9 715,032 2.3 2009 191,753 3.1 27,414 7.4 84,833 1.1 53,501 7.0 42,978 4.8 71,122 0.7 16,794 3.8 112,289 2.6 106,076 9.5 706,760 1.2 2010 198,861 3.7 26,210 4.4 87,143 2.7 56,509 5.6 42,019 2.2 70,811 0.4 17,379 3.5 111,634 0.6 100,606 5.2 711,172 0.6 2011 214,064 7.6 25,760 1.7 91,045 4.5 59,432 5.2 41,928 0.2 71,234 0.6 17,896 3.0 112,823 1.1 99,470 1.1 733,652 3.2 2012 233,522 9.1 25,715 0.2 96,035 5.5 64,608 8.7 42,573 1.5 71,919 1.0 18,386 2.7 115,189 2.1 101,810 2.4 769,757 4.9 2013 252,330 8.1 26,061 1.3 102,165 6.4 70,891 9.7 43,544 2.3 72,769 1.2 19,067 3.7 118,493 2.9 106,904 5.0 812,224 5.5 2.6 1.8 0.6 3.3 0.3 0.7 7.2 4.0 2.5 6.3 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media industry summary

31

Global market by segment


This section provides a snapshot of trends and forecasts for the 12 industry segments covered in the Outlook. For each category and subcategory, as well as for supplemental categories not shown here, data on a country-by-country basis as well as a discussion of the key drivers can be found in the full Outlook.

Global entertainment and media market by segment (US$ millions)


Segment Internet access: wired and mobile % Change Internet advertising: wired and mobile % Change TV subscriptions and license fees % Change TV advertising % Change Recorded music % Change Filmed entertainment % Change Video games % Change Consumer magazine publishing % Change Newspaper publishing % Change Radio/out-of-home % Change Consumer and educational book publishing % Change Business-to-business publishing % Change Total % Change 2004 110,370 21.9 17,922 43.7 134,396 8.3 145,575 10.8 37,355 0.1 82,834 6.8 27,807 13.5 75,817 4.2 182,142 3.6 67,696 5.9 103,407 1.5 151,240 3.4 7.3 2005 136,588 23.8 26,795 49.5 146,286 8.8 150,555 3.4 36,183 3.1 80,633 2.7 29,815 7.2 78,533 3.6 187,430 2.9 71,207 5.2 108,557 5.0 158,143 4.6 6.3 2006 162,394 18.9 38,696 44.4 158,598 8.4 160,273 6.5 34,957 3.4 82,233 2.0 34,504 15.7 79,872 1.7 190,833 1.8 75,224 5.6 109,730 1.1 167,310 5.8 6.7 2007 190,425 17.3 51,813 33.9 172,843 9.0 166,268 3.7 33,211 5.0 83,896 2.0 43,460 26.0 81,732 2.3 191,468 0.3 78,834 4.8 115,656 5.4 174,644 4.4 6.7 2008p 214,601 12.7 58,332 12.6 186,065 7.6 168,342 1.2 30,764 7.4 83,926 0.0 51,390 18.2 80,316 1.7 182,428 4.7 77,496 1.7 115,356 0.3 171,542 1.8 2.5 2009 226,221 5.4 56,762 2.7 191,753 3.1 149,076 11.4 28,382 7.7 84,833 1.1 55,089 7.2 72,796 9.4 163,793 10.2 72,322 6.7 112,960 2.1 151,541 11.7 3.9 2010 238,450 5.4 57,801 1.8 198,861 3.7 149,507 0.3 26,887 5.3 87,143 2.7 58,383 6.0 70,670 2.9 157,484 3.9 70,859 2.0 112,235 0.6 142,524 6.0 0.3 2011 262,360 10.0 62,937 8.9 214,064 7.6 151,648 1.4 26,349 2.0 91,045 4.5 61,604 5.5 71,201 0.8 157,223 0.2 71,569 1.0 113,386 1.0 141,069 1.0 3.8 2012 296,387 13.0 71,781 14.1 233,522 9.1 162,520 7.2 26,133 0.8 96,035 5.5 67,026 8.8 73,304 3.0 159,838 1.7 73,925 3.3 115,649 2.0 144,710 2.6 6.7 2013 333,628 12.6 83,085 15.7 252,330 8.1 168,414 3.6 26,424 1.1 102,165 6.4 73,513 9.7 76,823 4.8 164,589 3.0 77,456 4.8 118,916 2.8 152,879 5.6 7.1 2.3 2.7 0.6 0.0 2.0 0.9 7.4 4.0 3.0 0.0 6.3 7.3 9.2 200913 CAGR

1,135,020 1,206,983 1,287,656 1,374,465 1,408,620 1,353,768 1,358,277 1,410,111 1,503,929 1,610,086

Note: Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by segment

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Internet access
Global Internet access, which comprises both wired and mobile access, rose by 12.7 percent in 2008. Growth will drop to mid single digits during the next two years because of a slower migration rate from dial-up to broadband, a slower take-up rate for high-speed broadband services in the near term, and increased competition that will lower average spending per subscriber. Over the longer run, penetration into rural areas and faster broadband speeds will accelerate the migration to broadband. Wireless network upgrades, the further rollout of enhanced wireless, and increased penetration of smart phones with touch-screen capabilities will stimulate demand for mobile applications

and drive even further demand for high-speed Internet access, returning to a pattern of double-digit annual growth. Wired broadband access will increase at a 9.3 percent compound annual rate to $206 billion in 2013. Broadband growth is coming at the expense of dial-up, which will decline at an 11.9 percent compound annual rate to only $16 billion in 2013. Nearly three-quarters of total mobile access spending in 2008 was generated by Japan, South Korea, and the Peoples Republic of China. Mobile access will expand by 16.5 percent compounded annually to $111 billion in 2013. The overall access market will increase at a 9.2 percent compound annual rate to $334 billion in 2013.

Global Internet access market: wired and mobile by region (US$ millions)
Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 26,619 8.2 44,709 16.1 35,644 43.4 3,398 30.5 110,370 21.9 2005 29,990 12.7 52,370 17.1 49,756 39.6 4,472 31.6 136,588 23.8 2006 34,282 14.3 61,974 18.3 60,219 21.0 5,919 32.4 162,394 18.9 2007 40,962 19.5 71,608 15.5 70,224 16.6 7,631 28.9 190,425 17.3 2008p 44,049 7.5 80,344 12.2 81,291 15.8 8,917 16.9 214,601 12.7 2009 45,597 3.5 84,100 4.7 86,940 6.9 9,584 7.5 226,221 5.4 2010 47,319 3.8 88,855 5.7 91,837 5.6 10,439 8.9 238,450 5.4 2011 52,503 11.0 99,160 11.6 98,496 7.3 12,201 16.9 262,360 10.0 2012 60,497 15.2 114,086 15.1 107,164 8.8 14,640 20.0 296,387 13.0 2013 68,294 12.9 131,356 15.1 116,598 8.8 17,380 18.7 333,628 12.6 9.2 14.3 7.5 10.3 9.2 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Global Internet access market: wired and mobile by component (US$ millions)
Component Dial-up % Change Broadband % Change Total wired Internet access % Change Mobile access % Change Total % Change 2004 42,920 11.3 54,350 44.3 97,270 13.0 13,100 190.1 110,370 21.9 2005 39,111 8.9 72,719 33.8 111,830 15.0 24,758 89.0 136,588 23.8 2006 34,169 12.6 92,891 27.7 127,060 13.6 35,334 42.7 162,394 18.9 2007 32,089 6.1 114,830 23.6 146,919 15.6 43,506 23.1 190,425 17.3 2008p 30,542 4.8 132,058 15.0 162,600 10.7 52,001 19.5 214,601 12.7 2009 28,363 7.1 138,618 5.0 166,981 2.7 59,240 13.9 226,221 5.4 2010 25,656 9.5 146,837 5.9 172,493 3.3 65,957 11.3 238,450 5.4 2011 22,831 11.0 162,641 10.8 185,472 7.5 76,888 16.6 262,360 10.0 2012 19,534 14.4 184,285 13.3 203,819 9.9 92,568 20.4 296,387 13.0 2013 16,245 16.8 205,949 11.8 222,194 9.0 111,434 20.4 333,628 12.6 9.2 16.5 6.4 9.3 11.9 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by segment

35

Internet advertising
Global Internet advertising, including (1) advertising on Web sites accessed by a computer and (2) mobile sites intended for access by mobile phones, rose by 15.6 percent in 2008, a slowdown from annual gains in excess of 30 percent during the prior four years. The economic downturn will cut into growth during the next two years. Display and classified advertising will be hurt most by the recession, while search and video advertising will hold up better. The anticipated economic recovery will lead to a return to double-digit growth during 201213. In addition to the economy, broadband household growth will be the

principal driver of wired Internet advertising. In the mobile market, wireless network upgrades, growth in mobile access subscribers, increasing penetration of Internetenabled smart phones, and the expansion of mobile television will drive mobile advertising. We project global wired advertising to expand at a 6.7 percent compound annual rate to $78 billion in 2013. Mobile advertising will rise from $3.8 billion in 2008 to $9.2 billion in 2013, a 19.7 percent compound annual increase. Global Internet advertising as a whole will increase to $87 billion in 2013, growing at a 7.7 percent compound annual rate from $60 billion in 2008.

Global Internet advertising market: wired and mobile by region (US$ millions)
Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 10,069 33.8 4,760 59.9 2,940 57.8 153 45.7 17,922 43.7 2005 13,264 31.7 7,585 59.3 5,687 93.4 259 69.3 26,795 49.5 2006 18,149 36.8 12,524 65.1 7,685 35.1 338 30.5 38,696 44.4 2007 23,115 27.4 17,799 42.1 10,359 34.8 540 59.8 51,813 33.9 2008p 26,284 13.7 20,427 14.8 12,502 20.7 660 22.2 59,873 15.6 2009 25,459 3.1 19,533 4.4 13,019 4.1 706 7.0 58,717 1.9 2010 25,844 1.5 19,929 2.0 13,698 5.2 770 9.1 60,241 2.6 2011 27,697 7.2 21,829 9.5 15,211 11.0 917 19.1 65,654 9.0 2012 31,196 12.6 24,637 12.9 17,977 18.2 1,162 26.7 74,972 14.2 2013 35,918 15.1 28,106 14.1 21,230 18.1 1,474 26.9 86,728 15.7 7.7 17.4 11.2 6.6 6.4 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Global Internet advertising market: wired and mobile by component (US$ millions)
Component Wired Internet advertising % Change Mobile advertising % Change Total % Change 2004 17,604 42.7 318 140.9 17,922 43.7 2005 26,079 48.1 716 125.2 26,795 49.5 2006 37,407 43.4 1,289 80.0 38,696 44.4 2007 49,692 32.8 2,121 64.5 51,813 33.9 2008p 56,111 12.9 3,762 77.4 59,873 15.6 2009 54,695 2.5 4,022 6.9 58,717 1.9 2010 55,756 1.9 4,485 11.5 60,241 2.6 2011 60,242 8.0 5,412 20.7 65,654 9.0 2012 68,003 12.9 6,969 28.8 74,972 14.2 2013 77,502 14.0 9,226 32.4 86,728 15.7 7.7 19.7 6.7 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Television subscriptions and license fees


The global television subscription and license fee market increased by 7.6 percent in 2008 to $186 billion. The weak economy will keep increases at less than 4 percent during the next two years, while the expected economic recovery will lead to a return to high-single-digit annual gains during 201113. Subscribers upgrading from analog to digital will boost subscription spending and video-on-demand once the economy improves. Subscription spending will grow at a 6.7 percent compound annual rate to $202 billion in 2013 from $147 billion in 2008. Video-on-demand will decline in 2009 and then will return to gains in excess of 20

percent annually during 201113, averaging 14.7 percent compounded annually during the entire five-year forecast periodin the process, cannibalizing pay-per-view. Mobile TV will be the fastest-growing component, with a 34.6 percent compound annual increase from a small base, although free mobile TV services will cut into the potential for subscription spending on mobile television. In EMEA, free digital terrestrial television services will limit subscription spending. We expect the total market, including public TV license fees in EMEA and Asia Pacific, to reach $252 billion in 2013, a 6.3 percent compound annual increase from 2008.

Global TV subscription and license fee market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 57,725 9.4 53,923 6.3 16,805 11.2 5,943 7.9 134,396 8.3 2005 62,048 7.5 58,460 8.4 19,168 14.1 6,610 11.2 146,286 8.8 2006 66,717 7.5 63,150 8.0 21,365 11.5 7,366 11.4 158,598 8.4 2007 71,120 6.6 68,737 8.8 24,596 15.1 8,390 13.9 172,843 9.0 2008p 74,775 5.1 74,290 8.1 27,530 11.9 9,470 12.9 186,065 7.6 2009 76,187 1.9 76,142 2.5 29,698 7.9 9,726 2.7 191,753 3.1 2010 78,118 2.5 78,263 2.8 32,443 9.2 10,037 3.2 198,861 3.7 2011 84,512 8.2 82,748 5.7 36,177 11.5 10,627 5.9 214,064 7.6 2012 91,840 8.7 89,443 8.1 40,556 12.1 11,683 9.9 233,522 9.1 2013 97,278 5.9 96,672 8.1 45,423 12.0 12,957 10.9 252,330 8.1 6.3 6.5 10.5 5.4 5.4 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by segment

37

Global TV subscription and license fee market by component (US$ millions)


Component Subscriptions % Change Pay-per-view % Change Video-on-demand % Change Public TV license fees % Change Mobile TV % Change Total % Change 2004 103,499 9.0 3,006 17.1 1,232 59.8 26,659 3.0 134,396 8.3 2005 113,379 9.5 3,375 12.3 1,771 43.8 27,761 4.1 146,286 8.8 2006 123,740 9.1 3,738 10.8 2,448 38.2 28,397 2.3 275 158,598 8.4 2007 135,467 9.5 4,009 7.2 3,579 46.2 29,181 2.8 607 120.7 172,843 9.0 2008p 146,553 8.2 4,209 5.0 4,614 28.9 29,740 1.9 949 56.3 186,065 7.6 2009 151,218 3.2 4,023 4.4 4,595 0.4 30,848 3.7 1,069 12.6 191,753 3.1 2010 157,277 4.0 3,900 3.1 4,795 4.4 31,600 2.4 1,289 20.6 198,861 3.7 2011 170,441 8.4 3,966 1.7 5,899 23.0 32,017 1.3 1,741 35.1 214,064 7.6 2012 186,890 9.7 4,028 1.6 7,555 28.1 32,339 1.0 2,710 55.7 233,522 9.1 2013 202,479 8.3 4,007 0.5 9,152 21.1 32,501 0.5 4,191 54.6 252,330 8.1 6.3 34.6 1.8 14.7 1.0 6.7 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Television advertising
The TV advertising market rose by 1.2 percent in 2008, the slowest gain during the past five years despite the infusion of advertising associated with the Beijing Olympics. The economic decline during the latter part of the year was the cause of the slowdown. The adverse economy will lead to an 11.4 percent decline in 2009 and will keep spending low during 201011, with an improvement in the economic environment contributing to the recovery during 201213. Multichannel advertising will be the fastest-growing sector in each region, buoyed by large increases in digital households and viewing-share gains for cable, satellite

channels, and digital terrestrial television channels. Multichannel advertising will fall by 7.1 percent in 2009 and then rebound, averaging 3.8 percent compounded annually to $52 billion in 2013. Terrestrial broadcast advertising will fall by 13 percent in 2009 and will continue to decline through 2011, averaging a 1.5 percent compound annual decrease through 2013. Spending will total $116 billion in 2013 from $125 billion in 2008. Highdefinition television will boost advertising on free-to-air channels once the underlying economic environment improves. We project total television advertising to be flat during the next five years, returning to its $168-billion level in 2013.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Global television advertising market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 68,038 11.6 39,924 10.5 31,326 8.1 6,287 20.2 145,575 10.8 2005 68,074 0.1 42,272 5.9 32,568 4.0 7,641 21.5 150,555 3.4 2006 72,464 6.4 45,087 6.7 33,792 3.8 8,930 16.9 160,273 6.5 2007 71,811 0.9 48,755 8.1 34,972 3.5 10,730 20.2 166,268 3.7 2008p 71,367 0.6 48,876 0.2 35,856 2.5 12,243 14.1 168,342 1.2 2009 61,653 13.6 43,403 11.2 32,637 9.0 11,383 7.0 149,076 11.4 2010 62,563 1.5 42,715 1.6 32,941 0.9 11,288 0.8 149,507 0.3 2011 62,937 0.6 43,324 1.4 33,775 2.5 11,612 2.9 151,648 1.4 2012 68,597 9.0 46,384 7.1 35,330 4.6 12,209 5.1 162,520 7.2 2013 69,251 1.0 48,850 5.3 37,205 5.3 13,108 7.4 168,414 3.6 0.0 1.4 0.7 0.0 0.6 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Global television advertising market by component (US$ millions)


Component Terrestrial % Change Multichannel % Change Total % Change 2004 114,359 9.6 31,216 15.8 145,575 10.8 2005 116,090 1.5 34,465 10.4 150,555 3.4 2006 122,825 5.8 37,448 8.7 160,273 6.5 2007 125,362 2.1 40,906 9.2 166,268 3.7 2008p 125,026 0.3 43,316 5.9 168,342 1.2 2009 108,818 13.0 40,258 7.1 149,076 11.4 2010 107,482 1.2 42,025 4.4 149,507 0.3 2011 107,325 0.1 44,323 5.5 151,648 1.4 2012 113,985 6.2 48,535 9.5 162,520 7.2 2013 116,186 1.9 52,228 7.6 168,414 3.6 0.0 3.8 1.5 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by segment

39

Recorded music
The global recorded music market fell by 9.8 percent in 2008, its steepest decline during the past five years. Spending on physical formats fell by 17.3 percent, offsetting a 22.4 percent rise in digital formats. Physical distribution will decline in each region because of competition from legitimate digital services and piracy. We expect spending on physical formats to fall by 49 percent during the next five years to $11.3 billion from $22 billion in 2008. The digital market is dominated by Internet distribution in North America and EMEA and by mobile distribution in Asia Pacific and Latin America. The availability of music without copyright protection software and a growing broadband universe will boost Internet distribution. Internet distribution will more than double to $8.8 billion in 2013, growing at a 21.2 percent compound annual rate from $3.4 billion in 2008. Bundled services, low-cost or free mobile music, and side loading from lower-cost Internet services will cut into the paid mobile music market in North America and EMEA. Over time, the mobile music market will evolve into a subscription-based

service. In Asia Pacific and Latin America, mobile music faces less competition from Internet distribution, which will continue to be hampered by high piracy rates. Wireless network upgrades and advanced handsets will fuel mobile music spending in those regions. We expect spending on music distributed to mobile phones to rise at a 7.1 percent compound annual rate to $6 billion in 2013 from $4.3 billion in 2008. Total spending on digital music will expand by 14.2 percent compounded annually to $14.8 billion. By 2012, the global digital market will have overtaken the global physical market, with the result that further declines in spending on physical formats will have a less adverse impact on total spending. We expect modest growth in total spending to begin in 2013. In North America and Asia Pacific, digital will surpass physical in 2011, while in EMEA and Latin America, physical will remain the largest component through 2013. We project that global spending during the next five years will fall at a 2.5 percent compound annual rate to $26.1 billion in 2013 from $29.6 billion in 2008.

Global recorded music market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 13,590 5.3 14,775 4.3 7,783 1.9 1,180 13.8 37,328 0.1 2005 13,114 3.5 14,166 4.1 7,722 0.8 1,171 0.8 36,173 3.1 2006 12,516 4.6 13,396 5.4 7,890 2.2 1,141 2.6 34,943 3.4 2007 11,025 11.9 12,176 9.1 8,626 9.3 977 14.4 32,804 6.1 2008p 9,022 18.2 11,062 9.1 8,552 0.9 957 2.0 29,593 9.8 2009 8,031 11.0 10,091 8.8 8,386 1.9 906 5.3 27,414 7.4 2010 7,384 8.1 9,597 4.9 8,360 0.3 869 4.1 26,210 4.4 2011 7,102 3.8 9,354 2.5 8,441 1.0 863 0.7 25,760 1.7 2012 7,064 0.5 9,218 1.5 8,553 1.3 880 2.0 25,715 0.2 2013 7,188 1.8 9,215 0.0 8,720 2.0 938 6.6 26,061 1.3 2.5 0.4 0.4 3.6 4.4 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Recording Industry Association of America, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Global recorded music digital distribution market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 590 243.0 154 214.3 356 114.5 20 81.8 1,120 181.4 2005 1,103 86.9 418 171.4 807 126.7 28 40.0 2,356 110.4 2006 1,928 74.8 780 86.6 1,230 52.4 44 57.1 3,982 69.0 2007 2,462 27.7 1,187 52.2 2,469 100.7 118 168.2 6,236 56.6 2008p 2,813 14.3 1,654 39.3 2,969 20.3 195 65.3 7,631 22.4 2009 3,170 12.7 1,894 14.5 3,387 14.1 224 14.9 8,675 13.7 2010 3,537 11.6 2,297 21.3 3,869 14.2 251 12.1 9,954 14.7 2011 4,013 13.5 2,834 23.4 4,383 13.3 295 17.5 11,525 15.8 2012 4,545 13.3 3,377 19.2 4,866 11.0 364 23.4 13,152 14.1 2013 5,079 11.7 3,927 16.3 5,339 9.7 462 26.9 14,807 12.6 14.2 18.8 12.5 18.9 12.5 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Recording Industry Association of America, Wilkofsky Gruen Associates

Global recorded music physical distribution market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 13,000 2.1 14,621 4.9 7,427 4.3 1,160 13.1 36,208 1.9 2005 12,011 7.6 13,748 6.0 6,915 6.9 1,143 1.5 33,817 6.6 2006 10,588 11.8 12,616 8.2 6,660 3.7 1,097 4.0 30,961 8.4 2007 8,563 19.1 10,989 12.9 6,157 7.6 859 21.7 26,568 14.2 2008p 6,209 27.5 9,408 14.4 5,583 9.3 762 11.3 21,962 17.3 2009 4,861 21.7 8,197 12.9 4,999 10.5 682 10.5 18,739 14.7 2010 3,847 20.9 7,300 10.9 4,491 10.2 618 9.4 16,256 13.3 2011 3,089 19.7 6,520 10.7 4,058 9.6 568 8.1 14,235 12.4 2012 2,519 18.5 5,841 10.4 3,687 9.1 516 9.2 12,563 11.7 2013 2,109 16.3 5,288 9.5 3,381 8.3 476 7.8 11,254 10.4 12.5 9.0 9.5 10.9 19.4 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Recording Industry Association of America, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by segment

41

Global recorded music market by component (US$ millions)


Component Physical distribution % Change Internet % Change Mobile phones % Change Digital total % Change Total % Change 2004 36,208 1.9 382 402.6 738 129.2 1,120 181.4 37,328 0.1 2005 33,817 6.6 993 159.9 1,363 84.7 2,356 110.4 36,173 3.1 2006 30,961 8.4 1,698 71.0 2,284 67.6 3,982 69.0 34,943 3.4 2007 26,568 14.2 2,502 47.3 3,734 63.5 6,236 56.6 32,804 6.1 2008p 21,962 17.3 3,367 34.6 4,264 14.2 7,631 22.4 29,593 9.8 2009 18,739 14.7 4,270 26.8 4,405 3.3 8,675 13.7 27,414 7.4 2010 16,256 13.3 5,265 23.3 4,689 6.4 9,954 14.7 26,210 4.4 2011 14,235 12.4 6,441 22.3 5,084 8.4 11,525 15.8 25,760 1.7 2012 12,563 11.7 7,629 18.4 5,523 8.6 13,152 14.1 25,715 0.2 2013 11,254 10.4 8,801 15.4 6,006 8.7 14,807 12.6 26,061 1.3 2.5 14.2 7.1 21.2 12.5 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Recording Industry Association of America, Wilkofsky Gruen Associates

Filmed entertainment
Filmed entertainment was flat in 2008, at $84 billion, as a 3.8 percent increase in box office spending offset a 1.8 percent drop in home video. Key factors affecting the market in any given year are the quality of releases and their appeal to consumersdevelopments we cannot predict. The underlying box office market will be enhanced by a growing share of 3-D releases that generate higher prices and higher ticket sales than standard 2-D films do. Modern theaters, digital cinemas, and more screens will also boost spending. The adverse economy will cut into physical sell-through in the near term. Over the longer run, growth in Blu-ray HD videos will offset a declining DVD market and propel overall sell-through. Rentals will benefit from a weak economy in the near term because their lower prices will be more attractive.

Over the longer run, competition from video-on-demand and online distribution will cut into in-store rentals. The convenience of online rental services will boost spending. Faster broadband speeds and devices that allow TV viewing will propel a small digital download market. Piracy will continue to hold down spending, particularly in Asia Pacific and Latin America. Filmed entertainment will be the only segment where we expect (1) faster growth in 2009 1.1 percentthan in 2008, the result of improved box office spending from a larger array of 3-D releases, and (2) a modest gain in rental spending as the recession leads consumers to low-cost rentals for entertainment. During the next five years, we expect the market to expand at a 4 percent compound annual rate to $102 billion in 2013.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Global filmed entertainment market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 37,985 5.5 27,152 8.9 15,507 5.7 2,190 12.7 82,834 6.8 2005 37,374 1.6 25,465 6.2 15,604 0.6 2,190 0.0 80,633 2.7 2006 38,213 2.2 25,384 0.3 16,216 3.9 2,420 10.5 82,233 2.0 2007 38,992 2.0 25,374 0.0 16,944 4.5 2,586 6.9 83,896 2.0 2008p 38,243 1.9 25,533 0.6 17,663 4.2 2,486 3.9 83,925 0.0 2009 38,411 0.4 25,719 0.7 18,164 2.8 2,539 2.1 84,833 1.1 2010 39,232 2.1 26,261 2.1 19,022 4.7 2,628 3.5 87,143 2.7 2011 40,756 3.9 27,269 3.8 20,266 6.5 2,754 4.8 91,045 4.5 2012 42,687 4.7 28,744 5.4 21,687 7.0 2,917 5.9 96,035 5.5 2013 45,135 5.7 30,668 6.7 23,264 7.3 3,098 6.2 102,165 6.4 4.0 4.5 5.7 3.7 3.4 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Global filmed entertainment market by component (US$ millions)


Component Box office % Change Home video Physical sell-through % Change In-store rentals % Change Online rental subscriptions % Change Digital downloads % Change Home video total % Change Filmed entertainment total % Change 37,479 14.2 18,674 5.5 843 139.5 56,996 7.6 82,834 6.8 36,793 1.8 17,824 4.6 1,228 45.7 2 55,847 2.0 80,633 2.7 36,508 0.8 17,848 0.1 1,531 24.7 30 1400.0 55,917 0.1 82,233 2.0 36,353 0.4 17,898 0.3 2,210 44.4 133 343.3 56,594 1.2 83,896 2.0 34,708 4.5 17,691 1.2 2,900 31.2 286 115.0 55,585 1.8 83,925 0.0 33,371 3.9 17,747 0.3 3,741 29.0 388 35.7 55,247 0.6 84,833 1.1 33,257 0.3 17,775 0.2 4,481 19.8 535 37.9 56,048 1.4 87,143 2.7 34,243 3.0 17,757 0.1 5,285 17.9 714 33.5 57,999 3.5 91,045 4.5 35,983 5.1 17,690 0.4 6,053 14.5 1,029 44.1 60,755 4.8 96,035 5.5 38,774 7.8 17,562 0.7 6,702 10.7 1,416 37.6 64,454 6.1 102,165 6.4 4.0 3.0 37.7 18.2 0.1 2.2 2004 25,838 5.0 2005 24,786 4.1 2006 26,316 6.2 2007 27,302 3.7 2008p 28,340 3.8 2009 29,586 4.4 2010 31,095 5.1 2011 33,046 6.3 2012 35,280 6.8 2013 37,711 6.9 5.9 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by segment

43

Video games
Video games was the fastest-growing segment in 2008, with an 18.2 percent increase. The current generation of consoles will drive the market for the next few years. We expect that by 2012, the next generation of consoles will begin to be introduced, which will spur renewed growth in console games. Console games will average 5.5 percent growth compounded annually. The online market is being driven by the rising penetration of broadband households as well as the current generation of consoles that feature online capabilities. The increasing popularity of massive multiplayer online games (MMOGs)with their subscription fees, in-game advertising, and micro transactionsis also aiding the growth of the market. Casual games represent a further important component of the online market, helping expand the demographic base and stimulate spending. We expect online games to increase at a 10.6 percent compound annual rate.

Newer mobile phone handsets that are capable of downloading games and that provide larger screens and better graphics will drive demand for wireless games, as will the growth of 3G networks that will provide an environment that enables wireless games to approach the quality of console games. We expect wireless games to grow at a 13.8 percent compound annual rate. PC games will continue to deteriorate as consumers turn their attention to newer technologies, although the market will be maintained by purchases of PC games that often are needed to play MMOGs. PC games will decrease at a 1.2 percent compound annual rate. Video game advertising is emerging as an additional revenue stream. The growth of the online game market will fuel growth in dynamic in-game advertising. Growth will average 13.8 percent compounded annually. We project the overall video game market to expand from $51 billion in 2008 to $74 billion in 2013, a 7.4 percent compound annual increase.

Global video game market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 8,941 10.9 9,756 14.1 8,513 16.0 597 11.4 27,807 13.5 2005 9,036 1.1 10,648 9.1 9,504 11.6 627 5.0 29,815 7.2 2006 10,301 14.0 12,079 13.4 11,337 19.3 787 25.5 34,504 15.7 2007 13,315 29.3 15,135 25.3 13,985 23.4 1,025 30.2 43,460 26.0 2008p 16,243 22.0 18,133 19.8 15,747 12.6 1,267 23.6 51,390 18.2 2009 17,232 6.1 19,367 6.8 17,107 8.6 1,383 9.2 55,089 7.2 2010 17,798 3.3 20,360 5.1 18,719 9.4 1,506 8.9 58,383 6.0 2011 18,281 2.7 21,317 4.7 20,386 8.9 1,620 7.6 61,604 5.5 2012 19,632 7.4 23,038 8.1 22,580 10.8 1,776 9.6 67,026 8.8 2013 21,558 9.8 25,256 9.6 24,729 9.5 1,970 10.9 73,513 9.7 7.4 9.2 9.4 6.9 5.8 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Global video game market by component (US$ millions)


Component Console games % Change Online games % Change Wireless games % Change PC games % Change Total end-user spending % Change Advertising % Change Total video games % Change 2004 18,877 9.9 2,590 61.9 1,635 102.7 4,675 4.8 27,777 13.4 30 27,807 13.5 2005 18,329 2.9 3,895 50.4 2,820 72.5 4,594 1.7 29,638 6.7 177 490.0 29,815 7.2 2006 19,829 8.2 5,285 35.7 3,960 40.4 4,761 3.6 33,835 14.2 669 278.0 34,504 15.7 2007 25,465 28.4 6,823 29.1 5,424 37.0 4,704 1.2 42,416 25.4 1,044 56.1 43,460 26.0 2008p 30,394 19.4 8,251 20.9 7,028 29.6 4,344 7.7 50,017 17.9 1,373 31.5 51,390 18.2 2009 31,569 3.9 9,353 13.4 8,266 17.6 4,313 0.7 53,501 7.0 1,588 15.7 55,089 7.2 2010 32,380 2.6 10,317 10.3 9,533 15.3 4,279 0.8 56,509 5.6 1,874 18.0 58,383 6.0 2011 33,106 2.2 11,270 9.2 10,824 13.5 4,232 1.1 59,432 5.2 2,172 15.9 61,604 5.5 2012 35,751 8.0 12,453 10.5 12,230 13.0 4,174 1.4 64,608 8.7 2,418 11.3 67,026 8.8 2013 39,712 11.1 13,679 9.8 13,404 9.6 4,096 1.9 70,891 9.7 2,622 8.4 73,513 9.7 7.4 13.8 7.2 1.2 13.8 10.6 5.5 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Consumer magazine publishing


Consumer magazine publishing declined by 1.7 percent in 2008 as the impact of the economic downturn began to be felt. The adverse economy will lead to steep decreases in advertising in the near term. Print advertising will fall by 15.9 percent in 2009 and by a cumulative 19.9 percent through 2010. Migration of advertising and readers from print to digital will dampen print advertising over the long run while benefiting an emerging digital market. Broadband household growth and an expanding mobile access market will also fuel digital advertising. We expect digital advertising to rise at an 18.3 percent compound annual rate to $3.1 billion in 2013, while print advertising,

at $30.2 billion in 2013, will be 2.3 percent lower on a compound annual basis from 2008. Total advertising will decrease by 1.1 percent compounded annually during the next five years. Newsstand sales will be vulnerable to the economic cycle in many countries during the next two years, and subscription sales will be at risk as well when they are due for renewal. Rising discretionary income during the latter part of the forecast period will lead to a rebound in circulation spending. Circulation spending will decline through 2011 and will average a 0.7 percent compound annual decrease through 2013. We project consumer magazine publishing to contract at a 0.9 percent compound annual rate to $77 billion in 2013 from $80 billion in 2008.

Executive summary | Global entertainment and media market by segment

45

Global consumer magazine publishing market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 23,716 5.1 34,431 3.2 15,110 4.3 2,560 9.2 75,817 4.2 2005 24,609 3.8 35,306 2.5 15,813 4.7 2,805 9.6 78,533 3.6 2006 24,475 0.5 36,139 2.4 16,268 2.9 2,990 6.6 79,872 1.7 2007 25,404 3.8 36,731 1.6 16,335 0.4 3,262 9.1 81,732 2.3 2008p 24,510 3.5 36,228 1.4 16,214 0.7 3,364 3.1 80,316 1.7 2009 21,193 13.5 33,493 7.5 14,917 8.0 3,193 5.1 72,796 9.4 2010 20,417 3.7 32,689 2.4 14,429 3.3 3,135 1.8 70,670 2.9 2011 20,634 1.1 32,840 0.5 14,547 0.8 3,180 1.4 71,201 0.8 2012 21,270 3.1 33,688 2.6 15,004 3.1 3,342 5.1 73,304 3.0 2013 22,551 6.0 34,984 3.8 15,705 4.7 3,583 7.2 76,823 4.8 0.9 1.3 0.6 0.7 1.7 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Global consumer magazine publishing market by component (US$ millions)


Component Print advertising % Change Digital advertising % Change Total advertising % Change Circulation % Change Total % Change 2004 31,852 5.5 NA 31,852 5.5 43,965 3.3 75,817 4.2 2005 33,173 4.1 128 33,301 4.5 45,232 2.9 78,533 3.6 2006 34,184 3.0 385 200.8 34,569 3.8 45,303 0.2 79,872 1.7 2007 35,393 3.5 690 79.2 36,083 4.4 45,649 0.8 81,732 2.3 2008p 33,841 4.4 1,332 93.0 35,173 2.5 45,143 1.1 80,316 1.7 2009 28,452 15.9 1,366 2.6 29,818 15.2 42,978 4.8 72,796 9.4 2010 27,105 4.7 1,546 13.2 28,651 3.9 42,019 2.2 70,670 2.9 2011 27,359 0.9 1,914 23.8 29,273 2.2 41,928 0.2 71,201 0.8 2012 28,292 3.4 2,439 27.4 30,731 5.0 42,573 1.5 73,304 3.0 2013 30,189 6.7 3,090 26.7 33,279 8.3 43,544 2.3 76,823 4.8 0.9 0.7 1.1 18.3 2.3 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Newspaper publishing
Newspaper publishing fell by 4.7 percent in 2008, the result of an 8.7 percent drop in print advertising. We expect a steeper, 17.3 percent decline in 2009, with a cumulative 24.3 percent decrease through 2011. Print advertising in 2011 will be 32 percent lower than in 2006. In addition to the impact of the economy, the continuing migration of advertisingparticularly classified advertisingto the Internet will hurt print advertising over the long run. Nevertheless, improved economic conditions in 201213 will lead to a modest rebound in print

advertising, albeit from a much lower base. Even so, print advertising in 2013 will be 20.4 percent lower in 2013 than in 2008. Rising Web site traffic will boost digital advertising once economic conditions have improved. In digital advertising during the next five years, we project a 6.8 percent gain compounded annually. Overall newspaper advertising will fall at a 3.7 percent compound annual rate. Circulation spending will be relatively flat because declines in paid circulation in North America and EMEA will be offset by increases in Latin America and Asia Pacific. The overall newspaper market will decline from $182 billion in 2008 to $165 billion in 2013, a 2 percent compound annual decrease.

Global newspaper publishing market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 62,421 3.3 68,724 3.5 46,378 4.0 4,619 4.9 182,142 3.6 2005 63,488 1.7 70,967 3.3 47,953 3.4 5,022 8.7 187,430 2.9 2006 63,170 0.5 72,701 2.4 49,473 3.2 5,489 9.3 190,833 1.8 2007 59,083 6.5 74,997 3.2 51,262 3.6 6,126 11.6 191,468 0.3 2008p 50,793 14.0 73,102 2.5 51,717 0.9 6,816 11.3 182,428 4.7 2009 41,810 17.7 66,634 8.8 48,718 5.8 6,631 2.7 163,793 10.2 2010 38,071 8.9 64,798 2.8 48,009 1.5 6,606 0.4 157,484 3.9 2011 36,885 3.1 64,892 0.1 48,687 1.4 6,759 2.3 157,223 0.2 2012 36,858 0.1 65,903 1.6 50,039 2.8 7,038 4.1 159,838 1.7 2013 37,720 2.3 67,487 2.4 51,876 3.7 7,506 6.6 164,589 3.0 2.0 1.9 0.1 1.6 5.8 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by segment

47

Global newspaper publishing market by component (US$ millions)


Component Print advertising % Change Digital advertising % Change Total advertising % Change Circulation % Change Total % Change 2004 111,991 4.7 1,541 26.7 113,532 5.0 68,610 1.3 182,142 3.6 2005 114,926 2.6 3,005 95.0 117,931 3.9 69,499 1.3 187,430 2.9 2006 116,642 1.5 4,251 41.5 120,893 2.5 69,940 0.6 190,833 1.8 2007 114,853 1.5 5,480 28.9 120,333 0.5 71,135 1.7 191,468 0.3 2008p 104,830 8.7 5,992 9.3 110,822 7.9 71,606 0.7 182,428 4.7 2009 86,716 17.3 5,955 0.6 92,671 16.4 71,122 0.7 163,793 10.2 2010 80,529 7.1 6,144 3.2 86,673 6.5 70,811 0.4 157,484 3.9 2011 79,353 1.5 6,636 8.0 85,989 0.8 71,234 0.6 157,223 0.2 2012 80,559 1.5 7,360 10.9 87,919 2.2 71,919 1.0 159,838 1.7 2013 83,487 3.6 8,333 13.2 91,820 4.4 72,769 1.2 164,589 3.0 2.0 0.3 3.7 6.8 4.5 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Radio and out-of-home


The radio and out-of-home market fell by 1.7 percent in 2008 as the economic downturn cut into advertising. Outof-home declined by 0.8 percent, while radio fell by 2.2 percent. Weak economic conditions will lead to a steeper, 6.7 percent drop in 2009 and a further, 2 percent decrease in 2010. With improved economic conditions in 2011, we expect a return to growth. Out-of-home will be fueled by digital billboards that expand the effective out-of-home inventory because multiple ads can be shown on the same display. Improved out-of-home audience measurement will attract advertisers, and the expansion of captive video networks will also fuel growth. Radio advertising will face

growing competition from the Internet, but satellite radio will boost spending in North America. Modest increases in public radio license fees will help stabilize the radio markets in EMEA and Asia Pacific. We expect out-of-home advertising to expand at a 1.1 percent compound annual rate during the next five years to $30 billion in 2013 from $29 billion in 2008. We project that radio will decrease at a 0.7 percent compound annual rate from $49 billion in 2008 to $47 billion in 2013. The overall radio and out-of-home market will be flat, at $78 billion, as near-term decreases are offset by expansion during 201113.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Global radio/out-of-home market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 27,240 4.3 25,086 5.5 14,433 9.2 962 13.4 67,721 5.9 2005 28,534 4.8 26,394 5.2 14,912 3.3 1,392 44.7 71,232 5.2 2006 29,982 5.1 27,851 5.5 15,866 6.4 1,550 11.4 75,249 5.6 2007 30,947 3.2 29,286 5.2 16,861 6.3 1,765 13.9 78,859 4.8 2008p 29,631 4.3 29,075 0.7 16,935 0.4 1,893 7.3 77,534 1.7 2009 27,014 8.8 27,057 6.9 16,502 2.6 1,753 7.4 72,326 6.7 2010 26,239 2.9 26,366 2.6 16,589 0.5 1,700 3.0 70,894 2.0 2011 26,404 0.6 26,340 0.1 17,150 3.4 1,746 2.7 71,640 1.1 2012 27,390 3.7 26,740 1.5 18,044 5.2 1,864 6.8 74,038 3.3 2013 28,812 5.2 27,695 3.6 19,067 5.7 2,047 9.8 77,621 4.8 0.0 1.6 2.4 1.0 0.6 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Global radio market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 21,122 3.8 16,596 5.4 6,163 6.2 736 12.5 44,617 4.9 2005 21,910 3.7 17,292 4.2 6,473 5.0 852 15.8 46,527 4.3 2006 22,830 4.2 17,896 3.5 6,892 6.5 943 10.7 48,561 4.4 2007 23,155 1.4 18,550 3.7 7,037 2.1 1,089 15.5 49,831 2.6 2008p 21,941 5.2 18,378 0.9 7,235 2.8 1,170 7.4 48,724 2.2 2009 19,703 10.2 17,678 3.8 6,990 3.4 1,084 7.4 45,455 6.7 2010 18,889 4.1 17,483 1.1 6,963 0.4 1,041 4.0 44,376 2.4 2011 18,837 0.3 17,525 0.2 7,075 1.6 1,051 1.0 44,488 0.3 2012 19,395 3.0 17,719 1.1 7,279 2.9 1,102 4.9 45,495 2.3 2013 20,134 3.8 18,255 3.0 7,560 3.9 1,188 7.8 47,137 3.6 0.7 0.3 0.9 0.1 1.7 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by segment

49

Global out-of-home advertising market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 6,118 6.0 8,490 5.7 8,270 11.5 226 16.5 23,104 7.9 2005 6,624 8.3 9,102 7.2 8,439 2.0 540 138.9 24,705 6.9 2006 7,152 8.0 9,955 9.4 8,974 6.3 607 12.4 26,688 8.0 2007 7,792 8.9 10,736 7.8 9,824 9.5 676 11.4 29,028 8.8 2008p 7,690 1.3 10,697 0.4 9,700 1.3 723 7.0 28,810 0.8 2009 7,311 4.9 9,379 12.3 9,512 1.9 669 7.5 26,871 6.7 2010 7,350 0.5 8,883 5.3 9,626 1.2 659 1.5 26,518 1.3 2011 7,567 3.0 8,815 0.8 10,075 4.7 695 5.5 27,152 2.4 2012 7,995 5.7 9,021 2.3 10,765 6.8 762 9.6 28,543 5.1 2013 8,678 8.5 9,440 4.6 11,507 6.9 859 12.7 30,484 6.8 1.1 3.5 3.5 2.5 2.4 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Global radio/out-of-home market by component (US$ millions)


Component Radio advertising % Change Public radio license fees % Change Satellite radio subscriptions % Change Total radio % Change Out-of-home % Change Total % Change 2004 32,497 4.7 11,735 3.2 385 208.0 44,617 4.9 23,104 7.9 67,721 5.9 2005 33,353 2.6 12,162 3.6 1,012 162.9 46,527 4.3 24,705 6.9 71,232 5.2 2006 34,359 3.0 12,406 2.0 1,796 77.5 48,561 4.4 26,688 8.0 75,249 5.6 2007 34,558 0.6 12,746 2.7 2,527 40.7 49,831 2.6 29,028 8.8 78,859 4.8 2008p 32,546 5.8 12,923 1.4 3,255 28.8 48,724 2.2 28,810 0.8 77,534 1.7 2009 28,661 11.9 13,188 2.1 3,606 10.8 45,455 6.7 26,871 6.7 72,326 6.7 2010 26,997 5.8 13,439 1.9 3,940 9.3 44,376 2.4 26,518 1.3 70,894 2.0 2011 26,592 1.5 13,575 1.0 4,321 9.7 44,488 0.3 27,152 2.4 71,640 1.1 2012 27,109 1.9 13,671 0.7 4,715 9.1 45,495 2.3 28,543 5.1 74,038 3.3 2013 28,070 3.5 13,957 2.1 5,110 8.4 47,137 3.6 30,484 6.8 77,621 4.8 0.0 1.1 0.7 9.4 1.6 2.9 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

50

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Consumer and educational book publishing


The consumer and educational book publishing market fell by 0.2 percent in 2008, hurt by the economy and by the absencein most countriesof a Harry Potter title, which had boosted spending in 2007. The economic cycle will influence spending during the next five years, leading to near-term decreases and a subsequent rebound. Electronic browsing technologies will raise awareness of titles and stimulate consumer book sales once the economy improves. We expect print consumer books to be flat, at $72 billion. New, portable eReaders will boost electronic book sales in selected countries. We expect consumer electronic book sales to grow at a 26.8 percent compound annual rate from a small base to $2.3 billion in 2013, raising overall consumer book growth to 0.3 percent compounded annually.

Among educational books, elementary and high school textbooks represent the most cyclically sensitive component, while college textbooks have a countercyclical element and will benefit from people returning to college to improve their job prospects while employment opportunities are limited. We expect print educational books to decrease during the next two years and then expand during the subsequent three years, rising to $43 billion in 2013, a 0.4 percent compound annual gain. Electronic books are growing at the college level, and we project a 36.9 percent compound annual increase during the next five years to $1.7 billion in 2013, boosting overall educational growth to 1 percent compounded annually. We project total spending to increase at a 0.6 percent compound annual rate to $118 billion in 2013 from $115 billion in 2008.

Executive summary | Global entertainment and media market by segment

51

Global consumer and educational book publishing market by region (US$ millions)
Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 30,031 0.3 46,624 1.7 22,165 3.9 4,293 1.5 103,113 1.5 2005 32,211 7.3 48,624 4.3 23,001 3.8 4,399 2.5 108,235 5.0 2006 31,648 1.7 49,018 0.8 24,358 5.9 4,515 2.6 109,539 1.2 2007 33,778 6.7 50,671 3.4 26,413 8.4 4,652 3.0 115,514 5.5 2008p 32,592 3.5 50,277 0.8 27,625 4.6 4,772 2.6 115,266 0.2 2009 31,847 2.3 47,948 4.6 27,813 0.7 4,681 1.9 112,289 2.6 2010 31,773 0.2 46,979 2.0 28,252 1.6 4,630 1.1 111,634 0.6 2011 32,194 1.3 47,005 0.1 28,959 2.5 4,665 0.8 112,823 1.1 2012 32,850 2.0 47,689 1.5 29,874 3.2 4,776 2.4 115,189 2.1 2013 33,760 2.8 48,898 2.5 30,903 3.4 4,932 3.3 118,493 2.9 0.6 0.7 2.3 0.6 0.7 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Global consumer and educational book publishing market by component (US$ millions)
Component Print/audio consumer books % Change Print educational books % Change Total print/audio % Change Electronic consumer books % Change Electronic educational books % Change Total electronic % Change Total consumer % Change Total educational % Change Total % Change 2004 64,750 1.4 38,127 1.6 102,877 1.4 81 72.3 155 52.0 236 58.4 64,831 1.4 38,282 1.7 103,113 1.5 2005 68,439 5.7 39,455 3.5 107,894 4.9 157 93.8 184 18.7 341 44.5 68,596 5.8 39,639 3.5 108,235 5.0 2006 69,085 0.9 39,921 1.2 109,006 1.0 303 93.0 230 25.0 533 56.3 69,388 1.2 40,151 1.3 109,539 1.2 2007 73,730 6.7 41,030 2.8 114,760 5.3 464 53.1 290 26.1 754 41.5 74,194 6.9 41,320 2.9 115,514 5.5 2008p 72,474 1.7 41,723 1.7 114,197 0.5 706 52.2 363 25.2 1,069 41.8 73,180 1.4 42,086 1.9 115,266 0.2 2009 70,082 3.3 40,914 1.9 110,996 2.8 864 22.4 429 18.2 1,293 21.0 70,946 3.1 41,343 1.8 112,289 2.6 2010 69,149 1.3 40,804 0.3 109,953 0.9 1,123 30.0 558 30.1 1,681 30.0 70,272 1.0 41,362 0.0 111,634 0.6 2011 69,542 0.6 41,061 0.6 110,603 0.6 1,473 31.2 747 33.9 2,220 32.1 71,015 1.1 41,808 1.1 112,823 1.1 2012 70,471 1.3 41,660 1.5 112,131 1.4 1,882 27.8 1,176 57.4 3,058 37.7 72,353 1.9 42,836 2.5 115,189 2.1 2013 71,920 2.1 42,514 2.0 114,434 2.1 2,315 23.0 1,744 48.3 4,059 32.7 74,235 2.6 44,258 3.3 118,493 2.9 0.6 1.0 0.3 30.6 36.9 26.8 0.0 0.4 0.2 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

52

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Business-to-business publishing
Business-to-business publishing includes business information, trade magazines, professional books, and directory advertising. Spending fell by 1.8 percent in 2008 as a result of the economic downturn, because each segment of the market is sensitive to the economy. A rebounding economy during the latter part of the forecast period will lead to rebounds in each category during 201213. In the near term, we expect spending to fall by 11.7 percent in 2009 and by a cumulative 17.7 percent through 2011. The business information market will be hurt by the financial collapse, which will lead to steep near-term declines in demand for financial information. Reduced consumer spending will hurt marketing information, and falling investment will lower spending on industry information. The overall business information market will fall at a 2.5 percent compound annual rate to $76 billion in 2013. Print directory advertising will be hurt in the near term by the recession and over the longer run by the migration of advertising from print to the Internet, falling by

6.5 percent compounded annually to $23 billion in 2013. Growth in digital directory advertising, projected at 14.9 percent on a compound annual basis, will not make up the difference, because online rates are much lower than print rates. Overall directory advertising will decrease at a 3.8 percent compound annual rate. Trade magazines will be adversely affected by the declining economy and falling employment. Print advertising in trade magazines will be affected by a shift of advertising to the Internet, some of which will be recaptured on trade magazine Web sites. The trade magazine market as a whole, including circulation spending, will decline at a 1.8 percent compound annual rate. Falling employment will also cut into spending on professional books in the near term, although growth in electronic books will offset declines in print. The overall professional book market will rise at a 0.2 percent rate compounded annually, the only component that will be higher in 2013 than in 2008. We expect the total businessto-business publishing market to fall at a 2.3 percent compound annual rate to $153 billion in 2013 from $172 billion in 2008.

Global business-to-business publishing market by region (US$ millions)


Region North America % Change EMEA % Change Asia Pacific % Change Latin America % Change Total % Change 2004 79,143 4.0 51,363 2.3 17,811 2.9 2,923 7.2 151,240 3.4 2005 83,417 5.4 52,840 2.9 18,683 4.9 3,203 9.6 158,143 4.6 2006 88,253 5.8 56,085 6.1 19,548 4.6 3,424 6.9 167,310 5.8 2007 90,736 2.8 59,494 6.1 20,703 5.9 3,711 8.4 174,644 4.4 2008p 88,054 3.0 58,691 1.3 21,036 1.6 3,774 1.7 171,555 1.8 2009 75,336 14.4 53,061 9.6 19,517 7.2 3,605 4.5 151,519 11.7 2010 69,763 7.4 50,421 5.0 18,835 3.5 3,525 2.2 142,544 5.9 2011 68,701 1.5 49,893 1.0 18,965 0.7 3,551 0.7 141,110 1.0 2012 70,406 2.5 51,092 2.4 19,574 3.2 3,692 4.0 144,764 2.6 2013 74,687 6.1 53,618 4.9 20,722 5.9 3,918 6.1 152,945 5.7 2.3 0.8 0.3 1.8 3.2 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by segment

53

Global business-to-business publishing market by component (US$ millions)


Component Business information % Change Directory advertising Print % Change Digital % Change Total directory advertising % Change Trade magazines Print advertising % Change Digital advertising % Change Total advertising % Change Circulation spending % Change Total trade magazines % Change Professional books Print % Change Electronic % Change Total professional books % Change Total advertising % Change Total end user % Change Total % Change 19,025 0.6 451 56.6 19,476 1.4 48,387 2.7 102,853 3.7 151,240 3.4 18,889 0.7 542 20.2 19,431 0.2 50,847 5.1 107,296 4.3 158,143 4.6 19,512 3.3 665 22.7 20,177 3.8 53,499 5.2 113,811 6.1 167,310 5.8 21,165 8.5 825 24.1 21,990 9.0 55,174 3.1 119,470 5.0 174,644 4.4 21,061 0.5 1,028 24.6 22,089 0.5 54,316 1.6 117,239 1.9 171,555 1.8 20,276 3.7 1,081 5.2 21,357 3.3 45,443 16.3 106,076 9.5 151,519 11.7 19,906 1.8 1,202 11.2 21,108 1.2 41,938 7.7 100,606 5.2 142,544 5.9 19,814 0.5 1,408 17.1 21,222 0.5 41,640 0.7 99,470 1.1 141,110 1.0 19,938 0.6 1,733 23.1 21,671 2.1 42,954 3.2 101,810 2.4 144,764 2.6 20,158 1.1 2,113 21.9 22,271 2.8 46,041 7.2 106,904 5.0 152,945 5.7 2.3 1.8 3.3 0.2 15.5 0.9 17,929 2.8 NA 17,929 2.8 8,275 0.4 26,204 2.0 18,851 5.1 324 19,175 6.9 8,283 0.1 27,458 4.8 19,159 1.6 908 180.2 20,067 4.7 8,460 2.1 28,527 3.9 19,119 0.2 1,413 55.6 20,532 2.3 8,553 1.1 29,085 2.0 17,928 6.2 1,694 19.9 19,622 4.4 8,448 1.2 28,070 3.5 14,651 18.3 1,601 5.5 16,252 17.2 8,121 3.9 24,373 13.2 13,621 7.0 1,729 8.0 15,350 5.6 7,977 1.8 23,327 4.3 13,444 1.3 2,009 16.2 15,453 0.7 8,008 0.4 23,461 0.6 13,668 1.7 2,376 18.3 16,044 3.8 8,131 1.5 24,175 3.0 14,568 6.6 2,862 20.5 17,430 8.6 8,263 1.6 25,693 6.3 1.8 0.4 2.3 11.1 4.1 30,458 2.6 NA 30,458 2.6 31,387 3.1 285 31,672 4.0 32,008 2.0 1,424 399.6 33,432 5.6 32,440 1.3 2,202 54.6 34,642 3.6 31,774 2.1 2,920 32.6 34,694 0.2 26,355 17.1 2,836 2.9 29,191 15.9 23,481 10.9 3,107 9.6 26,588 8.9 22,402 4.6 3,785 21.8 26,187 1.5 22,184 1.0 4,726 24.9 26,910 2.8 22,759 2.6 5,852 23.8 28,611 6.3 3.8 14.9 6.5 2004 75,102 4.7 2005 79,582 6.0 2006 85,174 7.0 2007 88,927 4.4 2008p 86,702 2.5 2009 76,598 11.7 2010 71,521 6.6 2011 70,240 1.8 2012 72,008 2.5 2013 76,370 6.1 2.5 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

54

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Global market by region


In this section, we provide figures on total entertainment and media spending by segment, total advertising, total consumer/end-user, and total Internet access spending for each region. We also provide totals by country for each of these categories. For selected countries in each region, we provide a breakout by segment for 2013 and their associated compound annual growth rates from 2008.

Entertainment and media market by segment (US$ millions)


North America Internet access: wired and mobile % Change Internet advertising: wired and mobile % Change TV subscriptions and license fees % Change TV advertising % Change Recorded music % Change Filmed entertainment % Change Video games % Change Consumer magazine publishing % Change Newspaper publishing % Change Radio/out-of-home % Change Consumer and educational book publishing % Change Business-to-business publishing % Change Total % Change 2004 26,619 8.2 10,069 33.8 57,725 9.4 68,038 11.6 13,590 5.3 37,985 5.5 8,941 10.9 23,716 5.1 62,421 3.3 27,240 4.3 30,031 0.3 79,143 4.0 443,977 6.5 2005 29,990 12.7 13,264 31.7 62,048 7.5 68,074 0.1 13,114 3.5 37,374 1.6 9,036 1.1 24,609 3.8 63,488 1.7 28,534 4.8 32,211 7.3 83,417 5.4 462,345 4.1 2006 34,282 14.3 18,149 36.8 66,717 7.5 72,464 6.4 12,516 4.6 38,213 2.2 10,301 14.0 24,475 0.5 63,170 0.5 29,982 5.1 31,648 1.7 88,253 5.8 485,824 5.1 2007 40,962 19.5 23,115 27.4 71,120 6.6 71,811 0.9 11,025 11.9 38,992 2.0 13,315 29.3 25,404 3.8 59,083 6.5 30,947 3.2 33,778 6.7 90,736 2.8 504,346 3.8 2008p 44,049 7.5 26,284 13.7 74,775 5.1 71,367 0.6 9,022 18.2 38,243 1.9 16,243 22.0 24,510 3.5 50,793 14.0 29,631 4.3 32,592 3.5 88,054 3.0 498,748 1.1 2009 45,597 3.5 25,459 3.1 76,187 1.9 61,653 13.6 8,031 11.0 38,411 0.4 17,232 6.1 21,193 13.5 41,810 17.7 27,014 8.8 31,847 2.3 75,336 14.4 463,221 7.1 2010 47,319 3.8 25,844 1.5 78,118 2.5 62,563 1.5 7,384 8.1 39,232 2.1 17,798 3.3 20,417 3.7 38,071 8.9 26,239 2.9 31,773 0.2 69,763 7.4 457,753 1.2 2011 52,503 11.0 27,697 7.2 84,512 8.2 62,937 0.6 7,102 3.8 40,756 3.9 18,281 2.7 20,634 1.1 36,885 3.1 26,404 0.6 32,194 1.3 68,701 1.5 471,158 2.9 2012 60,497 15.2 31,196 12.6 91,840 8.7 68,597 9.0 7,064 0.5 42,687 4.7 19,632 7.4 21,270 3.1 36,858 0.1 27,390 3.7 32,850 2.0 70,406 2.5 501,737 6.5 2013 68,294 12.9 35,918 15.1 97,278 5.9 69,251 1.0 7,188 1.8 45,135 5.7 21,558 9.8 22,551 6.0 37,720 2.3 28,812 5.2 33,760 2.8 74,687 6.1 532,002 6.0 1.3 3.2 0.7 0.6 5.8 1.7 5.8 3.4 4.4 0.6 5.4 6.4 9.2 200913 CAGR

Note: Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

56

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

North America

Spending fell by 1.1 percent in 2008, and we expect a 7.1 percent drop in 2009 followed by a 1.2 percent decrease in 2010. We expect the market to rebound beginning in 2011 and to expand at rates of 6 percent or more during 201213. We expect increases in excess of 5 percent compounded annually for Internet access, Internet advertising, video games, and TV subscriptions. Recorded music, TV advertising, business-to-business publishing, newspaper publishing, consumer magazine

publishing, and radio/out-of-home will each be lower in 2013 than in 2008. Overall growth will average 1.3 percent compounded annually to $532 billion in 2013 from $499 billion in 2008. Canada will be the faster-growing country, with a projected 2.2 percent compound annual increase compared with 1.2 percent compound annual growth for the United States.

Entertainment and media market by country (US$ millions)


North America United States Canada Total 2004 416,775 27,202 443,977 2005 433,971 28,374 462,345 2006 455,436 30,388 485,824 2007 472,070 32,276 504,346 2008p 465,814 32,934 498,748 2009 431,914 31,307 463,221 2010 426,708 31,045 457,753 2011 439,270 31,888 471,158 2012 467,772 33,965 501,737 2013 495,292 36,710 532,002 200913 CAGR 1.2 2.2 1.3

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

United States
E&M spending in the United States fell by 1.3 percent in 2008, and we expect a 7.3 percent decrease in 2009, the second steepest of any country in the world, behind Russia, and a further, 1.2 percent drop in 2010, for a three-year cumulative decline of 9.6 percent. A rebound during the latter part of the forecast period will generate a 1.2 percent compound annual advance for the 2009 13 period as a whole. Internet access at 9.1 percent compounded annually will be the fastest-growing segment during the next five years. We also expect increases in

excess of 5 percent compounded annually for video games, TV subscriptions, and Internet advertising. Filmed entertainment will increase at a 3.3 percent compound annual rate, and out-of-home advertising will grow at a 2.5 percent rate compounded annually. The remaining segments will increase by less than 1 percent on a compound annual basis or will decline. Overall consumer/ end-user spending will grow by 1.9 percent compounded annually, while advertising will fall at a 1.7 percent compound annual rate.

Executive summary | Global entertainment and media market by region

57

Entertainment and media spending


Consumer/ end-user spending United States Internet access: wired and mobile Internet advertising: wired and mobile TV subscriptions and license fees TV advertising Recorded music Filmed entertainment Video games Consumer magazine publishing Newspaper publishing Radio Out-of-home Consumer and educational book publishing Business-to-business publishing Trade magazines Professional books Business information Directory advertising Business-to-business publishing total Total 259,023 1.9 173,564 1.7 1,480 7,080 38,900 1.5 0.8 3.4 11,440 5.6 9,638 2.9 11,118 7,080 38,900 11,440 68,538 495,292 2.7 0.8 3.4 5.6 3.3 1.2 32,044 0.7 6,596 40,908 18,334 8,448 9,039 4,351 4.7 3.3 5.4 2.8 2.3 8.0 1,190 12,992 26,105 13,805 8,150 12.9 0.9 7.0 0.0 2.5 91,843 5.5 66,100 0.6 2013 200913 (US$ millions) CAGR 62,705 9.1 33,814 6.3 Advertising 2013 200913 (US$ millions) CAGR Total 2013 200913 (US$ millions) CAGR 62,705 33,814 91,843 66,100 6,596 40,908 19,524 21,440 35,144 18,156 8,150 32,044 9.1 6.3 5.5 0.6 4.7 3.3 5.8 1.7 0.0 0.0 2.5 0.7

Note: The total includes Internet access. Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

58

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Canada
We project the Canadian E&M market to decline by 4.9 percent in 2009 and to average 2.2 percent compound annual growth through 2013. Internet access at 9.9 percent compounded annually will be a major driver of that projected gain. Internet advertising will grow at an 8.6 percent compound annual rate, and video games will increase by 6.2 percent compounded annually. We also

anticipate above-average compound annual growth in filmed entertainment (4.2 percent) and TV subscriptions and license fees (3.8 percent). The remaining segments will increase at rates averaging less than 2 percent on a compound annual basis or will decline. Overall consumer/ end-user spending will average 2 percent growth compounded annually, while advertising will decrease at a 0.5 percent compound annual rate.

Entertainment and media spending


Consumer/ end-user spending Canada Internet access: wired and mobile Internet advertising: wired and mobile TV subscriptions and license fees TV advertising Recorded music Filmed entertainment Video games Consumer magazine publishing Newspaper publishing Radio Out-of-home Consumer and educational book publishing Business-to-business publishing Trade magazines Professional books Business information Directory advertising Business-to-business publishing total Total 20,622 2.0 10,499 0.5 68 380 4,432 1.4 0.8 2.7 1,074 3.3 195 2.7 263 380 4,432 1,074 6,149 36,710 2.4 0.8 2.7 3.3 2.6 2.2 1,716 0.8 592 4,227 1,814 457 742 759 1.0 4.2 5.5 1.9 0.2 21.5 220 654 1,834 1,219 528 13.9 0.6 5.0 2.1 1.5 5,435 3.8 3,151 0.3 2013 200913 (US$ millions) CAGR 5,589 9.9 2,104 8.6 Advertising 2013 200913 (US$ millions) CAGR Total 2013 200913 (US$ millions) CAGR 5,589 2,104 5,435 3,151 592 4,227 2,034 1,111 2,576 1,978 528 1,716 9.9 8.6 3.8 0.3 1.0 4.2 6.2 1.1 0.0 0.0 1.5 0.8

Note: The total includes Internet access. Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by region

59

Internet access
Internet access spending growth slowed to 7.5 percent in 2008. We expect a further moderation during the next two years, with increases of less than 4 percent annually, and a return to double-digit growth during 201113. For the forecast period as a whole, spending will rise from

$44 billion in 2008 to $68 billion in 2013, a 9.2 percent compound annual increase. Canada will increase at a 9.9 percent compound annual rate during the next five years compared with 9.1 percent compound annual growth for the United States.

Internet access market: wired and mobile (US$ millions)


North America Internet access: wired and mobile % Change 2004 26,619 8.2 2005 29,990 12.7 2006 34,282 14.3 2007 40,962 19.5 2008p 44,049 7.5 2009 45,597 3.5 2010 47,319 3.8 2011 52,503 11.0 2012 60,497 15.2 2013 68,294 12.9 9.2 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet access market: wired and mobile by country (US$ millions)


North America United States Canada Total 2004 24,253 2,366 26,619 2005 27,327 2,663 29,990 2006 31,272 3,010 34,282 2007 37,631 3,331 40,962 2008p 40,559 3,490 44,049 2009 41,916 3,681 45,597 2010 43,440 3,879 47,319 2011 48,164 4,339 52,503 2012 55,579 4,918 60,497 2013 62,705 5,589 68,294 200913 CAGR 9.1 9.9 9.2

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Advertising
Advertising fell by 4.5 percent in 2008. We anticipate a 14.7 percent drop in 2009 and an additional, 3.3 percent decrease in 2010. Although advertising will rebound during the subsequent three years, spending in 2013 will remain

1.6 percent lower on a compound annual basis compared with 2008. Internet advertising, out-of-home, and a small video game market will be the only segments to be larger in 2013 than in 2008. Overall advertising will decrease from $200 billion in 2008 to $184 billion in 2013.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Advertising by segment (US$ millions)


North America Internet: wired and mobile % Change Television % Change Video games % Change Consumer magazines % Change Newspapers % Change Radio % Change Out-of-home % Change Directories % Change Trade magazines % Change Total % Change 2004 10,069 33.8 68,038 11.6 30 12,854 7.1 50,692 4.5 20,737 2.6 6,118 6.0 15,097 1.0 10,312 3.8 192,406 7.7 2005 13,264 31.7 68,074 0.1 116 286.7 13,603 5.8 51,979 2.5 20,898 0.8 6,624 8.3 15,646 3.6 11,342 10.0 198,732 3.3 2006 18,149 36.8 72,464 6.4 350 201.7 14,029 3.1 51,821 0.3 21,034 0.7 7,152 8.0 16,321 4.3 11,816 4.2 208,790 5.1 2007 23,115 27.4 71,811 0.9 585 67.1 14,903 6.2 47,884 7.6 20,628 1.9 7,792 8.9 16,658 2.1 12,022 1.7 209,456 0.3 2008p 26,284 13.7 71,367 0.6 765 30.8 14,262 4.3 39,900 16.7 18,686 9.4 7,690 1.3 16,496 1.0 11,372 5.4 200,007 4.5 2009 25,459 3.1 61,653 13.6 886 15.8 11,802 17.2 31,272 21.6 16,097 13.9 7,311 4.9 13,409 18.7 9,297 18.2 170,637 14.7 2010 25,844 1.5 62,563 1.5 1,042 17.6 11,373 3.6 27,833 11.0 14,949 7.1 7,350 0.5 12,014 10.4 8,751 5.9 164,951 3.3 2011 27,697 7.2 62,937 0.6 1,184 13.6 11,760 3.4 26,855 3.5 14,516 2.9 7,567 3.0 11,681 2.8 8,781 0.3 165,530 0.4 2012 31,196 12.6 68,597 9.0 1,303 10.1 12,449 5.9 26,974 0.4 14,680 1.1 7,995 5.7 11,812 1.1 9,002 2.5 175,458 6.0 2013 35,918 15.1 69,251 1.0 1,410 8.2 13,646 9.6 27,939 3.6 15,024 2.3 8,678 8.5 12,514 5.9 9,833 9.2 184,063 4.9 1.6 2.9 5.4 2.4 4.3 6.9 0.9 13.0 0.6 6.4 200913 CAGR

Note: Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Advertising in the United States fell by 4.8 percent in 2008 and will decrease by a projected 17.7 percent cumulatively during the next two years. For the forecast period as a whole, US advertising will decline at a 1.7 percent

compound annual rate. Canada held up better in 2008, with a 0.1 percent increase. We expect an 11.9 percent decline in 2009 and a 0.5 percent compound annual decrease through 2013.

Advertising by country (US$ millions)


North America United States Canada Total 2004 183,497 8,909 192,406 2005 189,330 9,402 198,732 2006 198,656 10,134 208,790 2007 198,700 10,756 209,456 2008p 189,240 10,767 200,007 2009 161,146 9,491 170,637 2010 155,795 9,156 164,951 2011 156,341 9,189 165,530 2012 165,710 9,748 175,458 2013 173,564 10,499 184,063 200913 CAGR 1.7 0.5 1.6

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by region

61

Consumer/end-user spending
Consumer/end-user growth slowed to 0.3 percent in 2008. We expect a 3 percent decline in 2009 and a further, 0.6 percent drop in 2010. Increases during the subsequent three years will boost spending to $280 billion in 2013, a 1.9 percent compound annual increase from $255 billion in 2008. Radio will be the fastest-growing component, with a 9.4 percent compound annual advance, boosted by a small but expanding satellite radio market. Video games

and TV subscriptions and license fees will expand by 5.4 percent compounded annually, and filmed entertainment will increase at a 3.4 percent compound annual rate. Consumer and educational books will grow by less than 1 percent on a compound annual basis, and the remaining segments will be lower in 2013 than in 2008. The United States and Canada will grow at comparable rates during the next five years: 1.9 percent compounded annually for the US and 2 percent for Canada.

62

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Consumer/end-user spending by segment (US$ millions)


North America TV subscriptions and license fees % Change Recorded music % Change Filmed entertainment % Change Video games % Change Consumer magazines % Change Newspapers % Change Radio % Change Consumer and educational books % Change Business-to-business publishing % Change Total % Change 2004 57,725 9.4 13,590 5.3 37,985 5.5 8,911 10.5 10,862 2.7 11,729 1.6 385 208.0 30,031 0.3 53,734 5.0 224,952 5.3 2005 62,048 7.5 13,114 3.5 37,374 1.6 8,920 0.1 11,006 1.3 11,509 1.9 1,012 162.9 32,211 7.3 56,429 5.0 233,623 3.9 2006 66,717 7.5 12,516 4.6 38,213 2.2 9,951 11.6 10,446 5.1 11,349 1.4 1,796 77.5 31,648 1.7 60,116 6.5 242,752 3.9 2007 71,120 6.6 11,025 11.9 38,992 2.0 12,730 27.9 10,501 0.5 11,199 1.3 2,527 40.7 33,778 6.7 62,056 3.2 253,928 4.6 2008p 74,775 5.1 9,022 18.2 38,243 1.9 15,478 21.6 10,248 2.4 10,893 2.7 3,255 28.8 32,592 3.5 60,186 3.0 254,692 0.3 2009 76,187 1.9 8,031 11.0 38,411 0.4 16,346 5.6 9,391 8.4 10,538 3.3 3,606 10.8 31,847 2.3 52,630 12.6 246,987 3.0 2010 78,118 2.5 7,384 8.1 39,232 2.1 16,756 2.5 9,044 3.7 10,238 2.8 3,940 9.3 31,773 0.2 48,998 6.9 245,483 0.6 2011 84,512 8.2 7,102 3.8 40,756 3.9 17,097 2.0 8,874 1.9 10,030 2.0 4,321 9.7 32,194 1.3 48,239 1.5 253,125 3.1 2012 91,840 8.7 7,064 0.5 42,687 4.7 18,329 7.2 8,821 0.6 9,884 1.5 4,715 9.1 32,850 2.0 49,592 2.8 265,782 5.0 2013 97,278 5.9 7,188 1.8 45,135 5.7 20,148 9.9 8,905 1.0 9,781 1.0 5,110 8.4 33,760 2.8 52,340 5.5 279,645 5.2 1.9 2.8 0.7 9.4 2.1 2.8 5.4 3.4 4.4 5.4 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Consumer/end-user spending (excluding Internet access) by country (US$ millions)


North America United States Canada Total 2004 209,025 15,927 224,952 2005 217,314 16,309 233,623 2006 225,508 17,244 242,752 2007 235,739 18,189 253,928 2008p 236,015 18,677 254,692 2009 228,852 18,135 246,987 2010 227,473 18,010 245,483 2011 234,765 18,360 253,125 2012 246,483 19,299 265,782 2013 259,023 20,622 279,645 200913 CAGR 1.9 2.0 1.9

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by region

63

Europe, Middle East, Africa (EMEA)

Entertainment and media spending rose by 2.8 percent in 2008, the slowest increase during the past five years. We expect a 3.7 percent decline in 2009, a flat market in 2010, and increases during the next three years to $596 billion in 2013, a 2.7 percent compound annual increase from $522 billion in 2008. Internet access, Internet advertising,

video games, and TV subscriptions and license fees will each grow at rates averaging more than 5 percent on a compound annual basis. Filmed entertainment will increase by a projected 3.7 percent compounded annually, while the remaining segments will either be flat or down.

Entertainment and media market by segment (US$ millions)


EMEA Internet access: wired and mobile % Change Internet advertising: wired and mobile % Change TV subscriptions and license fees % Change TV advertising % Change Recorded music % Change Filmed entertainment % Change Video games % Change Consumer magazine publishing % Change Newspaper publishing % Change Radio/out-of-home % Change Consumer and educational book publishing % Change Business-to-business publishing % Change Total % Change 2004 44,709 16.1 4,760 59.9 53,923 6.3 39,924 10.5 14,775 4.3 27,152 8.9 9,756 14.1 34,431 3.2 68,724 3.5 25,086 5.5 46,624 1.7 51,363 2.3 421,227 6.1 2005 52,370 17.1 7,585 59.3 58,460 8.4 42,272 5.9 14,166 4.1 25,465 6.2 10,648 9.1 35,306 2.5 70,967 3.3 26,394 5.2 48,624 4.3 52,840 2.9 444,387 5.5 2006 61,974 18.3 12,524 65.1 63,150 8.0 45,087 6.7 13,396 5.4 25,384 0.3 12,079 13.4 36,139 2.4 72,701 2.4 27,851 5.5 49,018 0.8 56,085 6.1 473,419 6.5 2007 71,608 15.5 17,799 42.1 68,737 8.8 48,755 8.1 12,176 9.1 25,374 0.0 15,135 25.3 36,731 1.6 74,997 3.2 29,286 5.2 50,671 3.4 59,494 6.1 508,003 7.3 2008p 80,344 12.2 20,427 14.8 74,290 8.1 48,876 0.2 11,062 9.1 25,533 0.6 18,133 19.8 36,228 1.4 73,102 2.5 29,075 0.7 50,277 0.8 58,691 1.3 522,403 2.8 2009 84,100 4.7 19,533 4.4 76,142 2.5 43,403 11.2 10,091 8.8 25,719 0.7 19,367 6.8 33,493 7.5 66,634 8.8 27,057 6.9 47,948 4.6 53,061 9.6 502,934 3.7 2010 88,855 5.7 19,929 2.0 78,263 2.8 42,715 1.6 9,597 4.9 26,261 2.1 20,360 5.1 32,689 2.4 64,798 2.8 26,366 2.6 46,979 2.0 50,421 5.0 503,230 0.1 2011 99,160 11.6 21,829 9.5 82,748 5.7 43,324 1.4 9,354 2.5 27,269 3.8 21,317 4.7 32,840 0.5 64,892 0.1 26,340 0.1 47,005 0.1 49,893 1.0 521,152 3.6 2012 114,086 15.1 24,637 12.9 89,443 8.1 46,384 7.1 9,218 1.5 28,744 5.4 23,038 8.1 33,688 2.6 65,903 1.6 26,740 1.5 47,689 1.5 51,092 2.4 554,791 6.5 2013 131,356 15.1 28,106 14.1 96,672 8.1 48,850 5.3 9,215 0.0 30,668 6.7 25,256 9.6 34,984 3.8 67,487 2.4 27,695 3.6 48,898 2.5 53,618 4.9 595,791 7.4 2.7 1.8 0.6 1.0 1.6 0.7 6.9 3.7 3.6 0.0 5.4 6.6 10.3 200913 CAGR

Note: Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

64

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Germany has the largest E&M market in EMEA, at $96 billion in 2008, with the UK next, at $92 billion. France at $67 billion was the only other country above $50 billion in 2008. Led by Saudi Arabia/Pan Arab, Middle East/Africa will be the fastest-growing area in EMEA, with an 11.7

percent compound annual increase. Central and Eastern Europe will expand at a 4.5 percent compound annual rate, and Western Europe will average 1.9 percent growth compounded annually.

Executive summary | Global entertainment and media market by region

65

Entertainment and media market by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 3,100 6,529 3,805 13,434 421,227 3,280 7,453 4,356 15,089 444,387 3,385 8,934 5,121 17,440 473,419 3,570 11,200 5,671 20,441 508,003 3,654 12,847 6,249 22,750 522,403 3,579 14,113 6,477 24,169 502,934 3,583 15,608 6,928 26,119 503,230 3,683 18,118 7,437 29,238 521,152 3,842 21,601 8,382 33,825 554,791 4,034 25,982 9,467 39,483 595,791 2.0 15.1 8.7 11.7 2.7 4,138 3,448 6,703 1,290 12,231 3,436 31,246 4,704 3,815 7,225 1,512 14,151 3,952 35,359 5,163 4,150 8,131 1,952 16,743 4,747 40,886 5,585 4,377 9,193 2,365 20,185 5,743 47,448 5,817 4,551 10,078 2,645 23,533 6,101 52,725 5,609 4,286 9,877 2,636 21,047 6,085 49,540 5,598 4,255 10,062 2,655 20,847 6,574 49,991 5,811 4,387 10,466 2,849 22,076 7,302 52,891 6,222 4,718 11,325 3,180 24,876 8,310 58,631 6,766 5,099 12,464 3,596 28,266 9,603 65,794 3.1 2.3 4.3 6.3 3.7 9.5 4.5 9,145 9,493 6,770 5,619 56,107 84,081 5,317 3,871 41,573 16,378 7,925 4,067 26,970 10,191 9,422 79,618 376,547 9,575 10,040 7,228 5,704 58,834 86,643 5,651 4,112 43,616 16,987 8,549 4,272 28,706 10,701 9,905 83,416 393,939 10,195 10,840 7,936 5,963 61,481 91,676 6,084 4,527 45,812 18,178 9,168 4,558 30,839 11,421 10,463 85,952 415,093 10,881 11,532 8,446 6,323 65,708 95,590 6,818 4,967 48,624 19,378 9,859 4,831 33,047 12,267 11,053 90,790 440,114 11,222 11,950 8,659 6,424 67,224 95,505 6,962 5,158 49,400 19,960 10,340 5,059 33,228 12,434 11,230 92,173 446,928 10,938 11,582 8,450 6,282 65,439 91,539 6,462 4,984 47,215 19,390 10,055 4,997 32,060 12,135 10,878 86,819 429,225 10,988 11,550 8,519 6,348 65,345 90,481 6,327 4,969 47,295 19,417 10,036 5,050 32,081 12,294 10,893 85,527 427,120 11,195 11,875 8,736 6,557 67,340 92,220 6,461 5,165 49,062 19,995 10,334 5,322 33,519 12,592 11,163 87,487 439,023 11,638 12,453 9,133 6,864 71,083 95,666 6,787 5,485 52,099 21,075 10,732 5,758 36,410 13,099 11,691 92,362 462,335 12,178 13,155 9,653 7,268 75,424 99,452 7,246 5,900 56,039 22,272 11,261 6,327 40,113 13,756 12,307 98,163 490,514 1.6 1.9 2.2 2.5 2.3 0.8 0.8 2.7 2.6 2.2 1.7 4.6 3.8 2.0 1.8 1.3 1.9 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

United Kingdom
Growth slowed to 1.5 percent in the UK in 2008, and we expect a cumulative 7.2 percent decline during the next two years because the economy is falling at a rapid rate. Although we expect a rebound beginning in 2010, Internet access, Internet advertising, TV subscriptions and license fees, filmed entertainment, and video games will be the only segments that will be larger in 2013 than in 2008. Consumer/end-user spending as a whole will

grow at a 1.7 percent compound annual rate during the next five years, and advertising as a whole will decline by 2.4 percent compounded annually. The projected 7.1 percent compound annual gain in Internet access will contribute to an increase in overall spending of 1.3 percent compounded annually to $98 billion in 2013. Video games will be the fastest-growing segment, with a 7.5 percent compound annual increase.

Entertainment and media spending


Consumer/ end-user spending United Kingdom Internet access: wired and mobile Internet advertising: wired and mobile TV subscriptions and license fees TV advertising Recorded music Filmed entertainment Video games Consumer magazine publishing Newspaper publishing Radio Out-of-home Consumer and educational book publishing Business-to-business publishing Trade magazines Professional books Business information Directory advertising Business-to-business publishing total Total 60,453 1.7 23,312 2.4 1,616 894 5,693 1.3 1.1 3.5 1,225.0 5.6 1,421.0 4.4 3,037.0 894 5,693 1,225 10,849.0 98,163 2.8 1.1 3.5 5.6 3.4 1.3 6,231 0.3 1,974 8,336 6,546 3,618 5,188 1,429 3.9 5.1 7.2 0.1 1.3 0.9 230 1,152 4,668 744 1,295 16.1 4.3 7.9 5.0 4.3 18,928 3.8 5,326 2.4 2013 200913 (US$ millions) CAGR 14,398 7.1 8,426 5.4 Advertising 2013 200913 (US$ millions) CAGR Total 2013 200913 (US$ millions) CAGR 14,398 8,426 18,928 5,326 1,974 8,336 6,776 4,770 9,856 2,173 1,295 6,231 7.1 5.4 3.8 2.4 3.9 5.1 7.5 1.2 4.8 1.4 4.3 0.3

Note: The total includes Internet access. Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by region

67

Germany
In Germany, the weak economy led to a 0.1 percent drop in entertainment and media spending in 2008. We expect spending to fall by an additional, 5.3 percent during the next two years. A subsequent 9.9 percent advance from 2010 to 2013 will leave spending only 0.8 percent higher on a compound annual basis in 2013 than in 2008. That gain will be attributed principally to a 4.7 percent compound annual increase in Internet access spending. Consumer/

end-user spending will grow by 0.9 percent compounded annually, and advertising will decline at a 1.8 percent compound annual rate. Video games will be the fastestgrowing segment, with a 5.8 percent compound annual gain. We also expect growth in Internet advertising, TV subscriptions and license fees, filmed entertainment, and radio. The remaining segments will be lower in 2013 than in 2008.

Entertainment and media spending


Consumer/ end-user spending Germany Internet access: wired and mobile Internet advertising: wired and mobile TV subscriptions and license fees TV advertising Recorded music Filmed entertainment Video games Consumer magazine publishing Newspaper publishing Radio Out-of-home Consumer and educational book publishing Business-to-business publishing Trade magazines Professional books Business information Directory advertising Business-to-business publishing total Total 59,920 0.9 22,052 1.8 1,478 4,098 6,878 1.7 1.2 1.6 1,751 2.6 1,334 1.6 2,812 4,098 6,878 1,751 15,539 99,452 0.0 1.2 1.6 2.6 1.4 0.8 9,220 0.3 2,076 4,083 3,559 3,695 6,555 4,098 1.9 2.8 5.5 1.0 0.0 1.2 122 2,314 5,789 754 973 14.5 1.9 3.4 3.9 2.9 14,180 2.8 5,707 1.0 2013 200913 (US$ millions) CAGR 17,480 4.7 4,772 3.9 Advertising 2013 200913 (US$ millions) CAGR Total 2013 200913 (US$ millions) CAGR 17,480 4,772 14,180 5,707 2,076 4,083 3,681 6,009 12,344 4,852 973 9,220 4.7 3.9 2.8 1.0 1.9 2.8 5.8 1.3 1.2 0.3 2.9 0.3

Note: The total includes Internet access. Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

France
We expect a more modest, 2.8 percent decrease in E&M spending in France during the next two years, the result of stronger growth in Internet access and TV subscriptions and license fees. Spending during the next five years will expand at a 2.3 percent compound annual rate, led by Internet access at 7.9 percent compounded annually, video games at 6.8 percent, TV subscriptions and license

fees at 6.0 percent, and Internet advertising at 5.3 percent on a compound annual basis. Filmed entertainment will expand at a 2.8 percent compound annual rate, newspapers will be flat, and the remaining segments will decline. Overall consumer/end-user spending will grow at a 1.9 percent compound annual rate, while advertising will decline by 1.4 percent compounded annually.

Entertainment and media spending


Consumer/ end-user spending France Internet access: wired and mobile Internet advertising: wired and mobile TV subscriptions and license fees TV advertising Recorded music Filmed entertainment Video games Consumer magazine publishing Newspaper publishing Radio Out-of-home Consumer and educational book publishing Business-to-business publishing Trade magazines Professional books Business information Directory advertising Business-to-business publishing total Total 47,433 1.9 12,662 1.4 878 1,229 3,410 0.7 0.3 1.6 1,086 4.0 660 1.9 1,538 1,229 3,410 1,086 7,263 75,424 1.3 0.3 1.6 4.0 1.7 2.3 8,158 0.8 1,058 4,363 5,126 5,305 3,159 1,393 7.4 2.8 6.6 0.6 1.1 1.7 149 1,513 1,730 739 1,266 14.1 2.8 1.9 3.2 1.3 13,354 6.0 4,024 0.9 2013 200913 (US$ millions) CAGR 15,329 7.9 2,203 5.3 Advertising 2013 200913 (US$ millions) CAGR Total 2013 200913 (US$ millions) CAGR 15,329 2,203 13,354 4,024 1,058 4,363 5,275 6,818 4,889 2,132 1,266 8,158 7.9 5.3 6.0 0.9 7.4 2.8 6.8 1.1 0.0 0.2 1.3 0.8

Note: The total includes Internet access. Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by region

69

Russia
We expect a dramatic turnaround in Russia. After growing at double-digit annual rates during the past five years, spending on E&M will fall by 10.6 percent in 2009, the steepest decline of any country in the world. We expect a further drop in 2010 followed by a rebound in 2011 and a return to double-digit growth during 201213. During the next five years, growth will be led by a surging Internet market. Internet advertising will expand at a 20.6 percent compound annual rate, and Internet access spending will grow by 19.6 percent compounded annually. We also expect healthy growth in TV subscriptions and

license fees at 15.9 percent on a compound annual basis and 8.4 percent compound annual growth in filmed entertainment. On the other hand, we expect spending to be lower in 2013 than in 2008 for recorded music, consumer magazines, radio, out-of-home, consumer and educational book publishing, and business-to-business publishing. Consumer/end-user spending will increase at a 1.8 percent compound annual rate, while advertising will decline by 0.1 percent compounded annually. Buoyed by Internet access, the overall market will expand at a 3.7 percent rate compounded annually.

Entertainment and media spending


Consumer/ end-user spending Russia Internet access: wired and mobile Internet advertising: wired and mobile TV subscriptions and license fees TV advertising Recorded music Filmed entertainment Video games Consumer magazine publishing Newspaper publishing Radio Out-of-home Consumer and educational book publishing Business-to-business publishing Trade magazines Professional books Business information Directory advertising Business-to-business publishing total Total 11,023 1.8 10,750 0.1 38 345 978 0.5 1.6 0.3 562 5.1 118 0.2 156 345 978 562 2,041 28,266 0.0 1.6 0.3 5.1 1.2 3.7 1,903 7.1 455 2,076 1,045 666 1,938 5.6 8.4 4.6 0.0 2.0 14 800 501 386 1,328 14.9 4.0 2.4 7.3 6.3 1,579 15.9 5,833 1.1 2013 200913 (US$ millions) CAGR 6,493 19.6 1,301 20.6 Advertising 2013 200913 (US$ millions) CAGR Total 2013 200913 (US$ millions) CAGR 6,493 1,301 1,579 5,833 455 2,076 1,059 1,466 2,439 386 1,328 1,903 19.6 20.6 15.9 1.1 5.6 8.4 4.7 2.3 1.0 7.3 6.3 7.1

Note: The total includes Internet access. Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Internet access
Internet access growth will drop to mid-single-digit gains during the next two years following double-digit annual growth through 2008. We expect a return to double-digit

growth during 201113. Overall spending will rise from $80 billion in 2008 to $131 billion in 2013, a 10.3 percent compound annual increase.

Internet access market: wired and mobile (US$ millions)


EMEA Internet access: wired and mobile % Change 2004 44,709 16.1 2005 52,370 17.1 2006 61,974 18.3 2007 71,608 15.5 2008p 80,344 12.2 2009 84,100 4.7 2010 88,855 5.7 2011 99,160 11.6 2012 114,086 15.1 2013 131,356 15.1 10.3 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Germany has the largest Internet access market in EMEA, at $13.9 billion in 2008, followed by France at $10.5 billion and the UK at $10.2 billion. Italy at $8.2 billion and Spain at $6 billion were the only other countries above $5 billion in 2008. Western Europe will expand at a 7

percent compound annual rate during the next five years. Central and Eastern Europe will grow by 17.5 percent compounded annually, and Middle East/Africa will increase at a 26.2 percent compound annual rate.

Executive summary | Global entertainment and media market by region

71

Internet access market: wired and mobile by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total

2004 1,153 1,242 970 593 5,381 9,095 185 186 5,520 1,962 984 457 2,870 1,614 1,019 6,557 39,788 843 299 682 107 536 463 2,930 500 872 619 1,991 44,709

2005 1,328 1,395 1,117 679 6,617 10,121 236 183 6,194 2,250 1,115 568 3,442 1,707 1,352 7,839 46,143 1,017 391 740 207 738 542 3,635 595 1,254 743 2,592 52,370

2006 1,646 1,577 1,312 800 7,842 12,125 310 244 6,791 2,426 1,235 734 4,320 1,876 1,551 8,699 53,488 1,148 550 911 433 1,037 743 4,822 685 1,932 1,047 3,664 61,974

2007 1,823 1,783 1,495 894 9,288 13,228 432 307 7,529 2,722 1,350 851 5,081 2,152 1,696 9,545 60,176 1,352 732 1,147 585 1,626 1,157 6,599 752 2,905 1,176 4,833 71,608

2008p 1,952 1,947 1,613 967 10,505 13,900 681 412 8,176 2,854 1,489 934 5,979 2,160 1,743 10,208 65,520 1,435 795 1,393 607 2,656 1,436 8,322 794 4,201 1,507 6,502 80,344

2009 1,956 1,975 1,633 1,018 10,606 13,560 760 478 8,632 2,879 1,487 984 6,183 2,168 1,755 10,346 66,420 1,467 846 1,570 730 2,818 1,897 9,328 803 5,718 1,831 8,352 84,100

2010 1,986 2,043 1,679 1,117 10,965 13,697 860 511 8,928 2,939 1,489 1,016 6,577 2,188 1,775 10,555 68,325 1,488 906 1,782 787 3,012 2,340 10,315 811 7,266 2,138 10,215 88,855

2011 2,025 2,134 1,755 1,225 11,943 14,898 1,016 588 9,721 3,044 1,567 1,124 7,517 2,261 1,880 11,426 74,124 1,577 1,017 2,046 942 3,747 2,829 12,158 865 9,475 2,538 12,878 99,160

2012 2,162 2,270 1,870 1,354 13,593 16,462 1,173 661 10,634 3,229 1,651 1,270 9,167 2,404 2,017 12,784 82,701 1,759 1,195 2,478 1,168 4,961 3,427 14,988 947 12,302 3,148 16,397 114,086

2013 2,295 2,439 2,006 1,513 15,329 17,480 1,381 759 11,571 3,477 1,760 1,528 11,160 2,603 2,206 14,398 91,905 2,006 1,394 3,099 1,472 6,493 4,151 18,615 1,041 15,955 3,840 20,836 131,356

200913 CAGR 3.3 4.6 4.5 9.4 7.9 4.7 15.2 13.0 7.2 4.0 3.4 10.3 13.3 3.8 4.8 7.1 7.0 6.9 11.9 17.3 19.4 19.6 23.7 17.5 5.6 30.6 20.6 26.2 10.3

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Advertising
Advertising decreased by 0.4 percent in 2008 following gains of 8.4 percent during each of the prior two years. We project a 12.5 percent decline in 2009 and a 3.6 percent decrease in 2010. For the five-year period as a whole, advertising will fall at a 0.9 percent compound annual rate

to $150 billion in 2013 from $157 billion in 2008. A small video game segment will be the fastest-growing category, at 14.9 percent on a compound annual basis. Internet advertising will expand at a 6.6 percent compound annual rate, while the remaining segments will be flat or down.

Advertising by segment (US$ millions)


EMEA Internet advertising: wired and mobile % Change Television % Change Video games % Change Consumer magazines % Change Newspapers % Change Radio % Change Out-of-home % Change Directories % Change Trade magazines % Change Total % Change 2004 4,760 59.9 39,924 10.5 NA 12,790 4.0 37,493 5.1 7,026 9.4 8,490 5.7 9,884 2.9 5,920 1.3 126,287 7.9 2005 7,585 59.3 42,272 5.9 41 13,153 2.8 39,275 4.8 7,419 5.6 9,102 7.2 10,213 3.3 6,009 1.5 134,359 6.4 2006 12,524 65.1 45,087 6.7 206 402.4 13,795 4.9 40,843 4.0 7,831 5.6 9,955 9.4 11,075 8.4 6,358 5.8 145,705 8.4 2007 17,799 42.1 48,755 8.1 304 47.6 14,226 3.1 42,643 4.4 8,182 4.5 10,736 7.8 11,504 3.9 6,563 3.2 157,952 8.4 2008p 20,427 14.8 48,876 0.2 400 31.6 13,934 2.1 40,804 4.3 7,871 3.8 10,697 0.4 11,623 1.0 6,338 3.4 157,335 0.4 2009 19,533 4.4 43,403 11.2 460 15.0 11,858 14.9 34,525 15.4 6,941 11.8 9,379 12.3 9,882 15.0 5,335 15.8 137,702 12.5 2010 19,929 2.0 42,715 1.6 545 18.5 11,385 4.0 32,761 5.1 6,528 6.0 8,883 5.3 8,954 9.4 5,072 4.9 132,769 3.6 2011 21,829 9.5 43,324 1.4 650 19.3 11,576 1.7 32,644 0.4 6,469 0.9 8,815 0.8 8,864 1.0 5,134 1.2 134,486 1.3 2012 24,637 12.9 46,384 7.1 736 13.2 12,104 4.6 33,316 2.1 6,604 2.1 9,021 2.3 9,217 4.0 5,434 5.8 141,582 5.3 2013 28,106 14.1 48,850 5.3 800 8.7 12,972 7.2 34,495 3.5 6,888 4.3 9,440 4.6 9,796 6.3 5,850 7.7 150,183 6.1 0.9 1.6 3.4 2.5 2.6 3.3 1.4 14.9 0.0 6.6 200913 CAGR

Note: Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

The UK has the largest advertising market in EMEA, at $26 billion, with Germany next, at $24 billion in 2008. Italy was third, at $18 billion, followed by France at $14 billion and Russia and Spain at $11 billion each. Advertising in Western Europe will fall at a 1.5 percent compound

annual rate during the next five years. Central and Eastern Europe will average 0.5 percent on a compound annual basis, while Middle East/Africa will increase at a 3 percent compound annual rate.

Executive summary | Global entertainment and media market by region

73

Advertising by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 892 2,102 1,546 4,540 126,287 939 2,482 1,855 5,276 134,359 939 3,103 2,187 6,229 145,705 1,003 4,083 2,494 7,580 157,952 1,011 4,314 2,642 7,967 157,335 945 4,092 2,533 7,570 137,702 937 4,023 2,637 7,597 132,769 952 4,176 2,656 7,784 134,486 983 4,635 2,856 8,474 141,582 1,019 5,120 3,104 9,243 150,183 0.2 3.5 3.3 3.0 0.9 1,506 1,652 2,083 372 4,569 1,402 11,584 1,698 1,877 2,311 419 5,761 1,719 13,785 1,933 1,995 2,634 541 7,333 2,118 16,554 2,036 2,008 3,054 676 9,244 2,557 19,575 2,123 2,088 3,344 869 10,801 2,494 21,719 1,900 1,818 3,092 755 8,950 2,053 18,568 1,853 1,750 3,106 725 8,542 2,081 18,057 1,907 1,758 3,160 760 8,744 2,212 18,541 2,027 1,852 3,428 842 9,741 2,465 20,355 2,181 1,945 3,692 917 10,750 2,832 22,317 0.5 1.4 2.0 1.1 0.1 2.6 0.5 1,826 3,185 1,341 1,562 12,604 21,078 3,021 1,206 16,482 4,799 2,414 1,519 9,292 2,620 3,562 23,652 110,163 1,919 3,432 1,469 1,641 12,969 21,824 3,259 1,354 17,012 4,989 2,658 1,565 10,089 2,888 3,650 24,580 115,298 2,102 3,848 1,863 1,725 13,537 23,734 3,553 1,530 17,725 5,661 2,893 1,561 10,913 3,249 3,856 25,172 122,922 2,306 4,141 2,023 1,892 13,971 25,156 4,057 1,686 18,334 6,067 3,171 1,611 11,918 3,501 4,221 26,742 130,797 2,385 4,245 2,075 1,934 13,565 24,195 3,914 1,684 17,829 6,133 3,340 1,615 10,597 3,561 4,218 26,359 127,649 2,139 3,892 1,870 1,722 11,968 21,272 3,367 1,452 15,356 5,547 3,060 1,465 9,483 3,284 3,843 21,844 111,564 2,080 3,749 1,800 1,679 11,524 20,414 3,137 1,384 14,810 5,384 3,014 1,415 9,089 3,290 3,758 20,588 107,115 2,110 3,815 1,823 1,717 11,664 20,540 3,069 1,411 14,926 5,454 3,037 1,433 9,184 3,375 3,827 20,776 108,161 2,224 4,000 1,923 1,794 12,100 21,152 3,145 1,481 15,431 5,713 3,163 1,497 9,629 3,537 3,999 21,965 112,753 2,352 4,227 2,040 1,889 12,662 22,052 3,274 1,575 16,088 6,068 3,344 1,573 10,191 3,756 4,220 23,312 118,623 0.3 0.1 0.3 0.5 1.4 1.8 3.5 1.3 2.0 0.2 0.0 0.5 0.8 1.1 0.0 2.4 1.5 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Consumer/end-user spending
Consumer/end-user spending rose by 2.3 percent in 2008, down from a 4.8 percent increase in 2007. We look for a 1.3 percent decline in 2009, a stable market in 2010, and modest growth during 201113. Spending will rise from $285 billion in 2008 to $314 billion in 2013, a 2 percent compound annual increase. Video games

will be the fastest-growing category, with a projected 6.6 percent compound annual increase. TV subscriptions will expand by 5.4 percent compounded annually, and filmed entertainment will grow at a 3.7 percent compound annual rate. Radio and newspapers will average less than 2 percent growth on a compound annual basis, while the remaining segments will be lower in 2013 than in 2008.

Consumer/end-user spending by segment (US$ millions)


EMEA TV subscriptions and license fees % Change Recorded music % Change Filmed entertainment % Change Video games % Change Consumer magazines % Change Newspapers % Change Radio % Change Consumer and educational books % Change Business-to-business publishing % Change Total % Change 2004 53,923 6.3 14,775 4.3 27,152 8.9 9,756 14.1 21,641 2.8 31,231 1.5 9,570 2.7 46,624 1.7 35,559 2.3 250,231 3.6 2005 58,460 8.4 14,166 4.1 25,465 6.2 10,607 8.7 22,153 2.4 31,692 1.5 9,873 3.2 48,624 4.3 36,618 3.0 257,658 3.0 2006 63,150 8.0 13,396 5.4 25,384 0.3 11,873 11.9 22,344 0.9 31,858 0.5 10,065 1.9 49,018 0.8 38,652 5.6 265,740 3.1 2007 68,737 8.8 12,176 9.1 25,374 0.0 14,831 24.9 22,505 0.7 32,354 1.6 10,368 3.0 50,671 3.4 41,427 7.2 278,443 4.8 2008p 74,290 8.1 11,062 9.1 25,533 0.6 17,733 19.6 22,294 0.9 32,298 0.2 10,507 1.3 50,277 0.8 40,730 1.7 284,724 2.3 2009 76,142 2.5 10,091 8.8 25,719 0.7 18,907 6.6 21,635 3.0 32,109 0.6 10,737 2.2 47,948 4.6 37,844 7.1 281,132 1.3 2010 78,263 2.8 9,597 4.9 26,261 2.1 19,815 4.8 21,304 1.5 32,037 0.2 10,955 2.0 46,979 2.0 36,395 3.8 281,606 0.2 2011 82,748 5.7 9,354 2.5 27,269 3.8 20,667 4.3 21,264 0.2 32,248 0.7 11,056 0.9 47,005 0.1 35,895 1.4 287,506 2.1 2012 89,443 8.1 9,218 1.5 28,744 5.4 22,302 7.9 21,584 1.5 32,587 1.1 11,115 0.5 47,689 1.5 36,441 1.5 299,123 4.0 2013 96,672 8.1 9,215 0.0 30,668 6.7 24,456 9.7 22,012 2.0 32,992 1.2 11,367 2.3 48,898 2.5 37,972 4.2 314,252 5.1 2.0 1.4 0.6 1.6 0.4 0.3 6.6 3.7 3.6 5.4 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Germany and the UK were the largest markets in 2008, at $57 billion and $56 billion, respectively. France was next, at $43 billion, nearly twice the total for Italy, which was the next largest, at $23 billion. We expect comparable

increases during the next five years for each area of EMEA. Middle East/Africa will average 2.6 percent compounded annually compared with 1.9 percent for Central and Eastern Europe and 2 percent for Western Europe.

Executive summary | Global entertainment and media market by region

75

Consumer/end-user spending (excluding Internet access) by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total

2004 6,166 5,066 4,459 3,464 38,122 53,908 2,111 2,479 19,571 9,617 4,527 2,091 14,808 5,957 4,841 49,409 226,596 1,789 1,497 3,938 811 7,126 1,571 16,732 1,708 3,555 1,640 6,903 250,231

2005 6,328 5,213 4,642 3,384 39,248 54,698 2,156 2,575 20,410 9,748 4,776 2,139 15,175 6,106 4,903 50,997 232,498 1,989 1,547 4,174 886 7,652 1,691 17,939 1,746 3,717 1,758 7,221 257,658

2006 6,447 5,415 4,761 3,438 40,102 55,817 2,221 2,753 21,296 10,091 5,040 2,263 15,606 6,296 5,056 52,081 238,683 2,082 1,605 4,586 978 8,373 1,886 19,510 1,761 3,899 1,887 7,547 265,740

2007 6,752 5,608 4,928 3,537 42,449 57,206 2,329 2,974 22,761 10,589 5,338 2,369 16,048 6,614 5,136 54,503 249,141 2,197 1,637 4,992 1,104 9,315 2,029 21,274 1,815 4,212 2,001 8,028 278,443

2008p 6,885 5,758 4,971 3,523 43,154 57,410 2,367 3,062 23,395 10,973 5,511 2,510 16,652 6,713 5,269 55,606 253,759 2,259 1,668 5,341 1,169 10,076 2,171 22,684 1,849 4,332 2,100 8,281 284,724

2009 6,843 5,715 4,947 3,542 42,865 56,707 2,335 3,054 23,227 10,964 5,508 2,548 16,394 6,683 5,280 54,629 251,241 2,242 1,622 5,215 1,151 9,279 2,135 21,644 1,831 4,303 2,113 8,247 281,132

2010 6,922 5,758 5,040 3,552 42,856 56,370 2,330 3,074 23,557 11,094 5,533 2,619 16,415 6,816 5,360 54,384 251,680 2,257 1,599 5,174 1,143 9,293 2,153 21,619 1,835 4,319 2,153 8,307 281,606

2011 7,060 5,926 5,158 3,615 43,733 56,782 2,376 3,166 24,415 11,497 5,730 2,765 16,818 6,956 5,456 55,285 256,738 2,327 1,612 5,260 1,147 9,585 2,261 22,192 1,866 4,467 2,243 8,576 287,506

2012 7,252 6,183 5,340 3,716 45,390 58,052 2,469 3,343 26,034 12,133 5,918 2,991 17,614 7,158 5,675 57,613 266,881 2,436 1,671 5,419 1,170 10,174 2,418 23,288 1,912 4,664 2,378 8,954 299,123

2013 7,531 6,489 5,607 3,866 47,433 59,920 2,591 3,566 28,380 12,727 6,157 3,226 18,762 7,397 5,881 60,453 279,986 2,579 1,760 5,673 1,207 11,023 2,620 24,862 1,974 4,907 2,523 9,404 314,252

200913 CAGR 1.8 2.4 2.4 1.9 1.9 0.9 1.8 3.1 3.9 3.0 2.2 5.1 2.4 2.0 2.2 1.7 2.0 2.7 1.1 1.2 0.6 1.8 3.8 1.9 1.3 2.5 3.7 2.6 2.0

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Asia Pacific

Entertainment and media spending in Asia Pacific rose by 6.8 percent in 2008, down from a 9.5 percent advance in 2007. Asia Pacific will be the only region where we expect spending to grow in 2009, with a projected 0.2 percent increase. For the forecast period as a whole, spending will rise at a 4.5 percent compound annual rate to $413 billion in 2013 from $331 billion in 2008. Double-digit compound annual increases are projected for Internet advertising

and TV subscriptions and license fees. We look for video games to increase at a 9.4 percent compound annual rate and Internet access spending to grow by 7.5 percent compounded annually. Filmed entertainment will expand at a projected 5.7 percent rate compounded annually. The remaining segments will post increases averaging less than 3 percent on a compound annual basis or will decline.

Entertainment and media market by segment (US$ millions)


Asia Pacific Internet access: wired and mobile % Change Internet advertising: wired and mobile % Change TV subscriptions and license fees % Change TV advertising % Change Recorded music % Change Filmed entertainment % Change Video games % Change Consumer magazine publishing % Change Newspaper publishing % Change Radio/out-of-home % Change Consumer and educational book publishing % Change Business-to-business publishing % Change Total % Change 2004 35,644 43.4 2,940 57.8 16,805 11.2 31,326 8.1 7,783 1.9 15,507 5.7 8,513 16.0 15,110 4.3 46,378 4.0 14,433 9.2 22,165 3.9 17,811 2.9 234,415 10.7 2005 49,756 39.6 5,687 93.4 19,168 14.1 32,568 4.0 7,722 0.8 15,604 0.6 9,504 11.6 15,813 4.7 47,953 3.4 14,912 3.3 23,001 3.8 18,683 4.9 260,153 11.0 2006 60,219 21.0 7,685 35.1 21,365 11.5 33,792 3.8 7,890 2.2 16,216 3.9 11,337 19.3 16,268 2.9 49,473 3.2 15,866 6.4 24,358 5.9 19,548 4.6 283,364 8.9 2007 70,224 16.6 10,359 34.8 24,596 15.1 34,972 3.5 8,626 9.3 16,944 4.5 13,985 23.4 16,335 0.4 51,262 3.6 16,861 6.3 26,413 8.4 20,703 5.9 310,236 9.5 2008p 81,291 15.8 12,502 20.7 27,530 11.9 35,856 2.5 8,552 0.9 17,663 4.2 15,747 12.6 16,214 0.7 51,717 0.9 16,935 0.4 27,625 4.6 21,036 1.6 331,264 6.8 2009 86,940 6.9 13,019 4.1 29,698 7.9 32,637 9.0 8,386 1.9 18,164 2.8 17,107 8.6 14,917 8.0 48,718 5.8 16,502 2.6 27,813 0.7 19,517 7.2 331,934 0.2 2010 91,837 5.6 13,698 5.2 32,443 9.2 32,941 0.9 8,360 0.3 19,022 4.7 18,719 9.4 14,429 3.3 48,009 1.5 16,589 0.5 28,252 1.6 18,835 3.5 341,522 2.9 2011 98,496 7.3 15,211 11.0 36,177 11.5 33,775 2.5 8,441 1.0 20,266 6.5 20,386 8.9 14,547 0.8 48,687 1.4 17,150 3.4 28,959 2.5 18,965 0.7 359,165 5.2 2012 107,164 8.8 17,977 18.2 40,556 12.1 35,330 4.6 8,553 1.3 21,687 7.0 22,580 10.8 15,004 3.1 50,039 2.8 18,044 5.2 29,874 3.2 19,574 3.2 384,149 7.0 2013 116,598 8.8 21,230 18.1 45,423 12.0 37,205 5.3 8,720 2.0 23,264 7.3 24,729 9.5 15,705 4.7 51,876 3.7 19,067 5.7 30,903 3.4 20,722 5.9 412,799 7.5 4.5 0.3 2.3 2.4 0.1 0.6 9.4 5.7 0.4 0.7 10.5 11.2 7.5 200913 CAGR

Note: Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by region

77

Japan at $149 billion is by far the dominant country, accounting for 45 percent of total spending in Asia Pacific in 2008 and the second-largest country in the world, behind the United States. Excluding Japan, E&M spending in Asia Pacific will increase at a projected 7.1 percent

compound annual rate. The PRC is second, at $70 billion, less than half the size of Japan. South Korea at $34 billion, Australia at $23 billion, and India at $15 billion were other countries above $10 billion in 2008.

Entertainment and media market by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 18,153 34,348 3,891 8,339 2,527 120,347 2,247 3,178 987 1,725 2,362 23,958 7,437 4,506 410 234,415 2005 19,208 41,486 4,344 9,724 2,894 131,726 2,453 3,413 1,085 1,917 2,442 26,626 7,569 4,716 550 260,153 2006 27,126 47,965 4,725 11,424 3,301 134,456 2,689 3,422 1,171 2,101 2,595 29,132 7,660 4,896 701 283,364 2007 22,026 58,695 5,165 13,626 4,178 146,625 3,336 3,745 1,422 2,431 2,861 32,019 7,901 5,330 876 310,236 2008p 23,291 69,800 5,607 15,088 4,742 148,779 3,745 3,805 1,709 2,861 2,988 34,376 7,875 5,531 1,067 331,264 2009 23,111 74,744 5,217 16,328 4,988 142,995 3,877 3,656 1,938 2,923 2,829 34,585 8,060 5,487 1,196 331,934 2010 23,496 80,613 5,269 18,039 5,460 142,300 3,997 3,637 2,164 3,115 2,773 35,645 8,094 5,577 1,343 341,522 2011 24,374 88,298 5,488 20,149 6,295 145,008 4,216 3,741 2,453 3,457 2,828 37,139 8,288 5,845 1,586 359,165 2012 25,673 98,309 5,795 22,489 7,497 150,044 4,500 3,897 2,825 3,971 3,201 39,202 8,573 6,262 1,911 384,149 2013 27,318 110,081 6,190 25,094 8,713 156,213 4,840 4,098 3,148 4,517 3,124 41,454 8,929 6,773 2,307 412,799 200913 CAGR 3.2 9.5 2.0 10.7 12.9 1.0 5.3 1.5 13.0 9.6 0.9 3.8 2.5 4.1 16.7 4.5

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

78

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Japan
A weak economy will lead to decreases in E&M spending during the next two years and sluggish growth through 2013, averaging only 1 percent compounded annually. Internet advertising, video games, and TV subscriptions and license fees will be relatively healthy, with compound annual increases of 8.7 percent, 7.4 percent, and 5.3 percent, respectively. Filmed entertainment will grow at a 3.6 percent compound annual rate, while Internet access

spending will advance by 2.8 percent compounded annually. Japan will be one of the few countries with higher recorded music spending in 2013 than in 2008, principally the result of a large mobile music market. Consumer and educational book publishing will be the only other segment that will be larger in 2013 than in 2008. Consumer/enduser spending will grow at a 1.2 percent compound annual rate, while advertising will decline by 2 percent on a compound annual basis.

Entertainment and media spending


Consumer/ end-user spending Japan Internet access: wired and mobile Internet advertising: wired and mobile TV subscriptions and license fees TV advertising Recorded music Filmed entertainment Video games Consumer magazine publishing Newspaper publishing Radio Out-of-home Consumer and educational book publishing Business-to-business publishing Trade magazines Professional books Business information Directory advertising Business-to-business publishing total Total 73,802 1.2 39,071 2.0 758 1,515 2,609 2.7 1.1 5.1 1,498 7.8 770 5.6 1,528 1,515 2,609 1,498 7,150 156,213 4.2 1.1 5.1 7.8 4.8 1.0 9,246 0.4 6,656 10,432 8,964 4,942 11,965 2,394 0.2 3.6 7.3 2.5 0.5 1.4 200 2,067 5,500 1,217 5,121 15.1 5.6 8.2 4.4 0.4 14,321 5.3 12,705 3.7 2013 200913 (US$ millions) CAGR 43,340 2.8 11,171 8.7 Advertising 2013 200913 (US$ millions) CAGR Total 2013 200913 (US$ millions) CAGR 43,340 11,171 14,321 12,705 6,656 10,432 9,164 7,009 17,465 3,611 5,121 9,246 2.8 8.7 5.3 3.7 0.2 3.6 7.4 3.5 3.4 4.4 0.4 0.4

Note: The total includes Internet access. Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by region

79

China
The PRC, by contrast, will continue to be among the faster-growing countries in 2009, with a projected 7.1 percent increase, although that gain will be well below the double-digit annual growth during the past five years. Double-digit annual gains during the next five years are projected for Internet access, Internet advertising, TV

subscriptions and license fees, recorded music, filmed entertainment, and video games. Overall consumer/enduser spending will increase at an 8.7 percent compound annual rate, and advertising will expand by 7.5 percent compounded annually. Overall spending, including Internet access, will rise at a 9.5 percent compound annual rate during the next five years.

Entertainment and media spending


Consumer/ end-user spending China Internet access: wired and mobile Internet advertising: wired and mobile TV subscriptions and license fees TV advertising Recorded music Filmed entertainment Video games Consumer magazine publishing Newspaper publishing Radio Out-of-home Consumer and educational book publishing Business-to-business publishing Trade magazines Professional books Business information Directory advertising Business-to-business publishing total Total 44,603 8.7 28,955 7.5 276 1,874 3,016 4.9 3.0 6.3 1,706 7.8 124 8.4 400 1,874 3,016 1,706 6,996 110,081 5.9 3.0 6.3 7.8 5.6 9.5 12,493 4.1 249 1,631 3,257 3,028 6,893 11.4 13.4 8.5 5.0 3.9 42 596 6,970 1,350 4,065 14.9 7.8 4.5 4.6 9.9 11,886 22.0 10,054 6.0 2013 200913 (US$ millions) CAGR 36,523 12.7 4,568 18.5 Advertising 2013 200913 (US$ millions) CAGR Total 2013 200913 (US$ millions) CAGR 36,523 4,568 11,886 10,054 249 1,631 3,299 3,624 13,863 1,350 4,065 12,493 12.7 18.5 22.0 6.0 11.4 13.4 12.6 5.5 4.2 4.6 9.9 4.1

Note: The total includes Internet access. Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

India
We expect even faster growth in India, with an 8.2 percent gain in 2009 and a 10.7 percent compound annual increase through 2013. Double-digit annual growth is projected for each segment except recorded music, consumer magazines,

newspaper publishing, consumer and educational book publishing, and business-to-business publishing. Overall consumer/end-user spending will increase at a 9.1 percent compound annual rate, and advertising will grow by 10.1 percent compounded annually.

Entertainment and media spending


Consumer/ end-user spending India Internet access: wired and mobile Internet advertising: wired and mobile TV subscriptions and license fees TV advertising Recorded music Filmed entertainment Video games Consumer magazine publishing Newspaper publishing Radio Out-of-home Consumer and educational book publishing Business-to-business publishing Trade magazines Professional books Business information Directory advertising Business-to-business publishing total Total 14,346 9.1 8,147 10.1 8 208 411 5.9 3.9 7.6 46 8.9 60 8.4 68 208 411 46 733 25,094 8.1 3.9 7.6 8.9 6.6 10.7 2,592 5.9 242 3,427 375 152 1,250 7.2 14.3 32.7 5.7 0.8 1 506 2,999 411 616 0.0 7.3 8.2 16.7 12.5 5,681 10.8 3,196 10.2 2013 200913 (US$ millions) CAGR 2,601 23.1 349 29.5 Advertising 2013 200913 (US$ millions) CAGR Total 2013 200913 (US$ millions) CAGR 2,601 349 5,681 3,196 242 3,427 376 658 4,249 411 616 2,592 23.1 29.5 10.8 10.2 7.2 14.3 32.5 7.0 5.7 16.7 12.5 5.9

Note: The total includes Internet access. Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by region

81

Internet access
Internet access growth will drop to single digits beginning in 2009 following years of double-digit increases. Growth through 2013 will average 7.5 percent compounded annually to $117 billion from $81 billion in 2008.

Japan, the PRC, and South Korea are the dominant countries, with spending at $38 billion, $20 billion, and $13 billion, respectively, in 2008. Australia at $2 billion and Taiwan at $1.4 billion were the only other countries above $1 billion. The top five countries in 2008 accounted for 91 percent of total access spending in Asia Pacific.

Internet access market: wired and mobile (US$ millions)


Asia Pacific Internet access: wired and mobile % Change 2004 35,644 43.4 2005 49,756 39.6 2006 60,219 21.0 2007 70,224 16.6 2008p 81,291 15.8 2009 86,940 6.9 2010 91,837 5.6 2011 98,496 7.3 2012 107,164 8.8 2013 116,598 8.8 7.5 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet access market: wired and mobile by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 1,384 5,005 449 254 130 17,951 268 204 374 166 487 7,404 1,013 458 97 35,644 2005 1,558 7,771 530 314 181 26,523 343 255 417 204 565 9,284 1,112 518 181 49,756 2006 1,721 9,564 682 428 243 32,671 432 291 459 290 661 10,530 1,317 661 269 60,219 2007 1,870 14,133 754 723 470 35,503 585 348 592 480 750 11,461 1,361 847 347 70,224 2008p 2,018 20,087 859 919 639 37,818 720 362 809 822 847 12,528 1,415 998 450 81,291 2009 2,131 22,334 879 1,150 774 38,840 819 370 1,016 950 854 13,179 1,980 1,132 532 86,940 2010 2,254 24,468 917 1,365 1,024 39,807 886 384 1,214 1,109 860 13,663 2,061 1,218 607 91,837 2011 2,449 27,344 976 1,640 1,494 41,036 944 411 1,455 1,388 886 14,204 2,159 1,360 750 98,496 2012 2,648 31,317 1,038 2,060 2,174 42,306 1,032 445 1,767 1,775 1,168 14,691 2,240 1,562 941 107,164 2013 2,905 36,523 1,118 2,601 2,778 43,340 1,145 487 2,027 2,253 979 15,143 2,343 1,795 1,161 116,598 200913 CAGR 7.6 12.7 5.4 23.1 34.2 2.8 9.7 6.1 20.2 22.3 2.9 3.9 10.6 12.5 20.9 7.5

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Advertising
Advertising growth slowed to 2.8 percent in 2008 from increases in excess of 6 percent during each of the prior four years. We expect a 7.8 percent decrease in 2009 and a further, 0.4 percent drop in 2010. A subsequent rebound will raise advertising to $110 billion in 2013, a 1.7 percent compound annual increase from $101 billion in 2008.

We project a 14.6 percent compound annual increase for a small video game market and 11.2 percent growth compounded annually for Internet advertising. Out-ofhome will expand at a projected 3.5 percent compound annual rate, with the remaining segments either growing by less than 1 percent compounded annually or declining.

Advertising by segment (US$ millions)


Asia Pacific Internet advertising: wired and mobile % Change Television % Change Video games % Change Consumer magazines % Change Newspapers % Change Radio % Change Out-of-home % Change Directories % Change Trade magazines % Change Total % Change 2004 2,940 57.8 31,326 8.1 NA 5,333 4.5 22,866 5.6 3,998 6.6 8,270 11.5 4,887 5.6 1,488 1.1 81,108 8.3 2005 5,687 93.4 32,568 4.0 18 5,529 3.7 23,888 4.5 4,184 4.7 8,439 2.0 5,120 4.8 1,589 6.8 86,804 7.0 2006 7,685 35.1 33,792 3.8 100 455.6 5,630 1.8 25,114 5.1 4,551 8.8 8,974 6.3 5,252 2.6 1,640 3.2 92,085 6.1 2007 10,359 34.8 34,972 3.5 138 38.0 5,709 1.4 26,301 4.7 4,659 2.4 9,824 9.5 5,594 6.5 1,669 1.8 98,181 6.6 2008p 12,502 20.7 35,856 2.5 185 34.1 5,647 1.1 26,342 0.2 4,819 3.4 9,700 1.3 5,684 1.6 1,627 2.5 100,958 2.8 2009 13,019 4.1 32,637 9.0 215 16.2 4,911 13.0 23,327 11.4 4,539 5.8 9,512 1.9 5,063 10.9 1,359 16.5 93,098 7.8 2010 13,698 5.2 32,941 0.9 255 18.6 4,668 4.9 22,598 3.1 4,479 1.3 9,626 1.2 4,812 5.0 1,271 6.5 92,736 0.4 2011 15,211 11.0 33,775 2.5 300 17.6 4,693 0.5 22,930 1.5 4,556 1.7 10,075 4.7 4,838 0.5 1,278 0.6 95,761 3.3 2012 17,977 18.2 35,330 4.6 336 12.0 4,866 3.7 23,898 4.2 4,723 3.7 10,765 6.8 5,049 4.4 1,328 3.9 102,039 6.6 2013 21,230 18.1 37,205 5.3 365 8.6 5,218 7.2 25,323 6.0 4,970 5.2 11,507 6.9 5,403 7.0 1,436 8.1 110,014 7.8 1.7 2.5 1.0 3.5 0.6 0.8 1.6 14.6 0.7 11.2 200913 CAGR

Note: Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by region

83

Japan at $43 billion in 2008 was the leading country, with the PRC second, at $20 billion, and Australia third, at $11 billion, together accounting for 74 percent of total

advertising in Asia Pacific. Excluding Japan, advertising growth for the remaining countries during the next five years will average 4.2 percent on a compound annual basis.

Advertising by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 8,932 11,065 1,827 2,649 1,544 41,356 628 1,395 109 793 803 5,609 2,484 1,717 197 81,108 2005 9,595 12,869 2,045 3,026 1,779 43,244 659 1,502 123 891 783 5,833 2,421 1,808 226 86,804 2006 9,830 15,329 2,258 3,724 2,121 43,882 710 1,493 153 959 818 6,341 2,340 1,869 258 92,085 2007 10,966 17,624 2,401 4,483 2,572 44,377 815 1,573 216 1,010 843 6,801 2,307 1,876 317 98,181 2008p 11,288 20,177 2,587 5,026 2,836 43,193 912 1,566 247 1,048 839 6,874 2,151 1,856 358 100,958 2009 10,856 20,612 2,162 5,473 2,825 37,257 870 1,407 249 972 696 5,861 1,779 1,700 379 93,098 2010 10,830 21,840 2,115 6,085 2,892 35,370 853 1,357 253 969 636 5,755 1,666 1,700 415 92,736 2011 11,042 23,586 2,186 6,722 3,074 35,315 876 1,371 263 983 635 5,838 1,642 1,770 458 95,761 2012 11,470 26,079 2,322 7,411 3,391 36,784 931 1,416 278 1,040 649 6,186 1,677 1,886 519 102,039 2013 12,109 28,955 2,495 8,147 3,794 39,071 1,002 1,477 296 1,000 679 6,611 1,734 2,044 600 110,014 200913 CAGR 1.4 7.5 0.7 10.1 6.0 2.0 1.9 1.2 3.7 0.9 4.1 0.8 4.2 1.9 10.9 1.7

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Consumer/end-user spending
Consumer/end-user spending rose by 5.1 percent in 2008, down from the gains during 200607 but comparable to the increases during 200405. We expect a slower, 1.9 percent advance in 2009 with steady improvement thereafter. For the forecast period as a whole, growth will average 4.6 percent compounded annually from $149 billion in 2008 to $186 billion in 2013. We project TV subscriptions and license fees to expand at a 10.5 percent compound annual rate, video games by 9.4

percent compounded annually, and filmed entertainment by 5.7 percent on a compound annual basis. Growth in the remaining segments will be 2.3 percent or less compounded annually, and spending on consumer magazines will be a bit lower in 2013 than in 2008. Japan at $68 billion in 2008 was more than twice that of the PRC, which was second, at $30 billion. South Korea totaled $15 billion, with Australia and India next at $10 billion and $9 billion, respectively.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Consumer/end-user spending by segment (US$ millions)


Asia Pacific TV subscriptions and license fees % Change Recorded music % Change Filmed entertainment % Change Video games % Change Consumer magazines % Change Newspapers % Change Radio % Change Consumer and educational books % Change Business-to-business publishing % Change Total % Change 2004 16,805 11.2 7,783 1.9 15,507 5.7 8,513 16.0 9,777 4.2 23,512 2.4 2,165 5.5 22,165 3.9 11,436 2.1 117,663 5.1 2005 19,168 14.1 7,722 0.8 15,604 0.6 9,486 11.4 10,284 5.2 24,065 2.4 2,289 5.7 23,001 3.8 11,974 4.7 123,593 5.0 2006 21,365 11.5 7,890 2.2 16,216 3.9 11,237 18.5 10,638 3.4 24,359 1.2 2,341 2.3 24,358 5.9 12,656 5.7 131,060 6.0 2007 24,596 15.1 8,626 9.3 16,944 4.5 13,847 23.2 10,626 0.1 24,961 2.5 2,378 1.6 26,413 8.4 13,440 6.2 141,831 8.2 2008p 27,530 11.9 8,552 0.9 17,663 4.2 15,562 12.4 10,567 0.6 25,375 1.7 2,416 1.6 27,625 4.6 13,725 2.1 149,015 5.1 2009 29,698 7.9 8,386 1.9 18,164 2.8 16,892 8.5 10,006 5.3 25,391 0.1 2,451 1.4 27,813 0.7 13,095 4.6 151,896 1.9 2010 32,443 9.2 8,360 0.3 19,022 4.7 18,464 9.3 9,761 2.4 25,411 0.1 2,484 1.3 28,252 1.6 12,752 2.6 156,949 3.3 2011 36,177 11.5 8,441 1.0 20,266 6.5 20,086 8.8 9,854 1.0 25,757 1.4 2,519 1.4 28,959 2.5 12,849 0.8 164,908 5.1 2012 40,556 12.1 8,553 1.3 21,687 7.0 22,244 10.7 10,138 2.9 26,141 1.5 2,556 1.5 29,874 3.2 13,197 2.7 174,946 6.1 2013 45,423 12.0 8,720 2.0 23,264 7.3 24,364 9.5 10,487 3.4 26,553 1.6 2,590 1.3 30,903 3.4 13,883 5.2 186,187 6.4 4.6 0.2 2.3 1.4 0.9 0.2 9.4 5.7 0.4 10.5 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by region

85

Consumer/end-user spending (excluding Internet access) by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 7,837 18,278 1,615 5,436 853 61,040 1,351 1,579 504 766 1,072 10,945 3,940 2,331 116 117,663 2005 8,055 20,846 1,769 6,384 934 61,959 1,451 1,656 545 822 1,094 11,509 4,036 2,390 143 123,593 2006 15,575 23,072 1,785 7,272 937 57,903 1,547 1,638 559 852 1,116 12,261 4,003 2,366 174 131,060 2007 9,190 26,938 2,010 8,420 1,136 66,745 1,936 1,824 614 941 1,268 13,757 4,233 2,607 212 141,831 2008p 9,985 29,536 2,161 9,143 1,267 67,768 2,113 1,877 653 991 1,302 14,974 4,309 2,677 259 149,015 2009 10,124 31,798 2,176 9,705 1,389 66,898 2,188 1,879 673 1,001 1,279 15,545 4,301 2,655 285 151,896 2010 10,412 34,305 2,237 10,589 1,544 67,123 2,258 1,896 697 1,037 1,277 16,227 4,367 2,659 321 156,949 2011 10,883 37,368 2,326 11,787 1,727 68,657 2,396 1,959 735 1,086 1,307 17,097 4,487 2,715 378 164,908 2012 11,555 40,913 2,435 13,018 1,932 70,954 2,537 2,036 780 1,156 1,384 18,325 4,656 2,814 451 174,946 2013 12,304 44,603 2,577 14,346 2,141 73,802 2,693 2,134 825 1,264 1,466 19,700 4,852 2,934 546 186,187 200913 CAGR 4.3 8.6 3.6 9.4 11.1 1.7 5.0 2.6 4.8 5.0 2.4 5.6 2.4 1.9 16.1 4.6

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Latin America

Latin America was the fast-growing region in 2008, with a 10.1 percent increase. We expect the recession to lead to a significant turnaround and a 1 percent decline in 2009. We look for accelerating increases thereafter and a return to double-digit growth in 2013. Spending will rise from $57 billion in 2008 to $73 billion in 2013, a 5.1 percent compound annual increase. We expect doubledigit compound annual growth in Internet advertising and

Internet access spending and a 9.2 percent compound annual gain in video games. TV subscriptions will expand at a 6.5 percent compound annual rate, and filmed entertainment will grow by 4.5 percent compounded annually. The remaining segments will average less than 2 percent annually, and recorded music will be lower in 2013 than in 2008.

Entertainment and media market by segment (US$ millions)


Latin America Internet access: wired and mobile % Change Internet advertising: wired and mobile % Change TV subscriptions and license fees % Change TV advertising % Change Recorded music % Change Filmed entertainment % Change Video games % Change Consumer magazine publishing % Change Newspaper publishing % Change Radio/out-of-home % Change Consumer and educational book publishing % Change Business-to-business publishing % Change Total % Change 2004 3,398 30.5 153 45.7 5,943 7.9 6,287 20.2 1,180 13.8 2,190 12.7 597 11.4 2,560 9.2 4,619 4.9 962 13.4 4,293 1.5 2,923 7.2 35,105 11.4 2005 4,472 31.6 259 69.3 6,610 11.2 7,641 21.5 1,171 0.8 2,190 0.0 627 5.0 2,805 9.6 5,022 8.7 1,392 44.7 4,399 2.5 3,203 9.6 39,791 13.3 2006 5,919 32.4 338 30.5 7,366 11.4 8,930 16.9 1,141 2.6 2,420 10.5 787 25.5 2,990 6.6 5,489 9.3 1,550 11.4 4,515 2.6 3,424 6.9 44,869 12.8 2007 7,631 28.9 540 59.8 8,390 13.9 10,730 20.2 977 14.4 2,586 6.9 1,025 30.2 3,262 9.1 6,126 11.6 1,765 13.9 4,652 3.0 3,711 8.4 51,356 14.5 2008p 8,917 16.9 660 22.2 9,470 12.9 12,243 14.1 957 2.0 2,486 3.9 1,267 23.6 3,364 3.1 6,816 11.3 1,893 7.3 4,772 2.6 3,774 1.7 56,535 10.1 2009 9,584 7.5 706 7.0 9,726 2.7 11,383 7.0 906 5.3 2,539 2.1 1,383 9.2 3,193 5.1 6,631 2.7 1,753 7.4 4,681 1.9 3,605 4.5 55,979 1.0 2010 10,439 8.9 770 9.1 10,037 3.2 11,288 0.8 869 4.1 2,628 3.5 1,506 8.9 3,135 1.8 6,606 0.4 1,700 3.0 4,630 1.1 3,525 2.2 56,990 1.8 2011 12,201 16.9 917 19.1 10,627 5.9 11,612 2.9 863 0.7 2,754 4.8 1,620 7.6 3,180 1.4 6,759 2.3 1,746 2.7 4,665 0.8 3,551 0.7 60,313 5.8 2012 14,640 20.0 1,162 26.7 11,683 9.9 12,209 5.1 880 2.0 2,917 5.9 1,776 9.6 3,342 5.1 7,038 4.1 1,864 6.8 4,776 2.4 3,692 4.0 65,732 9.0 2013 17,380 18.7 1,474 26.9 12,957 10.9 13,108 7.4 938 6.6 3,098 6.2 1,970 10.9 3,583 7.2 7,506 6.6 2,047 9.8 4,932 3.3 3,918 6.1 72,581 10.4 5.1 0.8 0.7 1.6 1.9 1.3 9.2 4.5 0.4 1.4 6.5 17.4 14.3 200913 CAGR

Note: Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by region

87

Brazil and Mexico are the dominant countries, at $26 billion and $14 billion, respectively, in 2008,

together accounting for 71 percent of total spending in Latin America.

Entertainment and media market by country (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 3,914 15,870 2,143 3,040 9,280 858 35,105 2005 4,610 18,254 2,267 3,605 10,105 950 39,791 2006 5,375 20,619 2,457 4,097 11,222 1,099 44,869 2007 6,249 23,648 2,729 4,776 12,754 1,200 51,356 2008p 6,838 26,248 2,821 5,320 14,077 1,231 56,535 2009 7,068 25,914 2,772 5,263 13,713 1,249 55,979 2010 7,387 26,175 2,817 5,409 13,902 1,300 56,990 2011 7,958 27,602 2,985 5,860 14,515 1,393 60,313 2012 8,796 29,930 3,250 6,465 15,744 1,547 65,732 2013 9,718 32,895 3,568 7,256 17,392 1,752 72,581 200913 CAGR 7.3 4.6 4.8 6.4 4.3 7.3 5.1

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

88

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Brazil
After Brazils growth at double-digit annual rates during each of the past five years, we expect spending to fall by 1.3 percent in 2009 and to remain weak through 2010 before rebounding with mid- to high-single-digit increases during the subsequent three years. Growth will average 4.6 percent compounded annually during the entire forecast

period, led by double-digit compound annual increases in Internet access and Internet advertising and a 9.2 percent rise in video games on a compound annual basis. Consumer/end-user spending will expand at a 3.3 percent compound annual rate, and advertising will grow by 2.4 percent compounded annually.

Entertainment and media spending


Consumer/ end-user spending Brazil Internet access: wired and mobile Internet advertising: wired and mobile TV subscriptions and license fees TV advertising Recorded music Filmed entertainment Video games Consumer magazine publishing Newspaper publishing Radio Out-of-home Consumer and educational book publishing Business-to-business publishing Trade magazines Professional books Business information Directory advertising Business-to-business publishing total Total 15,049 3.3 10,629 2.4 70 544 723 1.1 0.5 1.2 348 0.2 123 2.3 193 544 723 348 1,808 32,895 1.0 0.5 1.2 0.2 0.7 4.6 3,426 0.8 446 1,114 496 1,140 2,663 3.6 4.1 9.2 0.3 2.9 11 877 1,601 367 169 12.9 2.3 1.4 1.4 2.4 4,427 6.9 6,254 1.5 2013 200913 (US$ millions) CAGR 7,217 12.5 1,059 19.1 Advertising 2013 200913 (US$ millions) CAGR Total 2013 200913 (US$ millions) CAGR 7,217 1,059 4,427 6,254 446 1,114 507 2,017 4,264 367 169 3,426 12.5 19.1 6.9 1.5 3.6 4.1 9.2 1.1 2.3 1.4 2.4 0.8

Note: The total includes Internet access. Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Executive summary | Global entertainment and media market by region

89

Internet access
Internet access spending will rise from $9 billion in 2008 to $17 billion in 2013, a 14.3 percent compound annual increase. Growth will dip to high single digits during the

next two years and then return to double-digit gains during 201113. Brazil is the leader, at $4 billion in 2008, with Mexico and Argentina each at less than $2 billion.

Internet access market: wired and mobile (US$ millions)


Latin America Internet access: wired and mobile % Change 2004 3,398 30.5 2005 4,472 31.6 2006 5,919 32.4 2007 7,631 28.9 2008p 8,917 16.9 2009 9,584 7.5 2010 10,439 8.9 2011 12,201 16.9 2012 14,640 20.0 2013 17,380 18.7 14.3 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet access market: wired and mobile by country (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 791 1,371 186 263 735 52 3,398 2005 985 1,956 194 296 966 75 4,472 2006 1,198 2,755 233 413 1,219 101 5,919 2007 1,476 3,522 284 696 1,517 136 7,631 2008p 1,632 4,004 326 970 1,802 183 8,917 2009 1,838 4,211 346 1,124 1,855 210 9,584 2010 2,025 4,434 380 1,324 2,027 249 10,439 2011 2,305 5,155 438 1,679 2,333 291 12,201 2012 2,686 6,144 522 2,058 2,865 365 14,640 2013 3,050 7,217 616 2,523 3,508 466 17,380 200913 CAGR 13.3 12.5 13.6 21.1 14.3 20.6 14.3

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

90

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Advertising
Advertising will fall by a projected 6.5 percent in 2009, representing a 17.5-percentage-point turnaround from an 11 percent increase in 2008. We expect a further, 1.2 percent decrease in 2010 and a recovery thereafter. Growth for the five-year forecast period will average 1.9 percent compounded annually to $23 billion in 2013 from $21 billion in 2008. Internet advertising will expand at a projected 17.4 percent compound annual rate, and

a tiny video game advertising market will increase by 15.4 percent on a compound annual basis. Out-of-home will grow by 3.5 percent compounded annually, and the remaining segments will expand by less than 2 percent compounded annually. Brazil was the leader in 2008, at $9 billion, with Mexico next, at $6 billion, together constituting 73 percent of the market in Latin America.

Advertising by segment (US$ millions)


Latin America Internet advertising: wired and mobile % Change Television % Change Video games % Change Consumer magazines % Change Newspapers % Change Radio % Change Out-of-home % Change Directories % Change Trade magazines % Change Total % Change 2004 153 45.7 6,287 20.2 NA 875 12.0 2,481 7.6 736 12.5 226 16.5 590 15.5 209 10.0 11,557 15.9 2005 259 69.3 7,641 21.5 2 1,016 16.1 2,789 12.4 852 15.8 540 138.9 693 17.5 235 12.4 14,027 21.4 2006 338 30.5 8,930 16.9 13 550.0 1,115 9.7 3,115 11.7 943 10.7 607 12.4 784 13.1 253 7.7 16,098 14.8 2007 540 59.8 10,730 20.2 17 30.8 1,245 11.7 3,505 12.5 1,089 15.5 676 11.4 886 13.0 278 9.9 18,927 17.6 2008p 660 22.2 12,243 14.1 23 35.3 1,330 6.8 3,776 7.7 1,170 7.4 723 7.0 891 0.6 285 2.5 21,017 11.0 2009 706 7.0 11,383 7.0 27 17.4 1,247 6.2 3,547 6.1 1,084 7.4 669 7.5 837 6.1 261 8.4 19,650 6.5 2010 770 9.1 11,288 0.8 32 18.5 1,225 1.8 3,481 1.9 1,041 4.0 659 1.5 808 3.5 256 1.9 19,417 1.2 2011 917 19.1 11,612 2.9 38 18.8 1,244 1.6 3,560 2.3 1,051 1.0 695 5.5 804 0.5 260 1.6 19,999 3.0 2012 1,162 26.7 12,209 5.1 43 13.2 1,312 5.5 3,731 4.8 1,102 4.9 762 9.6 832 3.5 280 7.7 21,186 5.9 2013 1,474 26.9 13,108 7.4 47 9.3 1,443 10.0 4,063 8.9 1,188 7.8 859 12.7 898 7.9 311 11.1 23,061 8.9 1.9 1.8 0.2 3.5 0.3 1.5 1.6 15.4 1.4 17.4 200913 CAGR

Note: Each of newspaper, consumer magazine, trade magazine, and directory Web site and mobile advertising is included in its respective segment and also in the Internet advertising segment, but only once in the overall total. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Advertising by country (US$ Millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 862 4,335 853 1,428 3,744 335 11,557 2005 1,075 5,742 943 1,861 4,028 378 14,027 2006 1,376 6,687 1,021 2,075 4,478 461 16,098 2007 1,626 8,185 1,129 2,281 5,223 483 18,927 2008p 1,858 9,456 1,071 2,389 5,817 426 21,017 2009 1,835 8,915 979 2,156 5,359 406 19,650 2010 1,864 8,847 952 2,070 5,285 399 19,417 2011 1,990 9,143 980 2,083 5,384 419 19,999 2012 2,171 9,703 1,041 2,156 5,657 458 21,186 2013 2,414 10,629 1,127 2,298 6,084 509 23,061 200913 CAGR 5.4 2.4 1.0 0.8 0.9 3.6 1.9

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Consumer/end-user spending
Consumer/end-user spending rose by 7.3 percent in 2008, down from an 8.5 percent increase in 2007 but equal to or higher than the gains during 200406. We expect growth to slow to 0.5 percent and to remain sluggish through 2011. Spending will rise to $32 billion in 2013 from $27 billion in 2008, a 3.9 percent compound annual increase. Video games at 9.1 percent compounded annually and TV subscriptions and license fees at 6.5 percent will

be the fastest-growing categories, followed by filmed entertainment at 4.5 percent and newspapers at 2.5 percent. The remaining segments will grow by 1 percent or less compounded annually, and recorded music will decline at a 0.4 percent compound annual rate. Brazil at $13 billion and Mexico at $6 billion were the leading countries in 2008, accounting for 72 percent of the total.

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Consumer/end-user spending by segment (US$ millions)


Latin America TV subscriptions and license fees % Change Recorded music % Change Filmed entertainment % Change Video games % Change Consumer magazines % Change Newspapers % Change Consumer and educational books % Change Business-to-business publishing % Change Total % Change 2004 5,943 7.9 1,180 13.8 2,190 12.7 597 11.4 1,685 7.7 2,138 1.9 4,293 1.5 2,124 4.9 20,150 6.4 2005 6,610 11.2 1,171 0.8 2,190 0.0 625 4.7 1,789 6.2 2,233 4.4 4,399 2.5 2,275 7.1 21,292 5.7 2006 7,366 11.4 1,141 2.6 2,420 10.5 774 23.8 1,875 4.8 2,374 6.3 4,515 2.6 2,387 4.9 22,852 7.3 2007 8,390 13.9 977 14.4 2,586 6.9 1,008 30.2 2,017 7.6 2,621 10.4 4,652 3.0 2,547 6.7 24,798 8.5 2008p 9,470 12.9 957 2.0 2,486 3.9 1,244 23.4 2,034 0.8 3,040 16.0 4,772 2.6 2,598 2.0 26,601 7.3 2009 9,726 2.7 906 5.3 2,539 2.1 1,356 9.0 1,946 4.3 3,084 1.4 4,681 1.9 2,507 3.5 26,745 0.5 2010 10,037 3.2 869 4.1 2,628 3.5 1,474 8.7 1,910 1.8 3,125 1.3 4,630 1.1 2,461 1.8 27,134 1.5 2011 10,627 5.9 863 0.7 2,754 4.8 1,582 7.3 1,936 1.4 3,199 2.4 4,665 0.8 2,487 1.1 28,113 3.6 2012 11,683 9.9 880 2.0 2,917 5.9 1,733 9.5 2,030 4.9 3,307 3.4 4,776 2.4 2,580 3.7 29,906 6.4 2013 12,957 10.9 938 6.6 3,098 6.2 1,923 11.0 2,140 5.4 3,443 4.1 4,932 3.3 2,709 5.0 32,140 7.5 3.9 0.8 0.7 2.5 1.0 9.1 4.5 0.4 6.5 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Consumer/end-user spending (excluding Internet access) by country (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 2,261 10,164 1,104 1,349 4,801 471 20,150 2005 2,550 10,556 1,130 1,448 5,111 497 21,292 2006 2,801 11,177 1,203 1,609 5,525 537 22,852 2007 3,147 11,941 1,316 1,799 6,014 581 24,798 2008p 3,348 12,788 1,424 1,961 6,458 622 26,601 2009 3,395 12,788 1,447 1,983 6,499 633 26,745 2010 3,498 12,894 1,485 2,015 6,590 652 27,134 2011 3,663 13,304 1,567 2,098 6,798 683 28,113 2012 3,939 14,083 1,687 2,251 7,222 724 29,906 2013 4,254 15,049 1,825 2,435 7,800 777 32,140 200913 CAGR 4.9 3.3 5.1 4.4 3.8 4.6 3.9

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Methodology
How we derive the data
Historical information Historical information is obtained principally from confidential and proprietary sources. In instances where third-party sources are consulted and their information is used directlyfrom such sources as government agencies, trade associations, and related entities that seek to have their data disseminated in the public domain the sources of such information are explicitly cited. In instances where the information is used indirectly, as part of the calculus for the historical data, the sources are proprietary. Forecast information Recent trends in industry performance are analyzed, and the factors underlying those trends are identified. The factors considered are certain economic, demographic, technological, institutional, behavioral, competitive, and other drivers that may affect each of the entertainment and media markets. Models are then developed to quantify the impact of each factor on industry spending. A forecast scenario for each causative factor is then created, and the contribution of each factor on a prospective basis is identified. These proprietary mathematical models and analytic algorithms are used in the process to provide an initial array of prospective values. Our professional expertise and institutional knowledge are then applied to review and adjust those values if required. The entire process is then examined for internal consistency and transparency vis-vis prevailing industry wisdom. Forecasts for 20092013 are also based on an analysis of the dynamics of each segment in each region and on the factors that affect those dynamics. We provide compound annual growth rates (CAGRs) that cover the 20092013 forecast period. In the calculation of CAGRs, 2008 is the beginning year, with five growth years during the forecast period: 2009, 2010, 2011, 2012, and 2013. The end year is 2013. The formula is: CAGR = 100 * ((Value in 2013 Value in 2008) ^ (1 5) 1)

How we report the data in each chapter


Measures used to quantify segment spending Segment spending consists of advertising and end-user spending directly related to entertainment and media content. Each chapter introduction begins with a definition of the spending streams that are included in that segment. We do not include spending on hardware or on services that may be needed to access content. End-user spending is counted at the consumer or enduser level, not at the wholesale level, and includes retail markups when applicable. Advertising spending is measured net of agency commissions in all territories except the United States and Russia, where gross advertising is measured to be consistent with the way advertising is generally reported. In addition to annual spending figures, we also present data that are measured at a single point in time, such as TV subscriptions, Internet subscriptions, mobile subscriptions, and newspaper unit circulation. In these instances, we show annual averages rather than year-end totals because annual averages more accurately connect the impact of these figures to annual spending. Inflation Across all chapters, figures are reported in nominal terms reflecting actual spending transactions and therefore include the effects of inflation. Exchange rates All figures are presented in US dollars by using the average 2008 exchange rate held constant for each historical year and forecast year. This means the figures reflect industry trends and are not distorted by fluctuations in international exchange rates. The exchange rates used for the individual countries in each region are outlined in the tables on the next page. Nominal GDP growth Because all figures are shown as actual spending, with the effects of inflation included, nominal GDP growth has an important influence on entertainment and media spending. The tables on the following pages show historical and projected growth rates for nominal GDP for the individual countries in each region.

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Exchange rates per US$ (2008 average)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa New shekel US dollar Rand 3.59039 1.00000 8.27180 Koruna Forint Zloty New lei Ruble New lira 17.09639 172.64983 2.41106 2.51890 24.85774 1.30557 Euro Euro Krone Euro Euro Euro Euro Euro Euro Euro Krone Euro Euro Krona Franc Pound sterling 0.68334 0.68334 5.09502 0.68334 0.68334 0.68334 0.68334 0.68334 0.68334 0.68334 5.63610 0.68334 0.68334 6.59030 1.08318 0.54451 Currency Exchange rate

Exchange rates per US$ (2008 average)


North America United States Canada Currency Dollar Dollar Exchange rate 1.00000 1.06626

Exchange rates per US$ (2008 average)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Currency Dollar Yuan (renminbi) Dollar Rupee Rupiah Yen Ringgit Dollar Rupee Peso Dollar Won Dollar Baht Dong Exchange rate 1.19631 6.96254 7.78748 43.79828 9,680.94764 103.50200 3.33873 1.42420 70.77442 44.56425 1.41549 1,102.38867 31.55240 33.26634 16,705.62795

Exchange rates per US$ (2008 average)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Currency Peso Real Peso Peso Peso Bolivar fuerte Exchange Rate 3.17011 1.83880 523.58206 1,989.92282 11.13780 2.15240

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Figures are estimated in US$.

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Nominal GDP growth by country in EMEA (%)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total

2004 4.3 5.4 4.7 4.4 4.1 2.2 8.1 6.8 4.2 3.0 9.3 4.0 7.4 4.4 3.1 5.9 4.4 9.2 9.4 9.7 26.9 37.1 29.4 23.8 5.1 18.2 10.7 14.4 6.6

2005 5.1 4.2 5.6 3.3 4.0 1.5 7.2 8.9 2.7 4.5 11.6 3.4 8.0 4.2 2.7 4.2 4.0 6.0 6.4 6.3 30.9 29.2 23.2 19.7 6.3 24.7 10.4 18.8 6.3

2006 5.2 5.0 6.0 6.1 4.7 3.5 7.8 9.3 3.6 5.2 11.1 4.1 8.0 6.0 4.9 5.7 5.1 7.8 8.0 7.8 23.4 29.3 9.9 17.5 7.5 14.7 13.0 13.4 7.0

2007 5.3 4.4 3.3 7.0 3.3 4.6 7.0 7.5 3.7 5.0 5.9 4.9 7.0 6.0 3.5 6.2 4.9 10.4 6.8 9.7 28.0 30.4 23.8 22.6 5.0 10.0 12.6 9.9 7.4

2008 4.6 5.1 2.1 5.5 4.0 4.1 6.8 1.4 2.8 4.2 5.4 2.6 5.5 4.0 4.2 4.2 4.1 9.7 6.6 8.8 15.4 19.0 11.5 14.4 5.1 18.8 14.3 16.2 6.3

2009 0.3 0.2 0.3 0.6 0.4 1.7 1.9 3.4 1.2 0.1 0.4 0.6 0.3 0.3 0.4 2.3 1.0 0.5 1.1 1.8 2.8 2.9 4.0 2.7 1.2 2.9 3.8 2.9 0.2

2010 2.6 2.5 1.9 1.4 1.7 1.8 2.6 1.4 1.9 0.9 3.5 3.0 2.0 2.4 2.2 1.5 1.9 2.6 2.1 3.2 5.4 6.0 6.3 5.3 2.9 6.5 5.5 5.9 2.7

2011 3.8 3.5 3.1 3.8 2.8 2.5 5.7 4.2 2.8 3.4 5.0 4.2 4.5 4.1 3.4 3.6 3.3 6.1 3.4 4.2 7.7 7.5 8.0 6.9 4.5 8.7 7.2 7.9 4.2

2012 4.8 4.5 4.5 5.6 4.5 4.2 6.8 5.6 4.0 4.1 5.2 4.5 5.6 4.4 3.3 4.2 4.5 6.7 4.5 6.0 8.1 8.3 8.6 7.8 4.9 9.6 8.6 8.9 5.4

2013 5.1 5.3 5.7 7.0 4.5 4.7 6.3 7.0 4.5 4.5 5.1 4.3 5.9 4.8 3.2 4.6 4.9 6.3 5.6 6.6 7.5 9.0 8.9 8.3 5.7 9.5 9.9 9.2 5.8

200913 CAGR 3.3 3.2 3.1 3.4 2.6 2.3 4.7 2.9 2.4 2.6 3.6 3.3 3.5 3.1 2.3 2.3 2.7 4.4 2.9 4.3 6.3 6.7 7.1 6.2 3.8 7.4 7.0 6.9 3.5

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Nominal GDP growth by country in North America (%)


North America United States Canada North America total 2004 6.6 6.2 6.6 2005 6.3 6.1 6.3 2006 6.1 5.2 6.0 2007 4.8 6.4 4.9 2008 3.3 3.1 3.3 2009 2.2 0.7 2.1 2010 2.5 2.7 2.5 2011 3.5 4.0 3.5 2012 4.7 4.5 4.7 2013 5.5 5.8 5.5 200913 CAGR 2.8 3.3 2.8

Nominal GDP growth by country in Asia Pacific (%)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 7.4 17.5 4.6 14.3 12.7 1.6 13.2 7.1 15.7 12.9 13.6 7.6 4.4 9.7 16.5 7.6 2005 7.4 17.7 7.1 13.7 20.8 0.7 10.2 4.9 15.2 11.7 8.1 4.0 3.3 9.2 17.3 7.3 2006 7.4 17.2 6.7 15.8 20.4 1.4 9.8 5.2 16.8 10.8 8.8 4.6 4.6 10.0 16.1 8.2 2007 8.1 11.5 9.5 13.7 18.5 1.3 11.9 7.4 14.6 10.3 12.1 6.3 5.7 8.4 17.5 7.3 2008 6.6 15.0 8.6 14.9 15.5 0.9 9.8 3.3 15.1 11.0 2.2 7.2 6.9 8.0 29.4 8.2 2009 1.1 8.0 2.2 11.5 6.0 7.4 4.9 0.7 6.1 6.3 2.4 1.1 2.5 3.0 14.1 1.7 2010 2.6 11.5 5.7 10.3 7.5 0.2 7.0 1.5 8.6 8.8 0.6 4.7 4.8 4.4 14.3 5.9 2011 4.5 12.5 7.0 13.0 10.5 2.3 8.7 2.9 10.5 10.8 1.9 6.8 5.7 5.3 12.5 8.0 2012 5.7 12.0 7.7 12.6 11.1 3.1 10.0 4.2 11.9 9.8 3.1 7.2 6.5 6.7 11.1 8.4 2013 5.4 12.1 8.2 12.2 11.4 2.9 9.1 4.7 12.8 8.9 4.2 7.1 6.1 7.8 10.0 8.5 200913 CAGR 3.8 11.2 6.1 11.9 9.3 0.0 7.9 2.8 9.9 8.9 1.2 5.4 5.1 5.4 12.4 6.5

Nominal GDP growth by country in Latin America (%)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 18.1 20.2 14.0 23.6 8.5 34.7 15.6 2005 19.7 32.9 13.5 25.3 11.6 29.3 21.6 2006 17.0 21.1 17.3 10.4 11.9 26.5 17.0 2007 22.4 23.1 10.3 26.8 7.8 23.9 17.2 2008 14.4 10.9 12.9 3.5 6.5 33.8 11.1 2009 6.7 5.9 5.4 1.7 2.9 6.6 4.9 2010 8.7 7.0 6.2 2.2 6.3 7.7 6.7 2011 10.1 7.3 8.7 4.3 7.1 8.6 7.6 2012 10.7 7.8 11.1 6.2 7.0 10.5 8.2 2013 11.1 8.1 10.0 7.3 7.0 11.9 8.5 200913 CAGR 9.4 7.2 8.3 4.3 6.1 9.0 7.1

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Forecasts and economic analyses of 12 industry segments


Internet access: wired and mobile Internet advertising: wired and mobile Television subscriptions and license fees Television advertising Recorded music Filmed entertainment Video games Radio and out-of-home Consumer magazine publishing Newspaper publishing Consumer and educational book publishing Business-to-business publishing

Executive summary | Methodology

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Internet access spending: wired and mobile

102 Summary 103 North America 112 Europe, Middle East, Africa (EMEA) 129 Asia Pacific 142 Latin America

Summary

Internet access spending: wired and mobile


Internet wired and mobile access revenue consists of fees paid by consumers to Internet service providers and to wireless carriers for Internet access via mobile devices, whether provided as a stand-alone service or as part of a service bundle where the Internet component is estimated. Figures do not include the purchase of content such as music, or spending on entertainment content downloaded over the Internet or through mobile phones, which is included in the respective content chapters. Access fees for phones provided by corporations for workers to access the corporate network are not included. Internet access is a key driver of entertainment and media spending in most segments.

Market size and growth by component


Global wired broadband access is the largest component, at $132.1 billion in 2008, and is projected to grow at a 9.3 percent compound annual rate to $205.9 billion in 2013. Dial-up will decline to $16.2 billion from $30.5 billion in 2008, an 11.9 percent compound annual decrease. Total wired Internet access spending will increase at a 6.4 percent compound annual rate from $162.6 billion to $222.2 billion in 2013. Global mobile access spending totaled $52 billion in 2008, nearly three-quarters of which was generated by just three countries in Asia Pacific: Japan, the Peoples Republic of China, and South Korea. We expect mobile access will increase to $111.4 billion in 2013, a 16.5 percent compound annual increase.

Market size and growth by region


We project spending in North America, EMEA (Europe, Middle East, Africa), Asia Pacific, and Latin America will increase from $214.6 billion in 2008 to $333.6 billion in 2013, a 9.2 percent compound annual growth rate. Asia Pacific and EMEA are the largest regions, at $81.3 billion and $80.3 billion, respectively, in 2008. Asia Pacific will be the slowest-growing region during the next five years, principally because its mobile access market is far more developed than that of any other region. Asia Pacific will expand at a projected 7.5 compound annual rate to $116.6 billion in 2013. We project EMEA to grow at a 10.3 percent compound annual rate to $131.4 billion in 2013. Spending in North America will total $68.3 billion in 2013 from $44 billion in 2008, averaging 9.2 percent growth compounded annually. Latin America will be the fastest-growing region, with a 14.3 percent compound annual increase to $17.4 billion in 2013 from $8.9 billion in 2008.

Principal drivers
The global economic downturn during 200910 will reduce growth during the next two years to mid-single-digit increases following double-digit annual gains during the past five years. We look for growth to return to double digits during 201113 as economic conditions improve. The near-term slowdown will occur because of a slower migration rate from dial-up to broadband, a slower takeup rate for high-speed services in the near term, and increased competition that will lower average spending per subscriber. Over the longer run, penetration into rural areas and faster broadband speeds will accelerate the migration to broadband. Increased fiber deployments in the Internet backbone and fiber-to-the-home (FTTH) deployments will increase broadband speeds, making it more suitable for high-volume video applications. Wireless network upgrades; the further rollout of enhanced third-generation (3G) cellular wireless servicesnotably, high-speed packet access (HSPA); and increased penetration of smart phones with touch-screen capabilities will stimulate demand for mobile applications and drive even further demand for high-speed Internet access.

Data for the global Internet access spending market by region and for the global Internet access spending market by component can be found within the Executive Summary on pages 34 and 35.

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North America

The outlook in brief


Faster access speeds and continuing demand for versatile, easy-to-use applications will drive the broadband market over the long run. The economic downturn will slow growth in the near term and help extend the viability of dial-up services. Consumer demand for always-on connectivity and video will combine with smart phones and network upgrades to spur mobile Internet access.

Overview
We project Internet wired and mobile access spending will grow by 9.2 percent compounded annually, reaching $68.3 billion in 2013. Wired broadband access will increase to $53.2 billion, a 7.1 percent compound annual advance. Wired dial-up access spending will decline to $2 billion from $5.1 billion in 2008, a 17 percent drop compounded annually. Overall wired Internet access spending will grow by 5.2 percent compounded annually from $42.8 billion to $55.2 billion in 2013. Mobile access will total $13.1 billion in 2013 from $1.2 billion in 2008, a 60.9 percent compound annual increase from a small base.

Internet access market: wired and mobile by component (US$ millions)


North America Wired Internet access Dial-up Broadband Total wired Internet access Mobile access Total Internet and mobile access 9,475 17,144 26,619 26,619 8,587 21,402 29,989 1 29,990 7,398 26,735 34,133 149 34,282 6,285 33,942 40,227 735 40,962 5,148 37,689 42,837 1,212 44,049 4,654 38,372 43,026 2,571 45,597 4,174 39,320 43,494 3,825 47,319 3,505 42,964 46,469 6,034 52,503 2,854 48,433 51,287 9,210 60,497 2,025 53,196 55,221 13,073 68,294 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet access market growth: wired and mobile by component (%)


North America Wired Internet access Dial-up Broadband Total wired Internet access Mobile access Total Internet and mobile access 10.2 22.1 8.2 8.2 9.4 24.8 12.7 12.7 13.8 24.9 13.8 14.3 15.0 27.0 17.9 393.3 19.5 18.1 11.0 6.5 64.9 7.5 9.6 1.8 0.4 112.1 3.5 10.3 2.5 1.1 48.8 3.8 16.0 9.3 6.8 57.8 11.0 18.6 12.7 10.4 52.6 15.2 29.0 9.8 7.7 41.9 12.9 17.0 7.1 5.2 60.9 9.2 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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In terms of overall spending growth, including mobile access, Canada will be the country with the faster growth during the next five years, with a projected 9.9 percent compound annual increase compared with 9.1 percent for the United States. Both countries will record single-digit increases during the next two years, reflecting the impact of the weak

economy, and then will expand at double-digit annual rates during 201113, as economic conditions improve and as mobile access gains momentum. The United States will expand from $40.6 billion in 2008 to $62.7 billion in 2013, while Canada will rise to $5.6 billion from $3.5 billion.

Internet access market: wired and mobile by country (US$ millions)


North America United States Canada Total 2004 24,253 2,366 26,619 2005 27,327 2,663 29,990 2006 31,272 3,010 34,282 2007 37,631 3,331 40,962 2008p 40,559 3,490 44,049 2009 41,916 3,681 45,597 2010 43,440 3,879 47,319 2011 48,164 4,339 52,503 2012 55,579 4,918 60,497 2013 62,705 5,589 68,294 200913 CAGR 9.1 9.9 9.2

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Broadband
Broadband, or high-speed, Internet access is not only an appealing service for its own sake; it is also a critical element in triple-play packages, where it is provided together with television and telephone services. Telephone companies and cable operators have been in head-to-head competition in the broadband market for years. Since 2005, telephone companies have been distributing television services in their own triple-play packages, in the process making the broadband market even more competitive. The nature of the competition has evolved from being pricecentricwhereby cable and telephone companies offer steep discounts to lure broadband subscribers away from the competitionto speedcentric, with providers now featuring high-speed options. In the United States, Verizon is focusing on its higherend Fiber Optic Service (FiOS), which uses FTTH technology and can provide download speeds of up to 50 megabits per second or more. At 50 Mbps, a standard movie can be downloaded in about five minutes, a CD in 10 seconds, and a half-hour television show in less than a minute. Verizon also extended the availability of its 7.1 Mbps digital-subscriber-line (DSL) service to 6.6 million homes, twice its reach in June.

AT&T began offering an 18 Mbps service to its U-verse television subscribers, which was well in excess of its previous top speed of 10 Mbps. Cable operators in the United States responded with their own high-speed options. Comcast in April 2008 launched in the MinneapolisSt. Paul market the first Data Over Cable Service Interface Specification (DOCSIS) 3.0 service in the United States. DOCSIS 3.0 provides much faster download speeds. Comcast expects to be able to provide download speeds of up to 100 Mbps within the next two years. Charter Communications, Cox Cable, and Time Warner Cable plan to introduce DOCSIS 3.0 in 2009. Comcast also launched Extreme 50, a new service that offers download speeds of 50 Mbps in several areas in Oregon and Washington. It also offers a lower-speed service called Ultra that provides 22 Mbps downstream. In areas where these wideband services are available, Comcast doubled the speeds for standard packages at no additional cost. In general, cable offers faster speeds than does DSL, which accounts for its faster take-up rate in 2008. In Canada, Bell Canada is deploying fiber networks in Ontario and Quebec that will directly connect to apartment buildings. It is also expanding its fiber-tothe-node (FTTN) network to within a mile of the home

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and will use DSL for the connection into the home. These rollouts in 2008 connected more than 2 million homes to a fiber network. Bell Canada also acquired 40 gigabits per second of fiber-based technology from Nortel that will quadruple its transmission capacity. Videotron in Canada in early 2008 introduced its Ultimate Speed service, which provides download speeds of up to 50 Mbps. Bell Canada also has a highspeed 16 Mbps option. Prices range from C$15.95 (US$14.96) per month for a 256-kilobits-per-second connection to more than C$50 (US$46.89) per month for 50 Mbps. The appeal of large bandwidth is the ability to access high-volume video applications, which are becoming popular among some users. Uploads and downloads of video material from such sites as YouTube and the sharing of videos between users are leading to a surge in video traffic. Although only about 5 percent of broadband subscribers are high-volume video users, they account for half of all the bandwidth consumed. Video traffic now accounts for around 40 percent of all Internet traffic. As recently as 2005, there was virtually no video traffic on the Internet. In the United States, Comcast in October 2008 imposed a 250-gigabits-per-month cap on Internet traffic per user, which is about 100 times the average traffic per user. Those who exceed that cap will be suspended for one year. Time Warner introduced a tiered plan in some of its Texas markets. For a basic 768 kbps service, subscribers pay $29.95 per month for 5 Gb of traffic. There is also a $54.90-per-month option that provides download speeds of up to 15 Mbps and 40 Gb of traffic. If users exceed their limit, they are charged $1 for each incremental gigabyte. These pricing plans are similar to the wireless telephone pricing model in which larger buckets are offered at higher rates, with surcharges applying if subscribers exceed their limit. The major long-term impediment to expanded household penetration is limited availability in rural areas with sparse populations. With cable and DSL, households need to be within 18,000 wire-feet of the nearest node in order to receive broadband. Cable and DSL providers have held back from extending their infrastructure to rural areas because the return on the investment is low. This is an issue of significant concern in Canada, which has very large, sparsely populated

geographic areas, though its major population concentrations are in well-served city and suburban areas. To a lesser extent, this is an issue in the United States as well. The 2009/10 Canadian budget contains a $225-million allocation over three years to develop and implement a strategy on extending broadband coverage to unserved communities. This initiative will engage additional funding from other levels of government and the private sector to continue to expand Canadas broadband network. Fixed wireless and satellite are technologies that could serve rural markets, but prices are high, availability is currently limited, and penetration is quite low. In the United States, the Department of Agriculture announced in late 2008 that it is awarding $342 million in loans to companies that will help bring improved services to rural areas. The economic stimulus packageannounced by Pres. Barack Obama includes broadband as part of a national infrastructure investment. If funds are allocated to that program, broadband availability in rural areas would increase. Over the long run, the appeal of faster speeds, even at higher prices, and increased penetration in rural areas will drive the broadband market. Nevertheless, growth will be limited by approaching saturation. In Canada, two-thirds of households were already subscribed to broadband in 2008, and the United States was just behind, at 63.5 percent. Even with increased infrastructure investment, we expect that broadband availability in rural areas will remain less than in urban areas. This means that overall penetration will have difficulty reaching the 90 percent level. We project that during the next five years, broadband penetration in Canada will rise to 85.1 percent and in the United States to 84.5 percent. The number of broadband households in the United States will increase from 74 million in 2008 to 103.5 million in 2013, a 6.9 percent compound annual increase. In Canada, growth will average 6.4 percent compounded annually, from 9 million to 12.3 million. For North America as a whole, the broadband universe will reach 115.8 million in 2013 from 83 million in 2008, growing at a 6.9 percent rate compounded annually.

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Broadband households (millions)


North America United States Canada Total 2004 30.60 5.42 36.02 2005 39.60 6.43 46.03 2006 50.90 7.46 58.36 2007 65.90 8.50 74.40 2008p 74.00 9.00 83.00 2009 77.00 9.50 86.50 2010 80.00 10.00 90.00 2011 87.00 10.70 97.70 2012 96.50 11.50 108.00 2013 103.50 12.25 115.75 200913 CAGR 6.9 6.4 6.9

Sources: Canadian Radio-television and Telecommunications Commission, Federal Communications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Broadband household penetration (%)


North America United States Canada Total 2004 27.4 43.0 29.0 2005 34.9 50.2 36.5 2006 44.6 57.4 46.0 2007 57.2 64.4 57.9 2008p 63.5 67.2 63.9 2009 65.4 69.9 65.9 2010 67.3 72.5 67.8 2011 72.4 76.4 72.9 2012 79.6 81.0 79.7 2013 84.5 85.1 84.6

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

During 2009 and 2010, the weak economy will likely reduce the inclination of consumers to trade up to faster speeds. We therefore expect price competition to be more prevalent in the near term. For example, in the United States in late 2008, as the economy declined, Verizon reduced its prices for its DSL, telephone, and DirecTV service bundlein areas not covered by FiOS, Verizon teams up with DirecTV to offer television in a triple play. Verizon also introduced a six-month free DSL offer to subscribers who also sign up for landline telephone service. AT&T offered a two-year price guarantee to help it attract and retain subscribers. We expect average spending per month per subscriber in both the United States and Canada to decline during the next two years and then increase during the subsequent three years as an improving economic environment facilitates increased spending for higherspeed options.

For the five-year forecast period as a whole, broadband access spending will increase at a 7.1 percent compound annual rate to $53.2 billion in 2013 from $37.7 billion in 2008. The United States will be the faster-growing broadband country as it makes greater inroads into rural areas, rising at 7.3 percent compounded annually from $34.5 billion to $49.1 billion. Broadband access spending in Canada will expand by 5.3 percent compounded annually to $4.1 billion in 2013 from $3.2 billion in 2008.

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Broadband access spending (US$ millions)


North America United States Canada Total 2004 15,184 1,960 17,144 2005 19,079 2,323 21,402 2006 24,004 2,731 26,735 2007 30,881 3,061 33,942 2008p 34,499 3,190 37,689 2009 35,112 3,260 38,372 2010 36,000 3,320 39,320 2011 39,411 3,553 42,964 2012 44,583 3,850 48,433 2013 49,059 4,137 53,196 200913 CAGR 7.3 5.3 7.1

At average 2008 exchange rates. Sources: Canadian Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Near-term weakness
While we expect a strong long-term expansion in the broadband universe, we look for take-up rates to slow quite significantly during the next two years in both Canada and the United States as households are reluctant to incur additional expenses when they are concerned about the economic uncertainty. In the United States, broadband household growth slowed sharply in 2008 but still expanded by 12.3 percent over 2007. We expect growth to average only 4 percent annually during the next two years but then expect a pickup during the subsequent two years, with a return to double-digit growth in 2012. By 2013, when penetration passes 80 percent, growth will slow as the market approaches saturation. In Canada, which is ahead of the United States in penetration, growth dropped to 5.9 percent in 2008 following years of double-digit annual growth as the economy was weak throughout the year. We expect increases will average 5.4 percent compounded annually from 2008 to 2010. We then look for faster growth of 7 percent or more during 201112 and a 6.5 percent increase in 2013. Ultimately, Canadas broadband penetration potential will be limited because of difficulties in reaching the large rural areas of the country.

Broadband household growth in North America (%)


50 40 30 20 10 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Canada United States

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

A by-product of slower broadband growth is a slower decline in the dial-up universe. We expect decreases, which averaged double digits during the past three years in the United States, to drop to single-digit declines during the next two years before plunging at faster rates during 201113 as broadband growth again accelerates. In Canada, the dial-up household base had been falling at double-digit rates during 200407. The slowdown in broadband growth in 2008 was accompanied by a slowdown in the dial-up decline, which we expect will last through 2010 before the rate of decline again picks up.

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Dial-up household growth in North America (%)


0 5 10 15 20 25 30
Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

The overall number of dial-up households in North America will fall to 10.6 million from 24.9 million in 2008, a 15.7 percent decrease compounded annually. Canada, whose dial-up penetration is much lower than that of the United States, at 6.7 percent in 2008 compared with 20.6 percent for the US, will decrease at a 7.8 percent compound annual rate as there is a core dial-up market in rural areasas well as people who use the Internet just for e-mailthat will remain. Dial-up penetration will fall to 8.2 percent in the United States in 2013 and to 4.2 percent in Canada. Overall dial-up penetration in North America will average 7.7 percent in 2013 from 19.2 percent in 2008.

Canada United States

Dial-up households (millions)


North America United States Canada Total 2004 42.70 2.03 44.73 2005 38.50 1.57 40.07 2006 33.50 1.24 34.74 2007 29.00 0.95 29.95 2008p 24.00 0.90 24.90 2009 22.00 0.87 22.87 2010 20.00 0.84 20.84 2011 17.00 0.77 17.77 2012 14.00 0.70 14.70 2013 10.00 0.60 10.60 200913 CAGR 16.1 7.8 15.7

Sources: Canadian Radio-television and Telecommunications Commission, Federal Communications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Dial-up household penetration (%)


North America United States Canada Total 2004 38.3 16.1 36.0 2005 34.0 12.3 31.8 2006 29.4 9.5 27.4 2007 25.2 7.2 23.3 2008p 20.6 6.7 19.2 2009 18.7 6.4 17.4 2010 16.8 6.1 15.7 2011 14.2 5.5 13.3 2012 11.5 4.9 10.8 2013 8.2 4.2 7.7

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Dial-up access spending will decline from $5.1 billion in 2008 to $2 billion in 2013, a 17 percent compound annual decrease. The US will decrease at a 17.3 percent compound annual rate to $1.9 billion from

$5 billion in 2008, and Canada will fall from $180 million in 2008 to $105 million in 2013, a 10.2 percent decrease compounded annually.

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Dial-up access spending (US$ millions)


North America United States Canada Total 2004 9,069 406 9,475 2005 8,247 340 8,587 2006 7,136 262 7,398 2007 6,090 195 6,285 2008p 4,968 180 5,148 2009 4,488 166 4,654 2010 4,020 154 4,174 2011 3,366 139 3,505 2012 2,730 124 2,854 2013 1,920 105 2,025 200913 CAGR 17.3 10.2 17.0

At average 2008 exchange rates. Sources: Canadian Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

The overall Internet household universe will grow faster in Canada than in the United States during the next five years. Canada will increase at a 5.4 percent compound annual rate to 12.9 million in 2013, while the US will grow by 3 percent compounded annually to 113.5 million. For all of North America, growth will average 3.2 percent on a compound annual basis from 107.9 million households in 2008 to 126.4 million in 2013.

Although Canadas broadband penetration is higher than that of the United States, overall Internet penetration is higher in the US, at 84.1 percent in 2008 compared with 73.9 percent in Canada. The US will retain its advantage although the disparity will narrow. By 2013, Internet household penetration in the United States will reach 92.7 percent compared with 89.3 percent in Canada and 92.3 percent for the region as a whole.

Internet households (millions)


North America United States Canada Total 2004 73.30 7.45 80.75 2005 78.10 8.00 86.10 2006 84.40 8.70 93.10 2007 94.90 9.45 104.35 2008p 98.00 9.90 107.90 2009 99.00 10.37 109.37 2010 100.00 10.84 110.84 2011 104.00 11.47 115.47 2012 110.50 12.20 122.70 2013 113.50 12.85 126.35 200913 CAGR 3.0 5.4 3.2

Sources: Canadian Radio-television and Telecommunications Commission, Federal Communications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet household penetration (%)


North America United States Canada Total 2004 65.7 59.1 65.0 2005 68.9 62.5 68.2 2006 74.0 66.9 73.3 2007 82.4 71.6 81.2 2008p 84.1 73.9 83.1 2009 84.1 76.3 83.3 2010 84.1 78.6 83.5 2011 86.6 81.9 86.1 2012 91.1 85.9 90.6 2013 92.7 89.3 92.3

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Mobile access
The mobile access market was virtually nonexistent as recently as 2005 and totaled $1.1 billion in the United States and $120 million in Canada in 2008. A major catalyst for that expansion was the introduction of smart phones with touch-screen capabilities that make it much easier to access the Internet from a mobile phone. Screens are larger than traditional phones, and navigation is faster and more user-friendly. People are migrating to smart phones as hardware and software are becoming cheaper and the networks run faster. Carriers are heavily promoting the smart phones as their users spend much more per month than do non-smart-phone users. We expect that nearly 30 percent of wireless telephone subscribers in North America will use their handsets to access the Internet in 2013 compared with only 3.4 percent in 2008.

the price of their phones when the new iPhone was introduced. Verizon Wireless in 2008 introduced the LG Dare with an HTML browser and the Krave ZN4 from Motorola. AT&T, which markets the iPhone, also introduced the LG Vu, a touch-screen phone that comes with AT&T Mobile TV embedded. Sprint Nextel introduced the Samsung Instinct in June 2008, and also in 2008 Research in Motion introduced the consumeroriented BlackBerry Storm 9530, its first touch screen, exclusively through Verizon. T-Mobile introduced the G1 in October 2008, the first handset based on Googles open-sourced Android technology. The Android technology was introduced by Google in November 2007 with the goal of bringing the openness of the Internet to handsets. The Android system is expected to be incorporated into a number of new devices in 2009. Google is providing the Android operating system for handset makers and carriers for free to encourage deployment. The G1 has an Internet browser and has easy access to Googles applications such as Gmail and YouTube. The fundamental driver of the greatly increased use of mobile access is faster wireless speeds. Most carriers are already providing enhanced 3G options such as HSPA. The auction of wireless spectrum in the 700-megahertz band in mid-2008, the spectrum to be vacated by television stations, will open up new opportunities for wireless carriers to offer broadband. The Federal Communications Commission plans to auction spectrum in the advanced wireless services 3 band in 2009 with the stipulation that the winning bidder of a national license set aside a portion of the spectrum for a free broadband service. The next step in the wireless evolution is the fourth generation (4G), often defined as speeds of 100 Mbps or higher. In June 2006, seven international wireless carriersKPN Mobile, Orange, Sprint Nextel, T-Mobile International, Vodafone, China Mobile, and NTT DoCoMoformed Next Generation Mobile Networks (NGMN) to create a 4G mobile standard. NGMN hopes to be able to begin commercial 4G launches in 2010. As networks get upgraded and as smart phones gain penetration, the proportion of wireless telephone subscribers who use their handsets to access the

Mobile access subscribers as a percent of wireless telephone subscribers in North America


40 30 21.8 20 10 0 0.01 2005 0.5 2006 2.2 2007 3.4 2008 6.9 2009 9.9 14.9 29.8

2010

2011

2012

2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

United States A key development in the United States was Apples June 2007 launch of the iPhone, the first touch-screen device with an iPod, a digital organizer, and wireless Internet access. That was followed in July 2008 with the iPhone 3G, which is two to three times faster than the original model. Other carriers introduced various touch-screen phones to compete against the original iPhone and lowered

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Internet will increase, and wireless access revenue will expand. Wireless access spending will total $11.7 billion in the United States in 2013 from $1.1 billion in 2008. Canada The evolution to next-generation networks is accelerating in Canada, and broadband cellular networks are already operational in the major population centers. The advanced wireless services (AWS) spectrum auction was completed in July 2008. It was an unusual auction, with three of the six AWS bands set aside for new entrants, thereby limiting the ability of Rogers, Telus, and Bell to dominate the auction. The auction was very competitive, with the final average price per MHz per person reached being around three times that of the same spectrum auctioned in the United States. While the big three did dominate in the three unrestricted bands, the auction resulted in five new entrants of significance in the AWS bands. The incumbent cable operatorsShaw, Videotron, and Bragg/Eastlinkpicked up spectrum covering territory consistent with their respective cable operations to support a quad-play strategy. Two relative newcomersGlobalive and Data & Audio Visual

Enterprises Wireless Inc.picked up spectrum across the country. The enthusiasm of the auction has been somewhat muted by tough economic times, which have caused almost all of the new entrants to scale back and defer the launch of their offerings. The new entrants will change the wireless landscape in Canada, particularly for Rogers, which at the moment is the only carrier using the Global System for Mobile Communication (GSM) family of technologies, including high-speed packet access (HSPA). This position brings Rogers advantages in such areas as roaming and handset availability, including the Apple iPhone. In addition, Telus and Bell announced that they are spending $900 million to jointly build out an HSPAbased network, making them more competitive with Rogers. As in the United States, upgraded wireless networks and the proliferation of smart phones will propel mobile Internet access in Canada. We project spending will rise to $1.3 billion in 2013 from $120 million in 2008. The overall market for mobile access spending in North America will total $13.1 billion in 2013 from $1.2 billion in 2008, a 60.9 percent compound annual increase.

Mobile access market (US$ millions)


North America United States Canada Total 2005 1 1 2006 132 17 149 2007 660 75 735 2008p 1,092 120 1,212 2009 2,316 255 2,571 2010 3,420 405 3,825 2011 5,387 647 6,034 2012 8,266 944 9,210 2013 11,726 1,347 13,073 200913 CAGR 60.8 62.2 60.9

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Europe, Middle East, Africa (EMEA)

The outlook in brief


Fiber installations will provide faster broadband speeds and boost penetration in the long run. Lower prices and moderating subscriber growth during the next two years will cut into broadband spending growth. Wireless upgrades, 3G rollouts, and smart phones will drive mobile access.

Wired Internet access spending will increase from $69.3 billion in 2008 to $98.5 billion in 2013, a 7.3 percent compound annual increase. Wired broadband access spending will expand by 9.8 percent compounded annually to $94.6 billion from $59.3 billion in 2008. Wired dial-up access spending will decrease from $10 billion in 2008 to $3.9 billion in 2013, a 17.4 percent decline compounded annually. Mobile access will advance at a 24.5 percent compound annual rate to $32.9 billion in 2013 from $11 billion in 2008.

Overview
Internet wired and mobile access spending in EMEA will grow by 10.3 percent compounded annually to $131.4 billion in 2013 from $80.3 billion in 2008.

Internet access market: wired and mobile by component (US$ millions)


EMEA Wired Internet access Dial-up Broadband Total wired Internet access Mobile access Total Internet and mobile access 21,473 21,215 42,688 2,021 44,709 18,095 30,912 49,007 3,363 52,370 15,155 41,277 56,432 5,542 61,974 12,317 50,959 63,276 8,332 71,608 10,025 59,313 69,338 11,006 80,344 9,119 61,671 70,790 13,310 84,100 7,972 65,216 73,188 15,667 88,855 6,936 72,734 79,670 19,490 99,160 5,304 83,537 88,841 25,245 114,086 3,863 94,617 98,480 32,876 131,356 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet access market growth: wired and mobile by component (%)


EMEA Internet Access Dial-up Broadband Total Internet access Mobile access Total Internet and mobile access 14.1 69.9 13.9 96.4 16.1 15.7 45.7 14.8 66.4 17.1 16.2 33.5 15.2 64.8 18.3 18.7 23.5 12.1 50.3 15.5 18.6 16.4 9.6 32.1 12.2 9.0 4.0 2.1 20.9 4.7 12.6 5.7 3.4 17.7 5.7 13.0 11.5 8.9 24.4 11.6 23.5 14.9 11.5 29.5 15.1 27.2 13.3 10.8 30.2 15.1 17.4 9.8 7.3 24.5 10.3 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Internet access market: wired and mobile by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 500 872 619 1,991 44,709 595 1,254 743 2,592 52,370 685 1,932 1,047 3,664 61,974 752 2,905 1,176 4,833 71,608 794 4,201 1,507 6,502 80,344 803 5,718 1,831 8,352 84,100 811 7,266 2,138 10,215 88,855 865 9,475 2,538 12,878 99,160 947 12,302 3,148 16,397 114,086 1,041 15,955 3,840 20,836 131,356 5.6 30.6 20.6 26.2 10.3 843 299 682 107 536 463 2,930 1,017 391 740 207 738 542 3,635 1,148 550 911 433 1,037 743 4,822 1,352 732 1,147 585 1,626 1,157 6,599 1,435 795 1,393 607 2,656 1,436 8,322 1,467 846 1,570 730 2,818 1,897 9,328 1,488 906 1,782 787 3,012 2,340 10,315 1,577 1,017 2,046 942 3,747 2,829 12,158 1,759 1,195 2,478 1,168 4,961 3,427 14,988 2,006 1,394 3,099 1,472 6,493 4,151 18,615 6.9 11.9 17.3 19.4 19.6 23.7 17.5 1,153 1,242 970 593 5,381 9,095 185 186 5,520 1,962 984 457 2,870 1,614 1,019 6,557 39,788 1,328 1,395 1,117 679 6,617 10,121 236 183 6,194 2,250 1,115 568 3,442 1,707 1,352 7,839 46,143 1,646 1,577 1,312 800 7,842 12,125 310 244 6,791 2,426 1,235 734 4,320 1,876 1,551 8,699 53,488 1,823 1,783 1,495 894 9,288 13,228 432 307 7,529 2,722 1,350 851 5,081 2,152 1,696 9,545 60,176 1,952 1,947 1,613 967 10,505 13,900 681 412 8,176 2,854 1,489 934 5,979 2,160 1,743 10,208 65,520 1,956 1,975 1,633 1,018 10,606 13,560 760 478 8,632 2,879 1,487 984 6,183 2,168 1,755 10,346 66,420 1,986 2,043 1,679 1,117 10,965 13,697 860 511 8,928 2,939 1,489 1,016 6,577 2,188 1,775 10,555 68,325 2,025 2,134 1,755 1,225 11,943 14,898 1,016 588 9,721 3,044 1,567 1,124 7,517 2,261 1,880 11,426 74,124 2,162 2,270 1,870 1,354 13,593 16,462 1,173 661 10,634 3,229 1,651 1,270 9,167 2,404 2,017 12,784 82,701 2,295 2,439 2,006 1,513 15,329 17,480 1,381 759 11,571 3,477 1,760 1,528 11,160 2,603 2,206 14,398 91,905 3.3 4.6 4.5 9.4 7.9 4.7 15.2 13.0 7.2 4.0 3.4 10.3 13.3 3.8 4.8 7.1 7.0 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Western Europe will be the slowest-growing area in EMEA, in large part because its broadband market is the most mature, with 55 percent of all households already subscribing compared with 25 percent in Central and Eastern Europe and 12 percent in Middle East/Africa. Total access spending in Western Europe will increase at a 7 percent compound annual rate to $91.9 billion in 2013 from $65.5 billion in 2008. Central and Eastern Europe will increase at a 17.5 percent compound annual rate from $8.3 billion to $18.6 billion, fueled principally by a more than doubling of its broadband household base. In Middle East/Africa, we expect the broadband universe to nearly triple and overall spending to rise by 26.2 percent compounded annually to $20.8 billion in 2013 from $6.5 billion in 2008. Germany, France, and the United Kingdom were the leading countries in 2008, at $13.9 billion, $10.5 billion, and $10.2 billion, respectively. Italy was next, at $8.2 billion, followed by Spain at $6 billion and Saudi Arabia/ Pan Arab at $4.2 billion. These six countries accounted for nearly two-thirds of total spending in EMEA in 2008.

up to 100 Mbps. Older buildings will have FTTN and a copper connection to the home, allowing speeds of up to 40 Mbps. In France, the broadband market is very competitive, with four major providers, each of which is installing fiber networks to offer speeds of up to 100 Mbps. In Finland, TeliaSonera is investing in an FTTH service to provide 100 Mbps download speeds, and in the Czech Republic, Radiokomunikace upgraded its DSL service to 20 Mbps. Governments are also actively supporting broadband. In Finland, the government is funding a project that will extend the fiber network to within two kilometers of virtually all households, enabling download speeds of up to 100 Mbps. In Switzerland, legislation that went into effect in 2008 makes broadband a Universal Service Obligation, which means that Swisscom, as the universal service provider, is required to make broadband available to the entire population, including people living in rural areas that have been beyond the reach of DSL or cable modem service. During the past five years, Swisscom invested around $1 billion in upgrading its DSL network and has plans to spend another CHF8 billion ($7.4 billion) through 2016 on building a Swiss-wide FTTH network. Swisscom currently provides DSL speeds of up to 20 Mbps with ADSL and VDSL/VDSL2 technologies for 80 percent of the population. Furthermore, Swisscom aims to migrate to a fully digital infrastructureso-called allIP (Internet protocol)by 2013. Germany is spending 141 million ($206 million) in public funds to extend broadband availability to rural areas. The plan offers incentives for private companies to provide broadband for rural areas and uses public funds to subsidize broadband in areas where market conditions will not support it. The plan was approved by the European Commission in mid-2008. Rural broadband will also be helped by satellite. Eutelsat and Astra have deals in several countries with local providers to offer broadband by satellite. In Germany, for example, Eutelsat in conjunction with TelDaFax will provide a satellite broadband service in areas where DSL service is poor or nonexistent.

Broadband infrastructure upgrades


Broadband providers throughout EMEA are investing in their infrastructure in order to provide faster speeds. In Germany, Deutsche Telekom is deploying FTTN with an advanced DSL connection into the home. The shorter the distance over copper, the less the resistance and the faster the speeds. In Ireland, UPC began rolling out a 20 Mbps service, and in Spain Telefnica launched in 2008 its FTTH network, which offers broadband access at speeds of up to 100 Mbps. In Switzerland, Swisscom introduced a fiber/DSL service in most major cities in 2008, and Orange, ewz, and Sierre Energie, as well as the 11 members of Open-aXs, an association of power utilities companies, are investing in FTTH. British Telecom (BT) in the UK is investing 1.5 billion ($2.8 billion) in its fiber infrastructure and expects to pass 10 million homes by 2012. Newer buildings will be provided with a direct fiber connection with speeds of

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

In Italy, the digital divide is being reduced through the launch of WiMAX in early 2009. The new technology will cover rural communities throughout Italy and will be managed by two licensed operators. Moreover, Vodafone has declared that it will also cover digitally divided areas with High-Speed-Downlink Packet Access (HSDPA) technology. Fixed wireless is another potential solution. In Germany, O2 offers broadband through Genion Homezone, a fixed wireless service that uses its Universal Mobile Telecommunications System network for the last mile. In the Netherlands, Worldmax launched a fixed wireless service in Amsterdam. High-speed fixed wireless using WiMAX technology was also launched in Jordan, Saudi Arabia, and South Africa in 2008. In some areas, limitations in international connectivity effectively slow broadband speeds because it is difficult to access international Web sites. To address that bottleneck, undersea cables are being constructed in several countries. In Russia, an undersea cable that connects Sakhalin with Hokkaido, Japan, was completed in December 2007 and went into service in 2008. The project, a joint venture between TransTeleCom and NTT in Japan, accommodates 640 Gbps. Improved connectivity with Asia will speed up broadband activity in Russia. Telephone companies in South Africa are collectively spending $400 million to deploy an undersea cable along the west coast of Africa that will link the region to London. The cable is expected to substantially reduce service costs. Completion is anticipated by 2010, when South Africa will host the FIFA World Cup. Telecom Egypt in conjunction with Alcatel-Lucent is spending $125 million on an undersea cable linking Egypt with France.

In general, faster speeds facilitate high-volume applications such as video, which makes broadband more appealing. We expect the introduction of highspeed options to propel broadband penetration over the long run once economic conditions improve. The broadband household base has been growing at double-digit annual rates during each of the past five years. In 2008 there were 131.7 million broadband households in EMEA, a 22 percent increase from 2007 and more than three times the 37.4 million total in 2004. We project the number of broadband households in EMEA to increase to 223.8 million by 2013, an 11.2 percent compound annual increase from 2008. In Western Europe the broadband household universe will expand from 100.5 million to 154.8 million, a 9 percent compound annual increase. Central and Eastern Europe will increase at a 15.8 percent compound annual rate to 53.6 million from 25.7 million in 2008. Broadband will grow by 23.2 percent compounded annually in Middle East/Africa to 15.5 million from 5.4 million in 2008. Excluding Israel, which has a 77 percent broadband household penetration and a projected growth of only 4 percent compounded annually, Middle East/Africa will increase at a 23.2 percent compound annual rate. By 2013, 76.3 percent of households in Western Europe will be broadband households. Broadband penetration in Central and Eastern Europe will increase to 51.6 percent, and Middle East/Africa will rise to 32.2 percent. For the region as a whole, broadband penetration will average 63.1 percent in 2013 compared with 39.9 percent in 2008.

Internet access spending: wired and mobile | EMEA

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Wired broadband households (millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total

2004

2005

2006

2007

2008p

2009

2010

2011

2012

2013

200913 CAGR

0.73 1.43 0.87 0.65 5.07 6.57 0.03 0.10 3.49 2.90 0.54 0.67 3.40 1.25 1.06 4.62 33.38 0.20 0.34 1.26 0.11 0.51 0.39 2.81 0.81 0.31 0.04 1.16 37.35

1.02 1.82 1.18 0.87 8.02 8.31 0.11 0.24 5.77 3.95 0.83 1.00 5.04 1.66 1.49 8.01 49.32 0.60 0.53 2.74 0.43 1.13 1.08 6.51 1.10 0.67 0.11 1.88 57.71

1.31 2.18 1.54 1.15 11.09 12.74 0.32 0.46 7.73 4.60 1.12 1.30 6.69 2.20 1.86 11.44 67.73 0.91 0.93 3.65 1.02 2.24 2.37 11.12 1.33 1.27 0.25 2.85 81.70

1.51 2.54 1.86 1.35 14.13 17.40 0.75 0.65 9.75 5.40 1.34 1.52 8.07 2.81 2.29 14.26 85.63 1.37 1.35 4.73 1.69 5.00 4.20 18.34 1.47 2.15 0.40 4.02 107.99

1.72 2.80 2.02 1.47 16.65 21.70 1.40 0.90 11.50 5.65 1.55 1.60 9.48 2.88 2.50 16.70 100.52 1.65 1.45 5.29 1.98 10.00 5.35 25.72 1.60 3.14 0.70 5.44 131.68

1.78 2.90 2.07 1.55 17.50 23.00 1.50 1.05 12.50 5.75 1.60 1.67 10.14 2.92 2.60 17.50 106.03 1.80 1.51 5.85 2.15 11.00 6.75 29.06 1.65 4.08 0.95 6.68 141.77

1.85 3.05 2.15 1.70 19.00 25.00 1.60 1.12 14.00 5.90 1.65 1.75 11.02 2.98 2.70 18.50 113.97 1.90 1.60 6.68 2.30 11.50 7.75 31.73 1.70 5.15 1.20 8.05 153.75

1.95 3.20 2.25 1.85 21.00 28.00 1.80 1.25 16.00 6.10 1.75 1.85 12.68 3.10 2.85 20.00 125.63 2.05 1.75 7.79 2.60 14.00 8.70 36.89 1.80 6.74 1.50 10.04 172.56

2.15 3.35 2.35 2.00 23.50 32.00 2.00 1.35 18.50 6.35 1.80 2.00 15.43 3.30 3.00 22.00 141.08 2.35 2.00 9.74 3.15 17.50 9.90 44.64 1.90 8.69 2.00 12.59 198.31

2.25 3.50 2.45 2.15 25.50 34.00 2.20 1.50 21.00 6.65 1.85 2.20 18.74 3.60 3.20 24.00 154.79 2.70 2.25 12.53 3.90 21.00 11.20 53.58 1.95 11.00 2.50 15.45 223.82

5.5 4.6 3.9 7.9 8.9 9.4 9.5 10.8 12.8 3.3 3.6 6.6 14.6 4.6 5.1 7.5 9.0 10.4 9.2 18.8 14.5 16.0 15.9 15.8 4.0 28.5 29.0 23.2 11.2

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Wired broadband household penetration (%)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 41.5 1.0 0.4 2.6 11.8 56.4 2.0 1.1 4.2 18.1 66.8 3.8 2.6 6.4 25.4 72.1 6.4 4.2 8.9 33.4 76.9 9.2 7.3 11.9 39.9 77.8 11.9 9.8 14.5 42.2 78.7 14.8 12.4 17.3 45.1 81.8 19.1 15.5 21.3 50.0 84.8 24.4 20.7 26.5 56.7 85.5 30.6 25.8 32.2 63.1 4.4 8.5 9.3 1.5 1.0 2.3 2.8 13.1 13.1 20.1 5.9 2.1 6.2 6.5 19.7 22.8 26.7 13.9 4.2 13.4 11.1 29.3 32.8 34.6 23.0 9.5 23.3 18.2 35.0 35.0 38.6 27.0 18.9 29.2 25.4 37.7 36.2 42.5 29.3 20.7 36.3 28.6 39.4 38.1 48.5 31.3 21.6 41.0 31.0 42.1 41.4 56.4 35.3 26.3 45.3 35.9 47.8 46.9 70.4 42.7 32.8 50.8 43.2 54.3 52.4 90.3 52.9 39.3 56.6 51.6 22.0 29.9 35.1 28.4 19.8 16.8 0.9 6.8 15.6 40.8 27.3 19.0 15.0 27.8 32.9 18.2 19.3 30.4 37.3 47.4 37.9 31.2 21.2 3.4 16.2 25.4 54.9 41.3 28.4 21.7 36.5 45.8 31.4 28.3 38.8 43.8 61.6 50.0 42.9 32.5 10.0 30.7 33.6 63.0 54.9 36.9 28.0 47.8 56.5 44.7 38.5 44.0 50.0 74.1 58.6 54.3 44.5 23.4 42.8 41.8 74.0 65.0 43.2 33.0 60.4 69.0 55.5 48.2 49.4 54.1 80.2 63.6 63.7 55.6 43.5 58.4 48.7 76.4 73.8 45.5 32.2 61.3 74.4 64.7 54.8 50.9 54.9 81.8 67.0 66.5 59.1 46.4 67.3 52.3 77.1 75.5 47.6 30.7 61.5 76.5 67.6 56.5 52.6 56.7 84.6 73.3 71.8 64.4 49.4 70.9 57.9 78.5 77.1 49.9 30.0 62.1 78.5 71.2 59.3 55.1 58.4 88.2 79.6 78.9 72.4 55.4 78.1 65.3 80.5 81.0 53.0 32.5 63.9 82.1 76.6 64.4 60.4 60.0 91.8 85.5 87.9 82.9 61.3 83.3 74.6 83.1 82.6 57.5 36.7 67.3 85.5 84.0 70.9 62.8 61.6 95.3 91.5 94.8 88.3 67.3 91.5 83.7 86.4 84.1 63.2 41.6 72.7 90.4 91.3 76.3 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet access spending: wired and mobile | EMEA

117

Growth in broadband has come largely at the expense of dial-up. With the exceptions of Russia and Saudi Arabia/Pan Arab, the number of dial-up subscribers declined in each country in 2008. During the past four years, the dial-up subscriber base for EMEA as a whole has fallen at double-digit rates. We expect that the weak economy will lead to slower near-term growth in broadband and a slower decline in dial-up. During the latter part of the forecast period, we expect a faster increase in the broadband household universe and a faster decline in dial-up.

Western Europe will experience the sharpest decline in dial-up as that area becomes almost exclusively broadband. There is still a significant dial-up market in Germany, with 11 million subscribers in 2008, and in Italy, which has 7 million subscribers. In France and the United Kingdom, dial-up is fading away. In Central and Eastern Europe, Russia has the largest dial-up subscriber base, at 5.2 million. In Saudi Arabia/ Pan Arab and South Africa, dial-up continues to be the principal means of accessing the Internet. Western Europe had the largest dial-up market of the three areas in EMEA in 2008, at 24.5 million. In 2013 it will have an estimated 6.4 million, a 23.6 percent compound annual decline. Central and Eastern Europe will experience a 4.7 percent compound annual decline in dial-up households, falling from 6.9 million in 2008 to 5.4 million in 2013. Dial-up in Middle East/Africa will fall at a 3.7 percent compound annual rate to 8 million from 9.6 million in 2008. In 2013, Middle East/Africa will have the largest dial-up market in EMEA. The overall number of dial-up households will decline by 13.6 percent compounded annually to 19.8 million in 2013 from 41 million in 2008. Dial-up household penetration will drop from 12.4 percent in 2008 to 5.6 percent in 2013.

Dial-up household growth in EMEA (%)


0 5 10 15 20 25
Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Wired dial-up households (millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 0.57 3.09 3.31 6.97 71.75 0.48 3.72 3.81 8.01 63.42 0.46 4.16 4.39 9.01 55.99 0.40 4.62 4.50 9.52 48.15 0.32 4.92 4.40 9.64 41.00 0.29 5.00 4.20 9.49 38.50 0.26 4.96 4.00 9.22 34.65 0.23 4.74 3.80 8.77 31.10 0.20 4.58 3.60 8.38 25.22 0.17 4.40 3.40 7.97 19.76 11.9 2.2 5.0 3.7 13.6 1.95 0.38 0.68 0.27 4.50 1.65 9.43 1.70 0.35 0.55 0.29 4.75 1.38 9.02 1.50 0.21 0.48 0.22 5.00 0.92 8.33 1.25 0.07 0.40 0.20 5.10 0.64 7.66 1.00 0.04 0.37 0.02 5.15 0.30 6.88 0.90 0.03 0.32 0.02 5.10 0.25 6.62 0.85 0.02 0.27 0.01 5.00 0.20 6.35 0.80 0.01 0.22 0.01 4.90 0.15 6.09 0.70 0.01 0.13 0.01 4.80 0.10 5.75 0.60 0.01 0.03 0.01 4.70 0.07 5.42 9.7 24.2 39.5 12.9 1.8 25.3 4.7 0.81 0.54 0.82 0.50 6.21 13.40 0.58 0.91 13.49 2.18 0.82 0.40 1.85 2.02 0.47 10.35 55.35 0.66 0.34 0.57 0.37 4.56 13.20 0.65 0.63 11.65 1.65 0.59 0.34 1.20 1.63 0.45 7.90 46.39 0.76 0.24 0.32 0.20 3.14 13.45 0.55 0.52 9.90 1.15 0.35 0.21 0.84 1.24 0.40 5.38 38.65 0.71 0.17 0.14 0.11 2.02 12.50 0.31 0.46 8.40 0.80 0.22 0.13 0.54 0.95 0.35 3.16 30.97 0.60 0.14 0.10 0.08 1.25 11.00 0.15 0.23 7.00 0.65 0.15 0.09 0.34 0.90 0.30 1.50 24.48 0.57 0.12 0.07 0.06 1.00 10.00 0.10 0.21 7.20 0.60 0.12 0.07 0.14 0.88 0.25 1.00 22.39 0.55 0.10 0.05 0.05 0.75 9.00 0.07 0.19 6.00 0.55 0.10 0.05 0.07 0.85 0.20 0.50 19.08 0.50 0.08 0.04 0.04 0.50 8.00 0.05 0.16 5.00 0.45 0.07 0.04 0.03 0.80 0.18 0.30 16.24 0.35 0.06 0.03 0.03 0.25 5.75 0.04 0.12 3.00 0.35 0.05 0.03 0.01 0.70 0.15 0.17 11.09 0.30 0.03 0.01 0.01 0.15 3.75 0.03 0.05 1.00 0.25 0.03 0.02 0.01 0.55 0.10 0.08 6.37 12.9 26.5 36.9 34.0 34.6 19.4 27.5 26.3 32.2 17.4 27.5 26.0 50.6 9.4 19.7 44.4 23.6 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet access spending: wired and mobile | EMEA

119

Wired dial-up household penetration (%)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 29.2 9.5 34.5 15.9 22.7 24.6 11.3 39.6 18.1 19.9 23.1 12.5 45.6 20.1 17.4 19.6 13.8 46.7 21.0 14.9 15.4 14.5 45.6 21.1 12.4 13.7 14.5 43.5 20.6 11.5 12.0 14.3 41.4 19.8 10.2 10.5 13.5 39.3 18.6 9.0 8.9 12.9 37.2 17.6 7.2 7.5 12.2 35.1 16.6 5.6 43.1 9.5 5.0 3.7 8.6 9.6 9.5 37.2 8.6 4.0 4.0 9.0 7.9 9.0 32.5 5.1 3.5 3.0 9.5 5.2 8.3 26.8 1.7 2.9 2.7 9.6 3.6 7.6 21.2 1.0 2.7 0.3 9.7 1.6 6.8 18.9 0.7 2.3 0.3 9.6 1.3 6.5 17.6 0.5 2.0 0.1 9.4 1.1 6.2 16.4 0.2 1.6 0.1 9.2 0.8 5.9 14.2 0.2 0.9 0.1 9.0 0.5 5.6 12.1 0.2 0.2 0.1 8.8 0.4 5.2 24.4 11.3 33.1 21.8 24.3 34.3 18.2 62.3 60.2 30.7 41.4 11.4 8.2 44.9 14.6 40.7 32.0 19.7 7.0 22.9 16.1 17.7 33.7 20.4 42.6 51.3 22.9 29.4 9.7 5.2 35.8 13.8 31.0 26.6 22.5 4.8 12.8 8.7 12.1 34.3 17.2 34.7 43.0 15.8 17.2 6.0 3.5 27.0 12.2 21.0 21.9 20.7 3.3 5.6 4.8 7.8 32.0 9.7 30.3 36.1 11.0 10.7 3.7 2.2 20.4 10.5 12.3 17.4 17.2 2.7 4.0 3.5 4.8 28.2 4.7 14.9 29.7 8.8 7.1 2.6 1.2 19.1 8.9 5.8 13.4 16.3 2.3 2.8 2.6 3.8 25.7 3.1 13.5 30.1 8.0 5.7 2.0 0.4 18.5 7.4 3.9 11.9 15.6 1.9 2.0 2.2 2.8 23.2 2.2 12.0 24.8 7.3 4.7 1.4 0.2 17.7 5.8 1.9 9.9 14.1 1.5 1.6 1.7 1.9 20.7 1.5 10.0 20.4 5.9 3.2 1.1 0.1 16.5 5.2 1.1 8.3 9.8 1.1 1.2 1.3 0.9 14.9 1.2 7.4 12.1 4.6 2.3 0.9 0.0 14.3 4.3 0.6 5.6 8.4 0.5 0.4 0.4 0.6 9.7 0.9 3.0 4.0 3.2 1.4 0.6 0.0 11.1 2.8 0.3 3.1 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Wired Internet households (millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 1.38 3.40 3.35 8.13 109.10 1.58 4.39 3.92 9.89 121.13 1.79 5.43 4.64 11.86 137.69 1.87 6.77 4.90 13.54 156.14 1.92 8.06 5.10 15.08 172.68 1.94 9.08 5.15 16.17 180.27 1.96 10.11 5.20 17.27 188.40 2.03 11.48 5.30 18.81 203.66 2.10 13.27 5.60 20.97 223.53 2.12 15.40 5.90 23.42 243.58 2.0 13.8 3.0 9.2 7.1 2.15 0.72 1.94 0.38 5.01 2.04 12.24 2.30 0.88 3.29 0.72 5.88 2.46 15.53 2.41 1.14 4.13 1.24 7.24 3.29 19.45 2.62 1.42 5.13 1.89 10.10 4.84 26.00 2.65 1.49 5.66 2.00 15.15 5.65 32.60 2.70 1.54 6.17 2.17 16.10 7.00 35.68 2.75 1.62 6.95 2.31 16.50 7.95 38.08 2.85 1.76 8.01 2.61 18.90 8.85 42.98 3.05 2.01 9.87 3.16 22.30 10.00 50.39 3.30 2.26 12.56 3.91 25.70 11.27 59.00 4.5 8.7 17.3 14.3 11.1 14.8 12.6 1.54 1.97 1.69 1.15 11.28 19.97 0.61 1.01 16.98 5.08 1.36 1.07 5.25 3.27 1.53 14.97 88.73 1.68 2.16 1.75 1.24 12.58 21.51 0.76 0.87 17.42 5.60 1.42 1.34 6.24 3.29 1.94 15.91 95.71 2.07 2.42 1.86 1.35 14.23 26.19 0.87 0.98 17.63 5.75 1.47 1.51 7.53 3.44 2.26 16.82 106.38 2.22 2.71 2.00 1.46 16.15 29.90 1.06 1.11 18.15 6.20 1.56 1.65 8.61 3.76 2.64 17.42 116.60 2.32 2.94 2.12 1.55 17.90 32.70 1.55 1.13 18.50 6.30 1.70 1.69 9.82 3.78 2.80 18.20 125.00 2.35 3.02 2.14 1.61 18.50 33.00 1.60 1.26 19.70 6.35 1.72 1.74 10.28 3.80 2.85 18.50 128.42 2.40 3.15 2.20 1.75 19.75 34.00 1.67 1.31 20.00 6.45 1.75 1.80 11.09 3.83 2.90 19.00 133.05 2.45 3.28 2.29 1.89 21.50 36.00 1.85 1.41 21.00 6.55 1.82 1.89 12.71 3.90 3.03 20.30 141.87 2.50 3.41 2.38 2.03 23.75 37.75 2.04 1.47 21.50 6.70 1.85 2.03 15.44 4.00 3.15 22.17 152.17 2.55 3.53 2.46 2.16 25.65 37.75 2.23 1.55 22.00 6.90 1.88 2.22 18.75 4.15 3.30 24.08 161.16 1.9 3.7 3.0 6.9 7.5 2.9 7.5 6.5 3.5 1.8 2.0 5.6 13.8 1.9 3.3 5.8 5.2 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet access spending: wired and mobile | EMEA

121

Wired Internet household penetration (%)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 70.8 10.5 34.9 18.5 34.5 81.0 13.4 40.8 22.3 38.0 89.9 16.4 48.2 26.5 42.9 91.7 20.1 50.9 29.9 48.3 92.3 23.7 52.9 33.0 52.3 91.5 26.4 53.4 35.0 53.7 90.7 29.1 53.8 37.0 55.2 92.3 32.6 54.8 40.0 59.0 93.8 37.3 57.9 44.1 63.9 93.0 42.8 60.9 48.8 68.7 47.6 17.9 14.3 5.2 9.5 11.9 12.3 50.3 21.7 24.1 9.8 11.2 14.1 15.6 52.2 27.9 30.2 16.9 13.7 18.6 19.4 56.1 34.5 37.5 25.7 19.1 26.9 25.8 56.1 36.0 41.3 27.2 28.6 30.9 32.2 56.6 36.9 44.9 29.5 30.3 37.6 35.1 57.1 38.6 50.4 31.4 31.0 42.1 37.2 58.5 41.6 58.0 35.5 35.5 46.1 41.8 62.0 47.2 71.3 42.9 41.8 51.3 48.8 66.4 52.7 90.6 53.1 48.0 56.9 56.8 46.4 41.2 68.1 50.2 44.1 51.1 19.2 69.2 75.8 71.5 68.7 30.4 23.2 72.7 47.5 58.9 51.3 50.1 44.3 70.3 54.0 48.9 54.9 23.8 58.8 76.7 77.8 70.6 38.1 26.9 72.3 59.7 62.4 54.8 61.2 48.6 74.4 58.7 55.0 66.8 27.2 65.3 76.7 78.8 72.1 42.9 31.6 74.8 68.7 65.7 60.4 64.7 53.3 79.7 63.3 62.1 76.5 33.0 73.0 77.9 84.9 75.7 46.9 35.2 80.9 79.5 67.8 65.7 66.7 56.8 84.1 67.1 68.5 83.8 48.1 73.4 78.4 85.1 81.0 48.0 33.3 80.4 83.3 70.5 68.2 67.1 57.2 84.6 69.5 70.3 84.8 49.5 80.8 82.4 85.1 81.1 49.6 31.1 80.0 83.8 71.4 68.4 68.2 58.6 86.6 75.4 74.7 87.6 51.5 82.9 82.6 85.8 81.8 51.3 30.1 79.8 84.3 73.1 69.2 69.2 59.9 89.8 81.3 80.8 93.0 56.9 88.1 85.7 86.4 84.3 54.2 32.6 80.4 87.3 77.8 72.7 70.2 61.1 93.0 86.8 88.8 97.8 62.6 90.7 86.7 87.7 84.9 58.3 36.8 81.6 89.7 84.6 76.5 71.2 62.1 95.7 91.9 95.4 98.1 68.2 94.5 87.6 89.6 85.5 63.8 41.7 83.8 93.2 91.6 79.5 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

There were a total of 172.7 million Internet households in EMEA in 2008, for a penetration rate of 52.3 percent of all households. In Western Europe 68.2 percent of all households were online. Internet penetration was 32.2 percent in Central and Eastern Europe and 33 percent in Middle East/Africa. We project the number of Internet households to increase to 243.6 million by 2013, a 7.1 percent compound annual gain. Western Europe will expand at a 5.2 percent compound annual rate to 161.2 million; Central and Eastern Europe will grow by 12.6 percent compounded annually to 59 million households; and Middle East/Africa will rise to 23.4 million Internet households in 2013, up 9.2 percent on a compound annual basis. By 2013, 68.7 percent of all households in EMEA will be online. Penetration will increase to 79.5 percent in Western Europe. In Central and Eastern Europe, Internet penetration will rise to 56.8 percent, and in Middle East/Africa, 48.8 percent of households will be online in 2013.

In addition to competitive factors that are reducing costs, we expect that subscribers will be resistant to upgrade to higher-speed services during the next year or two so as to avoid incurring additional expenses in the face of deteriorating economic conditions and rising unemployment. We also expect a slower take-up rate in broadband itself. Consequently, we project broadband access spending, which has been growing at double-digit annual rates during the past five years, to slow to mid-single-digit increases during the next two years. We then project growth to return to double-digit levels during 201113 as improved economic conditions lead to a faster broadband adoption rate and trade-ups to higher-speed options raise average spending per subscriber.

Broadband access spending growth in EMEA (%)


100 80 60 40 20 0 69.9 45.7 33.5 23.5 16.4 4.0 5.7 11.5 14.9 13.3

Internet access spending


Efforts to promote competition are putting downward pressure on pricing and in the near term are offsetting the impact of growing penetration of higher-priced, high-speed services. In the United Kingdom, BT Openreach was created to promote local loop unbundling (LLU), which requires BT to share its network and infrastructure with all competitors. BT Openreach is credited with lowering prices and increasing broadband penetration. Sweden enacted the Bill of Functional Separation for Better Broadband Competition that took effect in July 2008. The legislation, modeled on BT Openreach, gives the regulatory body the power to require TeliaSonera, the incumbent carrier, to provide access to its copper infrastructure to competitors. In Switzerland, the Federal Communications Commission in late 2007 issued a ruling requiring Swisscom to offer access to its broadband infrastructure to competitors for a four-year period. In early 2008, Swisscom lowered the wholesale cost of its DSL service by 10 percent. There are at present more than 20 Internet service providers in the market.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Broadband access spending in Western Europe will grow by 8 percent compounded annually to $73.5 billion in 2013. Central and Eastern Europe will expand at a 13.1 percent compound annual rate to $11.5 billion in 2013 from $6.2 billion in 2008. Middle East/Africa will be the fastest-growing, with a 24.8 percent compound annual increase to $9.6 billion from $3.2 billion. France, Germany, and the UK had the largest broadband access markets in 2008, at $9.1 billion, $8.8 billion, and $8.3 billion, respectively. France overtook Germany in 2007, and we expect Germany to regain the lead in 2011, rising to $13.4 billion by 2013, with France at $13 billion and the UK at $11.6 billion.

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Wired broadband access spending (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 325 223 50 598 21,215 432 473 135 1,040 30,912 491 841 282 1,614 41,277 536 1,409 328 2,273 50,959 578 2,035 559 3,172 59,313 582 2,585 743 3,910 61,671 586 3,189 917 4,692 65,216 624 4,193 1,151 5,968 72,734 663 5,443 1,545 7,651 83,537 688 6,970 1,954 9,612 94,617 3.5 27.9 28.4 24.8 9.8 121 189 483 37 101 100 1,031 357 289 638 133 221 271 1,909 508 476 790 292 411 566 3,043 757 683 965 389 905 940 4,639 902 726 1,134 451 1,786 1,184 6,183 962 739 1,156 478 1,938 1,461 6,734 992 765 1,230 500 1,999 1,639 7,125 1,075 841 1,359 568 2,399 1,849 8,091 1,241 968 1,595 693 3,041 2,119 9,657 1,443 1,101 1,964 868 3,660 2,424 11,460 9.9 8.7 11.6 14.0 15.4 15.4 13.1 692 1,004 680 417 3,107 3,853 12 34 1,557 1,294 506 325 1,902 800 858 2,545 19,586 931 1,215 917 550 4,788 4,816 44 79 2,492 1,706 769 457 2,634 1,052 1,188 4,325 27,963 1,150 1,379 1,190 717 6,427 6,579 124 149 3,285 1,955 1,025 582 3,512 1,378 1,370 5,798 36,620 1,299 1,561 1,428 830 7,940 7,639 290 208 4,109 2,276 1,213 667 4,200 1,740 1,497 7,150 44,047 1,450 1,696 1,542 891 9,064 8,764 536 284 4,806 2,381 1,386 688 4,895 1,757 1,537 8,281 49,958 1,462 1,706 1,550 919 9,143 8,785 566 323 5,158 2,399 1,397 697 5,116 1,765 1,556 8,485 51,027 1,494 1,768 1,580 985 9,509 9,219 599 334 5,704 2,456 1,405 707 5,497 1,791 1,585 8,766 53,399 1,541 1,841 1,632 1,057 10,326 10,572 670 373 6,462 2,549 1,490 751 6,347 1,863 1,681 9,520 58,675 1,708 1,930 1,716 1,144 11,659 12,363 738 402 7,374 2,677 1,571 817 7,777 2,013 1,795 10,545 66,229 1,799 2,028 1,812 1,238 12,986 13,434 803 448 8,261 2,832 1,674 904 9,511 2,229 1,950 11,636 73,545 4.4 3.6 3.3 6.8 7.5 8.9 8.4 9.5 11.4 3.5 3.8 5.6 14.2 4.9 4.9 7.0 8.0 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Wired dial-up access spending (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 151 649 569 1,369 21,473 128 781 608 1,517 18,095 123 874 707 1,704 15,155 109 964 731 1,804 12,317 86 1,019 721 1,826 10,025 77 1,028 695 1,800 9,119 68 1,013 667 1,748 7,972 59 961 640 1,660 6,936 51 921 611 1,583 5,304 43 871 582 1,496 3,863 12.9 3.1 4.2 3.9 17.4 684 110 199 70 391 363 1,817 603 102 102 74 401 271 1,553 530 60 57 56 408 177 1,288 438 20 37 51 406 120 1,072 347 11 29 5 398 55 845 310 8 21 5 382 45 771 290 5 17 2 362 35 711 270 3 12 2 343 25 655 233 3 10 2 324 17 589 198 3 8 2 306 11 528 10.6 22.9 22.7 16.7 5.1 27.5 9.0 427 196 290 176 2,180 4,942 173 152 3,435 574 475 132 765 809 140 3,421 18,287 347 120 200 129 1,551 4,845 192 104 2,874 421 339 111 479 647 133 2,533 15,025 398 85 112 70 1,052 4,643 161 85 2,403 288 200 69 322 488 116 1,671 12,163 370 60 48 38 670 4,061 91 73 2,022 202 125 42 199 372 102 966 9,441 312 48 35 28 411 3,477 44 37 1,671 164 85 29 123 351 87 452 7,354 294 41 24 20 326 3,073 29 32 1,706 152 67 22 50 342 72 298 6,548 284 34 17 18 243 2,687 20 29 1,409 142 56 16 23 329 57 149 5,513 256 28 14 13 161 2,318 15 25 1,165 117 39 13 10 308 51 88 4,621 179 20 10 10 80 1,616 12 18 695 92 27 10 3 268 42 50 3,132 154 10 3 3 48 1,021 9 7 231 67 16 6 3 208 29 24 1,839 13.2 26.9 38.8 36.0 34.9 21.7 27.2 28.3 32.7 16.4 28.4 27.0 52.4 9.9 19.7 44.4 24.2 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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During the next five years, dial-up spending in Western Europe will decline at a 24.2 percent compound annual rate to $1.8 billion from $7.4 billion in 2008. Central and Eastern Europe will drop to $528 million, a 9 percent decrease compounded annually from $845 million in 2008. Dial-up spending in Middle East/Africa will fall by 3.9 percent compounded annually to $1.5 billion in 2013 from $1.8 billion in 2008. The dial-up market in all of EMEA will fall from $10 billion in 2008 to $3.9 billion in 2013, a 17.4 percent compound annual decrease.

Magyar Telecom has a long-term loan from the European Investment Bank for around $300 million to invest in mobile broadband. In Italy, mobile broadband access expanded significantly during 2008 and is forecast to increase further in 2009 and 2010. HSDPA is the standard technology, but TIM, the incumbent operator, recently announced the launch of a new network that will bring the capacity up to 28 Mbps. In Switzerland, Swisscom has invested in upgrading its HSDPA mobile access network, now offering speeds of up to 14.4 Mbps in most major city centers and tourism areas. The village of Davos was one of the first areas to be upgraded, due to the presence of the World Economic Forum. Swisscom introduced the iPhone in June 2008 and had sold 170,000 iPhones by the end of 2008. Every fourth new mobile phone sold at Swisscom over this period was an iPhone. Around 97 percent of iPhone users take on a subscription, with an average revenue per unit of CHF83 ($77), well above the average for Swisscom users. In Russia, each of the main wireless operators launched 3G services in the past 18 months. Vimplekom, which introduced 3G in St. Petersburg, has a deal with Apple to distribute the iPhone that will operate on its 3G network. Virgin introduced WiMAX in Moscow and several other cites in 2008, and Mobile TeleSystems (MTS) announced it plans to invest around $400 million during the next three years on 3G networks in St. Petersburg and other cities. Because mobile Internet access involves interactive communications, which are more complicated than the downloading of songs or ringtones, speed is important. We expect rollouts of high-speed services to spur mobile access penetration. In addition to network upgrades, the introduction of smart phones such as the iPhone can spur the market. Smart phones with touch-screen capabilities make it much easier to navigate the Internet. As the experience in Germany demonstrates, Internet-friendly handsets can drive usage.

Mobile access
Wireless network upgrades are facilitating growth in mobile Internet access because more wireless telephone subscribers can use their handsets to access the Internet. Orange UK is upgrading its 3G infrastructure in Scotland and Northern Ireland to HSDPA to facilitate mobile broadband with download speeds of up to 7.2 Mbps. In the Netherlands in 2008, Worldmax launched Europes first mobile WiMAX service. Carriers in Denmark spent around $1.6 billion to upgrade to 3G through 2008. Telecompany 3 introduced a 21 Mbps service in late 2008, and in Finland, each of the three mobile operators now offers 3G. In Germany, T-Mobile and Vodafone offer HSDPA with speeds of up to 1.8 Mbps. In some cities, speeds of up to 3.6 Mbps are available, and in large population centers, 7.2 Mbps is available. T-Mobile and Vodafone each provide a mobile Internet plan allowing data transfers of up to 5 Gbps per month. T-Mobile introduced the iPhone in late 2007 and within the first two months had 70,000 subscribers. Those subscribers are heavy Internet users, downloading up to 30 times more data than the average wireless subscriber does. Aside from the iPhone, other smart phones are also being offered and heavily promoted by operators, helping grow the mobile access market. HSDPA is also available in Austria, Italy, Portugal, Spain, Switzerland, Hungary, and Poland. In Hungary,

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Mobile access spending exceeded $1 billion in each of France, Germany, Italy, the United Kingdom, and Saudi Arabia/Pan Arab in 2008, and we expect Spain to reach that threshold in 2009, Russia in 2011, Turkey in 2012, and Poland in 2013. Mobile access is relatively high in Saudi Arabia/Pan Arab because of the limited availability of wired broadband. Currently, only a fraction of wireless telephone subscribers are mobile Internet subscribers. On average, 8.2 percent of the wireless telephone subscribers were mobile Internet subscribers in 2008. Slow speeds and limited penetration of smart phones or handsets with full keyboard capabilities limit penetration. Cost is also an issue, and we expect a slower take-up rate during the next two years as consumers look to conserve funds. In 2008, mobile access penetration increased by 1.9 percentage points. We expect a 1.4-percentage-point gain in 2009 to 9.6 percent followed by a 1.7-point increase in 2010. Thereafter, the combination of an improved underlying economy, more-Internet-appropriate handsets, and faster network speeds will propel penetration. From 2010 to 2013, we expect mobile access penetration to jump by 12.6 percentage points to 23.9 percent in 2013.

Mobile access subscribers as a percent of wireless telephone subscribers in EMEA


30 25 20 15 10 5 0 1.9 3.0 4.6 6.3 8.2 9.6 11.3 14.0 18.2 23.9

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Spending on mobile access will nearly triple during the next five years to $32.9 billion in 2013 from $11 billion in 2008, a 24.5 percent compound annual gain. Western Europe will increase to $16.5 billion in 2013 from $8.2 billion in 2008, a 15 percent compound annual gain. Central and Eastern Europe will expand by 38.6 percent compounded annually from $1.3 billion in 2008 to $6.6 billion in 2013. Middle East/Africa will be the fastest-growing area from a small base, rising to $9.7 billion in 2013 from $1.5 billion in 2008 for a 45.3 percent increase on a compound annual basis.

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Mobile access market (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 24 NA NA 24 2,021 35 NA NA 35 3,363 71 217 58 346 5,542 107 532 117 756 8,332 130 1,147 227 1,504 11,006 144 2,105 393 2,642 13,310 157 3,064 554 3,775 15,667 182 4,321 747 5,250 19,490 233 5,938 992 7,163 25,245 310 8,114 1,304 9,728 32,876 19.0 47.9 41.9 45.3 24.5 38 NA NA NA 44 NA 82 57 NA NA NA 116 NA 173 110 14 64 85 218 NA 491 157 29 145 145 315 97 888 186 58 230 151 472 197 1,294 195 99 393 247 498 391 1,823 206 136 535 285 651 666 2,479 232 173 675 372 1,005 955 3,412 285 224 873 473 1,596 1,291 4,742 365 290 1,127 602 2,527 1,716 6,627 14.4 38.0 37.4 31.9 39.9 54.2 38.6 34 42 NA NA 94 300 NA NA 528 94 3 NA 203 5 21 591 1,915 50 60 NA NA 278 460 NA NA 828 123 7 NA 329 8 31 981 3,155 98 113 10 13 363 903 25 10 1,103 183 10 83 486 10 65 1,230 4,705 154 162 19 26 678 1,528 51 26 1,398 244 12 142 682 40 97 1,429 6,688 190 203 36 48 1,030 1,659 101 91 1,699 309 18 217 961 52 119 1,475 8,208 200 228 59 79 1,137 1,702 165 123 1,768 328 23 265 1,017 61 127 1,563 8,845 208 241 82 114 1,213 1,791 241 148 1,815 341 28 293 1,057 68 133 1,640 9,413 228 265 109 155 1,456 2,008 331 190 2,094 378 38 360 1,160 90 148 1,818 10,828 275 320 144 200 1,854 2,483 423 241 2,565 460 53 443 1,387 123 180 2,189 13,340 342 401 191 272 2,295 3,025 569 304 3,079 578 70 618 1,646 166 227 2,738 16,521 12.5 14.6 39.6 41.5 17.4 12.8 41.3 27.3 12.6 13.3 31.2 23.3 11.4 26.1 13.8 13.2 15.0 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Asia Pacific

The outlook in brief


Fiber deployments, increased penetration into rural areas, and improved international connectivity will drive broadband penetration. Dial-up will serve the growing demand for Internet access in countries without an established broadband infrastructure. Wireless upgrades will propel mobile Internet access.

Wired Internet access spending will rise from $42 billion in 2008 to $54.3 billion in 2013, a 5.3 percent increase compounded annually. Wired dial-up access spending will total $9.5 billion in 2013, a 6.8 percent compound annual decline. Wired broadband access spending will grow at a 9.5 percent compound annual rate to $44.8 billion in 2013 from $28.5 billion in 2008. Mobile access spending will increase from $39.3 billion in 2008 to $62.3 billion in 2013, a 9.7 percent compound annual increase. Mobile access spending will overtake wired access spending in 2011.

Overview
Internet wired and mobile access will increase during the next five years to $116.6 billion in 2013 from $81.3 billion in 2008, averaging 7.5 percent compounded annually.

Internet access market: wired and mobile by component (US$ millions)


Asia Pacific Wired Internet access Dial-up Broadband Total wired Internet access Mobile access Total Internet and mobile access 9,830 14,735 24,565 11,079 35,644 10,236 18,126 28,362 21,394 49,756 9,284 21,418 30,702 29,517 60,219 11,293 24,784 36,077 34,147 70,224 13,549 28,477 42,026 39,265 81,291 12,955 31,299 44,254 42,686 86,940 12,058 34,230 46,288 45,549 91,837 11,163 37,418 48,581 49,915 98,496 10,349 40,923 51,272 55,892 107,164 9,506 44,815 54,321 62,277 116,598 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet access market growth: wired and mobile by component (%)


Asia Pacific Wired Internet access Dial-up Broadband Total wired Internet access Mobile access Total Internet and mobile access 9.2 39.9 15.0 217.7 43.4 4.1 23.0 15.5 93.1 39.6 9.3 18.2 8.3 38.0 21.0 21.6 15.7 17.5 15.7 16.6 20.0 14.9 16.5 15.0 15.8 4.4 9.9 5.3 8.7 6.9 6.9 9.4 4.6 6.7 5.6 7.4 9.3 5.0 9.6 7.3 7.3 9.4 5.5 12.0 8.8 8.1 9.5 5.9 11.4 8.8 6.8 9.5 5.3 9.7 7.5 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Japan has the largest market in Asia Pacific, at $37.8 billion in 2008, with 74 percent of that total coming from mobile access. Japan is the only country in the world where the majority of Internet access spending is generated from mobile phones. Because its mobile access market is already mature, Japan will not benefit from a surge in that market that will characterize most other countries. We project spending to increase at a 2.8 percent compound annual rate to $43.3 billion in 2013. The Peoples Republic of China (PRC) was the secondlargest country in Asia Pacific in 2008, at $20.1 billion. The PRC has the largest wired Internet household base in the world, at 161 million in 2008, and the secondlargest mobile access subscriber base, behind Japan, at around 45 million. The PRC passed the United

States in 2008 to become the largest wired broadband market in the world, with 76 million households. While growth will not match the explosive increases during the past five years, as the economy and Internet penetration growth slow, we do expect spending to continue to average double-digit gains of 12.7 percent on a compound annual basis. Spending will rise to a projected $36.5 billion in 2013. South Korea was next largest, at $12.5 billion, in 2008. South Korea has the third-largest mobile access subscriber base in the world, at more than 36 million, more than twice the number of broadband households. High penetration in both broadband and mobile will limit growth during the next five years. We project South Korea to increase at a 3.9 percent rate compounded annually to $15.1 billion in 2013.

Internet access market: wired and mobile by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 1,384 5,005 449 254 130 17,951 268 204 374 166 487 7,404 1,013 458 97 35,644 2005 1,558 7,771 530 314 181 26,523 343 255 417 204 565 9,284 1,112 518 181 49,756 2006 1,721 9,564 682 428 243 32,671 432 291 459 290 661 10,530 1,317 661 269 60,219 2007 1,870 14,133 754 723 470 35,503 585 348 592 480 750 11,461 1,361 847 347 70,224 2008p 2,018 20,087 859 919 639 37,818 720 362 809 822 847 12,528 1,415 998 450 81,291 2009 2,131 22,334 879 1,150 774 38,840 819 370 1,016 950 854 13,179 1,980 1,132 532 86,940 2010 2,254 24,468 917 1,365 1,024 39,807 886 384 1,214 1,109 860 13,663 2,061 1,218 607 91,837 2011 2,449 27,344 976 1,640 1,494 41,036 944 411 1,455 1,388 886 14,204 2,159 1,360 750 98,496 2012 2,648 31,317 1,038 2,060 2,174 42,306 1,032 445 1,767 1,775 1,168 14,691 2,240 1,562 941 107,164 2013 2,905 36,523 1,118 2,601 2,778 43,340 1,145 487 2,027 2,253 979 15,143 2,343 1,795 1,161 116,598 200913 CAGR 7.6 12.7 5.4 23.1 34.2 2.8 9.7 6.1 20.2 22.3 2.9 3.9 10.6 12.5 20.9 7.5

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Broadband
Countries throughout the region are enhancing their broadband capacity to provide faster speeds and greater throughput. The Japanese government is actively promoting broadband through its Next Generation Broadband Strategy 2010 initiative. That strategy targeted fiber to the home as a central tenet. The FTTH market rose from 2.9 million in 2005 to more than 13 million in 2008, the largest of any country in the world, and in 2008 fiber became the largest broadband access technology in Japan. Carriers are introducing high-speed options so-called next-generation networksto further enhance the market. In the PRC, the restructuring of the telecommunications market will lead to more broadband competition. There are now three competitive companies in the marketChina Mobile, China Telecom, and China Unicomeach of which can offer mobile and fixed-line service in a package, and each of which will operate a wireless network by using a single wireless broadband technology. China Mobile, the largest wireless carrier in the world, now has a fixed-line network, which will enable it to introduce a broadband service in 2009. It is unclear how long it will take for this increased competition to result in lower broadband access fees. In Australia, the government is expected to award a tender in 2009 for a national broadband network at an estimated cost of $5 billion. Telstra, Australias largest telecommunications company, had its tender submission rejected for alleged noncompliance. In 2008, Telstra activated its high-speed DSL network, providing speeds of up to 20 Mbps. In the Philippines, industry experts attribute growth in broadband Internet access to decreasing broadband user rates and the declining prices of personal computers. To respond to that increasing demand, two major broadband providers allocated a huge chunk of their 2009 capital expenditure budgets for investment in broadband expansion. Philippine Long Distance Telephone Company (PLDT) allocated $364 million, while Globe Telecom set aside $400 million to $420 million.

In Singapore, as part of its iN2015 master plan, which includes the Next Generation National Infocomm Infrastructure, the government is supporting a national fiber-to-the-home network that will provide speeds of up to 1 Gbps. The network is scheduled to initially become available in 2010 to 60 percent of the country and to be available to 95 percent of the country by 2012. In Malaysia, the project to build an FTTH network with Telekom Malaysia was delayed, but an agreement was finally signed in late 2008. The 10-year project will reach every urban home. The government awarded WiMAX licenses to provide fixed wireless broadband, and several companies began providing service in 2008. In South Korea, wired Internet access is entirely through a broadband connection. The governments long-term broadband strategy focused on creating a backbone network funded by the government that could be used by carriers. Carriers are able to provide broadband for rural areas because they do not have to build their own infrastructure. In India, a project is under way to extend broadband to rural areas by using broadband-over-power-line (BPL) technology. In Thailand, state-owned carrier CAT Telecom is building a fiber-optic cable backbone that will reach all regions of the country and provide faster broadband speeds. In Vietnam, the Vietnam Post and Telecommunications Group invested in a national broadband network in 2008, increasing capacity to 200 Gbps. In Indonesia, fixed wireless services are being rolled out by carriers as a less expensive alternative for the last-mile connection to the home. Around half of the broadband subscribers in Indonesia are connected via fixed wireless. Fixed wireless using WiMAX technology also is being introduced or expanded in other countries. In Pakistan, Motorola has a contract with Wateen Telecom for around 200,000 devices that will be used for wireless DSL. In Taiwan, six companies were issued WiMAX licenses in July 2007, and they are looking to jointly purchase WiMAX equipment to save on capital costs and accelerate the process of introducing service. WiMAX licenses are expected to be issued in Thailand in 2009, and in Vietnam four companies were issued licenses to test WiMAX service for one year.

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To assist in extending broadband to rural areas, O3b Networks entered the market in 2008 with a satellite service. A series of medium-Earth-orbit satellites is expected to be launched in late 2010. The satellites will provide broadband connectivity to areas across the region not reached by DSL or cable modem service. The ability to accommodate rising levels of Internet traffic will be a critical factor in the facilitating of broadband expansion. The construction of undersea fiber-optic cables that link Asia with the rest of the world will allow for faster broadband speeds. In October 2008, the first phase of the Trans-Pacific Express was completed that links China and Taiwan with the United States, the first such direct link. The eight companies participating in the projectChina Telecom, China Netcom, China Unicom, Chunghwa Telecom (Taiwan), Korea Telecom, NTT Communications Corp., AT&T, and Verizonare spending around $500 million. In Hong Kong, Hutchison in 2008 integrated its Hong KongShenzhen Western Corridor fiber-optic cable with the China Telecom network, increasing to four the number of fiber connections between Hong Kong and China. In other developments, KDDI of Japan and Rostelecom of Russia deployed two undersea fiber-optic cables connecting the two countries. The existing Rostelecom network in Russia will provide a link to fiber-optic cable networks in Europe to meet growing demand for data access between Japan and Europe. An undersea cable linking Japan and the United States, built jointly by SingTel, KDDI, Bharti Airtel, Pacnet, Global Transit, and Google at a cost of $300 million is scheduled to be completed in 2010. Meanwhile, the Asia American Gateway being built by Alcatel-Lucent and NECwhich will connect Hong Kong, Malaysia, the Philippines, Singapore, Thailand, and Vietnam with Hawaii and the West Coast of the United Statesis expected to become operational in 2009.

There is a wide disparity in broadband penetration in Asia Pacific. Broadband is well developed in Australia, Hong Kong, Japan, New Zealand, Singapore, South Korea, and Taiwan, each of which had penetration rates in excess of 50 percent in 2008. Broadband penetration in Malaysia was 24.6 percent, and in the PRC, 19.2 percent. The remaining countries have penetration rates below 10 percent. Despite its relatively low penetration rate, the PRC leads the region, with 76 million broadband subscribers. We expect that the restructuring will facilitate expansion of the broadband infrastructure, and we project the broadband subscriber base will more than double to 155 million by 2013, a 15.3 percent compound annual increase. The PRC will account for 66 percent of broadband household growth in Asia Pacific during the next five years. In countries that have high broadband penetration rates, we project low- to mid-single-digit gains during the next five years, while we look for double-digit average growth in each country where broadband penetration was less than 50 percent in 2008. We project the number of broadband households in Asia Pacific as a whole will increase to 264.3 million by 2013 from 144.7 million in 2008, a 12.8 percent compound annual increase. Excluding the PRC, broadband household growth will average 9.7 percent compounded annually. Broadband household penetration will increase from 17.5 percent in 2008 to 29.6 percent in 2013.

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Broadband households (millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 1.20 24.00 1.30 0.05 0.07 16.00 0.18 0.10 0.00 0.05 0.48 12.50 3.20 0.30 0.03 59.46 2005 2.30 36.00 1.43 0.80 0.10 20.00 0.38 0.15 0.01 0.10 0.60 13.15 3.60 0.35 0.13 79.10 2006 3.35 44.90 1.78 1.55 0.15 24.40 0.70 0.40 0.05 0.20 0.73 13.60 4.40 0.60 0.36 97.17 2007 4.00 58.70 1.90 2.70 0.23 27.60 1.15 0.76 0.09 0.65 0.84 14.10 4.60 0.80 0.90 119.02 2008p 4.75 76.00 2.20 4.90 0.30 29.45 1.45 0.83 0.16 1.20 0.93 15.10 4.75 1.00 1.65 144.67 2009 5.30 92.00 2.30 7.75 0.37 31.80 1.65 0.89 0.20 1.40 0.95 15.70 4.90 1.15 2.00 168.36 2010 5.80 110.00 2.40 9.70 0.45 34.00 1.85 0.96 0.30 1.60 0.97 16.20 5.05 1.35 2.10 192.73 2011 6.30 125.00 2.50 12.30 0.55 36.00 2.10 1.04 0.40 2.00 1.00 16.50 5.20 1.60 2.60 215.09 2012 6.70 140.00 2.60 16.00 0.70 38.00 2.50 1.13 0.50 2.50 1.05 16.80 5.35 1.90 3.10 238.83 2013 7.10 155.00 2.65 21.00 1.00 40.00 3.00 1.23 0.60 3.00 1.10 17.10 5.50 2.30 3.75 264.33 200913 CAGR 8.4 15.3 3.8 33.8 27.2 6.3 15.7 8.2 30.3 20.1 3.4 2.5 3.0 18.1 17.8 12.8

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Broadband household penetration (%)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 15.6 6.5 57.8 0.0 0.1 32.7 3.2 6.8 0.0 0.3 44.9 74.4 44.8 1.7 0.2 7.8 2005 29.6 9.6 62.2 0.4 0.2 40.4 6.6 10.1 0.0 0.6 55.6 77.8 49.0 1.9 0.8 10.1 2006 42.7 11.8 75.7 0.8 0.3 48.8 12.1 26.7 0.2 1.2 67.0 80.0 58.3 3.0 2.1 12.2 2007 50.6 15.1 79.2 1.4 0.4 54.7 19.7 50.3 0.4 3.9 76.4 82.5 59.4 3.8 4.9 14.7 2008p 59.5 19.2 89.8 2.5 0.5 57.7 24.6 54.6 0.7 7.1 83.8 87.8 59.7 4.4 8.7 17.5 2009 65.8 22.8 92.0 3.8 0.7 61.7 27.7 58.2 0.9 8.3 84.8 90.8 60.1 4.8 10.3 20.0 2010 71.4 26.8 94.1 4.6 0.8 65.4 30.8 62.3 1.3 9.5 85.8 93.1 60.5 5.3 10.7 22.5 2011 77.0 30.0 96.2 5.8 1.0 68.6 34.7 67.1 1.7 11.8 87.7 94.3 60.8 6.0 13.1 24.7 2012 81.3 33.0 98.1 7.5 1.3 71.7 41.0 72.4 2.1 14.7 91.3 95.5 61.1 6.8 15.5 27.1 2013 85.5 36.0 98.1 9.7 1.8 74.8 48.8 78.3 2.4 17.6 94.8 96.6 61.5 7.8 18.6 29.6

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Wired broadband access spending will increase to $44.8 billion in 2013 from $28.5 billion in 2008, a 9.5 percent compound annual increase.

The PRC will account for 56 percent of that increase. Excluding the PRC, spending growth will average 6.4 percent compounded annually.

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Wired broadband access spending (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 446 2,991 383 2 13 3,896 46 34 1 13 407 5,443 913 141 6 14,735 2005 842 4,436 413 39 18 4,812 96 50 3 26 509 5,726 1,013 123 20 18,126 2006 1,210 5,475 504 76 26 5,799 176 130 17 50 619 5,936 1,222 141 37 21,418 2007 1,424 7,082 527 144 40 6,480 285 243 30 163 712 6,170 1,268 144 72 24,784 2008p 1,668 9,071 597 286 50 6,829 356 263 52 298 788 6,624 1,283 180 132 28,477 2009 1,807 10,782 603 457 60 7,189 397 277 64 343 805 6,870 1,286 203 156 31,299 2010 1,949 12,702 610 577 71 7,490 439 295 93 388 822 7,089 1,306 236 163 34,230 2011 2,123 14,488 639 758 84 7,972 499 321 122 485 848 7,238 1,355 283 203 37,418 2012 2,269 16,347 673 1,052 104 8,481 595 350 149 613 890 7,406 1,404 343 247 40,923 2013 2,422 18,299 694 1,467 145 9,043 717 383 175 747 933 7,576 1,464 436 314 44,815 200913 CAGR 7.7 15.1 3.1 38.7 23.7 5.8 15.0 7.8 27.5 20.2 3.4 2.7 2.7 19.4 18.9 9.5

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Dial-up
Asia Pacific also has the largest dial-up subscriber base in the world, at 132.4 million. During the past two years, the number of dial-up subscribers jumped by 75 percent, principally because of a large increase in the PRC, whose dial-up market more than doubled to 85 million from 31 million in 2006. Rapid economic growth stimulated demand for the Internet, and many people who did not have access to broadband opted for dialup. With broadband availability increasing, we expect dial-up subscribers to migrate to broadband. Beginning in 2009, the dial-up universe in China will decline. In general, countries with established broadband infrastructures are experiencing decreases in dial-up as most households shift to broadband. In South Korea, all Internet access is through broadband connection. In other countries, however, the telecommunications infrastructure is still being built out and broadband is

not widely available. In those countries, dial-up is still expandingin many cases at double-digit annual rates. In addition to the PRC, India, Indonesia, Pakistan, the Philippines, Thailand, and Vietnam recorded increases in their dial-up subscriber bases. India will experience the largest increase in dial-up, with a projected rise to 18 million subscribers by 2013 from 10.5 million in 2008, a 7.5 million advance. India, which still does not have a well-developed broadband infrastructure, is experiencing an expanding Internet market, much of which is being achieved through dial-up. In most other countries, the broadband infrastructure is already built out or is expanding at a rapid pace. In those countries, many dial-up subscribers are shifting to broadband. We project the dial-up household universe to continue to decline in Australia, Hong Kong, Japan, Malaysia, New Zealand, Singapore, and South Korea.

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For the region as a whole, the number of dial-up households will begin falling in 2009 and will decline at a 6.2 percent compound annual rate, which would be the smallest decrease of any region. The number of

dial-up subscribers will total an estimated 96.3 million in 2013. Dial-up penetration will fall to 10.8 percent in 2013 from 16 percent in 2008.

Wired dial-up households (millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 3.06 21.00 0.10 5.40 1.05 26.50 3.09 0.75 1.79 1.03 0.23 0.15 0.30 1.85 1.20 67.50 2005 2.31 34.00 0.09 5.90 1.50 23.40 3.48 0.84 2.02 1.21 0.15 0.00 0.25 2.02 2.15 79.32 2006 1.62 31.00 0.08 6.95 2.05 19.90 3.64 0.84 2.20 1.65 0.10 0.00 0.20 2.09 3.12 75.44 2007 1.35 55.00 0.06 10.30 2.65 18.00 3.59 0.53 2.85 2.20 0.08 0.00 0.17 2.22 3.74 102.74 2008p 1.00 85.00 0.03 10.50 3.20 16.00 3.50 0.50 3.65 2.40 0.07 0.00 0.15 2.25 4.10 132.35 2009 0.90 80.00 0.02 11.00 3.50 14.50 3.40 0.46 4.40 2.70 0.06 0.00 0.13 2.28 4.50 127.85 2010 0.80 70.00 0.01 12.50 3.80 13.50 3.30 0.43 5.00 3.00 0.05 0.00 0.11 2.30 5.00 119.80 2011 0.70 60.00 0.01 14.00 4.20 12.50 3.20 0.39 5.50 3.30 0.04 0.00 0.10 2.30 5.50 111.74 2012 0.60 50.00 0.01 16.00 4.70 11.50 3.05 0.34 6.00 3.60 0.03 0.00 0.09 2.28 6.00 104.20 2013 0.50 40.00 0.01 18.00 5.20 10.50 2.85 0.28 6.25 3.90 0.01 0.00 0.08 2.25 6.50 96.33 200913 CAGR 12.9 14.0 19.7 11.4 10.2 8.1 4.0 10.9 11.4 10.2 32.2 11.8 0.0 9.7 6.2

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Wired dial-up household penetration (%)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 39.7 5.7 4.4 3.0 1.9 54.1 54.2 50.7 8.2 6.2 21.5 0.9 4.2 10.8 8.0 8.8 2005 29.7 9.1 3.9 3.2 2.7 47.3 60.5 56.4 9.1 7.3 13.9 0.0 3.4 10.9 13.4 10.2 2006 20.7 8.1 3.4 3.7 3.7 39.8 62.8 56.0 9.8 9.9 9.2 0.0 2.6 10.6 18.1 9.5 2007 17.1 14.1 2.5 5.3 4.8 35.6 61.4 35.1 12.6 13.1 7.3 0.0 2.2 10.5 20.4 12.6 2008p 12.5 21.5 1.2 5.3 5.8 31.4 59.3 32.9 15.9 14.3 6.3 0.0 1.9 10.0 21.6 16.0 2009 11.2 19.9 0.8 5.4 6.3 28.2 57.1 30.1 18.9 16.0 5.4 0.0 1.6 9.5 23.2 15.2 2010 9.9 17.1 0.4 6.0 6.9 26.0 55.0 27.9 21.2 17.8 4.4 0.0 1.3 9.1 25.5 14.0 2011 8.6 14.4 0.4 6.6 7.6 23.8 52.9 25.2 23.0 19.5 3.5 0.0 1.2 8.6 27.8 12.8 2012 7.3 11.8 0.4 7.5 8.5 21.7 50.0 21.8 24.8 21.2 2.6 0.0 1.0 8.1 30.0 11.8 2013 6.0 9.3 0.4 8.3 9.4 19.6 46.3 17.8 25.5 22.9 0.9 0.0 0.9 7.6 32.2 10.8

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Dial-up access spending rose at annual rates in excess of 20 percent during the past two years, reflecting the jump in the dial-up universe in the PRC. Excluding the PRC, dial-up spending in 2008 was 4.4 percent lower than in 2006.

We expect dial-up spending to begin to decline in 2009, mirroring the trend in dial-up households. Spending will drop to $9.5 billion in 2013 from $13.5 billion in 2008, down 6.8 percent on a compound annual basis.

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Wired dial-up access spending (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 921 1,864 28 252 117 5,146 222 145 373 153 78 49 74 317 91 9,830 2005 688 2,989 25 275 163 4,484 247 159 414 178 51 0 60 342 161 10,236 2006 478 2,698 21 352 217 3,762 256 155 442 240 34 0 46 351 232 9,284 2007 394 4,740 16 579 273 3,356 250 97 562 317 27 0 38 369 275 11,293 2008p 289 7,252 8 633 321 2,941 241 90 706 343 24 0 33 370 298 13,549 2009 257 6,756 5 693 342 2,628 232 82 834 383 20 0 28 371 324 12,955 2010 227 5,851 2 788 360 2,412 222 76 929 422 17 0 24 371 357 12,058 2011 196 4,964 2 882 387 2,201 213 68 1,001 460 13 0 21 367 388 11,163 2012 167 4,093 2 1,008 419 2,000 200 60 1,089 499 10 0 19 362 421 10,349 2013 139 3,240 2 1,134 451 1,808 185 49 1,129 539 4 0 17 355 454 9,506 200913 CAGR 13.6 14.9 24.2 12.4 7.0 9.3 5.2 11.4 9.8 9.5 30.1 12.4 0.8 8.8 6.8

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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There were a total of 277 million wired Internet households in Asia Pacific in 2008, with the PRC and Japan accounting for 206.5 million, or 75 percent of the total. From 2004 to 2008, the Internet household universe expanded at a 21.5 percent compound annual rate. We expect growth to drop to mid single digits beginning in 2009. Many countries are approaching saturation, while others, although expanding rapidly, are relatively small.

By 2013, the wired Internet universe will total an estimated 360.7 million, representing a 5.4 percent compound annual increase from 2008. The PRC and India will account for 69 percent of that growth. Internet household penetration will increase from 33.5 percent in 2008 to 40.3 percent in 2013.

Wired Internet households (millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 4.26 45.00 1.40 5.45 1.12 42.50 3.27 0.85 1.79 1.08 0.71 12.65 3.50 2.15 1.23 126.96 2005 4.61 70.00 1.52 6.70 1.60 43.40 3.86 0.99 2.03 1.31 0.75 13.15 3.85 2.37 2.28 158.42 2006 4.97 75.90 1.86 8.50 2.20 44.30 4.34 1.24 2.25 1.85 0.83 13.60 4.60 2.69 3.48 172.61 2007 5.35 113.70 1.96 13.00 2.88 45.60 4.74 1.29 2.94 2.85 0.92 14.10 4.77 3.02 4.64 221.76 2008p 5.75 161.00 2.23 15.40 3.50 45.45 4.95 1.33 3.81 3.60 1.00 15.10 4.90 3.25 5.75 277.02 2009 6.20 172.00 2.32 18.75 3.87 46.30 5.05 1.35 4.60 4.10 1.01 15.70 5.03 3.43 6.50 296.21 2010 6.60 180.00 2.41 22.20 4.25 47.50 5.15 1.39 5.30 4.60 1.02 16.20 5.16 3.65 7.10 312.53 2011 7.00 185.00 2.51 26.30 4.75 48.50 5.30 1.43 5.90 5.30 1.04 16.50 5.30 3.90 8.10 326.83 2012 7.30 190.00 2.61 32.00 5.40 49.50 5.55 1.47 6.50 6.10 1.08 16.80 5.44 4.18 9.10 343.03 2013 7.60 195.00 2.66 39.00 6.20 50.50 5.85 1.51 6.85 6.90 1.11 17.10 5.58 4.55 10.25 360.66 200913 CAGR 5.7 3.9 3.6 20.4 12.1 2.1 3.4 2.6 12.4 13.9 2.1 2.5 2.6 7.0 12.3 5.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Wired Internet household penetration (%)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 55.3 12.3 62.2 3.0 2.0 86.7 57.4 57.4 8.2 6.5 66.4 75.3 49.0 12.5 8.2 16.6 2005 59.3 18.7 66.1 3.6 2.9 87.7 67.1 66.4 9.2 7.9 69.4 77.8 52.4 12.8 14.2 20.3 2006 63.4 19.9 79.1 4.5 4.0 88.6 74.8 82.7 10.0 11.1 76.1 80.0 60.9 13.6 20.2 21.7 2007 67.6 29.2 81.7 6.7 5.2 90.3 81.0 85.4 13.0 17.0 83.6 82.5 61.5 14.3 25.4 27.3 2008p 72.1 40.7 91.0 7.7 6.3 89.1 83.9 87.5 16.6 21.4 90.1 87.8 61.6 14.4 30.3 33.5 2009 77.0 42.7 92.8 9.1 7.0 89.9 84.9 88.2 19.7 24.3 90.2 90.8 61.7 14.4 33.5 35.1 2010 81.3 43.9 94.5 10.6 7.7 91.3 85.8 90.3 22.5 27.2 90.3 93.1 61.8 14.4 36.2 36.4 2011 85.6 44.4 96.5 12.4 8.6 92.4 87.6 92.3 24.7 31.3 91.2 94.3 62.0 14.6 40.9 37.6 2012 88.6 44.8 98.5 15.0 9.7 93.4 91.0 94.2 26.9 35.9 93.9 95.5 62.2 14.9 45.5 38.9 2013 91.6 45.2 98.5 18.1 11.2 94.4 95.1 96.2 28.0 40.5 95.7 96.6 62.3 15.4 50.7 40.3

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Mobile access
Asia Pacific has by far the largest mobile access market in the world, at $39.3 billion in 2008, constituting 76 percent of the global total. Within Asia Pacific, Japan accounts for 71 percent of the total at $28 billion. South Korea at $5.9 billion and the PRC at $3.8 billion also have significant mobile access market. The top three countries represented 96 percent of the Asia Pacific total and 73 percent of the global total. In Japan, nearly 90 million people use their mobile phones to access the Internet. In the summer of 2008, SoftBank introduced the iPhone from Apple into the Japanese market. When launched in other countries, the iPhone proved to be very popular, and we expect a similar pattern in Japan. With around 80 percent of mobile telephone subscribers already using their mobile devices to access the Internet, growth will necessarily be limited. We expect mobile access spending in Japan to increase at a 3 percent compound annual rate to $32.5 billion in 2013.

The mobile access market in South Korea also is approaching saturation, and we expect a relatively modest, 5.1 percent annual increase to $7.6 billion in 2013. Restructuring in the PRC will make the wireless market more competitive, and the introduction of 3G services in 2009 will expand the reach of mobile access. Carriers during the next two years are expected to spend around $40 billion in the development of 3G networks. We expect the PRC to overtake South Korea in 2011 and rise to $15 billion by 2013, a 31.8 percent compound annual increase. Although the mobile access subscriber base is large in absolute terms, only about 7 percent of wireless telephone subscribers in the PRC were mobile access subscribers in 2008, leaving substantial room for growth. In Indonesia, mobile access was only recently introduced and quickly exceeded the wired broadband subscriber base. There are four high-speed wireless networks now in operation in Indonesia. We expect mobile access spending to rise to $2.2 billion in 2013 from $268 million in 2008.

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In Hong Kong, spectrum auctions for broadband wireless access are scheduled for 2009. Apple in late 2008 allowed the iPhone 3G to be able to be used by subscribers to any mobile carrier, which should significantly raise its penetration. Previously, the iPhone was available only through Hutchison. There are also a number of developments in other countries that are enhancing the wireless market. In Australia, Optus is expanding its 3G network to reach 98 percent of the population by the end of 2009 at an estimated cost of $800 million. In Thailand, CAT Telecom is expanding its 3G network, and during the past three years, wireless carriers in Thailand spent $1.8 billion on their wireless networks. Despite high penetration rates in Japan and South Korea, less than 13 percent of wireless telephone subscribers in all of Asia Pacific were mobile access subscribers in 2008. We expect relatively modest penetration growth during the next two years, followed by accelerated growth during 201113, reflecting the economic cycle and the

build out of advanced wireless networks. By 2013, an estimated 20.4 percent of the potential market will be mobile access subscribers. We project mobile access spending will increase to $62.3 billion in 2013, a 9.7 percent compound annual increase.

Mobile access subscribers as a percent of wireless telephone subscribers in Asia Pacific


25 20 15 10 5.9 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 9.6 11.3 11.3 12.3 12.8 13.2 14.7 20.4 17.2

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Mobile access market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 17 150 38 NA NA 8,909 NA 25 NA NA 2 1,912 26 NA NA 11,079 2005 28 346 92 NA NA 17,227 NA 46 NA NA 5 3,558 39 53 NA 21,394 2006 33 1,391 157 NA NA 23,110 NA 6 NA NA 8 4,594 49 169 NA 29,517 2007 52 2,311 211 NA 157 25,667 50 8 NA NA 11 5,291 55 334 NA 34,147 2008p 61 3,764 254 NA 268 28,048 123 9 51 181 35 5,904 99 448 20 39,265 2009 67 4,796 271 NA 372 29,023 190 11 118 224 29 6,309 666 558 52 42,686 2010 78 5,915 305 NA 593 29,905 225 13 192 299 21 6,574 731 611 87 45,549 2011 130 7,892 335 NA 1,023 30,863 232 22 332 443 25 6,966 783 710 159 49,915 2012 212 10,877 363 NA 1,651 31,825 237 35 529 663 268 7,285 817 857 273 55,892 2013 344 14,984 422 NA 2,182 32,489 243 55 723 967 42 7,567 862 1,004 393 62,277 200913 CAGR 41.3 31.8 10.7 52.1 3.0 14.6 43.6 69.9 39.8 3.7 5.1 54.2 17.5 81.4 9.7

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Latin America

The outlook in brief


Infrastructure upgrades, penetration into rural areas, and triple-play packages will drive broadband. The introduction of high-speed mobile wireless networks will stimulate demand for mobile access.

Wired Internet access spending will increase at a compound annual rate of 11 percent, growing to $14.2 billion in 2013 from $8.4 billion in 2008. Wired dial-up access spending will decrease from $1.8 billion in 2008 to $851 million in 2013, a 14.1 percent compound annual decline. Wired broadband access spending will total $13.3 billion in 2013, up 15.2 percent on a compound annual basis from $6.6 billion in 2008. Mobile access will expand from $518 million in 2008 to $3.2 billion in 2013, a 44 percent compound annual increase from a small base.

Overview
We expect Internet wired and mobile access spending in Latin America to grow at a 14.3 percent compound annual rate, from $8.9 billion in 2008 to $17.4 billion in 2013.

Internet access market: wired and mobile by component (US$ millions)


Latin America Wired Internet access Dial-up Broadband Total wired Internet access Mobile access Total Internet and mobile access 2,142 1,256 3,398 3,398 2,193 2,279 4,472 4,472 2,332 3,461 5,793 126 5,919 2,194 5,145 7,339 292 7,631 1,820 6,579 8,399 518 8,917 1,635 7,276 8,911 673 9,584 1,452 8,071 9,523 916 10,439 1,227 9,525 10,752 1,449 12,201 1,027 11,392 12,419 2,221 14,640 851 13,321 14,172 3,208 17,380 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet access market growth: wired and mobile by component (%)


Latin America Wired Internet access Dial-up Broadband Total wired Internet access Mobile access Total Internet and mobile access 6.4 112.5 30.5 30.5 2.4 81.4 31.6 31.6 6.3 51.9 29.5 32.4 5.9 48.7 26.7 131.7 28.9 17.0 27.9 14.4 77.4 16.9 10.2 10.6 6.1 29.9 7.5 11.2 10.9 6.9 36.1 8.9 15.5 18.0 12.9 58.2 16.9 16.3 19.6 15.5 53.3 20.0 17.1 16.9 14.1 44.4 18.7 14.1 15.2 11.0 44.0 14.3 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Internet access spending rose at double-digit annual rates during the past five years, fueled by a rapidly growing broadband market. We expect a dip to singledigit gains during the next two years as the economic environment weakens, and then a return to double-digit annual growth during 201113 as the economy recovers.

Brazil was the largest market in the region, at $4 billion in 2008. Mexico at $1.8 billion was next followed by Argentina at $1.6 billion. Each country will average double-digit compound annual increases during the next five years.

Internet access market: wired and mobile by country (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 791 1,371 186 263 735 52 3,398 2005 985 1,956 194 296 966 75 4,472 2006 1,198 2,755 233 413 1,219 101 5,919 2007 1,476 3,522 284 696 1,517 136 7,631 2008p 1,632 4,004 326 970 1,802 183 8,917 2009 1,838 4,211 346 1,124 1,855 210 9,584 2010 2,025 4,434 380 1,324 2,027 249 10,439 2011 2,305 5,155 438 1,679 2,333 291 12,201 2012 2,686 6,144 522 2,058 2,865 365 14,640 2013 3,050 7,217 616 2,523 3,508 466 17,380 200913 CAGR 13.3 12.5 13.6 21.1 14.3 20.6 14.3

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Infrastructure upgrades
Each country is initiating programs to expand its broadband market. In Brazil, the government is undertaking a program to provide broadband for schools and municipal councils. Satellite technology will be used to provide access points. Telefnica is expanding its broadband network, investing around $250 million in DSL and another $60 million in its fiber infrastructure. Embratel is providing wireless broadband access across the country as well, mostly for schools and public Internet centers. Additionally, BPL Global is deploying broadband over power line in conjunction with COPEL Telecomunicaes in Paran. We project the broadband market in Brazil to more than double to 20 million in 2013 from 8.7 million in 2008, an 18.1 percent compound annual increase. In Mexico, WiMAX is being used to extend broadband to areas not currently reached, because it is around 80 percent less expensive to deploy than wired technologies. The launch of triple-play services

by cable operators is driving broadband in areas reached by cable modems. Fueled by new, triple-play options, we expect broadband in Mexico to rise to 11 million subscribers in 2013, growing by 15.9 percent compounded annually from 5.25 million in 2008. In Argentina, Multicanal and CableVisin are investing more than $300 million in a fiber infrastructure to offer triple-play packages. CABASE is also planning to deploy a fiber network to provide broadband in competition with Telefnica de Argentina and Telecom Argentina outside of Buenos Aires. Telefnica de Argentina spent around $100 million on its broadband infrastructure in 2008. We expect Argentinas broadband market to nearly double to 5.1 million in 2013 from 2.65 million in 2008, a 14 percent compound annual increase. In Colombia, cable is the principal broadband technology, although DSL is gaining ground. Telefnica Colombia expanded its DSL network to each of the major cities. Telmex acquired five cable companies in Colombia and is using that platform to create an infrastructure to launch a triple-play service that should stimulate the broadband

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market. The broadband subscriber base in Colombia will expand at a 21 percent compound annual rate from 1.35 million in 2008 to 3.5 million in 2013. In Chile, the government is deploying broadband in lessdeveloped areas and has a program to offer broadband in schools and in public Internet places. We look for broadband to rise to 2.25 million households from 1.3 million, an 11.6 percent increase compounded annually. In Venezuela, Movistar is extending its fiber network to provide extra bandwidth for broadband. Additionally, Gran Caribe Telecommunications is planning an undersea cable to link Venezuela with Cuba, which will significantly increase capacity. The cable is expected

to go into operation in 2010. We expect Venezuela to increase to 2 million broadband subscribers in 2013, twice the total in 2008. For the region as a whole, we project the broadband household base to grow at a 16.7 percent compound annual rate to 43.85 million in 2013 from 20.25 million in 2008. Wired broadband household penetration will increase to 36.7 percent by 2013. Chile, the broadband leader in 2008, with a penetration rate of 31.7 percent, will rise to 53.6 percent in 2013, the only country in the region where a majority of households will have a broadband connection.

Broadband households (millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 0.40 2.06 0.42 0.10 0.74 0.16 3.88 2005 0.74 3.77 0.59 0.22 1.49 0.28 7.09 2006 1.25 5.15 0.84 0.47 2.50 0.45 10.66 2007 2.09 7.01 1.09 0.92 3.82 0.70 15.63 2008p 2.65 8.70 1.30 1.35 5.25 1.00 20.25 2009 3.10 10.00 1.40 1.60 6.00 1.15 23.25 2010 3.50 11.50 1.55 1.90 6.90 1.35 26.70 2011 4.00 14.00 1.75 2.40 8.00 1.50 31.65 2012 4.60 17.00 2.00 2.90 9.50 1.70 37.70 2013 5.10 20.00 2.25 3.50 11.00 2.00 43.85 200913 CAGR 14.0 18.1 11.6 21.0 15.9 14.9 16.7

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Broadband household penetration (%)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 4.1 4.1 10.4 1.1 3.1 2.9 3.8 2005 7.6 7.4 14.6 2.4 6.1 5.1 6.8 2006 12.6 9.9 20.7 5.2 10.1 8.1 10.1 2007 20.9 13.2 26.7 10.0 15.1 12.5 14.6 2008p 26.2 16.1 31.7 14.5 20.3 17.9 18.6 2009 30.4 18.2 34.0 17.0 22.8 20.5 21.0 2010 34.0 20.5 37.4 20.0 25.7 23.9 23.8 2011 38.5 24.6 42.1 25.0 29.3 26.5 27.7 2012 43.8 29.3 47.8 29.9 33.0 29.9 32.3 2013 48.1 33.9 53.6 35.7 36.3 35.1 36.7

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Through 2007, dial-up was the leading means of accessing the Internet. Beginning in 2008, the surging broadband market began to cannibalize dial-up. Dial-up fell 9.9 percent in 2008 and was overtaken by broadband. We expect smaller annual decreases during the next two years as the migration to broadband slows because of the weak economy. We then look for accelerating declines in dial-up during 201113 as the pace of migration to broadband picks up. By 2013, dial-up will account for only 17 percent of Internet households. The number of dial-up households will decrease at an 11.5 percent compound annual rate to 8.7 million in 2013 from 16.1 million in 2008. Dial-up household penetration for the region as a whole will drop to 7.3 percent in 2013 from 14.8 percent in 2008.

Internet households in Latin America (millions)


50 40 30 Dial-Up 20 10 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Broadband

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Dial-up households (millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 1.49 8.10 0.41 0.68 2.08 0.23 12.99 2005 1.50 9.49 0.25 0.51 2.05 0.27 14.07 2006 1.32 13.11 0.14 0.31 1.84 0.25 16.97 2007 0.82 15.00 0.11 0.22 1.50 0.19 17.84 2008p 0.40 14.25 0.08 0.15 1.05 0.14 16.07 2009 0.30 13.75 0.06 0.10 0.75 0.12 15.08 2010 0.20 13.00 0.04 0.07 0.50 0.08 13.89 2011 0.10 11.50 0.02 0.05 0.35 0.05 12.07 2012 0.05 10.00 0.01 0.04 0.20 0.04 10.34 2013 0.03 8.50 0.01 0.03 0.10 0.03 8.70 200913 CAGR 40.4 9.8 34.0 27.5 37.5 26.5 11.5

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Dial-up household penetration (%)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 15.4 16.2 10.2 7.6 8.7 4.2 12.7 2005 15.3 18.6 6.2 5.7 8.4 4.9 13.6 2006 13.3 25.2 3.4 3.4 7.4 4.5 16.1 2007 8.2 28.3 2.7 2.4 5.9 3.4 16.6 2008p 4.0 26.4 2.0 1.6 4.1 2.5 14.8 2009 2.9 25.0 1.5 1.1 2.9 2.1 13.6 2010 1.9 23.2 1.0 0.7 1.9 1.4 12.4 2011 1.0 20.2 0.5 0.5 1.3 0.9 10.6 2012 0.5 17.2 0.2 0.4 0.7 0.7 8.8 2013 0.3 14.4 0.2 0.3 0.3 0.5 7.3

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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There were 36.3 million wired Internet households in Latin America in 2008, giving a penetration rate of 33.4 percent. We project the total number of Internet households will increase to 52.6 million by 2013, a 7.7 percent compound annual gain. Except for Brazil which is focusing on wireless access for its next phase

of expansion and which will see Internet households increase at an annual rate of only 4.4 percenteach country will record double-digit annual increases. Overall penetration across the region will rise to 43.9 percent.

Internet households (millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 1.89 10.16 0.83 0.78 2.82 0.39 16.87 2005 2.24 13.26 0.84 0.73 3.54 0.55 21.16 2006 2.57 18.26 0.98 0.78 4.34 0.70 27.63 2007 2.91 22.01 1.20 1.14 5.32 0.89 33.47 2008p 3.05 22.95 1.38 1.50 6.30 1.14 36.32 2009 3.40 23.75 1.46 1.70 6.75 1.27 38.33 2010 3.70 24.50 1.59 1.97 7.40 1.43 40.59 2011 4.10 25.50 1.77 2.45 8.35 1.55 43.72 2012 4.65 27.00 2.01 2.94 9.70 1.74 48.04 2013 5.13 28.50 2.26 3.53 11.10 2.03 52.55 200913 CAGR 11.0 4.4 10.4 18.7 12.0 12.2 7.7

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet household penetration (%)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 19.5 20.3 20.6 8.8 11.8 7.1 16.5 2005 22.9 26.0 20.8 8.1 14.6 9.9 20.4 2006 26.0 35.1 24.1 8.6 17.5 12.6 26.2 2007 29.1 41.5 29.4 12.4 21.0 15.9 31.2 2008p 30.2 42.5 33.7 16.1 24.4 20.4 33.4 2009 33.3 43.2 35.4 18.1 25.7 22.6 34.6 2010 35.9 43.8 38.4 20.7 27.6 25.4 36.1 2011 39.4 44.7 42.5 25.5 30.6 27.4 38.3 2012 44.3 46.6 48.1 30.3 33.7 30.6 41.1 2013 48.4 48.3 53.8 36.0 36.6 35.6 43.9

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Wired Internet access spending


Broadband access spending will increase from $6.6 billion in 2008 to $13.3 billion in 2013, growing at a 15.2 percent compound annual rate. Brazil, the largest broadband access spending market in 2008, at $2.2 billion, will grow to $4.7 billion in 2013, a 16.2 percent compound annual increase, fueled by 18 percent annual growth in its broadband household base.

Mexico will reach $2.8 billion in 2013 from $1.5 billion in 2008, a 13.2 percent compound annual gain. Argentina will rise from $1.5 billion to $2.8 billion, growing at a 13.5 percent compound annual rate. Colombia will be the only other country to exceed the $1-billion threshold in 2013, rising to $2.2 billion from $912 million in 2008.

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Broadband access spending (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 227 578 111 72 242 26 1,256 2005 417 1,033 149 153 482 45 2,279 2006 700 1,378 207 323 781 72 3,461 2007 1,163 1,830 262 627 1,152 111 5,145 2008p 1,465 2,214 305 912 1,527 156 6,579 2009 1,690 2,415 321 1,061 1,616 173 7,276 2010 1,881 2,627 346 1,237 1,784 196 8,071 2011 2,150 3,198 389 1,549 2,026 213 9,525 2012 2,481 3,938 449 1,854 2,426 244 11,392 2013 2,761 4,699 511 2,216 2,844 290 13,321 200913 CAGR 13.5 16.2 10.9 19.4 13.2 13.2 15.2

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Dial-up access spending began to decline in 2007 and fell by 17 percent in 2008. We expect decreases averaging 10.7 percent compounded annually during the next two years following by compound annual declines of 16.3 percent during 201113.

For the forecast period as a whole, we expect dial-up spending to drop at a 14.1 percent compound annual rate from $1.8 billion in 2008 to $851 million in 2013.

Dial-up access spending (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 564 793 75 191 493 26 2,142 2005 568 923 45 143 484 30 2,193 2006 495 1,266 25 87 432 27 2,332 2007 304 1,439 19 61 351 20 2,194 2008p 147 1,358 14 42 244 15 1,820 2009 109 1,301 10 28 174 13 1,635 2010 72 1,230 7 19 116 8 1,452 2011 36 1,088 3 14 81 5 1,227 2012 18 946 2 11 46 4 1,027 2013 11 804 2 8 23 3 851 200913 CAGR 40.5 10.0 32.2 28.2 37.6 27.5 14.1

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Mobile access
Latin America is beginning to develop a wireless infrastructure capable of supporting mobile Internet access. Brazil is by far the largest market in Latin America, at $432 million. Mexico was a distant second at only $31 million.

In Brazil, the government auctioned 3G licenses in late 2007, and 3G services began to be launched in 2008. NII Holdings is spending $100 million to expand its wireless network and to upgrade to 3G. In Colombia, Movistar and Colombia Mvil launched 3G in 2008, and Telcel in Mexico expanded its 3G service area.

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In Argentina, Telecom Argentina spent $270 million in 2008 to upgrade its wireless network to 3G and to expand coverage. We expect these and other efforts to expand highspeed wireless in Latin America. As high-speed services become available, they will attract people who want to access the Internet from their wireless phones. In 2008, only 1.5 percent of wireless telephone subscribers were mobile access subscribers in Latin America, nearly 80 percent of whom were in Brazil. We expect only modest penetration growth during the next two years as the weak economy and limited infrastructure restrain growth. We then look for penetration to accelerate as wireless networks get upgraded and as economic conditions improve. By 2013, we expect that around 9 percent of wireless telephone subscribers will use their handsets to access the Internet.

Mobile access subscribers as a percent of wireless telephone subscribers in Latin America


12 10 8 6 4 2 0 0.5 2006 0.9 2007 1.5 2008 2.0 2009 4.1 2.6 6.3 9.1

2010

2011

2012

2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Mobile access spending will increase from $518 million in 2008 to $3.2 billion in 2013, up 44 percent on a compound annual basis.

Mobile access market (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2006 3 111 1 3 6 2 126 2007 9 253 3 8 14 5 292 2008p 20 432 7 16 31 12 518 2009 39 495 15 35 65 24 673 2010 72 577 27 68 127 45 916 2011 119 869 46 116 226 73 1,449 2012 187 1,260 71 193 393 117 2,221 2013 278 1,714 103 299 641 173 3,208 200913 CAGR 69.3 31.7 71.2 79.6 83.3 70.5 44.0

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Internet advertising: wired and mobile

150 Summary 151 North America 159 Europe, Middle East, Africa (EMEA) 166 Asia Pacific 172 Latin America

Summary

Internet advertising: wired and mobile


Wired Internet advertising and mobile Internet advertising consist of spending by online advertisers on display, classified, paid search, video, and other online formats and of spending on advertising delivered to mobile phones via text messages, display ads, video ads, local search, and other formats designed for mobile handset screens.

Principal drivers
The economic downturn will cut into growth during the next two years, leading to decreases in 2009 in North America and EMEA and slower growth in Asia Pacific and Latin America. Classified and display advertising will be hurt most by the recession, while search and video advertising will hold up better. The anticipated economic recovery will lead to a return to double-digit growth during 201213. In addition to the economy, broadband household growth will be the principal driver of wired Internet advertising. In the mobile market, wireless network upgrades, growth in number of mobile access subscribers, increasing penetration of Internet-enabled smart phones, and the expansion of mobile television will drive mobile advertising.

Market size and growth


We project spending in North America, EMEA (Europe, Middle East, Africa), Asia Pacific, and Latin America will increase from $59.9 billion in 2008 to $86.7 billion in 2013, a 7.7 percent compound annual growth rate. Spending in North America will total $35.9 billion in 2013, up from $26.3 billion in 2008, averaging 6.4 percent growth compounded annually. EMEA will reach $28.1 billion in 2013, a 6.6 percent compound annual increase from $20.4 billion in 2008. Asia Pacific will average 11.2 percent compounded annually from $12.5 billion in 2008 to $21.2 billion in 2013. Latin America, the smallest region, at only $660 million in 2008, will expand at a 17.4 percent compound annual rate to $1.5 billion in 2013. Global wired Internet advertising will decline by 2.5 percent in 2009 and stabilize in 2010 with a 1.9 percent advance. Growth will then accelerate during the next three years to $77.5 billion in 2013 from $56.1 billion in 2008, a 6.7 percent compound annual increase. Mobile advertising will rise to $9.2 billion in 2013 from $3.8 billion in 2008, a 19.7 percent compound annual increase.

Data for the global Internet advertising: wired and mobile market by region and for the global Internet advertising: wired and mobile market by component can be found within the Executive Summary on page 36.

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North America

The outlook in brief


Steep declines in display and classified will offset continued growth in search, leading to a decrease in wired advertising in 2009. Growth in the mobile access subscriber base will drive mobile advertising.

Overview
We project Internet and mobile advertising to grow at a 6.4 percent compound annual rate to $35.9 billion in 2013 from $26.3 billion in 2008. Wired Internet advertising will expand by a projected 5.8 percent compounded annually to $32.9 billion. Mobile advertising will double from $1.5 billion in 2008 to $3 billion in 2013, a 15.3 percent compound annual advance.

Internet advertising market: wired and mobile by component (US$ millions)


North America Wired Internet advertising Mobile advertising Total 2004 9,967 102 10,069 2005 13,069 195 13,264 2006 17,723 426 18,149 2007 22,370 745 23,115 2008p 24,808 1,476 26,284 2009 23,833 1,626 25,459 2010 24,086 1,758 25,844 2011 25,737 1,960 27,697 2012 28,871 2,325 31,196 2013 32,905 3,013 35,918

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet advertising market growth: wired and mobile by component (%)


North America Wired Internet advertising Mobile advertising Total 2004 33.1 175.7 33.8 2005 31.1 91.2 31.7 2006 35.6 118.5 36.8 2007 26.2 74.9 27.4 2008p 10.9 98.1 13.7 2009 3.9 10.2 3.1 2010 1.1 8.1 1.5 2011 6.9 11.5 7.2 2012 12.2 18.6 12.6 2013 14.0 29.6 15.1 200913 CAGR 5.8 15.3 6.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

We expect Canada to be the faster-growing country during the next five years, with an 8.6 percent compound annual increase to $2.1 billion from $1.4 billion in 2008. Canadas Internet advertising market is at an earlier stage of development, and as a result Canada has grown faster than the United States during the past five years. We expect that pattern to continue.

The US market for wired and mobile Internet advertising will decline in 2009 and then will rebound, returning to double-digit annual growth during 201213. For the five-year forecast period as a whole, we project that the market for wired and mobile Internet advertising in the United States will expand at a 6.3 percent compound annual rate to $33.8 billion in 2013 from $24.9 billion in 2008.

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Internet advertising market: wired and mobile by country (US$ millions)


North America United States Canada Total 2004 9,728 341 10,069 2005 12,737 527 13,264 2006 17,296 853 18,149 2007 21,936 1,179 23,115 2008p 24,893 1,391 26,284 2009 24,107 1,352 25,459 2010 24,460 1,384 25,844 2011 26,228 1,469 27,697 2012 29,465 1,731 31,196 2013 33,814 2,104 35,918

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet advertising market growth: wired and mobile by country (%)


North America United States Canada Total 2004 33.2 53.6 33.8 2005 30.9 54.5 31.7 2006 35.8 61.9 36.8 2007 26.8 38.2 27.4 2008p 13.5 18.0 13.7 2009 3.2 2.8 3.1 2010 1.5 2.4 1.5 2011 7.2 6.1 7.2 2012 12.3 17.8 12.6 2013 14.8 21.5 15.1 200913 CAGR 6.3 8.6 6.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Wired Internet advertising


The wired Internet advertising market grew at doubledigit annual rates since the early part of the decade through 2008. Growth was fueled by a surging broadband market, which expanded the audience for online advertising, and by an expanding economy. The Internet was one of the few media whose audience was growing, enabling it to gain share from other media, particularly the print media. Over the long run, continued broadband growth will drive Internet advertising. In the US, we expect a 40 percent increase in the number of broadband households during the next five years and a 36 percent increase in Canada. Consequently, the Internet audience will continue to expand and will continue to attract advertising. There has been a shift in ad spending from traditional media to the Internet during the past five years, and we expect that trend to continue. The Internet also is a shopping environment. Online commerce has been growing in conjunction with the broadband universe. Advertisers want to reach consumers when they are buying, and the Internet provides a means to do that.

The Internet also has become an entertainment center where people play video games, download music and movies, and watch television. People spend time at entertainment sites, and such sites are attracting advertising. Online television shows, which include embedded ads, are becoming popular and are providing an additional outlet for advertisers. The economic stimulus package in the United States includes funds for investment in the broadband infrastructure, which will enable broadband to penetrate rural areas, further expanding the audience and opening up additional opportunities for advertisers. For these reasons, we believe the long-run outlook for online advertising is bright. In the near term, however, the Internet will be affected by the economy. Internet advertising weakened in 2008although it remained much stronger than other advertising media. In the United States, growth fell to 10.6 percent in 2008 from 25.6 percent in 2007. Canada also continued to expand by double digits in 2008, but the increase was less than half the percentage gain in 2007.

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Ad rates for display advertising plunged in the United States in the fourth quarter of 2008 and fell in Canada as well. Display ads online are static and similar to display ads in print. The do not take advantage of the search capabilities of the Internet and were affected similarly to the print market. Although display ads can be sold on a performance basis and can target specific audiences, those features were not enough to prevent a slowdown. Display ad spending in the United States rose by 8 percent in 2008, well below the 19.9 percent increase in 2007. We expect the fourth-quarter weakness to continue in 2009 and project a full-year decline of 16.8 percent followed by an additional 6.3 percent drop in 2010. With the economy expected to begin to recover in 2011 and to post solid gains in 201213, we expect display advertising to stabilize and then post mid- to high-single-digit spending gains, benefiting from the overall expansion in advertising. Although projected to expand, we look for video, classifieds, and search to be the most attractive formats for advertisers seeking an online presence, because these formats tap into the fastest growth areas of the Internet. Consequently,

the anticipated recovery in display advertising in the United States in 201113 will not be sufficient to offset the near-term declines, and display advertising of $4.4 billion in 2013 will be 2 percent lower on a compound annual basis from $4.8 billion in 2008. Display advertising constitutes a larger component of the market in Canada33.2 percentcompared with 19.3 percent in the United States. We also look for display advertising to decline in Canada during the next two years, although at a slower rate than in the US, as display is holding up better in Canada. There has not been as pronounced an increase in online display inventory in Canada as in the US, and online display ad rates have not fallen as sharply. Consequently, we expect a smaller decline in Canada during the next two years than in the US. Thereafter, display will rebound and will return to double-digit growth during 201213, expanding at a 4.7 percent compound annual rate for the forecast period as a whole to $581 million in 2013. Overall display advertising to North America will fall at a 1.3 percent compound annual rate from $5.3 billion in 2008 to $4.9 billion in 2013.

Wired Internet display advertising market (US$ millions)


North America United States Canada Total 2004 1,830 154 1,984 2005 2,510 216 2,726 2006 3,715 294 4,009 2007 4,453 405 4,858 2008p 4,810 462 5,272 2009 4,000 427 4,427 2010 3,750 425 4,175 2011 3,800 436 4,236 2012 4,025 492 4,517 2013 4,350 581 4,931

At average 2008 exchange rates. Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Wired Internet display advertising market growth (%)


North America United States Canada Total 2004 20.0 31.6 20.8 2005 37.2 40.3 37.4 2006 48.0 36.1 47.1 2007 19.9 37.8 21.2 2008p 8.0 14.1 8.5 2009 16.8 7.6 16.0 2010 6.3 0.5 5.7 2011 1.3 2.6 1.5 2012 5.9 12.8 6.6 2013 8.1 18.1 9.2 200913 CAGR 2.0 4.7 1.3

Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Classified advertising is typically one of the most cyclically sensitive of the advertising categories. The economic downturn is cutting into classified spending in all media. Although classified advertising has been moving to the Internet, which has contributed to overall Internet advertising growth, it too will be affected by the economic downturn. Online classified advertising in the United States fell by 3.3 percent in 2008, and we anticipate declines during the next two years. We then look for a return to doubledigit gains during 201213 as the economy returns to a steady growth path. Classified advertising is typically a volatile category during periods of economic transition, and we expect large swings during the next five years.

Online classified advertising in the United States will total an estimated $3.9 billion in 2013 from $3.3 billion in 2008, a 3.5 percent increase compounded annually. Online classified advertising in Canada slowed to a 14 percent increase in 2008. We look for this category to decline during the next two years and then to rebound strongly with double-digit growth during 201213. Online classified advertising in Canada will total $441 million in 2013 from $326 million in 2008, a 6.2 percent increase compounded annually. Online classified advertising for the region as a whole will increase to $4.3 billion in 2013 from $3.6 billion in 2008, a 3.8 percent gain compounded annually.

Wired Internet classified advertising market (US$ millions)


North America United States Canada Total 2004 1,730 80 1,810 2005 2,130 116 2,246 2006 3,040 209 3,249 2007 3,393 286 3,679 2008p 3,280 326 3,606 2009 2,700 302 3,002 2010 2,600 294 2,894 2011 2,740 309 3,049 2012 3,300 365 3,665 2013 3,900 441 4,341

At average 2008 exchange rates. Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Wired Internet classified advertising market growth (%)


North America United States Canada Total 2004 40.1 142.4 42.7 2005 23.1 45.0 24.1 2006 42.7 80.2 44.7 2007 11.6 36.8 13.2 2008p 3.3 14.0 2.0 2009 17.7 7.4 16.7 2010 3.7 2.6 3.6 2011 5.4 5.1 5.4 2012 20.4 18.1 20.2 2013 18.2 20.8 18.4 200913 CAGR 3.5 6.2 3.8

Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Search advertising is the largest online category in both the United States and Canada, constituting 45 percent of total wired Internet advertising in the United States in 2008 and 40 percent in Canada. Search enables advertisers to direct their messages to the identified interests of users as reflected by the searches users initiate. No other media can provide a comparable platform. Despite the impact of the economy in 2008, search advertising rose by 20.2 percent in North America.

Although we expect the recession to cut into spending on search advertising, we look for this category to continue to expand. In both countries, we project a drop to single-digit gains during the next two years followed by a return to double-digit growth during 201113 in the United States and during 201213 in Canada. Spending on search advertising will increase at a 9.7 percent compound annual rate in the United States to $16.6 billion in 2013. Search advertising in Canada will grow by 10.2 percent compounded annually to $872 million. The overall market will total $17.5 billion in 2013, up 9.7 percent on a compound annual basis.

Wired Internet search advertising market (US$ millions)


North America United States Canada Total 2004 3,850 102 3,952 2005 5,142 185 5,327 2006 6,750 322 7,072 2007 8,695 448 9,143 2008p 10,450 537 10,987 2009 10,970 545 11,515 2010 11,525 575 12,100 2011 12,675 613 13,288 2012 14,385 726 15,111 2013 16,585 872 17,457

At average 2008 exchange rates. Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Wired Internet search advertising market growth (%)


North America United States Canada Total 2004 51.4 45.7 51.2 2005 33.6 81.4 34.8 2006 31.3 74.1 32.8 2007 28.8 39.1 29.3 2008p 20.2 19.9 20.2 2009 5.0 1.5 4.8 2010 5.1 5.5 5.1 2011 10.0 6.6 9.8 2012 13.5 18.4 13.7 2013 15.3 20.1 15.5 200913 CAGR 9.7 10.2 9.7

Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Online video advertising also is expanding. Rising broadband penetration and increased broadband speeds are making video advertising a feasible option. Video streaming of TV shows that contain video ads are facilitating video advertising, as is the popularity of video sites such as Hulu, Joost, Veoh, and YouTube, as well as television network Web-video sites. Video advertising rose by 10.8 percent in the United States in 2008 and doubled from a tiny base in Canada.

As with search, we expect video advertising to hold up during the economic downturn and to accelerate when the economy recovers. We project video advertising spend in North America to grow at an 8.4 percent compound annual rate to $3.5 billion in 2013 from $2.4 billion in 2008. The US will average 8.3 percent compounded annually, and Canada will advance at a 23 percent compound annual rate from a very small base.

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Wired Internet rich media/video advertising market (US$ millions)


North America United States Canada Total 2004 960 NA 960 2005 1,000 NA 1,000 2006 1,010 NA 1,010 2007 2,120 8 2,128 2008p 2,350 16 2,366 2009 2,450 18 2,468 2010 2,575 20 2,595 2011 2,765 24 2,789 2012 3,070 32 3,102 2013 3,500 45 3,545

At average 2008 exchange rates. Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Wired Internet rich media/video advertising market growth (%)


North America United States Canada Total 2004 46.6 46.6 2005 4.2 4.2 2006 1.0 1.0 2007 109.9 110.7 2008p 10.8 100.0 11.2 2009 4.3 12.5 4.3 2010 5.1 11.1 5.1 2011 7.4 20.0 7.5 2012 11.0 33.3 11.2 2013 14.0 40.6 14.3 200913 CAGR 8.3 23.0 8.4

Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

We expect declines in display and classified to offset gains in search and video in 2009, with the result that overall wired Internet advertising will decrease. We expect a 3.9 percent decline in 2009, with the US falling by 4 percent and Canada by 3.5 percent. Spending will edge up in 2010 as gains in search and video offset declines in display and classified. In both countries we expect mid-single-digit increases in 2011 and double-digit growth in 201213.

Including e-mail, sponsorships, lead generation, and other categories, wired online advertising for the overall forecast period will advance at a 5.8 percent compound annual rate to $32.9 billion in 2013 from $24.8 billion in 2008. The United States will increase at a 5.7 percent rate compounded annually to $30.9 billion, and Canada will grow by 7.7 percent on a compound annual basis to $2 billion.

Wired Internet advertising market (US$ millions)


North America United States Canada Total 2004 9,626 341 9,967 2005 12,542 527 13,069 2006 16,879 844 17,723 2007 21,206 1,164 22,370 2008p 23,448 1,360 24,808 2009 22,520 1,313 23,833 2010 22,750 1,336 24,086 2011 24,330 1,407 25,737 2012 27,230 1,641 28,871 2013 30,935 1,970 32,905

At average 2008 exchange rates. Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Wired Internet advertising market growth (%)


North America United States Canada Total 2004 32.5 53.6 33.1 2005 30.3 54.5 31.1 2006 34.6 60.2 35.6 2007 25.6 37.9 26.2 2008p 10.6 16.8 10.9 2009 4.0 3.5 3.9 2010 1.0 1.8 1.1 2011 6.9 5.3 6.9 2012 11.9 16.6 12.2 2013 13.6 20.0 14.0 200913 CAGR 5.7 7.7 5.8

Sources: Interactive Advertising Bureau, Interactive Advertising Bureau of Canada, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Mobile advertising
Advertising delivered to mobile phones has grown rapidly in recent years, with spending virtually doubling in 2008. Growth is being fueled by the mobile carriers adoption of nonintrusive, consumer-friendly advertising formats; by an increase in the number of people accessing the Internet through mobile phones; and by the increasing penetration of handsets that can accommodate video advertising. There were 10 million mobile Internet subscribers in North America in 2008, up from 6 million in 2007. We expect that figure to double to 20 million in 2009 and to increase to 30 million in 2010. The popularity of the new generation of smart phonesmost notably the iPhoneis contributing to mobile access growth. Smart phones make it easier to navigate the Internet, and improvements in the wireless infrastructure are producing faster download speeds. Smart phones also provide a better platform for mobile ads because of their larger screens compared with standard handsets. The market also will benefit from development of mobile advertising standards. We expect that when the economy begins to pick up, and as penetration of smart phones increases, the mobile access market will accelerate. We estimate there will be 99 million mobile access subscribers in North America in 2013, with 8 million of that total in Canada.

Mobile Internet subscribers in North America (millions)


120 100 80 60 40 20 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 United States Canada

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Text message advertising is still the dominant format, with banner ads the next-most-popular platform. Some providers offer wireless telephone subscribers the option of accepting advertising in return for free text messaging. Currently, only about a third of mobile sites sell advertising to third parties. We expect that percentage to increase as mobile carriers and consumers become more comfortable with mobile advertising formats and opt-in consumer policies and as traffic to those sites expands. We also expect that the video ad will become a more popular format as the number of people capable of accessing video ads increases. Click-through rates for mobile video ads are much higher than for mobile display ads.

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Mobile television will also help drive mobile advertising. Mobile television subscription revenues are unlikely to be large enough to offset incremental content production and distribution costs, so providers will be looking to advertising to turn profits. This will lead to a more concerted effort to sell mobile television ads. Although ads need to be shorter than on traditional television, and ad pods are not likely to be tolerated, growth in the mobile television market will propel overall mobile advertising. The economy will have an impact on the mobile advertising market. We expect growth in the United States to drop to single digits during the next two years and then to revert to double-digit gains. Mobile advertising will rise from $1.4 billion in 2008 to $2.9 billion in 2013, a 14.8 percent compound annual increase.

In Canada, the mobile advertising market is just getting started. We expect that consumers would welcome a trade-off of advertising for lower-cost plans. We look for annual increases of less than 30 percent during the next three years, representing a slower percentage increase compared with 200708, followed by annual gains of more than 45 percent in 2012 and 2013. By 2013, mobile advertising will total an estimated $134 million, a 34 percent compound annual increase from $31 million in 2008. The overall mobile advertising market will expand at a 15.3 percent compound annual rate, from $1.5 billion in 2008 to $3 billion in 2013.

Mobile Internet advertising market (US$ millions)


North America United States Canada Total 2004 102 102 2005 195 195 2006 417 9 426 2007 730 15 745 2008p 1,445 31 1,476 2009 1,587 39 1,626 2010 1,710 48 1,758 2011 1,898 62 1,960 2012 2,235 90 2,325 2013 2,879 134 3,013

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Mobile Internet advertising market growth (%)


North America United States Canada Total 2004 175.7 175.7 2005 91.2 91.2 2006 113.8 118.5 2007 75.1 66.7 74.9 2008p 97.9 106.7 98.1 2009 9.8 25.8 10.2 2010 7.8 23.1 8.1 2011 11.0 29.2 11.5 2012 17.8 45.2 18.6 2013 28.8 48.9 29.6 200913 CAGR 14.8 34.0 15.3

Sources: Interactive Advertising Bureau, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Europe, Middle East, Africa (EMEA)

The outlook in brief


Slumping economies will lead to an overall decrease in wired Internet advertising in 2009 and weak growth in 2010, with a return to double-digit gains expected for 201213 when economic conditions improve. Mobile access growth, mobile TV, and wireless network upgrades will propel mobile advertising.

Overview
Internet and mobile advertising in EMEA will grow by 6.6 percent compounded annually to $28.1 billion in 2013 from $20.4 billion in 2008. Wired online advertising will advance at a 5.4 percent compound annual rate to $25.2 billion in 2013 from $19.4 billion in 2008. Mobile advertising will expand from $1.1 billion in 2008 to $2.9 billion in 2013, a 22.3 percent compound annual increase.

Internet advertising market: wired and mobile by component (US$ millions)


EMEA Wired Internet advertising Mobile advertising Total 2004 4,648 112 4,760 2005 7,370 215 7,585 2006 12,107 417 12,524 2007 17,115 684 17,799 2008p 19,365 1,062 20,427 2009 18,431 1,102 19,533 2010 18,626 1,303 19,929 2011 20,123 1,706 21,829 2012 22,400 2,237 24,637 2013 25,205 2,901 28,106

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet advertising market growth: wired and mobile by component (%)


EMEA Wired Internet advertising Mobile advertising Total 2004 59.1 103.6 59.9 2005 58.6 92.0 59.3 2006 64.3 94.0 65.1 2007 41.4 64.0 42.1 2008p 13.1 55.3 14.8 2009 4.8 3.8 4.4 2010 1.1 18.2 2.0 2011 8.0 30.9 9.5 2012 11.3 31.1 12.9 2013 12.5 29.7 14.1 200913 CAGR 5.4 22.3 6.6

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Western Europe will decline by 5.4 percent in 2009 and hold steady in 2010 with a 1.4 percent advance. The market will then recover and expand at an 11.1 percent compound annual rate to $24.6 billion in 2013, which will be 5.6 percent higher on a compound annual basis than 2008s $18.7 billion. Central and Eastern Europe will be the fastest-growing area in EMEA, with a 15.8 percent compound annual increase to $2.9 billion from $1.4 billion in 2008. Middle East/Africa will expand at a 13.5 percent rate compounded annually from $314 million in 2008 to $591 million in 2013. The United Kingdom was the leading territory in 2008, at $6.5 billion, representing 32 percent of all wired and

mobile Internet advertising in EMEA. Germany was second, at $3.9 billion, followed by France at $1.7 billion, the Netherlands at $1.2 billion, and Italy at $1.1 billion. While we do not expect decreases in 2009 in Central and Eastern Europe and Middle East/Africa, we do anticipate slow growth. Central and Eastern Europe will expand at high-single-digit rates during the next two years, and Middle East/Africa will average mid-singledigit gains. Central and Eastern Europe and Middle East/Africa will return to double-digit annual gains beginning in 2011, while Western Europe will improve to double-digit growth in 2012.

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Internet advertising market: wired and mobile by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 26 15 10 51 4,760 48 31 12 91 7,585 63 67 23 153 12,524 81 130 35 246 17,799 91 169 54 314 20,427 93 180 59 332 19,533 95 193 64 352 19,929 105 228 79 412 21,829 120 275 100 495 24,637 134 335 122 591 28,106 8.0 14.7 17.7 13.5 6.6 23 12 68 2 91 27 223 30 16 109 4 152 61 372 72 27 168 8 243 111 629 123 35 322 17 377 187 1,061 150 47 407 28 510 238 1,380 155 47 449 29 554 252 1,486 163 47 501 31 602 271 1,615 184 51 567 33 786 304 1,925 212 57 646 39 1,018 375 2,347 241 66 736 47 1,301 478 2,869 9.9 7.0 12.6 10.9 20.6 15.0 15.8 52 45 97 60 518 825 15 23 420 255 158 9 141 213 106 1,549 4,486 67 113 129 105 813 1,357 18 42 513 378 261 10 244 321 167 2,584 7,122 149 275 324 137 1,105 2,653 24 61 727 854 394 15 471 484 229 3,840 11,742 214 381 462 183 1,519 3,806 46 106 1,004 1,109 539 27 735 654 333 5,374 16,492 247 440 518 234 1,699 3,937 54 111 1,135 1,188 627 36 825 798 394 6,490 18,733 235 423 494 225 1,629 3,685 53 106 1,085 1,140 646 40 806 835 376 5,937 17,715 243 439 495 230 1,605 3,617 53 108 1,127 1,159 674 41 822 881 385 6,083 17,962 261 477 548 247 1,731 3,889 58 119 1,238 1,247 722 45 904 959 421 6,626 19,492 289 531 615 275 1,932 4,266 66 133 1,417 1,393 800 54 1,014 1,068 467 7,475 21,795 327 612 700 310 2,203 4,772 76 155 1,631 1,591 910 66 1,143 1,199 525 8,426 24,646 5.8 6.8 6.2 5.8 5.3 3.9 7.1 6.9 7.5 6.0 7.7 12.9 6.7 8.5 5.9 5.4 5.6 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Wired Internet advertising


Wired Internet advertising has been fueled by growth in the broadband market. Broadband users visit more Web sites than dial-up users do, theyre able to access rich media ads, and they buy more products online, making those households attractive to advertisers. The propensity of broadband users to search the Internet has fueled search advertising. Search enables advertisers to target users just when they are looking for specific information relevant to the advertiser. Such a capability is not readily available in other media. Search is the largest category in 2008, at $9.4 billion, nearly half of the total, and was the fastest growing during the past five years. It also posted the largest gain in 2008, with an 18.8 percent increase. Search held up better than other categories in 2008, and we expect it will continue to grow in 2009, although at a much slower, 2.3 percent rate. Advertisers who are cutting back on their media investments will likely maintain their search expenditures because such expenditures yield measurable results. We expect a stronger, 5.9 percent rise in 2010, with double-digit gains thereafter as economic conditions improve. We project search to rise to $14.2 billion in 2013, growing at an 8.7 percent compound annual rate. Classified advertising has migrated to the Internet from the print media. Classifieds also benefit from the search capabilities of the Internet because online users can quickly find what theyre looking for. Online classified advertising quadrupled from 2004 to 2007 and rose by 11.3 percent in 2008. Classified advertising is highly cyclical and will be hurt by the weakening economy. We expect cutbacks in all media during the next two years. Although the Internet may be hurt less than other media because it is gaining share, the decrease in overall spending will lead to a drop in online classifieds. We project an 11.7 percent decline in 2009 and a further, 4.5 percent drop in 2010. We then look for a sharp positive swing in 2011 as economic conditions improve. We project an 8.1 percent rise, representing a 12.6-percentage-point turnaround. Large swings in classified advertising are not unusual, because classified advertising responds to changing economic conditions. We then expect doubledigit growth during 201213 and an overall 3.9 percent compound annual increase to $5.5 billion from $4.6 billion in 2008.

In contrast with search and classifieds, the Internet does not offer any particular technological advantage for display advertising compared with other media. With the slowing economy, display spending growth slowed to 5.6 percent in 2008 from increases of more than 30 percent annually during the prior four years. During a period of advertising cutbacks, we expect that advertisers are more likely to stay with established brand-building media, such as television, than with less proven media for establishing brand identity, such as the Internet. Accordingly, we project a 12.4 percent decline in display advertising in 2009 and a further, 5.2 percent decrease in 2010. With overall advertising expected to be increasing during 201113 as the economy rebounds, we expect online display advertising will benefit as well. Spending will stabilize in 2011 and then grow at low- to mid-single-digit rates during the subsequent two years. The projected $4.8-billion total for 2013 will be 1.4 percent lower on a compound annual basis than the $5.1 billion in 2008. Video advertising and other advertising is a small category, at $271 million, only 1.4 percent of total wired Internet advertising in 2008. With the growth in video streaming and high-speed broadband, we expect this category to expand. We expect the impact of upgraded broadband networks to offset the economy in 2009 and project an 8.9 percent increase in video advertising and other advertising. As fiber networks are deployed and as the economy improves, we expect growth to accelerate. By 2013, video and other advertising will total an estimated $655 million, a 19.3 percent compound annual increase from 2008. In 2009, declines in display and classified advertising will offset increases in search and video/other, resulting in a 4.8 percent decrease in overall wired Internet advertising. In 2010, we look for gains in search and video/other to offset continued declines in display and classifieds, leading to a modest, 1.1 percent gain. Thereafter, increases in each category will propel the overall market. We project growth to improve to 8 percent in 2011 and to double-digit gains during 2012 and 2013. Overall wired Internet advertising will expand at a 5.4 percent compound annual rate to $25.2 billion in 2013 from $19.4 billion in 2008.

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Wired Internet advertising market by component (US$ millions)


EMEA Search Display Classifieds Video/other Total 2004 1,978 1,554 976 140 4,648 2005 3,184 2,447 1,555 184 7,370 2006 5,509 3,717 2,675 206 12,107 2007 7,890 4,859 4,125 241 17,115 2008p 9,372 5,132 4,590 271 19,365 2009 9,584 4,497 4,055 295 18,431 2010 10,152 4,265 3,874 335 18,626 2011 11,168 4,326 4,186 443 20,123 2012 12,544 4,480 4,816 560 22,400 2013 14,216 4,789 5,545 655 25,205

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Wired Internet advertising market growth by component (%)


EMEA Search Display Classifieds Video/other Total 2004 52.2 41.3 39.4 35.9 45.1 2005 61.0 57.5 59.3 31.4 58.6 2006 73.0 51.9 72.0 12.0 64.3 2007 43.2 30.7 54.2 17.0 41.4 2008p 18.8 5.6 11.3 12.4 13.1 2009 2.3 12.4 11.7 8.9 4.8 2010 5.9 5.2 4.5 13.6 1.1 2011 10.0 1.4 8.1 32.2 8.0 2012 12.3 3.6 15.1 26.4 11.3 2013 13.3 6.9 15.1 17.0 12.5 200913 CAGR 8.7 1.4 3.9 19.3 5.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Wired Internet advertising in Western Europe grew at double-digit rates through 2008, principally because audiences are still expanding and it is gaining share from other media. Nevertheless, its principal underlying driver, growth in broadband households, is slowing, and the market is beginning to approach maturity. Western Europe is therefore more affected by economic conditions than the other areas in EMEA are. We expect spending to fall by 5.9 percent in 2009 and to rise by only 0.4 percent in 2010. Growth will rebound thereafter and will reach double-digit gains in 201213, but we do not expect a return to the 30-percent-plus gains that characterized 200407. Wired Internet advertising in Western Europe will increase at a 4.5 percent compound annual rate to $22.1 billion in 2013 from $17.8 billion in 2008.

Internet advertising is a developing market in Central and Eastern Europe and in Middle East/Africa. Both areas are still experiencing large gains in their broadband universes, as well as a rapidly growing audience for online advertising. We expect that the positive impact of a growing audience will offset the negative impact of a weaker economy, and we look for both areas to grow during the next two years. We look for a 7.4 percent annual increase in Central and Eastern Europe and a 5.2 percent annual gain in Middle East/ Africa from 2008 to 2010. Thereafter, we expect a return to double-digit growth in both areas during 201113. For the overall forecast period, we expect Central and Eastern Europe will increase from $1.3 billion in 2008 to $2.6 billion in 2013, growing at a 14.5 percent compound annual rate. Middle East/Africa will total $529 million in 2013 from $297 million in 2008, a 12.2 percent compound annual increase.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Wired Internet advertising market by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 26 15 10 51 4,648 47 30 12 89 7,370 61 65 22 148 12,107 78 125 34 237 17,115 86 160 51 297 19,365 88 170 56 314 18,431 89 180 60 329 18,626 97 210 73 380 20,123 109 250 91 450 22,400 120 300 109 529 25,205 6.9 13.4 16.4 12.2 5.4 23 12 66 2 89 27 219 29 16 106 4 149 61 365 70 26 162 8 237 107 610 118 34 310 17 362 180 1,021 142 45 386 27 483 226 1,309 146 44 425 28 523 237 1,403 152 44 470 29 563 253 1,511 170 47 525 31 724 280 1,777 193 52 590 35 925 341 2,136 216 59 660 41 1,167 429 2,572 8.8 5.6 11.3 8.7 19.3 13.7 14.5 51 44 95 59 505 805 15 23 410 249 154 9 138 208 103 1,510 4,378 66 110 125 102 790 1,317 18 41 498 366 253 10 237 312 162 2,509 6,916 145 266 313 133 1,067 2,564 23 60 702 825 381 15 455 468 222 3,710 11,349 205 366 444 176 1,460 3,660 45 102 966 1,067 518 26 707 629 320 5,166 15,857 234 417 491 222 1,610 3,732 51 105 1,076 1,127 594 35 783 756 374 6,152 17,759 222 400 466 212 1,537 3,476 50 100 1,024 1,076 609 37 761 788 355 5,601 16,714 227 410 463 215 1,500 3,380 50 101 1,054 1,083 630 38 768 823 360 5,684 16,786 241 439 505 228 1,595 3,585 54 110 1,141 1,149 665 42 834 884 388 6,106 17,966 263 483 559 250 1,756 3,878 60 121 1,288 1,266 727 50 922 971 425 6,795 19,814 293 549 628 278 1,976 4,280 69 139 1,463 1,427 816 59 1,024 1,075 471 7,557 22,104 4.6 5.7 5.0 4.6 4.2 2.8 6.2 5.8 6.3 4.8 6.6 11.0 5.5 7.3 4.7 4.2 4.5 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: Association of Communications Agencies of Russia, Interactive Advertising Bureau Europe, Interactive Advertising UK, Peako Research, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Mobile advertising
Advertising sent to mobile phones jumped by more than 55 percent in 2008 to $1.1 billion. Most of that total consisted of text message ads. Virtually everyone has a wireless phone capable of receiving text messages and text message advertising. We expect the next phase to be driven by growth in mobile broadband access subscriptions and by display and video advertising. Subscriber growth will in turn be stimulated by faster wireless networks and the introduction of smart phones that make it easier to navigate the Internet. We expect the number of mobile Internet subscribers in EMEA to more than triple during the next five years to 278 million from 83 million in 2008. In addition to driving subscriptions, smart phones provide a better platform for mobile ads because their screens are larger and they can accommodate video.

Mobile TV rollouts will also drive mobile advertising. Providers are moving toward an advertiser-supported model for mobile TV and relying less on subscriptions. In the process, they are ramping up their ad sales efforts. Mobile ad networks are also being introduced. These are media-buying companies that place ads on a number of Web sites on behalf of their clients. This means clients need deal with only one entity instead of hundreds of separate Web sites. Telefnica, for example, is creating a system in conjunction with Amobee that will provide a single contact for advertisers to buy ads that reach subscribers on multiple platforms. The system is being launched in Spain and the United Kingdom before other countries in Europe. The economy will also affect the mobile market, but we expect that will manifest in slower growth, not a downturn. We project mobile advertising in Western Europe, which accounts for virtually all of the spending, to grow by 2.8 percent in 2009 compared with a 53.4 percent increase in 2008. We then look for a return to double-digit growth and a five-year average of 21.1 percent compounded annually to $2.5 billion from $974 million in 2008. Central and Eastern Europe will average 33.1 percent compound annual growth from $71 million in 2008 to $297 million in 2013. Middle East/Africa has a small mobile advertising market, at $17 million in 2008. We project that by 2013, mobile advertising will total $62 million, a 29.5 percent compound annual increase. Total mobile advertising in EMEA will reach an estimated $2.9 billion in 2013, a 22.3 percent compound annual increase.

Mobile Internet subscribers in EMEA (millions)


350 300 250 200 150 100 50 0 11.5 21.9 39.4 60.2 82.8 101.8 123.1 155.8 207.2 277.7

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Mobile Internet advertising market by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 112 1 1 2 215 2 2 1 5 417 3 5 1 9 684 5 9 3 17 1,062 5 10 3 18 1,102 6 13 4 23 1,303 8 18 6 32 1,706 11 25 9 45 2,237 14 35 13 62 2,901 22.9 31.2 34.1 29.5 22.3 2 2 4 1 3 3 7 2 1 6 0 6 4 19 5 1 12 0 15 7 40 8 2 21 1 27 12 71 9 3 24 1 31 15 83 11 3 31 2 39 18 104 14 4 42 2 62 24 148 19 5 56 4 93 34 211 25 7 76 6 134 49 297 25.6 28.5 29.3 43.1 37.8 32.5 33.1 1 1 2 1 13 20 10 6 4 3 5 3 39 108 1 3 4 3 23 40 1 15 12 8 7 9 5 75 206 4 9 11 4 38 89 1 1 25 29 13 16 16 7 130 393 9 15 18 7 59 146 1 4 38 42 21 1 28 25 13 208 635 13 23 27 12 89 205 3 6 59 61 33 1 42 42 20 338 974 13 23 28 13 92 209 3 6 61 64 37 3 45 47 21 336 1,001 16 29 32 15 105 237 3 7 73 76 44 3 54 58 25 399 1,176 20 38 43 19 136 304 4 9 97 98 57 3 70 75 33 520 1,526 26 48 56 25 176 388 6 12 129 127 73 4 92 97 42 680 1,981 34 63 72 32 227 492 7 16 168 164 94 7 119 124 54 869 2,542 21.2 22.3 21.7 21.7 20.6 19.1 18.5 21.7 23.3 21.9 23.3 47.6 23.2 24.2 22.0 20.8 21.1 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Less than US$500,000. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Asia Pacific

The outlook in brief


Weak economies will stall wired Internet advertising during the next two years, with an expected economic recovery leading to a return to double-digit growth during 201113. Mobile access subscriber growth and mobile TV will propel mobile advertising.

Overview
The Internet and mobile advertising market will expand at an 11.2 percent compound annual rate to $21.2 billion in 2013 from $12.5 billion in 2008. Wired Internet advertising will grow by 9.9 percent compounded annually, rising from $11.3 billion in 2008 to $18.1 billion in 2013. Mobile advertising will total $3.1 billion in 2013, rising at a 21.2 percent compound annual rate from $1.2 billion in 2008.

Internet advertising market: wired and mobile by component (US$ millions)


Asia Pacific Wired Internet advertising Mobile advertising Total 2004 2,836 104 2,940 2005 5,381 306 5,687 2006 7,247 438 7,685 2007 9,686 673 10,359 2008p 11,307 1,195 12,502 2009 11,762 1,257 13,019 2010 12,321 1,377 13,698 2011 13,535 1,676 15,211 2012 15,689 2,288 17,977 2013 18,103 3,127 21,230

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet advertising market growth: wired and mobile by component (%)


Asia Pacific Wired Internet advertising Mobile advertising Total 2004 55.6 160.0 57.8 2005 89.7 194.2 93.4 2006 34.7 43.1 35.1 2007 33.7 53.7 34.8 2008p 16.7 77.6 20.7 2009 4.0 5.2 4.1 2010 4.8 9.5 5.2 2011 9.9 21.7 11.0 2012 15.9 36.5 18.2 2013 15.4 36.7 18.1 200913 CAGR 9.9 21.2 11.2

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Japan is the largest market in Asia Pacific, at $7.3 billion in 2008, nearly 60 percent of the total in Asia Pacific. The Peoples Republic of China (PRC) is next, at $2 billion, followed by Australia at $1.4 billion and South Korea at $1.2 billion. There is a huge gap between the top four countries and the rest of the region. No other country reached $200 million in 2008, and only three countries were larger

than $100 million, the largest of which was Taiwan, at $167 million. New Zealand was next, at $136 million, followed by Malaysia at $101 million. During the next five years, Japan will be the principal driver, generating 44 percent of the cumulative growth, with the PRC accounting for 30 percent of the total increase.

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Internet advertising market: wired and mobile by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total wired and mobile advertising 2004 325 274 17 14 1 1,841 34 9 NA 361 60 4 2,940 2005 520 490 20 23 1 3,923 43 27 1 NA 526 108 5 5,687 2006 840 798 23 37 1 5,036 68 39 1 NA 718 118 6 7,685 2007 1,133 1,390 25 62 2 6,328 85 95 1 2 13 1,062 154 6 1 10,359 2008p 1,435 1,955 27 96 2 7,346 101 136 1 2 16 1,210 167 7 1 12,502 2009 1,688 2,249 28 114 2 7,285 103 158 1 3 17 1,199 164 7 1 13,019 2010 1,919 2,503 28 140 2 7,404 106 179 1 3 20 1,216 168 8 1 13,698 2011 2,153 2,959 29 192 2 8,048 114 200 1 3 25 1,296 179 9 1 15,211 2012 2,370 3,735 33 262 3 9,429 132 221 1 3 30 1,549 199 9 1 17,977 2013 2,618 4,568 37 349 3 11,171 151 242 2 4 36 1,814 223 10 2 21,230 200913 CAGR 12.8 18.5 6.5 29.5 8.4 8.7 8.4 12.2 14.9 14.9 17.6 8.4 6.0 7.4 14.9 11.2

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Wired Internet advertising


Wired Internet advertising has been growing at doubledigit annual rates during the past five years. Growth has been fueled by the surge in broadband subscriptions, which has boosted the effective audience for online ads. It is estimated that Asia Pacific is home to around 40 percent of the worlds Internet users, having grown by about 25 percent during the past year. The reach of other media has not grown nearly as fast. The overall audience for the Internet is increasing, and the Internets advertising share has been increasing as well. Although down from gains in excess of 30 percent annually during 2006 and 2007, wired Internet advertising continued to grow by double digits, 16.7 percent, in 2008 despite the economic slowdown. Even in Japan, where the overall advertising market has

been sluggish, wired Internet advertising increased by 10 percent in 2008, due mainly to expansion in search engine advertising and online video advertising through free video-on-demand sites. During the 200507 period, online advertising growth outpaced broadband subscriber growth, reflecting the generally expanding economy in Asia Pacific and the extensive usage of Internet cafs by users who did not have access to either dial-up or broadband services. Typically, advertising tends to grow faster than the underlying audience growthin this case represented by broadband household growthwhen the economy is expanding, but slower when the economy is struggling or contracting. In 2008, advertising growth fell behind broadband subscriber growth as economic conditions weakened.

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We expect that wired Internet advertising will decline in 2009 in Japan, South Korea, and Taiwan, reflecting the weak economy. Recent data released by the China Internet Network Information Center indicated that the number of users in the PRC had risen by 41 percent in the past year to 298 million, or 22 percent of the entire population. Rural usage of the Internet is the fastest growing. Tencent is now the most visited site in Asia Pacific, with 159 million users, and Baidu now claims 152 million users. While the economies in the PRC and India should continue to expand, growth will be noticeably slower than in 2008. Although we project doubledigit gains in both countries in 2009, growth will be substantially below the projected increase in broadband subscriptions, reflecting the impact of a slowing economy on online advertising. In the PRC, we expect a 21 percent increase in broadband households compared with a 15 percent increase in online advertising. In 2008, by contrast, broadband households in the PRC increased by 29.5 percent, while online advertising rose by 40 percent. Similarly, in India, online advertising growth will drop to a projected 19 percent in 2009, well below the anticipated 58 percent increase in broadband households. We expect overall wired Internet advertising to grow by only 4 percent in 2009 compared with a 16.4 percent increase in broadband households.

We expect the weak economy to continue to depress online advertising in 2010 and project a 4.8 percent increase, still well below the 14.5 percent expected growth in broadband households. Improved economic conditions in 2011 will lead to a pickup in online advertising. The projected 9.9 percent gain will be comparable to the 11.6 percent rise in broadband. By 201213, we expect the economic recovery to be in full swing, which will propel online advertising. We project annual gains in excess of 15 percent compared with around 11 percent growth in broadband households, marking a return to the pattern of 2005 07, when advertising growth outpaced broadband household growth. With broadband household growth moderating, we expect online advertising growth during the recovery years to be slower than during 200407, when the broadband market was growing much faster. During the next five years as a whole, wired Internet advertising will expand at a 9.9 percent compound annual rate compared with 12.8 percent growth compounded annually for broadband households. Wired Internet advertising in 2013 will total an estimated $18.1 billion from $11.3 billion in 2008.

Wired Internet advertising and broadband household growth in Asia Pacific (%)
100 80 60 40 20 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Broadband households Wired Internet advertising

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Wired Internet advertising market by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total wired advertising 2004 324 273 17 14 1 1,753 33 9 NA 349 59 4 2,836 2005 518 488 19 23 1 3,649 42 27 1 NA 503 105 5 5,381 2006 837 790 22 37 1 4,663 66 39 1 NA 671 114 6 7,247 2007 1,125 1,369 24 62 2 5,800 82 95 1 2 12 957 148 6 1 9,686 2008p 1,421 1,917 26 96 2 6,377 96 136 1 2 15 1,052 158 7 1 11,307 2009 1,663 2,205 26 114 2 6,280 97 158 1 3 16 1,034 155 7 1 11,762 2010 1,881 2,442 26 137 2 6,328 99 179 1 3 19 1,039 157 7 1 12,321 2011 2,090 2,873 27 185 2 6,763 105 200 1 3 23 1,089 165 8 1 13,535 2012 2,257 3,591 30 247 3 7,729 120 221 1 3 27 1,270 181 8 1 15,689 2013 2,424 4,309 33 320 3 8,937 135 242 2 4 32 1,451 200 9 2 18,103 200913 CAGR 11.3 17.6 4.9 27.2 8.4 7.0 7.1 12.2 14.9 14.9 16.4 6.6 4.8 5.2 14.9 9.9

At average 2008 exchange rates. Less than US$500,000. Sources: Commercial Economic Advisory Service of Australia, Dentsu, Interactive Advertising Bureau New Zealand, Korea Broadcasting Advertising Corporation, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Mobile advertising
Mobile advertising totaled $1.2 billion in 2008, more than 80 percent of which was in Japan, with 70 percent of the remainder in South Korea. In both countries, around 80 percent of wireless telephone subscribers use their handsets to access the Internet, making these countries attractive markets for mobile advertisers. Mobile advertising totaled nearly $1 billion in Japan and $158 million in South Korea. Just as broadband growth will drive wired online advertising, we expect mobile access growth to drive mobile advertising. Expected restructuring in the PRC in 2009 will allow carriers to invest more in their networks and introduce third-generation (3G) services.

Spectrum auctions in India scheduled for 2009 will lead to upgraded wireless networks and an emerging mobile advertising market. Australia is also expanding its 3G infrastructure. Growth in 2009 will be less in Japan and South Korea, reflecting the economic downturn in Japan and the already high penetration rate in South Korea. In the Philippines, the mobile advertising market is still in its early stages pending the implementation of guidelines from the industry regulator: the National Telecommunications Commission. Mobile operator Smart ventured into mobile advertising campaigns in 2007 and launched its advertising-funded mobile service in May 2008. The company believes the mobile advertising growth curve will be only gradual, since 70 percent of its target audience still primarily watches television.

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Mobile Internet subscribers in Asia Pacific (millions)


600 500 400 300 200 100 0 40.6 79.8 118.7 147.6 195.9 235.4 273.4 337.3 431.4 549.8

Mobile TV subscribers in Asia Pacific (millions)


40 34.1 30 20 10 0 0.3 2006 0.5 2007 2.3 2008 4.0 2009 11.0 6.4 2010 2011 2012 2013 19.8

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Overall, the number of people accessing the Internet through their mobile phones in Asia Pacific rose to nearly 200 million in 2008. Around half of them were in the PRC. We expect that figure to more than double during the next five years to 549.8 million by 2013. Mobile TV rollouts will also fuel mobile advertising. Mobile TV has been available in South Korea and Japan for several years and was introduced in Australia in 2008. A mobile TV launch also is anticipated in the PRC in 2009. We expect the mobile TV subscriber base in Asia Pacific to grow to 34.1 million by 2013 from only 2.3 million in 2008.

The mobile TV market is shifting from reliance on subscribers to an advertiser-supported model. Free mobile television in South Korea and Japan has been successful, and we expect advertising to play an important role in mobile television in other countries as well. Currently, mobile advertising is dominated by text messaging ads. Growth in mobile Internet access and mobile television will create a platform for display and video ads. Display and video ads are more effective and command higher prices. As these formats expand, overall spending will increase. The mobile advertising market will not be immune from the effects of the economy. We expect growth in 2009 to drop to 5.2 percent from 78 percent in 2008. We then anticipate a relatively modest, 9.5 percent advance in 2010 from a small base. Thereafter, improved economic conditions combined with accelerating growth in mobile access and mobile television will drive mobile advertising. We look for annual increases to exceed 30 percent by 201213. For the forecast period as a whole, we project mobile advertising to expand at a 21.2 percent compound annual rate, rising to $3.1 billion by 2013. Japan will continue to dominate the market with a projected $2.2 billion in 2013, 71 percent of the total.

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Mobile Internet advertising market by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total mobile advertising 2004 1 1 0 88 1 NA 12 1 104 2005 2 2 1 274 1 NA 0 23 3 306 2006 3 8 1 373 2 NA 0 47 4 438 2007 8 21 1 528 3 NA 1 105 6 673 2008p 14 38 1 969 5 NA 1 158 9 1,195 2009 25 44 2 1,005 6 NA 1 165 9 1,257 2010 38 61 2 3 1,076 7 NA 1 177 11 1 1,377 2011 63 86 2 7 1,285 9 NA 2 207 14 1 1,676 2012 113 144 3 15 0 1,700 12 NA 3 279 18 1 2,288 2013 194 259 4 29 0 2,234 16 NA 4 363 23 1 3,127 200913 CAGR 69.2 46.8 32.0 18.2 26.2 32.0 18.1 20.6 21.2

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Latin America

The outlook in brief


Broadband growth and infrastructure upgrades will expand the platform for wired Internet advertising. An emerging mobile Internet access market and the launch of a mobile TV market will expand a developing mobile advertising market.

Overview
We expect wired and mobile Internet advertising in Latin America to grow at a 17.4 percent compound annual rate from its currently small base, rising to $1.5 billion in 2013 from $660 million in 2008. Wired Internet advertising will increase to $1.3 billion in 2013 from $631 million in 2008, a 15.4 percent compound annual increase. Mobile advertising will total an estimated $185 million in 2013, up 44.9 percent on a compound annual basis from $29 million in 2008.

Internet advertising market: wired and mobile by component (US$ millions)


Latin America Wired Internet advertising Mobile advertising Total 2004 153 153 2005 259 259 2006 330 8 338 2007 521 19 540 2008p 631 29 660 2009 669 37 706 2010 723 47 770 2011 847 70 917 2012 1,043 119 1,162 2013 1,289 185 1,474

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet advertising market growth: wired and mobile by component (%)


Latin America Wired Internet advertising Mobile advertising Total 2004 45.7 45.7 2005 69.3 69.3 2006 27.4 30.5 2007 57.9 137.5 59.8 2008p 21.1 52.6 22.2 2009 6.0 27.6 7.0 2010 8.1 27.0 9.1 2011 17.2 48.9 19.1 2012 23.1 70.0 26.7 2013 23.6 55.5 26.9 200913 CAGR 15.4 44.9 17.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Brazil is the largest market in the region, at $441 million in 2008, two-thirds of the total. Mexico was a distant

second, at $104 million. No other country reached $50 million.

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Internet advertising market: wired and mobile by country (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total wired and mobile advertising 2004 6 136 2 NA 9 153 2005 8 185 4 35 27 259 2006 23 217 5 41 50 2 338 2007 33 364 7 46 83 7 540 2008p 45 441 9 49 104 12 660 2009 48 473 9 51 111 14 706 2010 50 521 11 52 121 15 770 2011 56 634 12 55 143 17 917 2012 69 818 13 64 177 21 1,162 2013 83 1,059 16 74 216 26 1,474 200913 CAGR 13.0 19.1 12.2 8.6 15.7 16.7 17.4

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Wired Internet advertising


Wired Internet advertising is relatively undeveloped in Latin America. Advertising per broadband household averaged only $31 in 2008, less than half the $78 average for Asia Pacific and well below averages in EMEA and North America. Wired Internet advertising in Latin America has been held back by the relatively small broadband household base. Advertisers have not devoted significant resources to the Internet because of its limited reach. The Internet has not gained share in Latin America to the degree it has in other regions. Brazil was the only country with a meaningful broadband household base of nearly 9 million in 2008. Chile was the only country with broadband penetration above 30 percent, but its market in absolute terms is small, at only 1.3 million broadband households. To address that shortfall, each country in the region is investing in its broadband infrastructure. Fiber is being deployed in Argentina, Brazil, and Venezuela; fixed wireless is being used in Mexico and Brazil; and Colombia, Chile, and Brazil are expanding their digitalsubscriber-line networks.

These investments will make broadband available to more households, which we expect will lead to a significant expansion in the broadband household base. The number of broadband households rose by 30 percent in 2008 to 20 million. We expect that total to more than double during the next five years to nearly 44 million in 2013.

Annual Internet advertising per broadband household, 2008 (US$)


400 300 200 140 100 31 0 Latin America Asia Pacific EMEA North America 78 292 431.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Broadband households in Latin America (millions)


50 40 30 20 10 0 3.9 7.1 10.7 20.3 15.6 31.7 23.3 26.7 37.7 43.9

Wired Internet advertising in Mexico will nearly double from $99 million in 2008 to $189 million in 2013, a 13.8 percent compound annual increase. While we also expect double-digit broadband household growth in the remaining countries, a small household base will limit the advertising potential. We project wired Internet advertising growth in the rest of the region to average 9.5 percent on a compound annual basis. The adverse economic climate will cut into growth during the next two years. We look for gains to average 7 percent compounded annually in 200910 compared with 21 percent in 2008. Thereafter, as economic conditions improve, growth will accelerate at a 21.3 percent compound annual rate from 2010 to 2013. For the forecast period as a whole, wired Internet advertising will increase by 15.4 percent on a compound annual basis. Spending will rise to $1.3 billion from $631 million in 2008.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

There will be an estimated 20 million broadband households in Brazil in 2013 and 11 million in Mexico, totals that are large enough to attract advertisers. We expect Brazils wired Internet advertising market to more than double to an estimated $925 million in 2013 from $421 million in 2008. Brazil will be the fastest-growing market, with a 17.1 percent compound annual increase.

Wired Internet advertising market by country (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 6 136 2 NA 9 153 2005 8 185 4 35 27 259 2006 22 212 5 40 49 2 330 2007 32 351 7 44 80 7 521 2008p 43 421 9 47 99 12 631 2009 45 449 9 48 105 13 669 2010 47 489 10 49 114 14 723 2011 52 585 11 51 132 16 847 2012 62 734 12 57 159 19 1,043 2013 73 925 14 65 189 23 1,289 200913 CAGR 11.2 17.1 9.2 6.7 13.8 13.9 15.4

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Mobile advertising
Latin America is also upgrading its wireless infrastructure. Carriers in virtually every country launched 3G services during the past two years, and coverage is expected to expand during the next few years.

Growth in 3G availability will expand a tiny mobile Internet access market. There were 5 million mobile access subscribers in 2008. We expect that total to nearly double by 2010 and then to quadruple from 2010 to 2013, rising to 41 million during the next five years. That increase will substantially expand the potential audience for mobile advertising.

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Mobile access subscribers in Latin America (millions)


50 40 30 20 10 0 1.1 2006 2.8 2007 5.2 2008 7.1 2009 10.0 16.7 26.9 41.1

Mobile TV subscribers in Latin America (millions)


5 4 3 2 1 1.11 0.01 2008 0.02 2009 0.10 2010 0.24 2011 2012 2013 2.68

2010

2011

2012

2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Wireless network upgrades also will facilitate the introduction of mobile television. Currently, only Brazil has mobile television. We expect mobile TV launches in Mexico and Chile in 2009 and in Argentina in 2010. Although small at present, increases in the mobile TV subscriber base during 2012 and 2013 will attract mobile advertisers.

Mobile ad networks are being introduced in Mexico and Colombia by Telefnica. In conjunction with Amobee, Telefnica is providing a single contact for advertisers to buy ads that reach subscribers on multiple platforms. In 2008, mobile advertising totaled $29 million, $20 million of which was generated in Brazil. We project that by 2013, mobile advertising will total an estimated $185 million, a 44.9 percent compound annual increase from 2008.

Mobile Internet advertising market by country (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total mobile advertising
At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

2006 1 5 1 1 8

2007 1 13 2 3 19

2008p 2 20 2 5 29

2009 3 24 3 6 1 37

2010 3 32 1 3 7 1 47

2011 4 49 1 4 11 1 70

2012 7 84 1 7 18 2 119

2013 10 134 2 9 27 3 185

200913 CAGR 38.0 46.3 35.1 40.1 44.9

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Television subscriptions and license fees

178 Summary 179 North America 191 Europe, Middle East, Africa (EMEA) 215 Asia Pacific 232 Latin America

Summary

TV subscriptions and license fees


The television distribution market consists of revenues generated by distributors of television programming to viewers. It includes spending by consumers on subscriptions to basic and premium channels accessed from cable operators, satellite providers, telephone companies, and other multichannel distributors; video-ondemand (VOD); and television distributed to mobile phones on a subscription basis. In North America, EMEA (Europe, Middle East, Africa), and Asia Pacific it also includes payper-view. In EMEA and Asia Pacific, public TV license fees are also included.

Market size and growth by component


Subscription spendingthe principal component of the market, at $146.6 billion in 2008, 79 percent of the totalwill increase at a 6.7 percent compound annual rate to $202.5 billion in 2013. Pay-per-view will total $4 billion in 2013, down from $4.2 billion in 2008. Video-on-demand will rise from $4.6 billion in 2008 to $9.2 billion in 2013, a 14.7 percent compound annual increase. Public TV license fees will grow by 1.8 percent annually to $32.5 billion from $29.7 billion. Mobile TV subscription spending will be the fastest-growing category, from a small base, reaching $4.2 billion in 2013.

Market size and growth by region


We project the global television subscription and license fee market will increase from $186.1 billion in 2008 to $252.3 billion in 2013, a compound annual growth rate of 6.3 percent. Asia Pacific will be the fastest-growing region, with a 10.5 percent compound annual increase, Latin America will grow by 6.5 percent compounded annually, and North America and EMEA are each expected to expand at a 5.4 percent compound annual rate. North America and EMEA are virtually equal in size, at more than $74 billion in 2008. North America will rise to $97.3 billion in 2013, and EMEA to $96.7 billion. Asia Pacific will total an estimated $45.4 billion in 2013, and Latin America will reach $13 billion.

Principal drivers
In each region, the weak economy will lead to slower growth in 2009 and 2010, while the expected economic recovery will drive spending during 201113. Subscribers upgrading from analog to digital multichannel video will boost video-on-demand. VOD growth will largely come at the expense of pay-per-view. Free mobile TV services will cut into the potential for subscription spending on mobile television. Internet protocol television (IPTV)which contributes to subscription spending, VOD, and pay-perviewwill be the fastest-growing subscription technology in each region. In EMEA, free digital terrestrial television (DTT) services will limit subscription spending.

Data for the global television subscriptions and license fee market by region and for the global television subscriptions and license fee market by component can be found within the Executive Summary on pages 37 and 38.

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North America

The outlook in brief


Growth in telephone company penetration will reinvigorate the subscription market once economic conditions improve. The migration to digital will boost video-on-demand at the expense of pay-per-view. The development of a mobile TV standard in the United States using the vacated ultrahigh-frequency (UHF) spectrum will drive the mobile television market during 201113.

Overview
Overall spending in North America will rise to $97.3 billion in 2013, growing at a 5.4 percent compound annual rate. Subscription spending will total $88.8 billion in 2013, also a 5.4 percent compound annual increase. Pay-per-view will decline by 1.2 percent compounded annually, falling to $2.9 billion in 2013. Video-on-demand will pass pay-per-view in 2010 and reach $4.7 billion in 2013, a 10.8 percent compound annual increase. Mobile TV will decline in the near term and then will rebound with double-digit annual gains, rising to $852 million in 2013 for a 9.5 percent compound annual increase. However, mobile TV revenues in North America will not exceed their 2008 level until 2012.

TV subscription and license fee market by component (US$ millions)


North America Subscriptions Pay-per-view Video-on-demand Mobile TV Total 2004 54,398 2,293 1,034 57,725 2005 58,160 2,549 1,339 62,048 2006 62,039 2,757 1,741 180 66,717 2007 65,370 2,952 2,348 450 71,120 2008p 68,368 3,048 2,819 540 74,775 2009 69,768 2,989 2,926 504 76,187 2010 71,660 2,913 3,055 490 78,118 2011 77,470 2,948 3,563 531 84,512 2012 84,040 2,957 4,193 650 91,840 2013 88,839 2,873 4,714 852 97,278

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

TV subscription and license fee market growth by component (%)


North America Subscriptions Pay-per-view Video-on-demand Mobile TV Total 2004 8.5 16.5 53.4 9.4 2005 6.9 11.2 29.5 7.5 2006 6.7 8.2 30.0 7.5 2007 5.4 7.1 34.9 150.0 6.6 2008p 4.6 3.3 20.1 20.0 5.1 2009 2.0 1.9 3.8 6.7 1.9 2010 2.7 2.5 4.4 2.8 2.5 2011 8.1 1.2 16.6 8.4 8.2 2012 8.5 0.3 17.7 22.4 8.7 2013 5.7 2.8 12.4 31.1 5.9 200913 CAGR 5.4 1.2 10.8 9.5 5.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Growth in both the United States and Canada will slow to low-single-digit gains during 200910 as the weak economy cuts into growth. The United States will grow faster than Canada in the near term as the analog switch-off in 2009 provides a boost to the subscription television market.

Canada will benefit from growth in digital households and the introduction of mobile television during 201112 but will remain the slower-growing country, averaging 3.8 percent compounded annually to $5.4 billion in 2013 from $4.5 billion in 2008. The United States will expand at a 5.5 percent compound annual rate, rising from $70.3 billion in 2008 to $91.8 billion in 2013.

TV subscription and license fee market by country (US$ millions)


North America United States Canada Total 2004 54,449 3,276 57,725 2005 58,641 3,407 62,048 2006 62,809 3,908 66,717 2007 66,887 4,233 71,120 2008p 70,264 4,511 74,775 2009 71,667 4,520 76,187 2010 73,584 4,534 78,118 2011 79,823 4,689 84,512 2012 86,835 5,005 91,840 2013 91,843 5,435 97,278

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

TV subscription and license fee market growth by country (%)


North America United States Canada Total 2004 9.9 1.4 9.4 2005 7.7 4.0 7.5 2006 7.1 14.7 7.5 2007 6.5 8.3 6.6 2008p 5.0 6.6 5.1 2009 2.0 0.2 1.9 2010 2.7 0.3 2.5 2011 8.5 3.4 8.2 2012 8.8 6.7 8.7 2013 5.8 8.6 5.9 200913 CAGR 5.5 3.8 5.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

TV subscriptions
TV subscriptions consist of fees paid by households and are distinct from carriage fees paid by providers to carry programming. The economy has a varied impact on the television subscription market. On one hand, people tend to stay home more during economic downturns, and television viewing generally rises. Television subscriptions also tend to have a degree of stickiness. For these reasons, we do not expect a downturn in subscriptions. At the same time, fewer people are likely to take on new subscriptions and incur new expenses, which is why we expect slower growth in the near term. There also is a tendency to save on discretionary outlays such as premium services, pay-per-view, and video-on-demand

while maintaining basic subscriptions. We therefore expect slower subscription growth and declining spending per household on premium subscriptions, which will translate into slower growth in subscription spending during 2009 and 2010. On the upside of the economic cycle, spending on discretionary services tends to rise. We expect that development to lead to accelerated growth during the latter part of the forecast period. Gains in telephone company/IPTV TV subscriptions in North America will be the principal driver of overall TV subscription growth during the next five years, adding a total of 15.8 million subscribers. In contrast, cable, satellite, and other providers will add fewer than 1 million subscribers.

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Cumulative change in TV subscription households in North America from 2008 (millions)


20 15 10 Cable/satellite/other 5 0 Telephone company/IPTV 2008 2009 2010 2011 2012 2013

The United States is ahead of Canada with respect to IPTV rollouts, and we expect that the United States will generate a larger increase in the subscription market than Canada will. Subscription growth in the US will be boosted by faster growth in IPTV households and an overall pickup in reaction to the analog shutdown. By 2011, subscription household penetration in the United States will overtake Canada and will rise to 95.5 percent by 2013. The number of subscription households in the United States will increase at a 3 percent compound annual rate to 114.1 million in 2013. In Canada, subscription household penetration will rise to 92.2 percent in 2013, with subscription household growth averaging 1.4 percent compounded annually to 11.9 million in 2013. Most of that increase will occur from 2011 to 2013, reflecting the impact of an expanding economy and IPTV rollouts. The total subscription TV household market in North America will increase from 109.5 million in 2008 to 126 million in 2013, growing by 2.8 percent compounded annually. Penetration will increase from 87.1 percent to 95.2 percent.

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

The subscription TV household universe as a whole totaled 98.4 million in the United States in 2008 for a penetration rate of 86.8 percent. In Canada, penetration was 89.5 percent, with 11.1 million subscription households.

Subscription TV households (millions)


North America United States Canada Total 2004 92.3 9.7 102.0 2005 94.8 10.7 105.5 2006 96.1 10.9 107.0 2007 97.4 11.0 108.4 2008p 98.4 11.1 109.5 2009 99.9 11.2 111.1 2010 101.9 11.3 113.2 2011 107.2 11.4 118.6 2012 112.2 11.6 123.8 2013 114.1 11.9 126.0 200913 CAGR 3.0 1.4 2.8

Sources: Canadian Cable Telecommunications Association, Federal Communications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Subscription TV penetration of TV households (%)


North America United States Canada Total 2004 84.8 80.8 84.4 2005 86.3 88.4 86.5 2006 86.9 89.3 87.1 2007 87.0 89.4 87.3 2008p 86.8 89.5 87.1 2009 87.2 89.6 87.4 2010 87.9 89.7 88.1 2011 91.5 89.8 91.4 2012 94.8 90.6 94.4 2013 95.5 92.2 95.2

Sources: Canadian Cable Telecommunications Association, Federal Communications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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IPTV
Incumbent telephone companies in the United States and Canada have been losing telephone subscribers during this decade, with many of those losses going to cable companies that began offering telephone service. Cables advantage was its ability to package television in a triple-play service that includes broadband and telephone. In recent years, regulatory restrictions that effectively prevented telephone companies from participating in the television market became relaxed. In the United States, Verizon and AT&T each initiated aggressive programs to offer television. Verizons FiOS (Fiber Optic Service) is expected to be available to 18 million homes by 2010. AT&Ts U-verse network is expected to be available to around 30 million homes by 2012. In 2008, there were 2.2 million IPTV subscribers. In Canada, telephone companies entered the television distribution market in 2005. The established broadband infrastructure and high broadband subscribership rate in Canada provide telephone companies with a platform for IPTV. They had attracted 200,000 subscribers by 2007, but a pause in the rollout of IPTV led to a flat market in 2008. Telephone companies have been making inroads in the cable and satellite markets in areas where those

markets are available. We expect that as their footprints expand and as availability grows, they will continue to gain subscribers, although their take-up will be circumscribed because their reach will remain only a fraction that of cable and satellite. In Canada, limited availability in the near term will restrain growth in the number of IPTV subscribers. There are several regional IPTV offerings, but difficulty in obtaining financing is restraining rollouts. By 2011, the economy will strengthen, financing will become available, and investment in IPTV will increase. Moreover, the scheduled analog shutdown should spur demand for subscription services, including IPTV. Bell Canada plans to launch an IPTV service by 2011, which should boost penetration. We expect that the Bell rollout and expansion by Telus will make IPTV available to more households, and there will be more IPTV subscribers, which will accelerate IPTV growth during 201113. Although IPTV will remain the smallest component of the market, we expect it will be the fastest growing. We project the number of telephone company TV subscribers will rise to 17 million in the United States and to 1.2 million in Canada for a total of 18.2 million in North America by 2013. Penetration in North America will increase from 1.9 percent in 2008 to 13.7 percent in 2013.

Telephone company/IPTV households (millions)


North America United States Canada Total 2005 0.1 0.1 2006 0.3 0.1 0.4 2007 0.9 0.2 1.1 2008p 2.2 0.2 2.4 2009 3.0 0.2 3.2 2010 5.0 0.3 5.3 2011 10.0 0.5 10.5 2012 15.0 0.8 15.8 2013 17.0 1.2 18.2 200913 CAGR 50.5 43.1 50.0

Sources: Canadian Cable Telecommunications Association, Federal Communications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Telephone company/IPTV TV penetration of TV households (%)


North America United States Canada Total 2005 0.8 0.1 2006 0.3 0.8 0.3 2007 0.8 1.6 0.9 2008p 1.9 1.6 1.9 2009 2.6 1.6 2.5 2010 4.3 2.4 4.1 2011 8.5 3.9 8.1 2012 12.7 6.3 12.1 2013 14.2 9.3 13.7

Sources: Canadian Cable Telecommunications Association, Federal Communications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Cable
In 2009, the analog shutdown in the United States originally scheduled for February but postponed until Junewill provide a boost to the cable and satellite markets, as well as to telco video services. In Canada, the analog shutdown is scheduled for 2011 and will provide a similar boost. Households that get their programming over the air on one or more sets will be disenfranchised unless they get a digital TV set or a converter box or they upgrade to a subscription service. We expect a portion of those households will upgrade to cable, although the recession will limit the take-up. Following the projected boost in 2009, the cable universe will remain flat in 2010 and then grow at modest rates, helped by an expanding economy and a growing base of TV households. By 2013, there will be an estimated 65.3 million cable households in the United States, up 0.3 percent compounded annually from 64.3 million in 2008. In Canada, a stall in the pace of telephone company rollouts means that there is relatively little incremental competition from telephone companies at the present time. Meanwhile, a surge in digital cable subscribership is propelling the cable market.

Beginning in September 2011, cable and satellite providers in Canada will be permitted to provide moreflexible packages, including rival news and sports networks. Households will be able to select which channels they want as long as half of the package consists of Canadian channels. The greater flexibility should make subscription services in general more appealing and will help cable retain its subscriber base despite growing competition from IPTV. There was a 200,000 increase in cable households in Canada in 2008, and we expect another 200,000 gain in 2009. Thereafter, the cable market will stabilize as IPTV begins to attract some subscribers from cable. We expect there will be 8.6 million cable households in Canada in 2013 from 8.3 million in 2008, a 0.7 percent increase compounded annually. The overall cable universe in North America will rise from 72.6 million in 2008 to 73.9 million in 2013, growing at a 0.4 percent compound annual rate. Cable household growth will not keep pace with TV household growth, and penetration will decrease from 57.8 percent in 2008 to 55.8 percent in 2013.

Cable households (millions)


North America United States Canada Total 2004 67.5 7.4 74.9 2005 67.4 8.0 75.4 2006 66.8 8.1 74.9 2007 65.5 8.1 73.6 2008p 64.3 8.3 72.6 2009 65.0 8.5 73.5 2010 65.0 8.6 73.6 2011 65.1 8.6 73.7 2012 65.2 8.6 73.8 2013 65.3 8.6 73.9 200913 CAGR 0.3 0.7 0.4

Sources: Canadian Cable Telecommunications Association, Federal Communications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Cable penetration of TV households (%)


North America United States Canada Total 2004 62.0 61.7 62.0 2005 61.4 66.1 61.9 2006 60.4 66.4 61.0 2007 58.5 65.9 59.3 2008p 56.8 66.9 57.8 2009 56.7 68.0 57.8 2010 56.1 68.3 57.3 2011 55.6 67.7 56.8 2012 55.1 67.2 56.3 2013 54.6 66.7 55.8

Sources: Canadian Cable Telecommunications Association, Federal Communications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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183

Satellite
Satellite providers in the United States generally offer more channels, including more high-definition (HD) channels, than do cable operators, and their rates are generally lower. In the United States, the number of satellite households rose by 7.1 million to 31.9 million from 2004 to 2008. We expect that total to stabilize in the United States during the next two years, as the deteriorating economic environment limits expansion. We then look for an increase in 2011, as economic conditions improve, followed by a decline thereafter as telephone company expansion cuts into the satellite market. By 2013, the US satellite universe will dip to 31.8 million, down 0.1 percent compounded annually from 2008.

In Canada, the satellite market expanded by 17 percent from 2004 to 2006. In 2007, growth in the satellite market flattened as IPTV began to compete for, and attract, subscribers in areas where it was available. In 2008, satellite began to decline as cable picked up. We expect continued decreases during the next five years, reflecting losses to IPTV and digital cable. By 2013, there will be an estimated 2.1 million satellite households in Canada, down 4.2 percent on a compound annual basis from 2.6 million in 2008. The overall satellite universe in North America will decrease from 34.5 million in 2008 to 33.9 million in 2013, a 0.4 percent compound annual decline. Satellite penetration of TV households will fall from 27.4 percent to 25.6 percent.

Satellite households (millions)


North America United States Canada Total 2004 24.8 2.3 27.1 2005 27.4 2.6 30.0 2006 29.0 2.7 31.7 2007 31.0 2.7 33.7 2008p 31.9 2.6 34.5 2009 31.9 2.5 34.4 2010 31.9 2.4 34.3 2011 32.1 2.3 34.4 2012 32.0 2.2 34.2 2013 31.8 2.1 33.9 200913 CAGR 0.1 4.2 0.4

Includes C band, Satellite Master Antenna Television, and wireless cable. Sources: Canadian Cable Telecommunications Association, Federal Communications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Satellite penetration of TV households (%)


North America United States Canada Total 2004 22.8 19.2 22.4 2005 25.0 21.5 24.6 2006 26.2 22.1 25.8 2007 27.7 22.0 27.1 2008p 28.2 21.0 27.4 2009 27.8 20.0 27.1 2010 27.5 19.0 26.7 2011 27.4 18.1 26.5 2012 27.0 17.2 26.1 2013 26.6 16.3 25.6

Sources: Canadian Cable Telecommunications Association, Federal Communications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Subscription spending
In the United States, spending on television subscriptions will increase from $64.1 billion in 2008 to a projected $83.8 billion in 2013, representing a 5.5 percent compound annual increase. Gains will be less than 3 percent annually during 200910 and then will average 7.5 percent compounded annually from 2010 to 2013.

US basic subscription spending will be driven largely by telephone company/IPTV growth, which will account for nearly half of the total growth even though it constituted only 2 percent of the 2008 subscriber base. Telephone company/IPTV basic subscription spending will grow at a 55.8 percent compound annual rate during the next five years compared with low-single-digit growth for cable and direct broadcast satellite (DBS).

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Basic subscription spending (US$ millions)


United States Cable DBS Telephone company/IPTV Other Total 2004 31,023 9,335 668 41,026 2005 32,069 11,275 566 43,910 2006 33,387 12,768 128 457 46,740 2007 33,798 14,544 400 333 49,075 2008p 34,336 15,876 1,011 198 51,421 2009 35,100 16,357 1,413 100 52,970 2010 35,490 16,790 2,415 51 54,746 2011 36,716 17,664 5,040 53 59,473 2012 38,338 18,374 7,875 55 64,642 2013 39,964 19,020 9,282 58 68,324 200913 CAGR 3.1 3.7 55.8 21.8 5.8

Includes C band, Satellite Master Antenna Television, and wireless cable. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

In Canada, overall subscription spending growth will drop to only 0.2 percent annually during the next two years and then will improve to an average of 5.6 percent compounded annually during the subsequent three years. Over the forecast period as a whole, growth will average 3.4 percent on a compound annual

basis, with spending rising from $4.3 billion in 2008 to $5.1 billion in 2013. Subscription spending for North America as a whole will expand at a 5.4 percent compound annual rate to $88.8 billion in 2013 from $68.4 billion in 2008.

TV subscription market by country (US$ millions)


North America United States Canada Total 2004 51,205 3,193 54,398 2005 54,857 3,303 58,160 2006 58,280 3,759 62,039 2007 61,323 4,047 65,370 2008p 64,089 4,279 68,368 2009 65,482 4,286 69,768 2010 67,367 4,293 71,660 2011 73,043 4,427 77,470 2012 79,340 4,700 84,040 2013 83,783 5,056 88,839

At average 2008 exchange rates. Sources: Cable Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

TV subscription market growth by country (%)


North America United States Canada Total 2004 9.0 1.2 8.5 2005 7.1 3.4 6.9 2006 6.2 13.8 6.7 2007 5.2 7.7 5.4 2008p 4.5 5.7 4.6 2009 2.2 0.2 2.0 2010 2.9 0.2 2.7 2011 8.4 3.1 8.1 2012 8.6 6.2 8.5 2013 5.6 7.6 5.7 200913 CAGR 5.5 3.4 5.4

Sources: Cable Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Migration to digital
Within the cable universe, there has been a marked migration of subscribers from analog to digital. (This is distinct from the discontinuation of over-the-air analog broadcasting.) In the United States, around two-thirds of cable subscribers take a digital tier, and in Canada, nearly half are digital subscribers.

The satellite market is all digital, and the emerging telephone company/IPTV subscriber base is digital as well. Digital services allow for more channels than analog services do, which creates opportunities for incremental revenue streams from pay-per-view and video-on-demand. Pay-per-view is also available on analog systems, while VOD is available only on digital systems.

Digital and analog cable TV households (millions)


North America United States Analog only Digital Canada Analog only Digital Total Analog only Digital 48.6 26.3 45.3 30.1 40.9 34.0 33.3 40.3 25.8 46.8 21.4 52.1 17.2 56.4 13.9 59.8 10.4 63.4 9.5 64.4 18.1 6.6 5.3 2.1 5.2 2.8 5.1 3.0 4.8 3.3 4.5 3.8 4.4 4.1 4.2 4.4 3.8 4.8 3.2 5.4 2.2 6.4 13.3 11.0 43.3 24.2 40.1 27.3 35.8 31.0 28.5 37.0 21.3 43.0 17.0 48.0 13.0 52.0 10.1 55.0 7.2 58.0 7.3 58.0 19.3 6.2 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Sources: Canadian Cable Telecommunications Association, Federal Communications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Video-on-demand
The VOD market has evolved into two principal components. There is a free component, reflected in the subscription fee for digital cable that allows viewers to access movies and TV shows that already have been aired. Premium cable networks make this service available to digital subscribers, and cable operators and satellite providers also offer a selection of already-aired content on a VOD basis. In effect, these VOD offerings are equivalent to a hosted digital video recorder (DVR) service. In Canada, cable companies and broadcasters are negotiating licenses for VOD rights for their television shows. Broadcasters want to keep the advertising in the program and generate an additional revenue stream. The principal revenue-producing VOD market consists of viewers who can access on a paid basis a movie

that has yet to appear on cable or broadcast television. In some cases, movies are shown on VOD at or even before their DVD release. This component of the market is not available on satellite. As the digital cable and telephone company/IPTV subscriber base expands, the high-end VOD service will be available to more households, which should expand the market. We expect the potential VOD market for high-end paid services in North America to increase from 49.2 million households in 2008 to 82.6 million in 2013, a cumulative 68 percent increase. Canada will grow by 90 percent to 7.6 million households, while the United States will increase by 66 percent to 75 million households. Cable companies in Canada are pushing to replace their DVR services with VOD, allowing them control over which ads can be skipped. Most DVR services are provided by cable companies in Canada.

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VOD household universe in North America (millions)


80 60 40 Canada 20 0 United States 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

because spending is on an ad hoc basis and no commitment is involved. During the next two years, we expect VOD spending per household to decline, with a rebound anticipated during 201113. The drop in per-household spending will be offset by an expanding household base. Growth will drop to low single digits during the next two years. We then look for a return to double-digit annual growth as the expanding economy and a rising VOD household universe combine to propel spending. The VOD market in the United States will increase to $4.5 billion in 2013 from $2.7 billion in 2008, a 10.7 percent increase compounded annually. In Canada, growth will average 14.9 percent on a compound annual basis to $214 million, twice the level of 2008. The overall North American market will rise from $2.8 billion to $4.7 billion, for a 10.8 percent gain compounded annually.

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

VOD spending during the past five years has grown at double-digit annual rates, reflecting the rising VOD household universe and rising or stable spending per VOD household. VOD and pay-per-view are even more subject to the economic cycle than premium subscriptions are,

Video-on-demand/subscription video-on-demand market (US$ millions)


North America United States Canada Total 2004 1,016 18 1,034 2005 1,310 29 1,339 2006 1,690 51 1,741 2007 2,274 74 2,348 2008p 2,712 107 2,819 2009 2,816 110 2,926 2010 2,941 114 3,055 2011 3,432 131 3,563 2012 4,030 163 4,193 2013 4,500 214 4,714

At average 2008 exchange rates. Sources: Cable Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Video-on-demand/subscription video-on-demand market growth (%)


North America United States Canada Total 2004 54.4 12.5 53.4 2005 28.9 61.1 29.5 2006 29.0 75.9 30.0 2007 34.6 45.1 34.9 2008p 19.3 44.6 20.1 2009 3.8 2.8 3.8 2010 4.4 3.6 4.4 2011 16.7 14.9 16.6 2012 17.4 24.4 17.7 2013 11.7 31.3 12.4 200913 CAGR 10.7 14.9 10.8

Sources: Cable Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Pay-per-view
In addition to its on-demand nature, VOD is more appealing than pay-per-view because it gives viewers control with respect to pause, fast-forward, and rewind features. Cable operators and telephone companies are promoting VOD and putting much less emphasis on pay-per-view. Cable operators in Canada are pushing VOD so they can supply content and insert advertising they can sell. New movies are featured on VOD and are less frequently available on pay-per-view. Pay-per-view on cable is becoming largely an adult movie service. Satellite providers are still featuring mainstream recent releases on pay-per-view. Similarly, analog cable subscribers still have a traditional, if limited, pay-perview menu. In the United States, spending on pay-per-view during the next two years will decrease, reflecting the impact of the economy. We look for the market to stabilize during 201112 as economic conditions improve, and then to decline at an accelerated rate in 2013 as the satellite market takes a downward turn, losing share

to IPTV, and as the analog cable market continues to contract. For the forecast period as a whole, pay-perview spending in the United States will fall at a 1.2 percent compound annual rate to $2.75 billion in 2013 from $2.92 billion in 2008. Canada is a bit behind the US with respect to its payper-view market. Pay-per-view spending has grown at double-digit rates through 2008, while in the US the market has been advancing at single-digit rates for the past three years. We expect the economy to cut into pay-per-view in Canada during the next three years and project modest annual declines of 0.8 percent. The pay-per-view market will then stabilize during 2012 and 2013, and improved economic conditions will provide an upward lift, while the migration away from satellite and analog cable will put downward pressure on spending. Canadas pay-per-view market will remain essentially flat during the next five years, edging down to $123 million in 2013 from $125 million in 2008. Pay-per-view in North America will fall at a 1.2 percent compound annual rate to $2.9 billion from $3 billion in 2008.

Per-per-view market (US$ millions)


North America United States Canada Total 2004 2,228 65 2,293 2005 2,474 75 2,549 2006 2,659 98 2,757 2007 2,840 112 2,952 2008p 2,923 125 3,048 2009 2,865 124 2,989 2010 2,790 123 2,913 2011 2,826 122 2,948 2012 2,835 122 2,957 2013 2,750 123 2,873

At average 2008 exchange rates. Sources: Cable Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Pay-per-view market growth (%)


North America United States Canada Total 2004 16.6 10.2 16.5 2005 11.0 15.4 11.2 2006 7.5 30.7 8.2 2007 6.8 14.3 7.1 2008p 2.9 11.6 3.3 2009 2.0 0.8 1.9 2010 2.6 0.8 2.5 2011 1.3 0.8 1.2 2012 0.3 0.0 0.3 2013 3.0 0.8 2.8 200913 CAGR 1.2 0.3 1.2

Sources: Cable Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Mobile TV
Mobile TV began in the United States in 2006. In Canada, Rogers and Bell offer video clips, but the take-up is currently limited. MobiTV in the United States has a service used by a number of wireless providers, including Sprint Nextel and Alltel. Verizon Wireless introduced a live mobile TV service in 2007 using the MediaFLO technology from Qualcomm. AT&T entered the market in 2008 also using MediaFLO. Mobile TV through MediaFLO was available in more than 50 markets in 2008. The analog shutoff will open up spectrum for mobile television. MediaFLO acquired spectrum on channels 55 and 56 in some markets and will be able to broadcast on those channels without interfering with television channels that will have vacated that spectrum. Power levels can be raised without concern about interference, and the reach of the signal will be enhanced. In Los Angeles, for example, MediaFLO is expected to be able to reach 94 percent of the population when full power can be used, compared with reaching 52 percent of the population in 2008. Meanwhile, television stations are looking to create a new mobile digital television (DTV) standard using the UHF spectrum assigned to them in preparation for the analog shutoff. The Open Mobile Video Coalition (OMVC), a consortium of station groups, is driving the standards effort and conducting field tests. In late 2008, the Advanced Television Systems Committee approved the mobile DTV specification as a Candidate Standard, which means that broadcasters can use that standard to provide live mobile broadcasts on their existing spectrum. Gannett, a member of the OMVC, announced it plans to launch mobile DTV service in Atlanta and Denver. An advantage of DTV is that it operates like a television signal, where the same broadcast can be received by an unlimited number of viewers, rather than as a wireless signal, whereby transmissions to each user consume bandwidth.

Wireless carriers are expected to work with manufacturers to provide handsets for DTVin addition to handsets accommodating MediaFLO or MobiTVbecause DTV will not overload wireless networks. Currently, mobile television consists principally of a limited number of cable channels and a few specialized mobile services from broadcasters. DTV would essentially be a simulcast of a television stations programming, which is not now available. While mobile DTV has the potential to significantly expand the mobile television market, it may cut into subscription spending. Mobile subscribers currently pay around $15 per month for the service. Mobile DTV is likely to be offered for free on an advertisersupported basis. Competition from free services will cut into the paid market. The business model for mobile television is evolving. We expect that it will ultimately resemble the household-based television market in which free and paid services exist side by side, with premium content and a larger array of channels offered on a paid basis. In 2008, spending on mobile television subscriptions in the United States totaled an estimated $540 million. We expect that total to decline during the next two years, in part because of consumer cutbacks in response to the declining economy and in part due to the shift from paid to free services. We look for the market to rebound during 201113 because of an improved economy and the development of a recognizable hybrid market in which people become accustomed to using their wireless devices for television on a free basis and are willing to pay for access to premium content or for services that provide more channels. We expect US mobile subscription spending to fall to $486 million in 2010 and then to rise to $810 million in 2013, 8.4 percent higher on a compound annual basis than in 2008.

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In Canada, the evolution to next-generation networks is accelerating. An auction for advanced wireless spectrum was completed in July 2008, raising around $4 billion. Telus and BCE are jointly spending more than $900 million to upgrade their wireless networks using the new spectrum. The creation of a new wireless infrastructure is expected to pave the way for the introduction of mobile television.

We expect mobile TV in Canada to begin to gain momentum in 2010 with a slow take-up rate. As in the United States, we expect subscription services to be competing with free services. We project subscription spending to increase from $4 million in 2010 to $42 million in 2013. The overall mobile television subscription market in North America will total a projected $852 million in 2013, representing a 9.5 percent compound annual increase from 2008.

Mobile TV subscription market (US$ millions)


North America United States Canada Total 2006 180 180 2007 450 450 2008p 540 540 2009 504 504 2010 486 4 490 2011 522 9 531 2012 630 20 650 2013 810 42 852 200913 CAGR 8.4 9.5

At average 2008 exchange rates. Less than US$500,000. Sources: Cable Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Mobile TV subscription market growth (%)


North America United States Canada Total 2007 150.0 150.0 2008p 20.0 20.0 2009 6.7 6.7 2010 3.6 2.8 2011 7.4 125.0 8.4 2012 20.7 122.2 22.4 2013 28.6 110.0 31.1 200913 CAGR 8.4 9.5

Sources: Cable Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Europe, Middle East, Africa (EMEA)

The outlook in brief


Competition from free services will slow growth in multichannel subscriptions in the near term. Digital household growth will spur video-on-demand spending and support a pay-per-view market over the latter part of the forecast period, offsetting declines in 2009. Growth in advertiser-supported services will limit the potential for mobile television subscriptions. Rate increases will contribute to modest growth in public TV license fees.

Overview
The TV subscription and license fee market in EMEA will expand at a 5.4 percent compound annual rate to $96.7 billion in 2013 from $74.3 billion in 2008. Subscriptions will grow at a 6.2 percent compound annual rate to $64.4 billion in 2013. Video-on-demand in Western Europe will more than double from 2010 to 2013 and will average a 22.1 percent compound annual increase to $3.4 billion in 2013 from $1.2 billion in 2008. Pay-per-view in Western Europe will total an estimated $1 billion in 2013, down 0.7 percent on a compound annual basis. Public TV license fees will expand at a 1.9 percent compound annual rate to $26.5 billion in 2013 from $24.1 billion in 2008. Mobile television subscription spending will total an estimated $1.4 billion in 2013.

TV subscription and license fee market by component (US$ millions)


EMEA Subscriptions Pay-per-view Video-on-demand Public TV license fees Mobile TV Total 2004 31,563 652 100 21,608 53,923 2005 35,042 750 249 22,419 58,460 2006 38,848 894 433 22,933 42 63,150 2007 43,249 953 830 23,631 74 68,737 2008p 47,725 1,040 1,245 24,102 178 74,290 2009 48,740 916 1,156 25,130 200 76,142 2010 50,108 870 1,196 25,801 288 78,263 2011 53,583 899 1,673 26,138 455 82,748 2012 58,750 947 2,517 26,378 851 89,443 2013 64,397 1,005 3,375 26,458 1,437 96,672

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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TV subscription and license fee market growth by component (%)


EMEA Subscriptions Pay-per-view Video-on-demand Public TV license fees Mobile TV Total 2004 8.6 19.6 177.8 2.4 6.3 2005 11.0 15.0 149.0 3.8 8.4 2006 10.9 19.2 73.9 2.3 8.0 2007 11.3 6.6 91.7 3.0 76.2 8.8 2008p 10.3 9.1 50.0 2.0 140.5 8.1 2009 2.1 11.9 7.1 4.3 12.4 2.5 2010 2.8 5.0 3.5 2.7 44.0 2.8 2011 6.9 3.3 39.9 1.3 58.0 5.7 2012 9.6 5.3 50.4 0.9 87.0 8.1 2013 9.6 6.1 34.1 0.3 68.9 8.1 200913 CAGR 6.2 0.7 22.1 1.9 51.8 5.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Western Europe will grow at a 5.3 percent rate compounded annually, with spending reaching $86.6 billion in 2013. Central and Eastern Europe will grow at a projected 7 percent rate on a compound annual basis to $6.7 billion in 2013.

Middle East/Africa will average 5.6 percent compounded annually to $3.4 billion in 2013. The United Kingdom is the largest market in the region, at $15.7 billion in 2008, followed by Germany at $12.3 billion and France at $10 billion, in each case buoyed by large public TV license fees. Together, the top three countries account for 51 percent of total spending in EMEA and 60 percent of public TV license fees.

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TV subscription and license fee market by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 180 1,018 691 1,889 53,923 190 1,089 770 2,049 58,460 201 1,181 845 2,227 63,150 213 1,255 924 2,392 68,737 225 1,331 1,005 2,561 74,290 233 1,377 1,047 2,657 76,142 241 1,432 1,091 2,764 78,263 255 1,515 1,156 2,926 82,748 271 1,613 1,261 3,145 89,443 288 1,711 1,368 3,367 96,672 5.1 5.2 6.4 5.6 5.4 367 204 1,036 404 280 302 2,593 496 230 1,181 465 429 344 3,145 547 258 1,368 525 537 397 3,632 605 285 1,596 604 650 469 4,209 672 322 1,829 639 754 558 4,774 699 334 1,837 643 816 590 4,919 735 347 1,853 648 882 627 5,092 800 372 1,922 655 1,012 695 5,456 883 412 2,009 666 1,237 787 5,994 974 456 2,128 685 1,579 882 6,704 7.7 7.2 3.1 1.4 15.9 9.6 7.0 1,540 1,543 1,489 559 6,644 10,797 450 556 4,207 2,729 1,080 817 2,593 1,744 1,283 11,410 49,441 1,651 1,683 1,553 593 7,263 11,343 471 597 4,620 2,987 1,241 906 2,830 1,852 1,339 12,337 53,266 1,735 1,796 1,639 609 7,923 11,775 498 634 5,211 3,217 1,363 1,010 3,032 1,930 1,435 13,484 57,291 1,905 1,926 1,731 632 9,253 12,008 546 671 5,852 3,498 1,557 1,107 3,241 2,116 1,524 14,569 62,136 2,014 2,067 1,820 608 10,002 12,338 569 721 6,599 3,774 1,697 1,243 3,916 2,216 1,645 15,726 66,955 2,045 2,104 1,857 661 10,604 12,585 579 747 6,769 3,857 1,772 1,309 3,849 2,264 1,720 15,844 68,566 2,129 2,164 1,959 683 10,926 12,741 599 769 7,164 4,007 1,836 1,383 3,911 2,346 1,805 15,985 70,407 2,231 2,306 2,035 718 11,702 13,078 641 820 7,893 4,360 2,002 1,500 4,141 2,440 1,878 16,621 74,366 2,363 2,493 2,146 769 12,587 13,647 697 892 9,107 4,806 2,118 1,685 4,544 2,548 2,029 17,873 80,304 2,534 2,683 2,305 832 13,354 14,180 758 982 10,851 5,142 2,236 1,874 5,124 2,664 2,154 18,928 86,601 4.7 5.4 4.8 6.5 6.0 2.8 5.9 6.4 10.5 6.4 5.7 8.6 5.5 3.8 5.5 3.8 5.3 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Subscription spending
The proliferation of free digital terrestrial television in EMEA and the availability of free satellite services in several countries have cut into subscription TV household growth during the past three years. After growing by more than 7 percent annually during 200405, growth slowed to an average of 4.9 percent compounded annually during the past three years. The deteriorating economic environment will further cut into subscription household growth during the next two years. A decline in discretionary income and the desire of households to increase their savings will dampen demand to add another monthly expense. We expect that reluctance to have two effects. There will be (1) a slower take-up rate for new subscriptions and (2) cutbacks in premium services, pay-per-view, and video-on-demand. At the same time, people tend to stay home more during economic downturns, and television viewing generally rises. Consequently, we do not anticipate any widespread cancellation of basic subscription services. We project slower subscription household growth during the next two years and slower growth in spending per household. With respect to subscription households, we expect annual increases to drop to less than 2 percent annually. When economic conditions improve, which we expect during 201113, spending on discretionary services tends to rise. We expect that development to lead to faster subscription household growth, with increases climbing to 4.2 percent in 2011 and to more than 5 percent during 201213. We also expect faster growth in spending per household as more households trade up to digital services and spend more on premium services. Helping offset the impact of the economic cycle is the appeal of triple-play services and the desire for increased content. Cable companies have invested billions in recent years in upgrading their plants to enable them to offer telephone service, enhanced broadband, and digital television in a combined package that offers implicit discounts for each component when purchased together.

Subscription TV household growth in EMEA (%)


10 8 6 4 2 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

The overall number of subscription households will increase at a 2.9 percent compound annual rate in Western Europe, by 4 percent compounded annually in Middle East/Africa, and at a 5.3 percent compound annual rate in Central and Eastern Europe. By 2013 there will be an estimated 98.7 million subscription households in Western Europe from 85.4 million in 2008. Subscription TV household penetration will climb to 57.7 percent from 51.7 percent in 2008. Central and Eastern Europe will expand from 33.8 million in 2008 to 43.7 million in 2013. Penetration will increase to 43.6 percent from 34.7 percent. Middle East/Africa has the highest subscription TV penetration of the three areas of EMEA, at 72.6 percent in 2008. Penetration is high in Israel and Saudi Arabia/ Pan Arab, and there are fewer free services available. Subscription households will rise from 30.8 million in 2008 to 37.4 million in 2013. Penetration will increase to 83.3 percent in 2013. For EMEA as a whole, the number of subscription TV households will increase from 150 million in 2008 to 179.7 million in 2013, a 3.7 percent compound annual gain. By 2013, 56.9 percent of TV households will subscribe to a multichannel service, up from 49.2 percent in 2008.

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Subscription TV households (millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 1.30 21.20 2.10 24.60 116.47 1.33 22.40 2.30 26.03 125.53 1.37 24.00 2.50 27.87 133.71 1.42 25.20 2.70 29.32 142.54 1.47 26.40 2.90 30.77 149.98 1.51 27.00 2.96 31.47 152.21 1.55 27.76 3.02 32.33 155.16 1.62 29.02 3.14 33.78 161.63 1.70 30.54 3.37 35.61 170.36 1.78 32.04 3.57 37.39 179.74 3.9 3.9 4.2 4.0 3.7 1.20 2.55 4.65 3.11 6.10 2.05 19.66 1.30 2.65 5.50 3.79 8.71 2.20 24.15 1.41 2.75 6.50 4.40 9.76 2.40 27.22 1.56 2.83 7.82 5.25 10.77 2.55 30.78 1.75 2.99 9.28 5.58 11.48 2.70 33.78 1.82 3.05 9.66 5.60 11.95 2.79 34.87 1.92 3.12 9.89 5.62 12.45 2.90 35.90 2.10 3.24 10.20 5.67 13.50 3.09 37.80 2.30 3.39 10.60 5.75 15.10 3.36 40.50 2.50 3.55 11.05 5.90 17.05 3.62 43.67 7.4 3.5 3.6 1.1 8.2 6.0 5.3 2.76 4.57 1.83 1.09 7.68 20.08 0.22 0.95 3.35 7.25 1.44 1.66 2.77 3.15 2.70 10.71 72.21 2.85 4.68 1.88 1.15 8.64 19.64 0.24 0.99 3.90 7.51 1.59 1.73 3.37 3.27 2.76 11.15 75.35 2.91 4.85 1.92 1.19 9.60 19.40 0.27 1.03 4.60 7.62 1.66 1.77 3.75 3.34 2.82 11.89 78.62 2.97 4.95 1.96 1.22 11.70 18.88 0.32 1.06 5.20 7.78 1.81 1.81 3.98 3.49 2.88 12.43 82.44 3.06 5.15 2.03 1.26 12.55 18.68 0.34 1.10 6.00 7.85 1.89 1.86 4.20 3.63 2.95 12.88 85.43 3.11 5.20 2.07 1.28 12.77 18.19 0.35 1.13 6.20 7.78 1.93 1.89 4.23 3.68 3.11 12.95 85.87 3.16 5.24 2.12 1.31 13.10 18.15 0.37 1.16 6.45 7.76 1.96 1.93 4.26 3.75 3.18 13.03 86.93 3.25 5.35 2.19 1.36 14.00 18.42 0.41 1.21 7.20 7.84 2.04 1.99 4.36 3.87 3.26 13.30 90.05 3.34 5.46 2.26 1.41 14.85 18.81 0.46 1.29 8.40 7.91 2.06 2.06 4.54 3.97 3.33 14.10 94.25 3.39 5.53 2.31 1.48 15.50 19.40 0.52 1.38 10.20 7.83 2.08 2.16 4.82 4.08 3.40 14.60 98.68 2.1 1.4 2.6 3.3 4.3 0.8 8.9 4.6 11.2 0.1 1.9 3.0 2.8 2.4 2.9 2.5 2.9 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Note: Does not include free-to-air DTT and satellite households. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Subscription TV penetration of TV households (%)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 77.4 66.3 31.6 61.0 39.5 76.4 69.1 34.3 63.7 42.1 76.5 73.2 37.0 67.4 44.5 76.8 75.9 39.7 70.1 47.1 77.0 78.6 42.3 72.6 49.2 77.0 79.4 42.9 73.4 49.5 77.1 80.7 43.5 74.6 50.1 78.6 83.4 44.9 77.0 51.9 80.6 86.8 47.8 80.3 54.3 82.4 90.0 50.3 83.3 56.9 31.6 66.9 34.8 46.4 11.8 13.1 20.6 33.8 69.0 41.0 56.4 16.8 13.8 25.2 36.2 71.1 48.3 65.5 18.7 14.7 28.2 39.5 72.6 57.9 78.0 20.6 15.3 31.8 43.8 76.1 68.5 82.8 22.0 16.0 34.7 44.9 77.0 71.1 83.0 22.8 16.2 35.6 46.8 78.2 72.6 83.1 23.7 16.6 36.5 50.6 80.6 74.7 83.8 25.7 17.4 38.2 54.8 83.7 77.4 84.8 28.7 18.6 40.7 58.8 87.0 80.4 86.9 32.3 19.7 43.6 84.9 99.3 75.0 54.5 31.7 55.5 7.0 66.4 15.1 103.6 74.2 47.4 18.5 72.4 90.0 42.8 45.3 86.9 99.4 76.7 57.2 35.3 52.7 7.6 68.3 17.3 106.1 80.7 49.4 22.0 74.3 90.5 44.4 46.6 87.4 100.4 78.0 59.5 38.9 52.2 8.6 70.1 20.2 106.6 83.0 50.7 24.0 75.1 91.0 47.2 48.3 87.4 100.2 79.4 61.0 46.9 51.0 10.1 71.1 22.5 107.6 89.6 51.9 25.0 77.6 91.4 49.1 50.2 88.7 102.0 81.9 64.6 49.8 50.6 10.7 72.8 25.6 107.6 91.7 53.3 25.9 79.8 92.2 50.7 51.7 89.6 100.8 83.1 66.0 50.2 49.4 11.0 73.9 26.2 105.8 93.2 54.3 25.6 80.0 95.7 50.8 51.6 90.5 99.4 84.8 67.9 51.0 49.5 11.6 74.8 26.9 104.6 94.2 55.5 25.4 80.6 96.4 50.9 51.8 92.6 99.4 87.3 70.8 53.9 50.3 12.8 77.1 29.6 104.8 97.6 57.2 25.5 82.3 97.3 51.8 53.3 94.6 99.5 89.7 73.8 56.7 51.5 14.3 81.1 34.1 104.9 98.1 59.4 26.1 83.6 98.5 54.7 55.4 95.5 98.8 91.3 77.9 58.6 53.3 16.1 85.7 41.0 103.0 98.6 62.2 27.2 85.0 99.7 56.4 57.7 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

Note: Does not include free-to-air DTT and satellite households. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

IPTV households
Telephone companies have responded to the threat of inroads in their telephone market from cable by using their broadband Internet infrastructure to deliver IPTV in their own triple-play bundles. In Europe, most broadband Internet subscribers are with telephone companies. If the telcos can add TV, the package would be more attractive. IPTV offers more VOD options than most cable providers and has an advantage over satellite in that it offers recent movies on VOD. Satellite providers are offering VOD through their DVR services, enabling subscribers to access previously aired movies and TV shows, but not films that have yet to be shown on television. France has the largest IPTV market in EMEA, with 3.1 million subscribers in 2008. All of the major operators and two resellers offer triple play in France, making it the most competitive IPTV market. Fiber to the home (FTTH), however, will be a major competitive factor for Frances main triple-play providersFree, Orange, and Numericableas FTTH rollouts could cut into IPTV growth. In Italy, there is no cable television, which creates opportunities for IPTV because there is less competition. Italy had an average of 1.3 million IPTV subscribers in 2008, the second-largest market. Spain ranked third, with 760,000 subscribers, led by Telefnicas Imagenio triple-play service. We expect the UK to become a major IPTV market in the coming years as new services were recently launched in that country. BT Vision launched a subscription video-on-demand service in 2008, the first company in Europe to do so. It has a content deal with Universal Pictures, which should make its service more attractive. We look for the UK to reach 1.7 million IPTV subscribers in 2013, becoming the third-largest market. In Germany, Deutsche Telekom is planning to spend billions of dollars to enhance its IPTV service. We expect Germany to be one of the faster-growing IPTV markets, with a projected 1.6 million subscribers in 2013 from only 200,000 in 2008.

In Switzerland, Swisscom attracted around 100,000 IPTV subscribers with its IPTV offering Bluewin TV in 2008. Swisscom adopted a triple-screen strategy (mobile, PC, and TV), and it plans to invest 8 billion Swiss francs ($7 billion) to roll out fiber networks in the form of FTTH. We expect the IPTV market in Switzerland to triple during the next five years to 300,000 customers in 2013. IPTV is not yet significant in Central and Eastern Europe, although there is activity in each country. Although expansion plans in Russia currently are on hold because of the economy, we look for Russia to eventually become a major IPTV market in EMEA, with 1.2 million subscribers in 2013. We expect IPTV launches in Middle East/Africa during the next two years, but the IPTV market in that area will remain small. The overall IPTV subscriber base rose by 51 percent in 2008 to 7.4 million. We expect much smaller gains of less than 15 percent annually during the next two years as difficulties in obtaining financing slow the pace of system rollouts. The pace of new construction will accelerate in 2011 as credit becomes more available, and subscriber growth will improve to an annual average of nearly 30 percent. By 2013, there will be an estimated 20.2 million IPTV households in EMEA, a 22.1 percent compound annual increase. IPTV will generate 79 percent of the entire growth in subscription households in Western Europe during the next five years and 43 percent of growth for EMEA as a whole. IPTV will account for 18 percent of all television subscription households in Western Europe in 2013 and 11 percent of all subscription households in EMEA. Overall penetration of IPTV households will increase to 10.2 percent in Western Europe and to 6.4 percent in all of EMEA.

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IPTV households (millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 0.00 0.34 0.00 1.24 0.00 2.36 0.00 4.94 0.00 7.44 0.01 0.01 0.02 8.23 0.02 0.01 0.02 0.05 9.37 0.04 0.02 0.04 0.10 12.23 0.07 0.04 0.07 0.18 16.14 0.10 0.04 0.07 0.21 20.16 22.1 0.00 0.01 0.01 0.01 0.01 0.06 0.08 0.06 0.01 0.02 0.12 0.21 0.15 0.04 0.08 0.23 0.01 0.51 0.18 0.05 0.11 0.25 0.02 0.61 0.22 0.06 0.14 0.30 0.05 0.77 0.30 0.09 0.20 0.55 0.09 1.23 0.40 0.14 0.30 0.85 0.16 1.85 0.50 0.20 0.45 1.20 0.22 2.57 27.2 38.0 41.3 39.2 85.6 38.2 0.13 0.17 0.02 0.01 0.01 0.34 0.01 0.02 0.01 0.54 0.01 0.30 0.04 0.04 0.21 0.02 0.03 1.23 0.02 0.09 0.02 0.90 0.02 0.60 0.06 0.05 0.01 0.41 0.04 0.02 0.04 2.28 0.03 0.22 0.03 2.50 0.05 0.01 0.80 0.14 0.08 0.02 0.56 0.14 0.07 0.08 4.73 0.08 0.38 0.06 3.10 0.20 0.03 0.01 1.30 0.25 0.13 0.04 0.76 0.26 0.10 0.23 6.93 0.12 0.42 0.08 3.25 0.23 0.04 0.02 1.40 0.30 0.15 0.06 0.80 0.30 0.13 0.30 7.60 0.17 0.45 0.11 0.01 3.50 0.30 0.06 0.03 1.55 0.40 0.17 0.08 0.83 0.35 0.16 0.38 8.55 0.26 0.53 0.18 0.02 4.10 0.60 0.11 0.05 2.00 0.55 0.25 0.12 0.89 0.44 0.20 0.60 10.90 0.35 0.60 0.25 0.04 4.60 1.00 0.16 0.08 2.80 0.70 0.30 0.17 1.00 0.51 0.25 1.30 14.11 0.40 0.65 0.30 0.07 5.00 1.60 0.21 0.12 4.00 0.70 0.35 0.25 1.15 0.58 0.30 1.70 17.38 38.0 11.3 38.0 10.0 51.6 47.6 64.4 25.2 22.9 21.9 44.3 8.6 17.4 24.6 49.2 20.2 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Less than 5,000. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

IPTV penetration of TV households (%)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 0.0 0.1 0.0 0.4 0.0 0.8 0.0 1.6 0.0 2.4 0.5 0.1 0.0 2.7 1.0 0.0 0.3 0.1 3.0 1.9 0.1 0.6 0.2 3.9 3.3 0.1 1.0 0.4 5.1 4.6 0.1 1.0 0.5 6.4 0.0 0.0 0.0 0.3 0.1 0.1 0.1 1.5 0.3 0.1 0.2 0.2 3.8 1.0 0.6 0.4 0.5 4.4 1.3 0.8 0.5 0.1 0.6 5.4 1.5 1.0 0.6 0.3 0.8 7.2 2.2 1.5 1.0 0.5 1.2 9.5 3.5 2.2 1.6 0.9 1.9 11.8 4.9 3.3 2.3 1.2 2.6 0.5 0.8 1.0 0.1 0.0 0.2 0.3 0.4 0.4 2.2 0.0 1.3 0.6 2.0 1.4 0.5 0.1 0.8 0.6 1.9 0.8 3.6 0.1 2.6 0.8 2.5 0.3 2.6 0.9 0.2 1.4 0.9 4.5 1.2 10.0 0.1 0.3 3.5 1.9 4.0 0.6 3.5 3.1 2.2 0.3 2.9 2.3 7.5 2.4 12.3 0.5 0.9 0.7 5.6 3.4 6.3 1.1 4.7 5.7 3.1 0.9 4.2 3.5 8.1 3.2 12.8 0.6 1.3 1.3 5.9 4.1 7.2 1.7 4.8 6.5 4.0 1.2 4.6 4.9 8.5 4.4 0.5 13.6 0.8 1.9 1.9 6.5 5.4 8.2 2.3 4.9 7.5 4.8 1.5 5.1 7.4 9.9 7.2 1.0 15.8 1.6 3.4 3.2 8.2 7.4 12.0 3.4 5.2 9.4 6.0 2.3 6.5 9.9 10.9 9.9 2.1 17.6 2.7 5.0 5.0 11.4 9.3 14.3 4.9 5.7 10.7 7.4 5.0 8.3 11.3 11.6 11.9 3.7 18.9 4.4 6.5 7.5 16.1 9.2 16.6 7.2 6.5 12.1 8.8 6.6 10.2 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Cable households
The cable market is facing increased competition from IPTV and from free DTT services as well as from a growing subscription satellite market that typically offers more channels than cable does. In the UK and Germany, the cable universe has declined in recent years, and in Israel it fell during the 200407 period before stabilizing in 2008, helped by the introduction of triple play. The Netherlands cable market also fell in 2008, losing subscribers to an expanding IPTV platform. Overall cable household growth averaged 4.5 percent compounded annually from 2004 to 2006, but only 1.4 percent compounded annually during the past two years. With household budgets tightening in 2009, we expect slower growth in most countries; steeper declines in the United Kingdom, Germany, and the Netherlands; and a drop in Spain. In the UK, we project a 5.5 percent decrease as a number of subscribers switch to Freeview, a free DTT service. The overall cable universe in EMEA will edge down by 0.3 percent in 2009 to 74.1 million households. We look for 2010 to be a weak year as well, with a 0.5 percent increase.

With economic conditions expected to improve during the latter part of the forecast period, we expect the underlying strengths of cableits ability to package television in a triple-play bundle and its ability to feature video-on-demandto lead to a rebound in subscribership. Cable households in all of Western Europe will decrease at a 0.1 percent compound annual rate to 51.6 million in 2013 from 51.9 million in 2008. Cable penetration of TV households will drop from 31.4 percent in 2008 to 30.2 percent in 2013. In Central and Eastern Europe, there are few free services available, and IPTV is not nearly as well established as it is in Western Europe. Consequently, cable faces much less competition, and we expect increases in the cable household base, with growth projected at 3.2 percent compounded annually to 25.3 million households in 2013. Cable penetration will increase to 25.2 percent in 2013 from 22.1 percent in 2008. Overall cable household growth in EMEA will average 0.9 percent compounded annually to 77.8 million in 2013. Cable household penetration will edge up to 28.4 percent in 2013 from 28.1 percent in 2008.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Cable/subscription DTT households (millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 0.88 NA NA 0.88 66.55 0.85 NA NA 0.85 70.44 0.84 NA NA 0.84 72.70 0.83 NA NA 0.83 73.63 0.83 NA NA 0.83 74.29 0.84 NA NA 0.84 74.10 0.85 NA NA 0.85 74.45 0.86 NA NA 0.86 75.36 0.87 NA NA 0.87 76.55 0.88 NA NA 0.88 77.76 1.2 1.2 0.9 0.75 2.15 3.55 3.11 4.85 1.20 15.61 0.80 2.15 4.00 3.64 6.80 1.25 18.64 0.85 2.21 4.50 3.79 7.40 1.30 20.05 0.90 2.28 4.60 3.55 8.10 1.35 20.78 0.95 2.40 4.70 3.60 8.50 1.40 21.55 0.97 2.45 4.80 3.60 8.75 1.42 21.99 1.00 2.50 4.90 3.60 9.00 1.45 22.45 1.05 2.55 5.05 3.62 9.35 1.50 23.12 1.10 2.60 5.20 3.65 10.00 1.55 24.10 1.15 2.65 5.35 3.70 10.80 1.60 25.25 3.9 2.0 2.6 0.5 4.9 2.7 3.2 1.15 4.30 1.54 0.95 3.50 19.30 0.01 0.54 0.00 6.65 0.83 1.50 1.11 2.40 2.70 3.58 50.06 1.22 4.39 1.55 1.00 4.00 18.80 0.01 0.56 0.00 6.81 0.93 1.55 1.20 2.45 2.76 3.72 50.95 1.28 4.48 1.56 1.02 4.55 18.50 0.01 0.58 0.00 6.90 0.96 1.56 1.30 2.49 2.82 3.80 51.81 1.34 4.50 1.57 1.04 5.00 17.90 0.03 0.59 0.00 6.94 1.03 1.58 1.35 2.52 2.88 3.75 52.02 1.38 4.51 1.58 1.06 5.20 17.50 0.04 0.60 0.00 6.90 1.04 1.60 1.37 2.53 2.95 3.65 51.91 1.40 4.52 1.58 1.07 5.25 17.00 0.04 0.61 0.00 6.83 1.05 1.60 1.36 2.53 2.98 3.45 51.27 1.41 4.53 1.58 1.08 5.30 16.90 0.04 0.62 0.00 6.76 1.06 1.61 1.35 2.54 3.02 3.35 51.15 1.42 4.56 1.57 1.10 5.50 16.85 0.05 0.63 0.00 6.72 1.08 1.62 1.37 2.55 3.06 3.30 51.38 1.43 4.59 1.56 1.12 5.75 16.80 0.06 0.65 0.00 6.67 1.07 1.63 1.41 2.56 3.08 3.20 51.58 1.44 4.61 1.55 1.14 5.90 16.70 0.07 0.67 0.00 6.62 1.06 1.64 1.45 2.58 3.10 3.10 51.63 0.9 0.4 0.4 1.5 2.6 0.9 11.8 2.2 0.8 0.4 0.5 1.1 0.4 1.0 3.2 0.1 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: Finnpanel, Ofcom, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates, YLE

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201

Cable/subscription DTT penetration of TV households (%)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 52.4 2.2 26.0 48.9 2.1 27.2 46.9 2.0 27.8 44.9 2.0 28.0 43.5 2.0 28.1 42.9 2.0 27.8 42.3 2.0 27.8 41.7 2.0 27.9 41.2 2.0 28.2 40.7 2.0 28.4 19.7 56.4 26.5 46.4 9.3 7.6 16.4 20.8 56.0 29.8 54.2 13.1 7.8 19.5 21.8 57.1 33.4 56.4 14.2 8.0 20.8 22.8 58.5 34.1 52.7 15.5 8.1 21.4 23.8 61.1 34.7 53.4 16.3 8.3 22.1 24.0 61.9 35.3 53.3 16.7 8.3 22.5 24.4 62.7 36.0 53.3 17.1 8.3 22.8 25.3 63.4 37.0 53.5 17.8 8.4 23.4 26.2 64.2 38.0 53.8 19.0 8.6 24.2 27.1 65.0 38.9 54.5 20.5 8.7 25.2 35.4 93.5 63.1 47.5 14.5 53.3 0.3 37.8 0.0 95.0 42.8 42.9 7.4 55.2 90.0 14.3 31.4 37.2 93.2 63.3 49.8 16.4 50.4 0.3 38.6 0.0 96.2 47.2 44.3 7.8 55.7 90.5 14.8 31.5 38.4 92.8 63.4 51.0 18.4 49.7 0.3 39.5 0.0 96.5 48.0 44.7 8.3 56.0 91.0 15.1 31.8 39.4 91.1 63.6 52.0 20.0 48.4 0.9 39.6 0.0 96.0 51.0 45.3 8.5 56.0 91.4 14.8 31.7 40.0 89.3 63.7 54.4 20.6 47.4 1.3 39.7 0.0 94.6 50.5 45.8 8.5 55.6 92.2 14.4 31.4 40.3 87.6 63.5 55.2 20.6 46.2 1.3 39.9 0.0 92.9 50.7 46.0 8.2 55.0 91.7 13.5 30.8 40.4 86.0 63.2 56.0 20.6 46.0 1.3 40.0 0.0 91.1 51.0 46.3 8.0 54.6 91.5 13.1 30.5 40.5 84.8 62.5 57.3 21.2 46.0 1.6 40.1 0.0 89.8 51.7 46.6 8.0 54.3 91.3 12.8 30.4 40.5 83.6 61.9 58.6 21.9 46.0 1.9 40.9 0.0 88.5 51.0 47.0 8.1 53.9 91.1 12.4 30.3 40.6 82.3 61.3 60.0 22.3 45.9 2.2 41.6 0.0 87.1 50.2 47.3 8.2 53.8 90.9 12.0 30.2 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: Ofcom, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Subscription satellite households


Although the subscription satellite market faces the same competitive forces as cable does, it has held up better because satellite providers typically offer more channels and a wider array of premium services than cable does, albeit VOD is not available on satellite. Premium services refers to pay networks such as Premiere in Germany or HBO in the US. The UK is the leading satellite market in EMEA, with 9 million subscribers in 2008. Satellite provider BSkyB introduced three additional HD channels in 2008, although it dropped its plans to introduce a subscription DTT service. Following a ruling by regulatory body Ofcom, BSkyB will now be required to make firstrun films and Premier League coverage available to competitors at rates regulated by Ofcom, which could cut into the ability to attract new subscribers. When Freeview is included, the market in the UK is approaching saturation. Satellite subscriber growth will slow from a 6 percent compound annual increase from 2004 to 2008 to a 1.7 percent compound annual rate, resulting in 9.8 million subscribers in 2013. Italy has the next-largest satellite market, at 4.7 million in 2008. Satellite faces less competition in Italy than in other countries because there is no cable. The government announced in late 2008 that the lower value-added tax (VAT) of 10 percent enjoyed by subscription services will no longer apply, and the VAT will rise to 20 percent, which we expect will lead to slower subscription growth. The market is also becoming more competitive, with Mediasets launching a satellite service to compete with Sky Italias. We look for growth to slow in the near term and then to pick up during 201113 as the near-term impact of the weak economy and higher VAT run their course and a more competitive market fuels growth.

France has the third-largest subscription satellite market. Satellite will remain the last solution for customers to receive digital TV in remote areas before the end of free-to-air TV by the end of 2011. This should lead to continued growth in satellite subscriptions, which we project will increase at a 1.6 percent compound annual rate to 4.6 million in 2013. Spain has the fourth-largest subscription satellite market in Western Europe, at 2.1 million in 2008. That market has been flat in recent years because the expanding IPTV market is attracting all the new subscribers. We expect an additional flat year followed by modest gains as the economy improves. We project 1.4 percent compound annual growth to 2.2 million in 2013. In Western Europe as a whole, we anticipate a 2.3 percent compound annual increase to 29.9 million subscribers in 2013. Satellite penetration in Western Europe will increase to 17.5 percent in 2013 from 16.2 percent in 2008. As with cable, we expect faster increases in satellite in Central and Eastern Europe, which we project at 6.2 percent compounded annually. Satellite reaches areas not covered by cable, and its extensive channel capacity will drive demand. Penetration will increase from 12 percent in 2008 to 15.8 percent in 2013. The number of subscription satellite households in EMEA will increase from 39.1 million in 2008 to 46.5 million in 2013. Penetration will average 17 percent in 2013 from 14.8 percent in 2008.

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203

Subscription satellite households (millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 0.42 NA NA 0.42 26.28 0.48 NA NA 0.48 29.19 0.53 NA NA 0.53 32.24 0.59 NA NA 0.59 36.16 0.64 NA NA 0.64 39.09 0.66 NA NA 0.66 39.97 0.68 NA NA 0.68 40.65 0.72 NA NA 0.72 42.05 0.76 NA NA 0.76 44.03 0.80 NA NA 0.80 46.53 4.6 4.6 3.5 0.45 0.40 1.10 1.25 0.85 4.05 0.50 0.50 1.50 0.15 1.90 0.95 5.50 0.55 0.54 2.00 0.61 2.30 1.10 7.10 0.60 0.55 3.20 1.70 2.55 1.20 9.80 0.65 0.55 4.50 1.98 2.75 1.30 11.73 0.67 0.55 4.75 2.00 2.95 1.35 12.27 0.70 0.56 4.85 2.02 3.15 1.40 12.68 0.75 0.60 4.95 2.05 3.60 1.50 13.45 0.80 0.65 5.10 2.10 4.25 1.65 14.55 0.85 0.70 5.25 2.20 5.05 1.80 15.85 5.5 4.9 3.1 2.1 12.9 6.7 6.2 1.61 0.27 0.29 0.14 4.05 0.78 0.21 0.41 3.18 0.60 0.59 0.16 1.65 0.75 0.00 7.12 21.81 1.62 0.27 0.32 0.15 4.10 0.83 0.23 0.43 3.60 0.70 0.62 0.18 1.96 0.80 0.00 7.40 23.21 1.61 0.28 0.34 0.17 4.15 0.88 0.26 0.45 4.00 0.72 0.65 0.20 2.04 0.81 0.00 8.05 24.61 1.60 0.23 0.36 0.18 4.20 0.93 0.29 0.47 4.40 0.70 0.70 0.21 2.07 0.83 0.00 8.60 25.77 1.60 0.26 0.39 0.20 4.25 0.98 0.30 0.49 4.70 0.70 0.72 0.22 2.07 0.84 0.00 9.00 26.72 1.59 0.26 0.41 0.21 4.27 0.96 0.31 0.50 4.80 0.65 0.73 0.23 2.07 0.85 0.00 9.20 27.04 1.58 0.26 0.43 0.22 4.30 0.95 0.33 0.51 4.90 0.60 0.73 0.24 2.08 0.86 0.00 9.30 27.29 1.57 0.26 0.44 0.24 4.40 0.97 0.36 0.53 5.20 0.57 0.71 0.25 2.10 0.88 0.00 9.40 27.88 1.56 0.27 0.45 0.25 4.50 1.01 0.40 0.56 5.60 0.54 0.69 0.26 2.13 0.90 0.00 9.60 28.72 1.55 0.27 0.46 0.27 4.60 1.10 0.45 0.59 6.20 0.51 0.67 0.27 2.22 0.92 0.00 9.80 29.88 0.6 0.8 3.4 6.2 1.6 2.3 8.4 3.8 5.7 6.1 1.4 4.2 1.4 1.8 1.7 2.3 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Note: Does not include free-to-air satellite households. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: Ofcom, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Subscription satellite penetration of TV households (%)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 25.0 1.0 10.3 27.6 1.2 11.3 29.6 1.3 12.3 31.9 1.4 13.8 33.5 1.5 14.8 33.7 1.5 15.0 33.8 1.6 15.2 35.0 1.6 15.6 36.0 1.7 16.2 37.0 1.8 17.0 11.8 10.5 8.2 0.0 2.4 5.4 4.3 13.0 13.0 11.2 2.2 3.7 5.9 5.7 14.1 14.0 14.9 9.1 4.4 6.7 7.4 15.2 14.1 23.7 25.3 4.9 7.2 10.1 16.3 14.0 33.2 29.4 5.3 7.7 12.0 16.5 13.9 35.0 29.6 5.6 7.8 12.5 17.1 14.0 35.6 29.9 6.0 8.0 12.9 18.1 14.9 36.2 30.3 6.8 8.4 13.6 19.0 16.0 37.2 31.0 8.1 9.1 14.6 20.0 17.2 38.2 32.4 9.6 9.8 15.8 49.5 5.9 11.9 7.0 16.7 2.2 6.7 28.7 14.3 8.6 30.4 4.6 11.0 17.2 0.0 28.5 13.7 49.4 5.7 13.1 7.5 16.8 2.2 7.3 29.7 16.0 9.9 31.5 5.1 12.8 18.2 0.0 29.5 14.4 48.3 5.8 13.8 8.5 16.8 2.4 8.3 30.6 17.5 10.1 32.5 5.7 13.1 18.2 0.0 31.9 15.1 47.1 4.7 14.6 9.0 16.8 2.5 9.2 31.5 19.0 9.7 34.7 6.0 13.0 18.4 0.0 34.0 15.7 46.4 5.1 15.7 10.3 16.9 2.7 9.5 32.5 20.1 9.6 35.0 6.3 12.8 18.5 0.0 35.4 16.2 45.8 5.0 16.5 10.8 16.8 2.6 9.7 32.7 20.3 8.8 35.3 6.6 12.5 18.5 0.0 36.1 16.2 45.3 4.9 17.2 11.4 16.7 2.6 10.3 32.9 20.4 8.1 35.1 6.9 12.4 18.5 0.0 36.3 16.3 44.7 4.8 17.5 12.5 17.0 2.7 11.3 33.8 21.4 7.6 34.0 7.2 12.3 18.7 0.0 36.6 16.5 44.2 4.9 17.9 13.1 17.2 2.8 12.5 35.2 22.8 7.2 32.9 7.5 12.2 18.9 0.0 37.2 16.9 43.7 4.8 18.2 14.2 17.4 3.0 14.0 36.6 24.9 6.7 31.8 7.8 12.5 19.2 0.0 37.8 17.5 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

Note: Does not include free-to-air satellite households. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: Ofcom, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Television subscriptions and license fees | EMEA

205

Subscription spending
We expect the recession to cut into spending on the discretionary components of the marketparticularly, premium services and digital tiers, as well as videoon-demand and pay-per-view. There will be less of an impact on basic services, although providers will likely restrain rate increases. We expect subscription spending, which has grown at double-digit and high-single-digit rates during the past five years, to slow markedly, with gains dropping to less than 3 percent annually during the next two years. Thereafter, as economic conditions improve, there will be less restraint on discretionary services, and we look for a jump in spending per household. In addition to a stronger economy, subscribers will be attracted to more channels in total and more HD channels. Spending per subscription household on TV subscriptions (not including video-on-demand, payper-view, or broadband or telephone service) rose at rates in excess of 4 percent annually during 200608. We expect that growth to drop to less than 1 percent annually during the next two years. We then look for a rebound, with increases of around 4 percent annually during 2012 and 2013.

Subscription spending in EMEA will grow at rates in excess of 9 percent annually during 2012 and 2013 and will average 6.2 percent compounded annually for the forecast period as a whole. Subscription spending will rise from $47.7 billion in 2008 to $64.4 billion in 2013. Subscription spending in Western Europe will grow at a 6.1 percent compound annual rate to $55.3 billion in 2013. We expect subscription spending in Central and Eastern Europe to increase from $4.2 billion to $6 billion, a 7.3 percent compound annual advance. Middle East/Africa will be the slowest-growing area in EMEA, at 5.8 percent compounded annually, with spending reaching $3.1 billion in 2013.

Subscription spending growth per household in EMEA (%)


6 5 4 3 2 1 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

TV subscription market by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 102 1,018 573 1,693 31,563 109 1,089 651 1,849 35,042 117 1,181 725 2,023 38,848 126 1,255 803 2,184 43,249 135 1,331 883 2,349 47,725 140 1,377 923 2,440 48,740 145 1,432 964 2,541 50,108 157 1,515 1,025 2,697 53,583 170 1,613 1,124 2,907 58,750 184 1,711 1,217 3,112 64,397 6.4 5.2 6.6 5.8 6.2 227 204 810 281 280 302 2,104 269 230 972 346 429 344 2,590 317 258 1,165 405 537 397 3,079 372 285 1,397 487 650 469 3,660 436 322 1,656 521 754 558 4,247 460 334 1,707 524 808 590 4,423 492 347 1,723 528 865 627 4,582 553 372 1,790 534 978 695 4,922 630 412 1,873 544 1,166 787 5,412 711 456 1,980 562 1,440 882 6,031 10.3 7.2 3.6 1.5 13.8 9.6 7.3 771 882 685 211 3,803 4,655 189 350 1,891 2,005 665 773 2,403 860 688 6,935 27,766 850 945 740 233 4,324 4,902 208 382 2,249 2,262 802 850 2,618 923 734 7,581 30,603 920 1,021 796 250 4,872 5,170 234 416 2,735 2,495 912 918 2,763 973 781 8,490 33,746 991 1,087 859 268 6,041 5,374 280 446 3,173 2,732 1,079 985 2,898 1,049 830 9,313 37,405 1,074 1,175 937 288 6,612 5,685 299 483 3,761 2,950 1,207 1,079 3,438 1,124 883 10,134 41,129 1,098 1,196 965 294 6,784 5,590 309 500 3,919 3,006 1,274 1,112 3,465 1,153 939 10,273 41,877 1,127 1,215 999 304 7,017 5,658 328 520 4,134 3,099 1,335 1,152 3,517 1,188 968 10,424 42,985 1,199 1,292 1,057 328 7,621 5,984 366 553 4,741 3,338 1,477 1,223 3,675 1,254 1,011 10,845 45,964 1,291 1,376 1,144 356 8,214 6,508 413 612 5,716 3,612 1,579 1,339 3,915 1,323 1,070 11,963 50,431 1,370 1,456 1,224 389 8,710 7,155 468 679 7,165 3,815 1,683 1,479 4,257 1,404 1,130 12,870 55,254 5.0 4.4 5.5 6.2 5.7 4.7 9.4 7.0 13.8 5.3 6.9 6.5 4.4 4.5 5.1 4.9 6.1 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: Ofcom, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Television subscriptions and license fees | EMEA

207

Video-on-demand and pay-per-view


In the process of upgrading to provide triple-play services, cable operators are creating a digital platform suitable for video-on-demand. Cable operators are promoting their VOD capabilities as an advantage over satellite and to compete with IPTV, which is actively promoting its own VOD services. There were 16 million households in Western Europe capable of accessing video-on-demand in 2008, compared with fewer than 3 million in 2004. Although VOD household growth will slow during the next two years, we look for a pickup beginning in 2011 and an increase to 41 million households by 2013, more than twice the level in 2008.

With the economy rapidly weakening, we look for a significant turnaround in per-household spending during the next two years and project a cumulative 27 percent decline. Annual spending per VOD household will drop by more than $20. The anticipated rebound in the economy will then lead to a more-than-proportional increase in discretionary items such as VOD. By 2013, we look for VOD spending per household to surpass its level in 2008 and climb to more than $82.

Annual VOD spending per household in Western Europe (US$)


90 75 60 45 30

VOD households in Western Europe (millions)


50 40 30 20 10 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

In Norway, RiksTV, which provides digital signals over the air, will introduce VOD in 2009 as a competitor to cable companies. Growth in the underlying VOD household base will provide a strong boost to VOD spending during the next five years. VOD is also affected by per-household usage, which in turn is affected by the economy as well as by available content. We believe VOD is a highly discretionary component of the market: there is not a long history of usage; VOD programming is not yet part of the routine for the average viewer; and there is not commitment to VOD as there is for a premium service. From 2004 to 2008, there was a sharp increase in buy rates per household, reflecting a generally expanding economy and the rollout of new services. France, which has the largest VOD market in Western Europe, has seven providers offering VOD.

Overall VOD spending, which has grown explosively in recent years from a small base, will decline by 7.1 percent in 2009 and grow by only 3.5 percent in 2010. The market will then surge at rates in excess of 30 percent annually during 201113. We look for France to remain the largest VOD market in Western Europe, rising to an estimated $746 million in 2013. We expect each country except the UK to average double-digit compound annual increases during the next five years. The UK, by contrast, will grow by only 5.4 percent on a compound annual basis. The UK market is largely satellite based, and the cable component is declining, which will largely offset gains in IPTV and keep the VOD potential relatively limited. Overall VOD spending will increase from $1.2 billion in 2008 to a projected $3.4 billion in 2013, a 22.1 percent compound annual increase.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Video-on-demand and subscription VOD (US$ millions)


Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total 2004 6 7 3 1 83 100 2005 6 13 6 44 18 9 2 6 145 249 2006 7 32 12 92 40 23 7 13 12 195 433 2007 18 67 13 241 9 1 59 53 14 16 40 28 30 241 830 2008p 31 102 20 16 331 22 3 9 105 92 17 28 108 40 49 272 1,245 2009 34 100 26 13 300 16 3 15 92 100 22 31 73 46 54 231 1,156 2010 34 108 30 18 299 23 3 13 91 135 22 34 72 58 59 197 1,196 2011 57 154 42 28 416 51 7 23 132 208 32 47 92 74 71 239 1,673 2012 85 234 60 51 604 101 13 31 225 322 41 78 162 96 105 309 2,517 2013 114 303 69 67 746 170 19 45 351 413 50 110 300 112 152 354 3,375 200913 CAGR 29.8 24.3 28.1 33.2 17.6 50.5 44.7 38.0 27.3 35.0 24.1 31.5 22.7 22.9 25.4 5.4 22.1

At average 2008 exchange rates. Negligible. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Cable operators and IPTV providers are emphasizing VOD at the expense of pay-per-view. Satellite providers, on the other hand, continue to promote their pay-perview services. In Italy, for example, where satellite is the dominant platform, pay-per-view soared in 2008. The satellite universe also is large in Spain, France, and the UK. In France, the pay-per-view market declined during the past two years as subscribers shifted to VOD, while Spain and the UK have seen their pay-perview markets expand. Pay-per-view, like VOD, is a discretionary purchase that is subject to cutbacks when economic conditions

tighten. We expect sharp declines in Spain and France and project an overall 11.9 percent decrease, with a further 5 percent decline in 2010. We do not expect as dramatic a rebound in pay-perview as we do in video-on-demand, because pay-perview will not be promoted as vigorously. We do look for a return to mid-single-digit growth by 2012. We project the pay-per-view market in Western Europe to drop to $1 billion in 2013 from $1.04 billion in 2008, a 0.7 percent compound annual decline.

Television subscriptions and license fees | EMEA

209

Pay-per-view spending (US$ millions)


Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Total 2004 4 1 3 169 22 1 44 58 4 2 190 20 1 133 652 2005 5 1 3 202 24 1 1 57 69 5 3 212 22 2 143 750 2006 6 1 4 239 27 1 1 74 79 6 3 269 23 3 158 894 2007 6 1 4 223 28 2 1 89 88 7 4 303 24 3 170 953 2008p 6 1 5 184 28 2 2 132 94 7 4 366 25 4 180 1,040 2009 6 1 4 131 26 2 2 127 91 8 4 307 26 4 177 916 2010 6 1 4 96 25 2 2 127 89 8 4 300 26 3 177 870 2011 6 1 5 82 26 2 2 137 88 8 4 329 26 3 180 899 2012 6 1 5 65 26 3 2 154 88 8 4 366 27 3 189 947 2013 6 1 5 57 27 3 2 179 86 8 4 402 28 3 194 1,005 200913 CAGR 0.0 0.0 0.0 20.9 0.7 8.4 0.0 6.3 1.8 2.7 0.0 1.9 2.3 5.6 1.5 0.7

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

210

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Mobile TV
Mobile television in a number of countries is at a crossroads. In some countries, services have failed; in others, new rollouts are taking place; and the business model is shifting from subscriber based to advertiser supported. In Germany, Vodafone, T-Mobile, and O2 teamed up to apply for a DVB-H (Digital Video Broadcasting Handheld) license but were turned down in favor of Mobile 3.0. By late 2008, it appeared that Mobile 3.0 would be returning its license because it failed to meet its license requirements. Meanwhile, a DVB-T (Digital Video BroadcastingTerrestrial) service was launched in Germany on a free basis. In the UK, BT Movio closed its mobile TV service in early 2008 as mobile TV has yet to gain traction in that country. Italy has the largest mobile TV market in Europe, at $107 million in 2008, a figure that would have been much higher had 3 Italia, one of the leading providers, not launched a free service that is cutting into the subscription market. In Norway, Norges Mobil-TV, a newly formed company owned by large media stakeholders, will start test transmissions in March 2009, using the DMB (Digital Multimedia Broadcasting) standard. The test transmissions will be available to 1.4 million people. At the same time, a number of subscription services are entering the market. In Austria, mobile TV was launched on a free basis in conjunction with the UEFA Championships in mid-2008. In 2009, it will switch to a subscription service at 6 ($8.65) per month. In France, 13 mobile TV licenses were awarded in 2008 in addition to 3 licenses that had been previously granted. In late 2008, Orange introduced five channels that will be accessible to mobile phones for 6 ($8.65) per month.

KPN in the Netherlands and Swisscom in Switzerland launched mobile services in 2008 on a subscription basis. Swisscom in 2008 launched Bluewin TV Mobile, a mobile TV subscription service available per day or on a monthly basis. The offering consists of 30 channels of which 20 can be received in HD quality. Subscribers can pay a premium for special news and sports packages. There also is activity in Central and Eastern Europe and Middle East/Africa. Mobile TV licenses are expected to be awarded in Poland and South Africa in 2009, and a rollout is expected in Russia in 2009 as well. During the next two years, take-up rates for mobile television are likely to be very low because of the economic environment. Providers will likewise not be aggressive in rolling out services because of difficulties in obtaining financing and an expected low initial return on investment. Over the longer run, rollout and take-up rates will improve as the economy expands. It remains to be seen how the business model will evolve and whether mobile TV gets offered on a subscription basis or an advertiser-supported basis or a combination of the two. We expect that the bulk of the growth will be on an advertiser-supported basis but that a subscription component will expand as well. Premium content and sports will likely be offered on a subscription basis, while conventional programming may migrate to a free basis. We project that the mobile TV subscription market will increase from $178 million in 2008 to $1.4 billion in 2013.

Television subscriptions and license fees | EMEA

211

Mobile TV market (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total NA NA 0 42 NA NA 0 74 NA NA 0 178 NA NA 0 200 NA NA 2 2 288 NA NA 5 5 455 NA NA 10 10 851 NA NA 22 22 1,437 51.8 NA NA 0 NA NA 0 NA NA 0 NA 8 NA 8 1 NA 2 17 NA 20 2 NA 5 34 NA 41 5 NA 10 71 NA 86 12 NA 22 139 NA 173 7 NA 35 42 4 NA 70 74 61 3 NA 107 1 4 2 178 1 1 66 3 NA 107 1 1 4 1 5 2 192 3 3 1 1 101 3 NA 1 108 4 1 3 22 2 7 6 266 6 4 2 3 138 4 NA 3 145 9 1 6 45 3 14 26 409 12 10 4 6 225 18 NA 6 240 23 3 15 101 7 26 59 755 25 23 9 15 329 45 NA 12 351 45 6 31 165 14 36 136 1,242 40.1 71.9 26.8 114.1 110.4 78.3 47.5 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Less than US$500,000. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

212

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Public TV license fees


Public TV license fees are levied on TV households to support public television channels. Revenues totaled $24.1 billion in 2008, with most of that total, $23.4 billion, generated in Western Europe. Germany and the United Kingdom are the leaders in support for public broadcasters. Public television broadcasters in Germany received $6.6 billion, and the United Kingdom accounted for $5.1 billion, together comprising nearly half of the total for EMEA in 2008. France and Italy also actively supported public television at $2.8 billion and $2.5 billion, respectively, in 2008. In France, license fees will increase by a combined 4 ($5.85) per household during the next two years to help compensate for the discontinuation of advertising on most of the public television channels. In Germany, a declining household base driven by a falling population will lead to a drop in public TV license fees during 2012 and 2013. Public TV license fees in 2013 will total $6.8 billion, a 0.5 percent compound annual increase. We expect license fee growth in the UK to average 0.9 percent compounded annually to $5.4 billion in 2013, driven by TV household growth and a rate increase in 2011. In the Netherlands, although formal license fees were discontinued in 2000, the government continues to support public television from general tax revenues. From 2004 to 2006, the government reduced its

contribution to public television. The government subsequently reversed course and increased its contribution during the past two years, with larger gains expected going forward. We project a 4.2 percent compound annual expansion through 2013 to $783 million. Portugal introduced public TV license fees in 2004 and is ramping up the contribution. We expect fees to rise at a 13.6 percent compound annual rate, the largest percent increase in EMEA. Poland, by contrast, is reducing its public TV fees. Fees have fallen since 2004 and are projected to continue to decline through 2012 and to stabilize in 2013. We project license fees in Western Europe to increase at a 1.9 percent compound annual rate to $25.7 billion in 2013. In Central and Eastern Europe, the decrease in Poland will offset modest growth in the Czech Republic, leading to an overall compound annual decrease of 1 percent to $500 million from $527 million in 2008. Russia, Turkey, and Hungary have no public license fees. In Middle East/Africa, South Africa and Israel have public TV license fees; Saudi Arabia/Pan Arab does not. TV household growth and modest license fee increase will generate 1.9 percent growth compounded annually to $233 million in 2013 from $212 million in 2008. For EMEA as a whole, public TV license fees will increase to $26.5 billion in 2013, up 1.9 percent on a compound annual basis.

Television subscriptions and license fees | EMEA

213

Public TV license fees (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 78 0 118 196 21,608 81 0 119 200 22,419 84 0 120 204 22,933 87 0 121 208 23,631 90 0 122 212 24,102 93 0 124 217 25,130 96 0 125 221 25,801 98 0 126 224 26,138 101 0 127 228 26,378 104 0 129 233 26,458 2.9 1.1 1.9 1.9 140 0 226 123 0 0 489 227 0 209 119 0 0 555 230 0 203 120 0 0 553 233 0 199 117 0 0 549 236 0 173 118 0 0 527 239 0 130 119 0 0 488 242 0 128 120 0 0 490 245 0 127 121 0 0 493 248 0 126 122 0 0 496 251 0 126 123 0 0 500 1.2 6.1 0.8 1.0 765 660 801 348 2,666 6,120 260 206 2,265 663 410 42 0 864 594 4,259 20,923 790 724 804 360 2,693 6,417 262 214 2,296 647 432 53 0 901 603 4,468 21,664 802 742 827 359 2,720 6,571 263 217 2,327 620 438 76 0 922 651 4,641 22,176 890 771 855 364 2,748 6,593 263 224 2,461 625 457 102 0 1,015 661 4,845 22,874 903 789 858 304 2,814 6,600 265 227 2,494 637 466 132 0 1,027 707 5,140 23,363 906 806 862 354 3,323 6,950 265 230 2,524 659 468 161 0 1,038 718 5,161 24,425 959 837 925 360 3,413 7,032 266 233 2,704 680 470 190 0 1,072 768 5,181 25,090 963 855 929 359 3,445 7,013 266 239 2,738 717 484 220 0 1,083 779 5,331 25,421 969 872 933 356 3,479 6,994 268 241 2,772 761 487 249 0 1,095 825 5,353 25,654 1,019 900 998 361 3,512 6,783 268 244 2,805 783 489 250 0 1,106 833 5,374 25,725 2.4 2.7 3.1 3.5 4.5 0.5 0.2 1.5 2.4 4.2 1.0 13.6 1.5 3.3 0.9 1.9 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Fees were discontinued after 1999. Figures reflect government contributions from general tax revenues. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: Ofcom, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Asia Pacific

The outlook in brief


Following a near-term slowdown, a pickup in subscription household growth will drive subscription spending. Increases in digital cable and IPTV will propel video-ondemand and cut into pay-per-view growth. New services will continue to drive mobile television subscription spending despite the expansion of an advertiser-supported mobile TV market. Public TV license fees will be enhanced by TV household growth and modest rate hikes.

digits during the next two years and then improve to double-digit annual gains during 201113. Subscription spending will increase at an 11.7 percent compound annual rate to $36.5 billion in 2013 from $21 billion in 2008. Video-on-demand will grow from $530 million in 2008 to $1 billion in 2013, a 14.1 percent increase compounded annually. A small pay-per-view market will increase at a 1.3 percent compound annual rate to $129 million in 2013. Public TV license fees will rise at a 1.4 percent annual rate to $6 billion. Mobile television subscription spending will total $1.7 billion by 2013.

Overview
We project overall spending to rise to $45.4 billion in 2013 from $27.5 billion in 2008, a 10.5 percent compound annual increase. Growth will drop to single

TV subscription and license fee market by component (US$ millions)


Asia Pacific Subscriptions Video-on-demand Pay-per-view Public TV license fees Mobile TV Total 2004 11,598 95 61 5,051 16,805 2005 13,571 179 76 5,342 19,168 2006 15,496 265 87 5,464 53 21,365 2007 18,472 387 104 5,550 83 24,596 2008p 21,011 530 121 5,638 230 27,530 2009 23,007 491 118 5,718 364 29,698 2010 25,503 518 117 5,799 506 32,443 2011 28,803 634 119 5,879 742 36,177 2012 32,520 810 124 5,961 1,141 40,556 2013 36,501 1,023 129 6,043 1,727 45,423

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

TV subscription and license fee market growth by component (%)


Asia Pacific Subscriptions Video-on-demand Pay-per-view Public TV license fees Mobile TV Total 2004 13.5 55.7 17.3 5.5 11.2 2005 17.0 88.4 24.6 5.8 14.1 2006 14.2 48.0 14.5 2.3 11.5 2007 19.2 46.0 19.5 1.6 56.6 15.1 2008p 13.7 37.0 16.3 1.6 177.1 11.9 2009 9.5 7.4 2.5 1.4 58.3 7.9 2010 10.8 5.5 0.8 1.4 39.0 9.2 2011 12.9 22.4 1.7 1.4 46.6 11.5 2012 12.9 27.8 4.2 1.4 53.8 12.1 2013 12.2 26.3 4.0 1.4 51.4 12.0 200913 CAGR 11.7 14.1 1.3 1.4 49.7 10.5

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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The economic decline will lead to somewhat slower growth in subscription households during the next two years and slower growth in spending per household. When incomes are being squeezed, households cut back on discretionary purchases. We expect spending per household on premium services, video-ondemand, and pay-per-view to experience declines. We also anticipate that providers will impose smaller rate increases on basic services. Most countries are expected to grow more slowly during the next two years compared with 2008. Japan is the largest market in Asia Pacific, at $11.1 billion, 40 percent of the total. The Peoples Republic of China (PRC) and India are next, at $4.4 billion and

$3.4 billion, respectively. South Korea is fourth, at $2.3 billion, followed by Australia and Taiwan, the only other countries in excess of $1 billion. Large increases in the satellite market will propel the PRC and India during the next five years, while an expanding mobile TV market will boost spending in South Korea. Each of these countries will average double-digit compound annual growth. We look for Australia to increase by 9.5 percent compounded annually, boosted by emerging video-ondemand and mobile TV markets. We anticipate midsingle-digit gains in the other major countries.

TV subscription and license fee market by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 957 1,679 219 1,716 40 8,390 368 266 229 163 185 1,274 1,091 210 18 16,805 2005 1,122 2,154 329 2,208 64 9,059 414 321 256 197 202 1,462 1,132 213 35 19,168 2006 1,338 2,750 391 2,666 86 9,408 496 372 271 229 231 1,678 1,173 221 55 21,365 2007 1,654 3,555 459 3,121 130 10,433 587 410 288 258 259 1,941 1,198 224 79 24,596 2008p 2,040 4,401 568 3,398 200 11,076 654 447 307 278 277 2,308 1,224 243 109 27,530 2009 2,157 5,440 595 3,771 279 11,281 684 463 316 284 280 2,514 1,265 245 124 29,698 2010 2,326 6,687 637 4,207 393 11,622 713 479 326 301 283 2,742 1,324 252 151 32,443 2011 2,584 8,315 689 4,662 527 12,257 762 517 349 327 299 3,033 1,394 267 195 36,177 2012 2,892 10,093 743 5,140 666 13,167 808 556 375 371 336 3,400 1,463 292 254 40,556 2013 3,205 11,886 809 5,681 804 14,321 861 603 404 449 378 3,835 1,531 323 333 45,423 200913 CAGR 9.5 22.0 7.3 10.8 32.1 5.3 5.7 6.2 5.6 10.1 6.4 10.7 4.6 5.9 25.0 10.5

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Subscription households and spending


Subscription spending will be fueled principally by an expanding subscription household base, which in turn will be driven largely by gains in the IPTV and satellite components. During the next two years, subscription household growth will average 5.8 percent compounded annually, down from the 7.3 percent increase in 2008. Growth will improve to an average of 6.8 percent compounded annually during 201113 as economic conditions improve. For the forecast period as a whole, we project the overall subscription TV household universe in Asia Pacificincluding cable, satellite, and IPTVto increase to 403.6 million households by 2013, a 6.4 percent compound annual gain. Subscription TV penetration will rise from 42.5 percent in 2008 to 52.5 percent in 2013. Growth in subscription TV households will be the principal driver of subscription spending. The PRC and India together will account for 86 percent of the projected increase. We expect the number of

subscription TV households in the PRC to rise to 220 million by 2013 from 162.6 million in 2008, while India will total 115.2 million subscriptions households from 80.01 million in 2008. In 2013, the PRC and India will constitute 83 percent of subscription TV households in Asia Pacific. The problem of piracy continues to impact the growth of subscription TV in a number of markets in the region. Piracy losses were estimated by the Cable and Satellite Broadcasting Association of Asia in October 2008 to be $1.8 billion annually, a total that excludes the PRC. The nature of piracy varies by market. Illegal distributors in Thailand (1.3 million households), Indonesia (1.4 million households), and Pakistan (7.2 million households) serve more households than the legal distributors do. In India, the estimated cost of piracy increased by 15 percent to $1.1 billion in 2008 due to both an increase in illegal connections and higher average revenue per unit. In markets where the migration to digital cable and the rollout of IPTV are ongoing, piracy levels are decreasing.

Subscription TV households (millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 1.62 110.01 0.79 50.10 0.17 8.80 1.45 0.55 3.30 1.10 0.39 14.50 5.54 0.45 0.30 199.07 2005 1.73 125.06 1.26 62.00 0.27 9.80 1.60 0.64 3.50 1.25 0.40 15.00 5.79 0.46 0.55 229.31 2006 1.89 138.18 1.50 70.00 0.40 10.20 1.95 0.71 3.65 1.45 0.45 15.30 6.13 0.53 0.85 253.19 2007 2.14 153.00 1.76 73.50 0.72 12.00 2.20 0.75 3.81 1.60 0.49 15.55 6.40 0.60 1.20 275.72 2008p 2.46 162.60 2.02 80.01 1.24 13.00 2.31 0.79 4.00 1.69 0.52 16.10 6.88 0.70 1.50 295.82 2009 2.51 172.00 2.09 86.02 1.69 13.19 2.35 0.81 4.06 1.73 0.53 16.03 7.07 0.75 1.64 312.47 2010 2.59 181.75 2.16 93.05 2.36 13.51 2.40 0.83 4.16 1.80 0.54 16.20 7.28 0.82 1.79 331.24 2011 2.80 193.00 2.25 100.10 3.09 14.25 2.54 0.88 4.38 1.95 0.57 16.65 7.51 0.89 2.11 352.97 2012 3.06 206.00 2.34 107.20 3.73 15.40 2.70 0.93 4.64 2.18 0.64 17.00 7.72 0.98 2.57 377.09 2013 3.30 220.00 2.44 115.20 4.18 16.85 2.87 0.99 4.95 2.54 0.72 17.40 7.93 1.08 3.19 403.64 200913 CAGR 6.1 6.2 3.9 7.6 27.5 5.3 4.4 4.6 4.4 8.5 6.7 1.6 2.9 9.1 16.3 6.4

Note: Does not include free-to-air DTT and satellite households. Sources: Cable and Satellite Broadcasting Association of Asia, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Subscription TV penetration of TV households (%)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 21.7 30.9 35.6 49.1 0.6 18.6 26.1 37.7 29.2 8.1 36.8 87.3 79.7 3.0 2.1 31.6 2005 23.0 34.3 55.5 56.9 0.9 20.5 28.6 43.5 29.7 9.2 37.4 89.8 82.1 2.9 3.6 35.3 2006 24.9 37.0 64.4 62.5 1.3 21.1 34.5 48.0 29.7 10.6 41.7 91.1 85.7 3.1 5.2 38.0 2007 27.9 40.3 73.6 63.9 2.3 24.6 38.6 50.3 29.8 11.6 45.0 92.0 87.1 3.3 6.8 40.5 2008p 31.7 41.9 82.8 67.8 3.9 26.4 40.2 52.7 30.1 12.2 47.3 94.7 91.1 3.7 7.9 42.5 2009 32.2 43.5 83.9 71.1 5.1 26.5 40.5 53.6 29.6 12.4 47.7 93.7 91.2 3.7 8.2 44.0 2010 32.9 45.2 85.0 75.0 6.9 27.0 41.0 54.6 29.5 12.8 48.2 94.2 91.6 3.9 8.4 45.7 2011 35.3 47.2 86.9 78.8 8.9 28.2 43.1 57.5 30.2 13.7 50.4 96.2 92.1 4.0 9.4 47.7 2012 38.3 49.5 88.6 82.5 10.4 30.3 45.4 60.4 31.1 15.2 56.1 97.7 92.5 4.2 10.8 50.0 2013 41.0 52.0 90.7 86.6 11.4 32.8 47.8 63.9 32.4 17.6 62.6 99.4 92.7 4.5 12.8 52.5

Note: Does not include free-to-air DTT and satellite households. Sources: Cable and Satellite Broadcasting Association of Asia, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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IPTV
Augmenting growth in TV households will be a rapidly expanding IPTV market. IPTV is now available in each country except Indonesia, the Philippines, and Vietnam. Growth in the Internet broadband market has expanded the platform for IPTV. Telephone companies are introducing IPTV to create attractive service bundles that combine landline telephone service with broadband Internet access and television. Bundled services have proved to be popular, and carriers are hoping they will stem the erosion in landline subscriptions. Infrastructure upgrades in many countries focus on Internet protocolbased next-generation networks that will allow for high-speed broadband, television, and other high-volume applications. In the PRC, the telecommunications market was restructured in 2008. Under the new structure, there are now three national operators that offer both wireless and fixed-line services, replacing the previous structure of six state-owned operators. The restructuring has made the market more efficient and has made it easier for carriers to offer IPTV packages, thereby opening the way to easier availabilitywhich will be the key driver of market growth. China Netcom, for example, added a number of cities to its IPTV network in 2008. The IPTV subscriber base more than doubled in 2008 to 2.6 million, and we expect it will expand to 10 million households by 2013. In early 2009, Microsoft and Guangzhou Digital Media Group teamed up to launch Zhujiang Digital on the Microsoft Mediaroom IPTV platform. The service will enable subscribers to access any previously aired program on an on-demand basis. In South Korea, the Korean Communications Commission awarded three IPTV licenses in 2008 to Hanaro Telecom (now part of SK Broadband), KT, and LG Dacom. KT announced it plans to invest more than $1 billion in its IPTV service during the next four years and is working on creating programming for its IPTV platform. In Hong Kong, IPTV is the dominant platform, accounting for more than half of all subscription households and more than 40 percent of all television households. Now TV, the IPTV service from PCCW, announced it is launching a new Cantonese-language channel. Because of its already high penetration rate, IPTV growth will be more limited in Hong Kong than in the rest of the region. We project for Hong Kong a 7.6

percent compound annual increase during the next five years, the only territory where we expect single-digit compound annual growth. IPTV penetration in Hong Kong will increase to 55.8 percent by 2013, by far the highest in Asia Pacific. Japan, which has the second-largest IPTV market, at 1.35 million subscribers in 2008, is enhancing its offerings. GyaO NEXT began offering FOX on Demand, and NHK began offering NHK On Demand on their respective IPTV services in late 2008. We expect IPTV in Japan to rise to 4 million households by 2013. In Singapore, MioTV from SingTel has become a successful IPTV service, accounting for nearly 10 percent of all subscription households. It now allows programming to be forwarded to SingTels wireless subscribers. In a deal with ABC, FOX, and Warner Bros., MioTV also will be carrying a number of popular US shows within a day after their US broadcasts. These features should make the service more appealing. In India in 2008, the government declared the licensing rules for the rollout of IPTV services in India. Under these guidelines, Telecom service providers can provide triple-play services, and Internet service providers that meet a net-worth requirement will be permitted to provide IPTV service under their existing licenses without needing further registration. Similarly, registered cable TV operators, too, can provide IPTV services without any further permission. These norms, along with other clarifications recently brought out, will support the long-awaited rollout of IPTV services in India. Although double-digit gains are expected in each country except Hong Kong throughout the forecast period, increases will be slower during the next two years as the take-up rate moderates and as rollouts become less aggressive. IPTV penetration, which increased by four-tenths of a point in 2008, will expand by only three-tenths of a point cumulatively during the next two years. We then expect growth rates to increase as economic conditions improve, and we project IPTV penetration to rise by 1.4 percentage points from 2010 to 2013. The IPTV market as a whole will increase to a projected 19.8 million households by 2013, a 27.1 percent compound annual increase. IPTV penetration will increase from 0.9 percent in 2008 to 2.6 percent in 2013.

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IPTV households (millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 0.01 0.08 0.10 0.01 0.20 2005 0.03 0.06 0.50 0.20 0.01 0.06 0.86 2006 0.06 0.18 0.68 0.35 0.01 0.20 1.48 2007 0.10 1.00 0.85 0.005 0.80 0.01 0.03 0.35 0.01 3.155 2008p 0.15 2.60 1.04 0.01 1.35 0.01 0.01 0.02 0.05 0.10 0.60 0.04 5.98 2009 0.18 3.00 1.10 0.02 1.50 0.02 0.02 0.03 0.07 0.20 0.75 0.06 6.95 2010 0.21 3.75 1.15 0.05 0.01 1.75 0.03 0.03 0.05 0.01 0.08 0.50 0.80 0.08 8.50 2011 0.27 5.00 1.25 0.10 0.02 2.25 0.04 0.04 0.08 0.02 0.10 1.00 0.85 0.10 0.01 11.13 2012 0.35 7.00 1.37 0.20 0.03 3.00 0.05 0.05 0.12 0.03 0.15 1.45 0.90 0.13 0.02 14.85 2013 0.40 10.00 1.50 0.20 0.04 4.00 0.07 0.06 0.15 0.04 0.20 1.95 1.00 0.17 0.04 19.82 200913 CAGR 21.7 30.9 7.6 82.1 24.3 47.6 43.1 49.6 32.0 81.1 10.8 33.6 27.1

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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IPTV penetration of TV households (%)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 0.0 3.6 0.2 0.1 0.0 2005 0.4 0.0 22.0 0.4 0.9 0.9 0.1 2006 0.8 0.0 29.2 0.7 0.9 2.8 0.2 2007 1.3 0.3 35.6 0.0 1.6 0.1 2.8 4.8 0.1 0.5 2008p 1.9 0.7 42.6 0.0 2.7 0.2 0.7 0.2 4.5 0.6 7.9 0.2 0.9 2009 2.3 0.8 44.2 0.0 0.0 3.0 0.3 1.3 0.2 0.1 6.3 1.2 9.7 0.3 1.0 2010 2.7 0.9 45.3 0.0 3.5 0.5 2.0 0.4 0.1 7.1 2.9 10.1 0.4 1.2 2011 3.4 1.2 48.3 0.1 0.1 4.5 0.7 2.6 0.6 0.1 8.8 5.8 10.4 0.5 0.0 1.5 2012 4.4 1.7 51.9 0.2 0.1 5.9 0.8 3.2 0.8 0.2 13.2 8.3 10.8 0.6 0.1 2.0 2013 5.0 2.4 55.8 0.2 0.1 7.8 1.2 3.9 1.0 0.3 17.4 11.1 11.7 0.7 0.2 2.6

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Cable
Cable is the largest component of the subscription household market in Asia Pacific, with a total of 264.2 million subscribers in 2008, accounting for 89 percent of all subscription households. The PRC and India have the largest markets, at 160 million and 70 million, respectively. In the PRC, cable household growth slowed to 5.3 percent in 2008 following three years of double-digit annual gains. We expect that the legalization of satellite in 2009 will further limit the cable market. We project cable household growth to average 2.9 percent compounded annually during the next five years to 185 million. In India, the conditional access system (CAS) was introduced in 2007 in select areas of Mumbai, Delhi, and Kolkata. CAS allows subscribers to pay only for the channels they choose to receive and puts a cap on prices for basic packages at Rs77 ($1.76) and at Rs5

($0.11) per pay channel. Basic packages must include at least 30 free-to-air channels, and premium channels must be offered on an la carte basis. Though CAS has not yet been extended to the rest of the Indian cities as recommended by the Telecom Regulatory Authority of India, there is significant activity on deployment of voluntary digital cable systems. In 2008, News Corp. owned entity Star India formed a 50-50 joint venture with DEN Digital Entertainment Networks to distribute television channels on all fixed networks, including cable, DTH (direct to home), IPTV, HITS (Headend in the Sky), and MMDS (multichannel multipoint distribution service). We expect the cable universe in India to increase to 80 million in 2013. South Korea has the third-largest cable market, at 14.4 million subscribers, up 3 percent from 2007. With a surging IPTV market anticipated during the next five years, we expect cable to decline, falling to 14.2 million households in 2013.

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In Japan, the fourth-largest cable market, at 7.2 million, competition from satellite and an expanding IPTV market will cut into cable growth. As in other countries, increases will be modest in the near term and stronger during 201213, when the economy is expected to be healthier. The cable universe is expected to total 7.7 million in 2013, a 1.4 percent compound annual increase. Indonesia only has two cable television operators: First Media (formerly Kabelvision) and TELKOMVision. With high expansion of new satellite TV operators, which

are more flexible for Indonesias geographic condition, cable TV is expected to have difficulty in competing with satellite TV. For Asia Pacific as a whole, cable households will increase by 1.9 percent in 2009 and by 2.3 percent in 2010, with increases projected at more than 3 percent annually during 2012 and 2013. Overall growth will average 2.7 percent compounded annually to 302.2 million in 2013. Cable penetration will rise from 38 percent to 39.3 percent.

Cable households (millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 0.79 110.00 0.68 50.00 0.09 5.42 0.00 0.06 1.05 1.04 0.39 13.16 5.52 0.14 0.20 188.54 2005 0.76 125.00 0.72 61.00 0.15 6.17 0.00 0.05 1.15 1.15 0.39 13.56 5.71 0.13 0.30 216.24 2006 0.71 138.00 0.76 68.00 0.20 6.25 0.00 0.06 1.25 1.30 0.44 13.78 5.91 0.13 0.50 237.29 2007 0.75 152.00 0.83 70.00 0.22 7.05 0.00 0.07 1.30 1.40 0.46 14.00 6.02 0.13 0.75 254.98 2008p 0.80 160.00 0.89 70.00 0.24 7.15 0.00 0.08 1.38 1.45 0.47 14.40 6.25 0.13 1.00 264.24 2009 0.80 164.00 0.90 71.00 0.24 7.16 0.00 0.08 1.40 1.48 0.46 14.30 6.28 0.13 1.10 269.33 2010 0.81 168.00 0.91 73.00 0.25 7.18 0.00 0.08 1.43 1.52 0.46 14.25 6.40 0.14 1.20 275.63 2011 0.83 173.00 0.90 75.00 0.27 7.25 0.00 0.09 1.50 1.60 0.47 14.25 6.55 0.14 1.40 283.25 2012 0.86 179.00 0.86 77.00 0.30 7.45 0.00 0.09 1.57 1.75 0.49 14.20 6.70 0.14 1.70 292.11 2013 0.90 185.00 0.83 80.00 0.34 7.65 0.00 0.09 1.65 2.00 0.52 14.15 6.80 0.14 2.10 302.17 200913 CAGR 2.4 2.9 1.4 2.7 7.2 1.4 2.4 3.6 6.6 2.0 0.3 1.7 1.5 16.0 2.7

Sources: Cable and Satellite Broadcasting Association of Asia, Ministry of Internal Affairs and Communications (Japan), PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Cable penetration of TV households (%)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 10.6 30.9 30.6 49.0 0.3 11.4 0.0 4.1 9.3 7.7 36.8 79.3 79.4 0.9 1.4 30.0 2005 10.1 34.2 31.7 56.0 0.5 12.9 0.0 3.4 9.7 8.5 36.4 81.2 81.0 0.8 2.0 33.3 2006 9.4 37.0 32.6 60.7 0.7 12.9 0.0 4.1 10.2 9.5 40.7 82.0 82.7 0.8 3.0 35.7 2007 9.8 40.0 34.7 60.9 0.7 14.4 0.0 4.7 10.2 10.1 42.2 82.8 81.9 0.7 4.2 37.5 2008p 10.3 41.2 36.5 59.3 0.7 14.5 0.0 5.3 10.4 10.4 42.7 84.7 82.8 0.7 5.3 38.0 2009 10.3 41.5 36.1 58.7 0.7 14.4 0.0 5.3 10.2 10.6 41.4 83.6 81.0 0.6 5.5 37.9 2010 10.3 41.8 35.8 58.9 0.7 14.3 0.0 5.3 10.1 10.8 41.1 82.8 80.5 0.7 5.6 38.0 2011 10.5 42.3 34.7 59.1 0.8 14.4 0.0 5.9 10.3 11.3 41.6 82.4 80.4 0.6 6.2 38.3 2012 10.8 43.0 32.6 59.2 0.8 14.6 0.0 5.8 10.5 12.2 43.0 81.6 80.2 0.6 7.2 38.8 2013 11.2 43.7 30.9 60.2 0.9 14.9 0.0 5.8 10.8 13.9 45.2 80.9 79.5 0.6 8.4 39.3

Sources: Cable and Satellite Broadcasting Association of Asia, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Satellite
The satellite market rose by 45.5 percent in 2008 to 25.6 million households, boosted by a large increase in India. We expect satellite service to be legalized in the PRC in 2009 and to grow to 25 million households by 2013. We look for the satellite market in India to more than triple to 35 million households from 10 million in 2008. Satellite can reach rural areas much less expensively than cable or IPTV, and we expect that take-up rates in areas not served by other technologies will drive growth in the PRC and India during the next five years.

In India in 2008, two additional DTH services were launched by Indias largest two telecoms operators: Big TV by Reliance and Digital TV by Bharti Airtel. These launches took the total number of private DTH players in India to five. State broadcaster Doordarshan also operates a free-to-air DTH service. Since regulation in Indiaunlike in the rest of the worldprohibits DTH players from broadcasting exclusive content, DTH players face competition from around 20,000 cable operators in India. Hence, 2008 witnessed price wars, subsidizing of set-top boxes, and major marketing campaigns from both new and existing DTH players.

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In other countries, the large capacity of satellite compared with cable will enable providers to offer more channels and an attractive HD service. In Japan, for example, SKY PerfecTV added 15 HD channels in late 2008. In South Korea, on the other hand, we expect that the expanding appeal of IPTV and the availability of ondemand services on cable systems will cannibalize

the satellite market, and we project a 4.1 percent compound annual decline during the next five years. We project the overall satellite household universe to increase to 81.7 million households by 2013 from 25.6 million in 2008, a 26.1 percent compound annual increase. Penetration will rise to 10.6 percent from 3.7 percent in 2008.

Satellite households (millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 0.83 0.00 0.03 0.10 0.08 3.28 1.45 0.49 2.25 0.06 0.00 1.34 0.01 0.31 0.10 10.33 2005 0.94 0.00 0.04 1.00 0.12 3.43 1.60 0.59 2.35 0.10 0.00 1.44 0.02 0.33 0.25 12.21 2006 1.12 0.00 0.06 2.00 0.20 3.60 1.95 0.65 2.40 0.15 0.00 1.52 0.02 0.40 0.35 14.42 2007 1.29 0.00 0.08 3.50 0.50 4.15 2.20 0.68 2.50 0.20 0.00 1.55 0.03 0.46 0.45 17.59 2008p 1.51 0.00 0.09 10.00 1.00 4.50 2.30 0.70 2.60 0.24 0.00 1.60 0.03 0.53 0.50 25.60 2009 1.53 5.00 0.09 15.00 1.45 4.53 2.33 0.71 2.63 0.25 0.00 1.53 0.04 0.56 0.54 36.19 2010 1.57 10.00 0.10 20.00 2.10 4.58 2.37 0.72 2.68 0.27 0.00 1.45 0.08 0.60 0.59 47.11 2011 1.70 15.00 0.10 25.00 2.80 4.75 2.50 0.75 2.80 0.33 0.00 1.40 0.11 0.65 0.70 58.59 2012 1.85 20.00 0.11 30.00 3.40 4.95 2.65 0.79 2.95 0.40 0.00 1.35 0.12 0.71 0.85 70.13 2013 2.00 25.00 0.11 35.00 3.80 5.20 2.80 0.84 3.15 0.50 0.00 1.30 0.13 0.77 1.05 81.65 200913 CAGR 5.8 4.1 28.5 30.6 2.9 4.0 3.7 3.9 15.8 4.1 34.1 7.8 16.0 26.1

Note: Does not include free-to-air satellite households. Sources: Cable and Satellite Broadcasting Association of Asia, Japan Satellite Broadcasting Association, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Satellite penetration of TV households (%)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 11.1 0.0 1.4 0.1 0.3 6.9 26.1 33.6 19.9 0.4 0.0 8.1 0.1 2.1 0.7 1.6 2005 12.5 0.0 1.8 0.9 0.4 7.2 28.6 40.1 19.9 0.7 0.0 8.6 0.3 2.0 1.6 1.9 2006 14.8 0.0 2.6 1.8 0.7 7.4 34.5 43.9 19.5 1.1 0.0 9.0 0.3 2.3 2.1 2.2 2007 16.8 0.0 3.3 3.0 1.6 8.5 38.6 45.6 19.5 1.4 0.0 9.2 0.4 2.5 2.5 2.6 2008p 19.4 0.0 3.7 8.5 3.1 9.1 40.0 46.7 19.5 1.7 0.0 9.4 0.4 2.8 2.6 3.7 2009 19.6 1.3 3.6 12.4 4.4 9.1 40.2 47.0 19.2 1.8 0.0 8.9 0.5 2.8 2.7 5.1 2010 19.9 2.5 3.9 16.1 6.2 9.1 40.5 47.4 19.0 1.9 0.0 8.4 1.0 2.8 2.8 6.5 2011 21.4 3.7 3.9 19.7 8.0 9.4 42.4 49.0 19.3 2.3 0.0 8.1 1.3 2.9 3.1 7.9 2012 23.2 4.8 4.2 23.1 9.5 9.7 44.5 51.3 19.8 2.8 0.0 7.8 1.4 3.1 3.6 9.3 2013 24.8 5.9 4.1 26.3 10.4 10.1 46.7 54.2 20.6 3.5 0.0 7.4 1.5 3.2 4.2 10.6

Note: Does not include free-to-air satellite households. Sources: Cable and Satellite Broadcasting Association of Asia, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Subscription spending
During the next two years, we expect that consumers will be resistant to incurring additional expenses for the more discretionary portions of TV subscription such as premium content and digital tiers. We therefore look for spending growth per household to moderate, which will reduce overall spending growth. We expect a drop to a 9.5 percent rise in 2009 from the 13.7 percent increase in 2008, as well as a somewhat

improved, 10.8 percent increase in 2010. We then look for spending to increase at rates in excess of 12 percent annually during the subsequent three years as the discretionary components of the market expand as the economy improves. Overall subscription spending will expand at an 11.7 percent compound annual rate to $36.5 billion in 2013 from $21 billion in 2008.

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TV subscription market by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 935 1,679 208 1,716 40 3,703 368 249 195 163 124 899 1,091 210 18 11,598 2005 1,093 2,154 295 2,208 64 4,068 414 299 209 197 138 1,052 1,132 213 35 13,571 2006 1,302 2,750 342 2,666 86 4,243 496 344 222 229 165 1,202 1,173 221 55 15,496 2007 1,607 3,555 393 3,121 130 5,124 587 378 237 258 189 1,392 1,198 224 79 18,472 2008p 1,964 4,401 482 3,398 199 5,629 654 408 254 278 202 1,588 1,210 243 101 21,011 2009 2,084 5,436 510 3,771 277 5,770 684 424 261 284 208 1,692 1,251 242 113 23,007 2010 2,235 6,676 546 4,207 387 6,018 713 437 270 298 211 1,835 1,295 249 126 25,503 2011 2,473 8,284 589 4,662 507 6,458 762 471 291 324 223 2,000 1,350 257 152 28,803 2012 2,743 10,000 625 5,140 609 7,129 808 502 315 367 253 2,165 1,402 274 188 32,520 2013 3,015 11,669 667 5,681 675 7,969 861 542 343 436 288 2,372 1,452 292 239 36,501 200913 CAGR 9.0 21.5 6.7 10.8 27.7 7.2 5.7 5.8 6.2 9.4 7.4 8.4 3.7 3.7 18.8 11.7

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Video-on-demand
Growth in IPTV and a small but expanding digital cable market will drive spending on VOD over the long run. Telephone companies are promoting VOD to attract subscribers to IPTV, and cable operators are upgrading their infrastructures to offer VOD. Video-on-demand is being actively promoted in several countries. In South Korea, for example, The Dark Knight was launched on VOD two weeks before its DVD release. In Australia, telephone companies are expanding their IPTV reach and their VOD offers. There were nearly 10 million potential VOD households in Asia Pacific in 2008 compared with around 2 million in 2004. We expect relatively little growth in 2009, reflecting the slowing economy, and look for a modest increase in 2010 as well. Faster gains are anticipated

during 201113 as economic conditions improve and as the IPTV market grows faster. By 2013, there will be 19 million VOD households.

VOD households in Asia Pacific (millions)


20 15 10 5 0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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In addition to slower VOD household growth, we expect VOD spending per household to decrease during the next two years as consumers forgo discretionary expenses. We then look for a rebound in per-household spending during 201113.

The result will be a projected 7.4 percent decline in overall VOD spending in 2009, which would be an abrupt interruption from annual gains that exceeded 30 percent during the past four years. We expect a relatively tepid, 5.5 percent advance in 2010 and then a return to double-digit growth, with increases of more than 20 percent annually during 201113. South Korea and Japan are the region leaders, at $225 million and $199 million, respectively, in 2008, accounting for 80 percent of the total. Except for Hong Kong, whose subscription growth will be satellite based, we look for double-digit compound annual increases in each country for which we have data. Overall VOD spending will increase from $530 million in 2008 to $1 billion in 2013, growing at a 14.1 percent compound annual rate.

Annual spending per VOD household in Asia Pacific (US$)


60

50

40

30

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Video-on-demand and subscription VOD (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 3 NA 6 NA NA 32 NA 0 NA NA 1 53 NA NA NA 95 2005 7 NA 26 NA NA 58 NA 0 NA NA 3 85 NA NA NA 179 2006 11 NA 39 NA NA 85 NA 1 NA NA 4 125 NA NA NA 265 2007 17 NA 53 NA NA 141 NA 1 NA NA 7 168 NA NA NA 387 2008p 24 NA 70 NA NA 199 NA 2 NA NA 10 225 NA NA NA 530 2009 21 NA 69 NA NA 187 NA 2 NA NA 8 204 NA NA NA 491 2010 22 NA 70 NA NA 196 NA 2 NA NA 8 220 NA NA NA 518 2011 28 NA 77 NA NA 243 NA 3 NA NA 11 272 NA NA NA 634 2012 38 NA 88 NA NA 321 NA 4 NA NA 16 343 NA NA NA 810 2013 47 NA 103 NA NA 424 NA 5 NA NA 21 423 NA NA NA 1,023 200913 CAGR 14.4 8.0 16.3 20.1 16.0 13.5 14.1

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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There is a relatively small pay-per-view market in Asia Pacific that is being promoted by satellite providers and analog cable. Most of the pay-per-view activity is in Australia, New Zealand, Japan, and Hong Kong, which together accounted for 89 percent of total spending in 2008. While satellite expansion will continue to drive the market, the increased share of subscribers going to

IPTV and digital cablewhere VOD is the favored alternativewill cut into pay-per-view growth. As in the VOD market, we expect decreased spending per household in the near term followed by a rebound when the economy again expands at healthy rates. Overall pay-per-view spending will increase from $121 million in 2008 to $129 million in 2013, 1.3 percent compounded annually.

Pay-per-view spending (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 19 NA 5 NA NA 12 NA 17 NA NA 2 6 NA NA NA 61 2005 22 NA 8 NA NA 14 NA 22 NA NA 3 7 NA NA NA 76 2006 25 NA 10 NA NA 15 NA 27 NA NA 3 7 NA NA NA 87 2007 30 NA 13 NA NA 19 NA 31 NA NA 4 7 NA NA NA 104 2008p 37 NA 16 NA NA 21 NA 34 NA NA 5 8 NA NA NA 121 2009 36 NA 16 NA NA 20 NA 34 NA NA 4 8 NA NA NA 118 2010 37 NA 16 NA NA 20 NA 34 NA NA 3 7 NA NA NA 117 2011 35 NA 16 NA NA 21 NA 35 NA NA 4 8 NA NA NA 119 2012 36 NA 16 NA NA 22 NA 37 NA NA 5 8 NA NA NA 124 2013 36 NA 17 NA NA 24 NA 38 NA NA 6 8 NA NA NA 129 200913 CAGR 0.5 1.2 2.7 2.2 3.7 0.0 1.3

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Mobile TV
Mobile television has been available in South Korea and Japan for three years and was introduced in Australia, Indonesia, New Zealand, Taiwan, and Vietnam in 2008. Commercial launches are expected in the PRC and Thailand in 2009 and in Hong Kong and the Philippines in 2010. In Hong Kong, three mobile TV licenses are expected to be auctioned in 2009. Licensees will be required to launch services in 2010. SpeedCast in conjunction with Alcatel Lucent announced the launching of a satellite-based hosted service using DVB-H technology. Instead of wireless carriers creating their own infrastructure, they can access the hosted service that will be delivered by satellite to local towers for retransmission, saving infrastructure and operating costs for local carriers. The service will provide more than 20 channels and should make it easier for carriers to provide mobile TV. These developments will propel the subscription mobile TV market. At the same time, there have been setbacks. In Japan, Toshiba announced it is closing Mobile Broadcasting Corporation, its satellite mobile TV service. One Segment, a free digital terrestrial mobile TV service, has become the dominant platform, limiting the scope of the subscription market. While mobile TV is becoming ubiquitous in Japan, only a small portion of the market is on a paid basis. In South Korea, the free T-DMB mobile TV service, with more than 10 million users, dwarfs the paid service from TU Media, which has around 1.4 million subscribers. Nevertheless, with 22 channels compared with 6 for the free service, the paid service is slowly gaining ground. In Australia, significant third-generation (3G) upgrades by Telstra and Optus will expand the reach of mobile TV. Optus plans to extend its 3G network to virtually the entire country by the end of 2009.

The success of free services in Japan and South Korea will likely lead to the introduction of free services in other countries, which will cut into the potential for subscription services. It also appears that there is a niche for subscription services that provide more content than free services do. We expect that mobile television will advance on a parallel track, with both free and paid services expanding. The paid portion of the market will likely be the smaller segment, but we expect it will total $1.7 billion in 2013 from only $230 million in 2008. Despite South Korea and Japans having successful free services, we expect those two countries to have the largest subscription mobile TV services, with spending totaling an estimated $699 million in South Korea in 2013 and $318 million in Japan. We also expect that the PRC, Indonesia, and Australia will have mobile TV subscription markets in excess of $100 million by 2013. In the Philippines, the commercial launch of mobile TV has been delayed as the National Telecommunications Commission has yet to release guidelines for the operation of mobile TV services in the market. This means providers of mobile TV, such as Smart Communications, are currently limited to providing the service for free for their subscribers. To access the service, their subscribers need only have the appropriate type of technology-ready mobile phone.

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Mobile TV market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2006 29 NA NA NA 24 53 2007 31 NA NA NA 52 83 2008p 15 1 26 NA 3 NA NA 163 14 8 230 2009 16 4 2 27 NA 3 NA NA 284 14 3 11 364 2010 32 11 5 6 34 NA 6 NA 3 NA 352 29 3 25 506 2011 48 31 7 20 105 NA 8 NA 3 NA 423 44 10 43 742 2012 75 93 14 57 187 NA 13 NA 4 NA 553 61 18 66 1,141 2013 107 217 22 129 318 NA 18 NA 13 NA 699 79 31 94 1,727 200913 CAGR 48.1 164.3 65.0 43.1 33.8 41.4 63.7 49.7

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Public TV license fees


Only Japan, South Korea, Singapore, and Pakistan levy license fees on TV households to support their public broadcasters. Indonesia has a license fee program in place but does not require households to pay it. Consequently, collection is sporadic and the actual fees collected are not significant. Japan is the dominant market, at $5.2 billion in 2008, 92 percent of the total. TV household growth is the principal driver of license fee growth. There were 80.7 million TV households in the countries with public TV license fees in 2008. That total will rise to a projected 85.3 million by 2013, a 1.1 percent compound annual increase.

TV households in countries with public TV license fees (millions)


90 84.34 85.25 82.52 83.43 80.70 81.61 78.53 79.64

80

76.31 77.42

70

60

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Modest rate increases averaging 0.3 percent compounded annually will also contribute to growth.

We project public TV license fees to increase from $5.6 billion in 2008 to $6 billion in 2013, a 1.4 percent compound annual advance.

Public TV license fees (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 4,643 34 58 316 5,051 2005 4,919 47 58 318 5,342 2006 5,036 49 59 320 5,464 2007 5,118 51 59 322 5,550 2008p 5,201 53 60 324 5,638 2009 5,277 55 60 326 5,718 2010 5,354 56 61 328 5,799 2011 5,430 58 61 330 5,879 2012 5,508 60 62 331 5,961 2013 5,586 61 63 333 6,043 200913 CAGR 1.4 2.9 1.0 0.5 1.4

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Latin America

The outlook in brief


The economic slowdown will cut into near-term penetration growth and subscription spending. Growth in digital cable and the introduction of IPTV will fuel a small VOD market. Infrastructure upgrades will lead to mobile TV launches.

Overview
We project the market to expand from $9.5 billion in 2008 to $13 billion in 2013, a 6.5 percent compound annual increase. Subscription spending will increase to $12.7 billion in 2013, a 6.2 percent compound annual gain. VOD will double to $40 million in 2013, a 14.9 percent increase compounded annually. Mobile television will accelerate to $175 million by 2013.

TV subscription and license fee market by component (US$ millions)


Latin America Subscriptions Video-on-demand Mobile TV Total 2004 5,940 3 5,943 2005 6,606 4 6,610 2006 7,357 9 7,366 2007 8,376 14 8,390 2008p 9,449 20 1 9,470 2009 9,703 22 1 9,726 2010 10,006 26 5 10,037 2011 10,585 29 13 10,627 2012 11,580 35 68 11,683 2013 12,742 40 175 12,957

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

TV subscription and license fee market growth by component (%)


Latin America Subscriptions Video-on-demand Mobile TV Total 2004 7.9 7.9 2005 11.2 33.3 11.2 2006 11.4 125.0 11.4 2007 13.9 55.6 13.9 2008p 12.8 42.9 12.9 2009 2.7 10.0 0.0 2.7 2010 3.1 18.2 400.0 3.2 2011 5.8 11.5 160.0 5.9 2012 9.4 20.7 423.1 9.9 2013 10.0 14.3 157.4 10.9 200913 CAGR 6.2 14.9 180.9 6.5

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Brazil and Mexico were the leading countries in Latin America in 2008, at $3.2 billion and $2.4 billion, respectively, followed by Argentina at $1.7 billion.

Chile will be the fastest-growing country during the next five years, with a projected 8 percent compound annual increase, fueled by an expanding IPTV market. The remaining countries will expand at mid-single-digit rates ranging from 5.1 percent in Venezuela to 6.9 percent in Brazil.

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TV subscription and license fee market by country (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 1,073 1,994 470 677 1,481 248 5,943 2005 1,257 2,215 492 747 1,637 262 6,610 2006 1,418 2,430 544 855 1,843 276 7,366 2007 1,595 2,741 622 999 2,130 303 8,390 2008p 1,742 3,170 702 1,135 2,396 325 9,470 2009 1,784 3,267 727 1,165 2,450 333 9,726 2010 1,856 3,368 761 1,202 2,508 342 10,037 2011 1,971 3,571 828 1,271 2,625 361 10,627 2012 2,141 3,969 922 1,398 2,868 385 11,683 2013 2,337 4,427 1,030 1,548 3,198 417 12,957 200913 CAGR 6.1 6.9 8.0 6.4 5.9 5.1 6.5

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Subscription households and subscription spending


The number of subscription households in Latin America has increased at rates averaging around 10 percent annually during the past four years. Rising incomes allowed more people to be able to afford a subscription service. We expect economic declines to cut into disposable income growth, which in turn will lead to noticeably slower growth in subscription households in 2009 and 2010 compared with recent years. At the same time, new triple-play packages that offer implicit discounts for television are helping expand the market. The overall subscription television market will increase from 23.7 million households in 2008 to 30.1 million in 2013, a 4.8 percent compound annual increase.

Subscription TV penetration will rise to 26.2 percent in 2013 from 22.6 percent in 2008. Argentina has the largest number of subscribers in 2008, at 6.75 million, and will remain the leader in 2013, at 8.5 million. Mexico will have 7.8 million subscribers in 2013, and Brazil, 7.65 million. Subscription household penetration in Argentina will reach 82.1 percent by 2013. In Chile, the majority of television households will have a TV subscription in 2013, with penetration projected at 52 percent. No other country will reach a penetration rate of 50 percent during the next five years.

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Subscription TV households (millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 4.50 4.05 1.06 1.00 4.10 1.35 16.06 2005 5.20 4.45 1.10 1.10 4.50 1.40 17.75 2006 5.75 4.80 1.20 1.25 5.00 1.45 19.45 2007 6.30 5.30 1.35 1.45 5.64 1.55 21.59 2008p 6.75 6.00 1.49 1.63 6.23 1.62 23.72 2009 6.87 6.15 1.53 1.67 6.36 1.65 24.23 2010 7.10 6.30 1.59 1.72 6.50 1.68 24.89 2011 7.45 6.60 1.71 1.81 6.76 1.75 26.08 2012 7.94 7.10 1.87 1.97 7.24 1.83 27.95 2013 8.46 7.65 2.04 2.15 7.81 1.94 30.05 200913 CAGR 4.6 5.0 6.5 5.7 4.6 3.7 4.8

Note: Does not include free-to-air DTT and satellite households. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Subscription TV penetration of TV households (%)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 47.9 8.5 28.5 11.5 17.8 25.4 16.4 2005 54.7 9.2 29.3 12.5 19.1 26.2 17.8 2006 59.9 9.7 31.8 14.0 20.8 27.1 19.2 2007 64.9 10.4 35.5 16.1 23.0 28.8 20.9 2008p 68.9 11.5 39.0 17.9 24.9 30.0 22.6 2009 69.4 11.6 39.8 18.2 24.9 30.4 22.6 2010 71.0 11.6 41.2 18.5 25.0 30.9 22.8 2011 73.8 11.9 44.1 19.3 25.5 32.1 23.5 2012 77.8 12.5 47.9 20.7 26.8 33.4 24.8 2013 82.1 13.2 52.0 22.4 28.4 35.3 26.2

Note: Does not include free-to-air DTT and satellite households. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Cable
Triple-play offerings are driving the cable market. In Argentina, for example, Multicanal and Cablevision are investing more than $300 million in a fiber infrastructure to offer triple-play packages. In Colombia, Telmex acquired five cable companies and is using that platform to create an infrastructure to launch a triple-play service. In Mexico, cable operators were permitted to provide triple-play services beginning in 2007, which is helping expand cable. During the past two years, cable household growth in Latin America accelerated to increases in excess of 9 percent annually.

We expect cable household growth to slow to less than 3 percent annually during the next two years. We expect a stronger, 4.6 percent increase in 2011 as the economy begins to rebound, and increases of 6 percent or more during the subsequent two years, when the economy resumes a growth profile. The number of cable households in Latin America will increase to 21.8 million in 2013 from 17.7 million in 2008, a 4.3 percent compound annual increase. Cable penetration of TV households will rise from 16.8 percent in 2008 to 19 percent in 2013.

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Cable households (millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 4.10 2.95 0.94 0.90 2.90 1.03 12.82 2005 4.50 3.05 0.97 0.92 3.20 1.07 13.71 2006 4.90 3.20 1.03 0.95 3.60 1.11 14.79 2007 5.30 3.50 1.10 1.00 4.10 1.15 16.15 2008p 5.70 4.00 1.18 1.08 4.50 1.20 17.66 2009 5.80 4.10 1.20 1.10 4.60 1.22 18.02 2010 6.00 4.20 1.23 1.12 4.70 1.24 18.49 2011 6.30 4.40 1.30 1.16 4.90 1.28 19.34 2012 6.70 4.65 1.40 1.22 5.20 1.33 20.50 2013 7.10 4.95 1.50 1.30 5.55 1.40 21.80 200913 CAGR 4.5 4.4 4.9 3.8 4.3 3.1 4.3

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Cable penetration of TV households (%)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 43.6 6.2 25.2 10.3 12.6 19.4 13.1 2005 47.4 6.3 25.9 10.5 13.6 20.0 13.8 2006 51.0 6.4 27.3 10.7 15.0 20.7 14.6 2007 54.6 6.9 29.0 11.1 16.7 21.4 15.7 2008p 58.2 7.7 30.9 11.9 18.0 22.2 16.8 2009 58.6 7.7 31.3 12.0 18.0 22.5 16.8 2010 60.0 7.7 31.9 12.0 18.1 22.8 17.0 2011 62.4 7.9 33.5 12.3 18.5 23.4 17.4 2012 65.7 8.2 35.9 12.8 19.3 24.3 18.2 2013 68.9 8.5 38.3 13.5 20.2 25.5 19.0

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

IPTV
While cable companies have been entering the telephone market, there remain impediments to telephone companies offering television. In Argentina, Telecom Argentina is testing an IPTV service and is petitioning the government to let it offer IPTV on a commercial basis. We expect IPTV to become available in 2010. In Brazil, Brazil Telecom launched a VOD service using IPTV, but IPTV is still not permitted as a platform for television programs. Unless the law changes, we do not expect IPTV to be introduced in Brazil.

In Mexico, Telmex has been looking to modify its license to allow it to offer IPTV, but so far is not permitted to do so. Given the recent ruling allowing cable companies to provide telephone service, we expect that Telmex will ultimately be permitted to provide IPTV, and we expect a launch in 2010. In Venezuela, state-owned telephone company Cantv is upgrading its infrastructure, and we expect an IPTV launch there in 2011. Currently, Chile is the only country with an active IPTV service. We expect Chile will remain the largest IPTV market in Latin America, with 130,000 subscribers in 2013. The overall market will total 290,000 subscribers.

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IPTV households (millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2008p 0.01 0.01 2009 0.02 0.02 2010 0.01 0.04 0.01 0.06 2011 0.02 0.07 0.02 0.01 0.12 2012 0.04 0.10 0.04 0.02 0.20 2013 0.06 0.13 0.06 0.04 0.29 200913 CAGR 67.0 96.1

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Satellite
There is an active satellite market in Latin America that reaches areas not accessible by cable. The satellite household base has grown much faster than the cable household base, with double-digit annual gains during each of the past five years. We expect an even sharper slowdown in satellite household growth than in cable household growth during the next two years relative to 2008 because the cost of a satellite dish will be a significant impediment when disposable income is squeezed.

We expect growth to drop to less than 2.5 percent annually in 2009 and 2010. We also look for a larger rebound in satellite than in cable during the latter part of the forecast period as rising incomes make satellite dishes affordable to more people. We project increases of 9.5 percent or more in 2012 and 2013. We project the overall satellite market to increase from 6.1 million in 2008 to 8 million in 2013, growing at a 5.6 percent compound annual rate. Satellite penetration will rise to 6.9 percent in 2013 from 5.8 percent in 2008.

Subscription satellite households (millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 0.40 1.10 0.12 0.10 1.20 0.32 3.24 2005 0.70 1.40 0.13 0.18 1.30 0.33 4.04 2006 0.85 1.60 0.17 0.30 1.40 0.34 4.66 2007 1.00 1.80 0.25 0.45 1.54 0.40 5.44 2008p 1.05 2.00 0.30 0.55 1.73 0.42 6.05 2009 1.07 2.05 0.31 0.57 1.76 0.43 6.19 2010 1.09 2.10 0.32 0.60 1.79 0.44 6.34 2011 1.13 2.20 0.34 0.65 1.84 0.46 6.62 2012 1.20 2.45 0.37 0.75 2.00 0.48 7.25 2013 1.30 2.70 0.41 0.85 2.20 0.50 7.96 200913 CAGR 4.4 6.2 6.4 9.1 4.9 3.5 5.6

Note: Does not include free-to-air satellite households. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Subscription satellite penetration of TV households (%)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 4.3 2.3 3.2 1.1 5.2 6.0 3.3 2005 7.4 2.9 3.5 2.0 5.5 6.2 4.1 2006 8.9 3.2 4.5 3.4 5.8 6.3 4.6 2007 10.3 3.5 6.6 5.0 6.3 7.4 5.3 2008p 10.7 3.8 7.8 6.0 6.9 7.8 5.8 2009 10.8 3.9 8.1 6.2 6.9 7.9 5.8 2010 10.9 3.9 8.3 6.5 6.9 8.1 5.8 2011 11.2 4.0 8.8 6.9 6.9 8.4 6.0 2012 11.8 4.3 9.5 7.9 7.4 8.8 6.4 2013 12.6 4.7 10.5 8.9 8.0 9.1 6.9

Note: Does not include free-to-air satellite households. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Subscription spending
Just as subscription household growth will slow during the next two years, we also expect slower growth in subscription spending per household, reflecting the tightening economy and a slower take-up rate for premium services. Spending per household should grow faster during the latter part of the forecast period, when economic conditions improve.

In 2008, TV subscription spending in Latin America rose by 12.8 percent. We expect increases averaging 2.9 percent during the next two years followed by accelerating growth to 2013, when we project a 10 percent advance. For the forecast period as a whole, TV subscription spending will increase at a 6.2 percent compound annual rate from $9.4 billion in 2008 to $12.7 billion in 2013.

TV subscription market (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 1,072 1,993 470 677 1,480 248 5,940 2005 1,255 2,214 492 747 1,636 262 6,606 2006 1,415 2,428 543 854 1,841 276 7,357 2007 1,590 2,738 621 998 2,127 302 8,376 2008p 1,735 3,165 700 1,134 2,391 324 9,449 2009 1,777 3,261 725 1,164 2,444 332 9,703 2010 1,848 3,358 759 1,200 2,501 340 10,006 2011 1,962 3,553 826 1,269 2,616 359 10,585 2012 2,129 3,900 918 1,396 2,854 383 11,580 2013 2,322 4,285 1,021 1,545 3,155 414 12,742 200913 CAGR 6.0 6.2 7.8 6.4 5.7 5.0 6.2

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Video-on-demand
Cable upgrades that allow for triple-play packages also create a platform for video-on-demand. The emergence of IPTV will also enhance the VOD base because one of the features of IPTV is its ability to provide VOD. The effective household base for VOD is still small in Latin America, at only 1.8 million in 2008, a figure we project will more than double to 3.7 million by 2013. As with the subscription market, we expect spending per VOD household to decline in 2009, which will dampen overall spending growth. We expect a $2-million increase in VOD spending in 2009, down from the $6-million advance in 2008. A rise in per-household spending will propel the VOD market during subsequent years. We project total VOD spending to increase to $40 million in 2013 from $20 million in 2008, a 14.9 percent compound annual rate.

VOD households in Latin America (millions)


5 4 3 2 1 0 0.26 0.55 0.89 1.82 1.29 2.67 2.23 2.96 3.33 3.74

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Video-on-demand and subscription VOD (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 1 1 1 3 2005 2 1 1 4 2006 3 2 1 1 2 9 2007 5 3 1 1 3 1 14 2008p 7 4 2 1 5 1 20 2009 7 5 2 1 6 1 22 2010 8 5 2 2 7 2 26 2011 9 7 2 2 7 2 29 2012 11 9 3 2 8 2 35 2013 12 10 3 3 9 3 40 200913 CAGR 11.4 20.1 8.4 24.6 12.5 24.6 14.9

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Mobile TV
Mobile TV is currently available only in Brazil. Brazil adopted the Japanese ISDB-T (Integrated Services Digital BroadcastingTerrestrial) standard for its digital terrestrial television service and is using that platform to deliver mobile television. In Chile, the three mobile operators are seeking ultrahigh frequencies for mobile TV, and we expect a launch in 2009. In Mexico, Iusacell upgraded its wireless network in preparation for mobile TV, which we expect in 2009.

In Argentina, each of the wireless carriers upgraded its networks to 3G, and we look for mobile TV to be launched in 2010. In the near term, we expect little demand for mobile TV as well as slow rollouts as providers face difficulty in obtaining financing. We expect the mobile TV market to remain tiny during the next three years, at a projected $13 million in 2011. We then look for spending to ramp up as rollouts accelerate and incomes rise. By 2013 we expect the mobile TV market to total $175 million.

Mobile TV market (US$ Millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2008p 1 NA NA 1 2009 1 NA NA 1 2010 5 NA NA 5 2011 11 NA 2 NA 13 2012 1 60 1 NA 6 NA 68 2013 3 132 6 NA 34 NA 175 200913 CAGR 165.5 180.9

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Television advertising

242 Summary 243 North America 253 Europe, Middle East, Africa (EMEA) 262 Asia Pacific 269 Latin America

Summary

Television advertising
The television advertising market consists of advertiser spending on both terrestrial television and multichannel television. It is distinct from mobile TV advertising and advertising on TV Web sites, both of which are covered in the Internet Advertising: Wired and Mobile chapter. Net television advertising figuresconsisting of spending minus agency commissions and discountsare tracked in EMEA (Europe, Middle East, Africa), Asia Pacific, Latin America, and Canada. Advertising in the US and Russia is reported with agency commissions included, as is customary. Multichannel advertising refers to advertising on networks that are accessed by viewers via cable (analog or digital), satellite, digital terrestrial television (DTT), or other means but that are not otherwise available without these services. Terrestrial advertising consists of advertising that is generated by free-to-air broadcast networks and that can be received through an ordinary television receiver, even if viewers can also receive such networks through a cable, satellite, or DTT service.

Market size and growth by component


Global terrestrial advertising is the dominant component of total television advertising, at $125 billion in 2008, 74 percent of the total. Terrestrial advertising will fall by 13 percent in 2009 and will continue to decline through 2011. Spending in 2013 will be a projected $116.2 billion, a 1.5 percent compound annual decrease from 2008. Multichannel advertising will be less affected by the economy, although we still expect a 7.1 percent decrease in 2009. We look for a rebound in 2010 and an increase to $52.2 billion by 2013, up 3.8 percent compounded annually from $43.3 billion in 2008.

Principal drivers
Near-term economic declines will be the dominant factor affecting the market in each region, with an improvement in the economic environment contributing to the recovery during 201213. Multichannel advertising will be the fastest-growing sector in each region, buoyed by large increases in digital households and viewing-share gains for cable, satellite channels, and DTT channels. Highdefinition television (HDTV) will also boost advertising on free-to-air channels once the underlying economic environment improves.

Market size and growth by region


The global television advertising market will decline by 11.4 percent in 2009 and will total an estimated $168.4 billion in 2013, nearly returning to the $168.3-billion level of 2008. The market will remain weak during 2010 and 2011 before improving during 201213. Latin America will be the fastest-growing market, with a compound annual increase of 1.4 percent. Asia Pacific is next, with a projected 0.7 percent compound annual gain. We expect EMEA to be flat and North America to decline by 0.6 percent compounded annually. North America will remain the largest market in 2013, at $69.3 billion, followed by EMEA at $48.9 billion and Asia Pacific at $37.2 billion. Latin America will total $13.1 billion.

Data for the global television advertising market by region and for the global television advertising market by component can be found within the Executive Summary on page 39.

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North America

The outlook in brief


The economic downturn will lead to a sharp drop in television advertising in 2009. The incidence of commercial skipping will plateau as the digital video recorder (DVR) market matures, leading to improved broadcast network growth once the economy recovers. Viewing-share gains and the introduction of addressable advertising will contribute to cable network advertising growth during 201112.

Overview
Television advertising will fall by a projected 13.6 percent in 2009 and will total an estimated $69.3 billion in 2013, representing a 0.6 percent compound annual decrease from $71.4 billion in 2008. Multichannel advertising will rise by an estimated 2.1 percent compounded annually from $28.2 billion in 2008 to $31.3 billion in 2013. Terrestrial advertising will fall by 15.9 percent in 2009 and in 2013 will be 2.6 percent lower than in 2008 on a compound annual basis, falling to $37.9 billion from $43.1 billion.

Television advertising market by component (US$ millions)


North America Terrestrial advertising Multichannel advertising Total 2004 45,847 22,191 68,038 2005 43,700 24,374 68,074 2006 46,612 25,852 72,464 2007 44,603 27,208 71,811 2008p 43,149 28,218 71,367 2009 36,285 25,368 61,653 2010 36,391 26,172 62,563 2011 35,877 27,060 62,937 2012 39,026 29,571 68,597 2013 37,910 31,341 69,251

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Television advertising market growth by component (%)


North America Terrestrial advertising Multichannel advertising Total 2004 10.2 14.5 11.6 2005 4.7 9.8 0.1 2006 6.7 6.1 6.4 2007 4.3 5.2 0.9 2008p 3.3 3.7 0.6 2009 15.9 10.1 13.6 2010 0.3 3.2 1.5 2011 1.4 3.4 0.6 2012 8.8 9.3 9.0 2013 2.9 6.0 1.0 200913 CAGR 2.6 2.1 0.6

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

The United States will experience the steeper near-term decline, falling by 13.7 percent in 2009 compared with a projected 11.2 percent decrease in Canada. In addition to the impact of the economy, television in the United States will lose the political and Olympic advertising that contributed to the market in 2008. By contrast, Canada had relatively less political and Olympic advertising than the US did in 2008 and therefore had less to lose. During the 201013 period, we expect both the United States and Canada to rebound with a projected 3.4 percent advance compounded annually in Canada and 2.9 percent in the United States.

For the forecast period as a whole, Canada will increase at a 0.3 percent compound annual rate to $3.2 billion in 2013 from $3.1 billion in 2008. Television advertising in the United States will decrease from $68.3 billion in 2008 to $66.1 billion in 2013, a 0.6 percent decrease compounded annually.

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Television advertising market by country (US$ millions)


North America United States Canada Total 2004 65,264 2,774 68,038 2005 65,254 2,820 68,074 2006 69,428 3,036 72,464 2007 68,723 3,088 71,811 2008p 68,268 3,099 71,367 2009 58,900 2,753 61,653 2010 59,750 2,813 62,563 2011 60,100 2,837 62,937 2012 65,600 2,997 68,597 2013 66,100 3,151 69,251

At average 2008 exchange rates. Sources: Canadian Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Universal McCann, Wilkofsky Gruen Associates

Television advertising market growth by country (%)


North America United States Canada Total 2004 11.9 4.8 11.6 2005 0.0 1.7 0.1 2006 6.4 7.7 6.4 2007 1.0 1.7 0.9 2008p 0.7 0.4 0.6 2009 13.7 11.2 13.6 2010 1.4 2.2 1.5 2011 0.6 0.9 0.6 2012 9.2 5.6 9.0 2013 0.8 5.1 1.0 200913 CAGR 0.6 0.3 0.6

Sources: Canadian Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Universal McCann, Wilkofsky Gruen Associates

Economic downturn
The difficult economic environment began to cut into the broadcast network advertising market in both the United States and Canada in 2008. US broadcast network advertising posted a modest, 1.0 percent advance, and Canadian broadcast advertising fell by 1.2 percent. The US market was bolstered by more than $1 billion in advertising for the Beijing Olympics. The Beijing Olympics also boosted television advertising in Canada. However, the Olympic advertising of 2008 will leave the North American market in 2009, exacerbating the decline, but will return in 2010. In addition to the slumping economy, broadcast networks were hurt by the writers strike in early 2008 that interrupted the flow of programs, leading to increased airings of reruns and reality shows. Ratings were down significantly. The impact was not limited to the United States. Canadian broadcasters were faced with a shortage of original US shows.

Cable networks and specialty channels were less affected by the strike, because they rely more on live programming, reruns, and reality shows as a matter of course. The strike therefore accelerated the shift in viewing from broadcast networks to cable networks. Cable news channels also benefited from the enormous interest in the presidential campaign that lasted from the fall of 2007 through November 2008. Cable news channels experienced a spike in ratings and doubledigit advertising growth. That viewership gain as well as the ad spending increase came at the expense of the broadcast networks. The growth in cable news channel viewing also led to an increase in political advertising going to cable networks as compared with the past. Furthermore, cable networks are getting more involved in original production. Consequently, cable network advertising held up relatively well in 2008. US cable network advertising rose by 4 percent in 2008 compared with 1 percent growth in broadcast network advertising. In Canada, specialty channels recorded a 4.4 percent increase, while broadcast networks experienced a 1.2 percent decline.

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2008 networks advertising growth in North America (%)


6 4 2 0 2 1.2 Canada 4.0 Broadcast networks Cable networks 4.4

While the economic downturn will affect all segments of the market, we expect that the broadcast networks and local advertising will be hardest-hit compared with cable networks and specialty channels. We expect a 15.9 percent decrease in the United States in 2009 and a 13.2 percent decline in Canada.

1.0

United States

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Broadcast network and local television advertising market (US$ millions)


North America United States Canada Total 2004 48,840 2,110 50,950 2005 46,958 2,099 49,057 2006 50,108 2,208 52,316 2007 48,109 2,199 50,308 2008p 46,828 2,171 48,999 2009 39,400 1,885 41,285 2010 39,550 1,941 41,491 2011 39,100 1,927 41,027 2012 42,600 2,026 44,626 2013 41,600 2,110 43,710

At average 2008 exchange rates. Sources: Canadian Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Universal McCann, Wilkofsky Gruen Associates

Broadcast network and local television advertising market growth (%)


North America United States Canada Total 2004 10.1 1.6 9.7 2005 3.9 0.5 3.7 2006 6.7 5.2 6.6 2007 4.0 0.4 3.8 2008p 2.7 1.3 2.6 2009 15.9 13.2 15.7 2010 0.4 3.0 0.5 2011 1.1 0.7 1.1 2012 9.0 5.1 8.8 2013 2.3 4.1 2.1 200913 CAGR 2.3 0.6 2.3

Sources: Canadian Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Universal McCann, Wilkofsky Gruen Associates

US market
The scheduled shutdown of analog broadcasting in the United States could also have an adverse impact on television station viewing and advertising. Millions of households still receive television through over-theair signals. Moreover, even in households where the primary television set is connected to a multichannel distribution system, secondary sets often are not.

The scheduled analog broadcasting shutdown date of February 17, 2009, became delayed until June 12, 2009, because many households were not prepared for the switchover. The switchover will likely lead to an uptick in multichannel subscriptions, resulting in television stations and broadcast networks facing more competition from cable networks. Consequently, the competitive position of broadcast television will deteriorate in 2009, further eroding their advertising.

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In the United States, local advertising on television stations fell 9 percent in 2008, the steepest decrease of all television advertising segments. We expect an additional 16.1 percent decrease in 2009. The national spot market fell by 3 percent in 2008, cushioned by the surge in political advertising, most of which will leave the market in 2009. We expect a 19.7 percent decline in national spot in 2009. We expect that drop in 2009 to be steeper than in 2007 or 2005 because of the declining economy. Overall US television station advertising fell by 6.5 percent in 2008, and a further 17.6 percent decrease is expected in 2009. Multichannel systems in the United States garnered a larger share of political advertising than in the past, helping them post a 2.5 percent advance in 2008. The absence of that advertising in 2009 combined with cutbacks by traditional advertisers will lead to a 14.5 percent decline in 2009. That decrease will be less than that projected for television stations, because of multichannels increased viewing share as the digital switchover boosts subscribership. Total TV station and multichannel systems advertising in the United States fell 4.8 percent in 2008, and we project a further 17 percent decline in 2009.

providers for the Local Programming Improvement Fund from 5 percent to 6 percent. Increased funding should help certain local stations in Canada improve their news programming and other operations, which should have a positive effect on viewing and advertising over the longer run. The analog switch-off scheduled in Canada in 2011 will likely have a modest adverse impact on the remaining over-the-air market as the take-up rate of paid distribution increases and viewing of specialty channels rises. The Canadian government is changing the policy that prohibits cable and satellite providers from selling advertising on US cable programs carried in Canada. US cable programs typically allocate two minutes per hour for local advertising (called local avails). Currently, cable operators are required to use 30 seconds of that time to promote Canadian programming. The remainder can be used to promote only a cable or satellite systems own products. In the future, cable operators will be permitted to sell that time to Canadian advertisers, which should provide an incremental revenue stream. We expect increases averaging 4.7 percent annually during 2012 and 2013, reflecting the impact of this added revenue. The local market in Canada will also be helped by new over-the-air stations targeting niche audiences. In 2008, for example, Rogers Communications launched OMNI Calgary and OMNI Edmonton, which serve the expanding immigrant population in each of those cities. These positive developments will help the local market in Canada to outperform the United States. We project 1 percent compound annual decline in local television advertising in Canada during 200913 compared with a projected 2.6 percent decline compounded annually in the US. Local television advertising as a whole in North America fell by 4.8 percent in 2008, and we project a 17 percent decrease in 2009. By 2013, local television advertising will total $25.6 billion compared with $29.2 billion in 2008, also a 2.6 percent compound annual decrease.

Canadian market
The local television market in Canada is relatively small, constituting only 12.7 percent of total television advertising in 2008 compared with 42.2 percent in the United States. Local television advertising in Canada fell 1.5 percent in 2008, a smaller decrease compared with that in the United States. We expect a somewhat smaller, 14.2 percent decline in 2009 because Canada is not affected by the large swings in political advertising seen in the United States. In 2008, the Canadian Radio-television and Telecommunications Commission (CRTC) raised the fee paid by broadcasters, cable operators, and satellite

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Television station and multichannel systems advertising market (US$ millions)


North America United States Television stations National spot Local Total television station advertising Multichannel systems Total United States Canada Total 11,370 14,507 25,877 5,103 30,980 377 31,357 10,040 14,260 24,300 5,358 29,658 371 30,029 11,626 14,887 26,513 5,705 32,218 387 32,605 10,138 14,411 24,549 5,705 30,254 400 30,654 9,834 13,114 22,948 5,850 28,798 394 29,192 7,900 11,000 18,900 5,000 23,900 338 24,238 8,300 10,500 18,800 5,100 23,900 347 24,247 8,000 10,400 18,400 5,150 23,550 342 23,892 9,000 11,000 20,000 5,600 25,600 361 25,961 8,200 11,200 19,400 5,800 25,200 375 25,575 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

At average 2008 exchange rates. Sources: Canadian Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Universal McCann, Wilkofsky Gruen Associates

Television station and multichannel systems advertising market growth (%)


North America United States Television stations National spot Local Total television station advertising Multichannel systems Total United States Canada Total 14.3 7.3 10.3 5.0 9.4 0.5 9.2 11.7 1.7 6.1 5.0 4.3 1.6 4.2 15.8 4.4 9.1 6.5 8.6 4.3 8.6 12.8 3.2 7.4 0.0 6.1 3.4 6.0 3.0 9.0 6.5 2.5 4.8 1.5 4.8 19.7 16.1 17.6 14.5 17.0 14.2 17.0 5.1 4.5 0.5 2.0 0.0 2.7 0.0 3.6 1.0 2.1 1.0 1.5 1.4 1.5 12.5 5.8 8.7 8.7 8.7 5.6 8.7 8.9 1.8 3.0 3.6 1.6 3.9 1.5 3.6 3.1 3.3 0.2 2.6 1.0 2.6 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Sources: Canadian Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Universal McCann, Wilkofsky Gruen Associates

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Impact of DVR growth


The television advertising market also was affected by a large increase in digital video recorder penetration. In the United States, DVR penetration rose in 2008 to nearly 27 percent from around 20 percent in 2007. In Canada, penetration rose to nearly 18 percent from 10 percent in 2007. For North America as a whole, there were an average of 32.7 million DVR households in 2008, a gain of 41 percent in a weak economy. From 2006 to 2008, the DVR household count nearly tripled. The take-up rate of the DVR is mirroring that of the VCR in the 1980s and the DVD in the current decade. Using that experience as a guide and taking into account a weak economy during the next two years, we expect DVR penetration to increase to 60 percent in the United States and to 52 percent in Canada by 2013. The overall number of DVR households in North America will rise to an estimated 78.7 million, for a penetration rate of 59.4 percent.

Effective DVR penetration in the United States could be even higher depending on how cable operators react to an August 2008 ruling by the US Court of Appeals in New York that allows Cablevision and, by extension, other cable operators to store recorded programs in a central location rather than providing each household with DVR capability. In principle, subscribers without a DVR set-top box could record programs simply by using their remote control devices. Use of DVR functions on an ad hoc basis could expand the effective DVR universe. In Canada, this area is not regulated, so DTT operators will seek to match the cable operators by introducing hybrid models with the download signal from the satellite link, and an Internet connection to the receiver box for uploads. This echoes the approach taken by Sky TV in Europe. We expect that the impact of DVRs on television advertising will be somewhat larger than the trend in DVR household growth.

DVR households
North America United States DVR households (millions) DVR household penetration (%) Canada DVR households (millions) DVR household penetration (%) North America total DVR households (millions) DVR household penetration (%) 5.7 4.7 9.5 7.8 11.7 9.5 23.2 18.7 32.7 26.0 39.2 30.8 47.6 37.0 59.6 45.9 70.7 53.9 78.7 59.4 0.2 1.7 0.5 4.1 0.7 5.7 1.2 9.8 2.2 17.7 2.7 21.6 3.6 28.6 4.6 36.2 5.7 44.5 6.7 51.9 5.5 5.1 9.0 8.2 11.0 9.9 22.0 19.7 30.5 26.9 36.5 31.8 44.0 38.0 55.0 47.0 65.0 54.9 72.0 60.3 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013

Annual averages. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

The impact of DVRs on television viewing and television advertising is not yet clear. Overall television viewing is up in the United States despite increased competition from the Internet and video games, suggesting that while the DVR is not contributing to an overall decline in viewing, it is likely contributing to an overall decline in advertising exposure.

Networks and advertisers in the United States shifted from measuring the viewing of programs on a live basis to live viewing plus the viewing of commercials on a program within three days of its original airing, known as C3 ratings. Initial comparisons with prior years live ratings were adverse because of much higher DVR penetration and the fact that commercial skipping was

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occurring even without the DVR but was not measured. Viewers leave the room, switch channels by using their remote control devices, or skip commercials by using their VCR or DVD recorders. Advertisers typically assumed a certain level of commercial skipping in the past. One advantage of the new system is that it actually measures commercial viewing as opposed to program viewing. The issue of commercial skipping is not new; it was a major concern in the early days of the VCR. Early adopters recorded a lot of shows and did a lot of commercial skipping during playback. Over time, the incidence of recording decreased as the novelty effect wore off, and viewers recorded only those shows they had the most interest in seeing. As the incidence of recording decreased, so did commercial skipping, and the issue faded. Also, commercial skipping, as measured by C3 ratings, is not growing as fast as the number of DVR households, which suggests that skipping per household is not growing or is decreasing. Nearly two-thirds of DVR households in North America have had their DVRs for less than two years. As with the VCR, early DVR adopters do a lot of recording, giving them a lot of opportunities for commercial skipping. Moreover, the rapid expansion in the DVR household base means that a growing share of the television universe is watching shows during playback. As the DVR market matures, we would expect that among DVR households, the incidence of recording and watching shows during playback would reach a plateau. Most of DVR recording is for high-rated broadcast network shows. These programs benefit from increased exposure compared with live-only viewing but also experience more commercial skipping. In the near term, with the DVR universe expanding rapidly and dominated by early adopters, the net impact is likely negative. Over time, as DVR household growth slows and as the incidence of commercial skipping stabilizes, commercial viewing will also stabilize. DVR playback occurs during late night hours, after the local late evening news, and, increasingly, during the 10 p.m. hour. Ratings for prime-time shows during that period have fallen more than ratings for shows aired during other time periods. That factor likely was considered in NBCs decision to abandon expensive, scripted shows during that time slot in favor of Jay Leno.

The networks are developing new ways to sell advertising. C7 ratingsviewing of commercials within seven days of the original broadcastare generally holding up well compared with live ratings in the past. While advertisers as a group have not agreed to buy on that measure, for some advertisers whose message is not time sensitive there may be opportunities to sell on that basis. Advertising shown on the lower portion of the screen during the program itself is increasingly being used as a way to avoid the impact of the DVR. Product placements and show sponsorships are alternatives to advertising revenues that have been around for a while. The market in general is changing, and initial broadcasts no longer adequately capture viewing. Cable networks are increasingly airing original scripted shows that are repeated often during the initial week (encore runs). These networks are reporting cumulative viewing levels and are attempting to sell advertising on that basis. Broadcast networks also have repeat airings on television both on their own networks and on their owned cable networks. Programs also are available for streaming over the Internet and are becoming available through video-on-demand, which is, in effect, equivalent to a DVR service. We believe that over time, new audience metrics, including those that measure audience engagement, will become appropriate for certain advertisers and will allow networks to more efficiently sell advertising in the changing environment. In parallel, creative agencies and media buyers are creating proprietary databases aimed at estimating the impacts of multiformat campaigns, even though the measurements in each format are not directly comparable. This may affect on the relative importance of television, which was traditionally the starting point for most major campaign plans over the forecast period. The broadcast networks, as well as the cable networks, will benefit from a growing high-definition (HD) universe. HD set sales were up by more than 20 percent during the first half of 2008, although growth fell during the latter part of the year, when the economy declined. Nevertheless, around 25 percent of television households watch programs in HD.

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Viewing levels in HD households are higher than in nonHD households. As HD penetration expands, television will be better able to hold on to its audiences in the face of growing competition from other media, since HD makes TV more appealing to viewers. Television is also developing 3-D capability. Liquid crystal display sets that are 3-D capable are expected to be introduced in 2009. The 2009 Bowl Championship Series championship game was shown in 3-D-equipped movie theaters to promote the technology, and 3-D has become a successful draw in theaters. It should have a similar impact on television. Ultimately, improved audience retention from HD and 3-D will translate into improved advertising growth.

Over time, viewers longer DVR ownership tenure will mean that the incidence of commercial skipping will flatten rather than increase as it is doing now. This will result in a more stable ratings pattern, benefiting the broadcast networks once the economy recovers. Also, the Vancouver 2010 Winter Olympics will generate higher ratings in North America due to time zone and cultural connections. In the United States, we look for a 9.3 percent increase in 2012the next Summer Olympics yearand a 3.5 percent decline in 2013: in the next postSummer Olympics year. For the forecast period as a whole, broadcast network advertising in the United States will fall at a 1.9 percent compound annual rate to $16.4 billion from $18 billion in 2008.

Broadcast network advertising market (US$ millions)


North America United States Canada Total 2004 17,860 1,733 19,593 2005 17,300 1,728 19,028 2006 17,890 1,821 19,711 2007 17,855 1,799 19,654 2008p 18,030 1,777 19,807 2009 15,500 1,547 17,047 2010 15,650 1,594 17,244 2011 15,550 1,585 17,135 2012 17,000 1,665 18,665 2013 16,400 1,735 18,135

At average 2008 exchange rates. Sources: Canadian Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Universal McCann, Wilkofsky Gruen Associates

Broadcast network advertising market growth (%)


North America United States Canada Total 2004 11.3 0.6 10.2 2005 3.1 0.3 2.9 2006 3.4 5.4 3.6 2007 0.2 1.2 0.3 2008p 1.0 1.2 0.8 2009 14.0 12.9 13.9 2010 1.0 3.0 1.2 2011 0.6 0.6 0.6 2012 9.3 5.0 8.9 2013 3.5 4.2 2.8 200913 CAGR 1.9 0.5 1.7

Sources: Canadian Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Universal McCann, Wilkofsky Gruen Associates

In Canada, time shifting of viewing goes beyond DVRs. Cable and satellite providers often carry local stations on their systems and retransmit them nationally to subscribers. Distant-signal retransmission makes it possible for subscribers in one television market to watch local stations originating in another market.

The out-of-market audience for stations in the eastern time zone in Canada is not credited to those stations, and they cannot monetize that viewing by charging advertisers higher rates. Meanwhile, stations in the west may lose viewers because people may have already seen the same program earlier, and this decline in viewing affects advertising.

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Broadcasters in Canada applied to the CRTC for cable and satellite companies to pay broadcasters to carry their stations. The CRTC rejected that request for stations carried by local cable operators but did approve carriage fees for out-of-market distant-signal retransmissions. Broadcasters will be permitted to negotiate carriage fees only for out-of-province stations beginning in September 2011. It is the stated intent of television distributors in Canada to migrate households from DVRs to videoon-demand systems where the operator sells the ad rather than the broadcaster, and ads will not be able to be skipped. Once the video-on-demand systems have been established, distributors will stop offering DVR service. They also intend to encrypt signals to prevent third-party DVRs from functioning. Such a development would reduce the value of traditional broadcasters by limiting the reach of the ads they sell. The broadcast networks will receive a boost in 2010 as the Vancouver Olympics provides an overall lift to the advertising market in Canada. After the Canadian market falls by 12.9 percent in 2009, we project a 3 percent rebound in 2010. A portion of those funds will leave the market in 2011. We look for gains of 5 percent in 2012 and 4.2 percent in 2013. Broadcast network advertising in Canada will decline from $1.78 billion in 2008 to $1.74 billion in 2013, a 0.5 percent decrease compounded annually. Broadcast network advertising for North America as a whole will total $18.1 billion in 2013, down 1.7 percent on a compound annual basis from $19.8 billion in 2008.

networks are reducing the number of scripted shows they air. Scripted shows are the ratings leaders on cable, and as more such programs get added, cable viewing shares should continue to rise. Cable networks are not immune to the economy, and we expect that they too will experience an advertising decline in 2009, projected at 9 percent in the United States and 6.5 percent in Canada. The sharper decrease in the United States will result in part from the fact that cable received a portion of the Olympic and political advertising in 2008 that will be leaving the market in 2009. A new feature of the television advertising market is addressable advertising. Early addressable advertising implementations allow advertisers to send several messages at once in a single spot, with different versions going to different households. This type of addressability can be especially attractive to national advertisers because it enables them to tailor messages more narrowly, which should make them more appealing to distinct groups of viewers (e.g., feature four-wheel drive in cold climates and convertibles in warmer climates). With advertising migrating to the Internet, television providers are looking for ways to make their messages more effective. Early tests of addressable advertising found that households that received them had higher viewing levels for those ads than households that received a common national ad. In 2008, Comcast, Time Warner Cable, Cox Cable, Charter Communications, Cablevision Systems, and Bright House formed Canoe Ventures to create a national addressable-advertising platform. The platform will combine geographic advertising zones used by the cable industry with demographic databases that will allow advertisers to stratify markets by demographic characteristics. The platform will allow up to four versions of an ad to be transmitted simultaneously in a single spot. Canoe Ventures is expected to launch its first addressable-ad platform in 2009. Note: As far as we know, this is not available on broadcast television. The Dish Network and Invidi have also teamed up to offer an addressable advertising platform based on geographic and demographic information. Addressable advertising should enhance the appeal of cable networks to advertisers.

Cable networks
Share gains by cable networks helped them grow faster in 2008 than the broadcast networks despite the fact that the bulk of Olympic advertising in the United States went to the broadcast networks. The expected rise in multichannel penetration related to the analog switchoff should provide a further boost to cable network audience shares in 2009 in the United States and in 2011 in Canada. The economics of cable networks have improved to the point that cable networks are increasing their roster of original scripted programs just as the broadcast

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Cable networks in the United States will no longer benefit from significant penetration gains that translated into double-digit advertising growth through 2005. From 2005 to 2008, cable network advertising rose at a 5.4 percent compound annual rate. Once the economy stabilizes, we expect modest improvement in cable network advertising, with a projected 5.9 percent compound annual advance from 2009 to 2013. From 2008, growth will average 2.7 percent compounded annually to $24.5 billion in 2013. In Canada, the CRTC in 2008 ruled that cable and satellite operators will have flexibility in the packages they can offer to subscribers and that genre protection will be removed for certain types of programming, which will result in competing news and sports channels. Rogers Communications announced in late 2008 that it will launch its own news channel, CITY News Toronto, which will compete with CP24. We expect other news channels to be launched to compete with CBC Newsworld and CTV Newsnet, and other

sports channels to compete with TSN and Sportsnet. Equally, some broadcasters are having difficulty getting broad-based carriage for new specialty channels, such as TSN2, where these compete with distributorowned channels. The major Canadian networks such as CTV and Global are beginning the license renewal process for conventional TV in early 2009. The expectation is that, because of the significant capital investment required, when networks make their submissions, many will ask for flexibility in the requirement to transition to digital. New channels should provide a boost to cable advertising in Canada during 201113, once the economy picks up. We project cable network (specialty channel) advertising in Canada to total $1 billion in 2013 from $928 million in 2008, a 2.3 percent compound annual increase. Overall cable network advertising in North America will expand at a 2.7 percent compound annual rate from $22.4 billion in 2008 to $25.5 billion in 2013.

Cable network advertising market (US$ millions)


North America United States Canada Total 2004 16,424 664 17,088 2005 18,296 720 19,016 2006 19,320 827 20,147 2007 20,614 889 21,503 2008p 21,440 928 22,368 2009 19,500 868 20,368 2010 20,200 872 21,072 2011 21,000 910 21,910 2012 23,000 971 23,971 2013 24,500 1,041 25,541

At average 2008 exchange rates. Sources: Canadian Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Universal McCann, Wilkofsky Gruen Associates

Cable network advertising market growth (%)


North America United States Canada Total 2004 17.7 16.7 17.7 2005 11.4 8.4 11.3 2006 5.6 14.9 5.9 2007 6.7 7.5 6.7 2008p 4.0 4.4 4.0 2009 9.0 6.5 8.9 2010 3.6 0.5 3.5 2011 4.0 4.4 4.0 2012 9.5 6.7 9.4 2013 6.5 7.2 6.5 200913 CAGR 2.7 2.3 2.7

Sources: Canadian Radio-television and Telecommunications Commission, PricewaterhouseCoopers LLP, Universal McCann, Wilkofsky Gruen Associates

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Europe, Middle East, Africa (EMEA)

The outlook in brief


Declining economies will lead to reduced advertising in 2009 and 2010. Digital terrestrial television platforms and new digital multiplexes will stimulate multichannel advertising. High-definition television will attract viewers and contribute to a rebound in terrestrial advertising.

Overview
The television advertising market will decline by a cumulative 12.6 percent during the next two years and then expand at mid-single-digit rates during the latter part of the forecast period to $48.9 billion in 2013, returning to its level in 2008. Terrestrial advertising will fall by a combined 14.5 percent during 200910, stabilize in 2011, and then rebound in 201213. Spending of $39.9 billion in 2013 will be 0.9 percent lower on a compound annual basis from $41.6 billion in 2008. Multichannel advertising will grow by 4.4 percent compounded annually, from $7.2 billion to $9 billion.

Television advertising market by component (US$ millions)


EMEA Terrestrial advertising Multichannel advertising Total 2004 35,277 4,647 39,924 2005 37,148 5,124 42,272 2006 39,332 5,755 45,087 2007 42,053 6,702 48,755 2008p 41,637 7,239 48,876 2009 36,510 6,893 43,403 2010 35,600 7,115 42,715 2011 35,716 7,608 43,324 2012 38,078 8,306 46,384 2013 39,876 8,974 48,850

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Television advertising market growth by component (%)


EMEA Terrestrial advertising Multichannel advertising Total 2004 9.9 14.5 10.5 2005 5.3 10.3 5.9 2006 5.9 12.3 6.7 2007 6.9 16.5 8.1 2008p 1.0 8.0 0.2 2009 12.3 4.8 11.2 2010 2.5 3.2 1.6 2011 0.3 6.9 1.4 2012 6.6 9.2 7.1 2013 4.7 8.0 5.3 200913 CAGR 0.9 4.4 0.0

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Middle East/Africa will be the fastest-growing area in EMEA, with a 5.2 percent compound annual increase to $3.6 billion in 2013 from $2.8 billion in 2008. Growth will be driven by double-digit increases in Saudi Arabia/ Pan Arab during 201213. South Africa will experience a jump in 2010 when it hosts the FIFA World Cup. Central and Eastern Europe, which expanded at double-digit rates during the past five years, will experience a reversal during the next two years and a cumulative 14.9 percent decline. The region was affected later than other areas by the global recession, but it will not escape the recessions impact, especially given Russias economic problems, financial problems in other countries, and the regions closer integration into the world economy than it had a decade ago. We look for the market in Central and Eastern Europe to stabilize in 2011 and to return to double-digit and high-single-digit growth during 201213. Growth for the entire forecast period will average 1.2 percent compounded annually from $11.1 billion in 2008 to $11.7 billion in 2013. Television advertising in Western Europe fell by 3.6 percent in 2008, and we expect a steeper, 11.1 percent drop in 2009 followed by an additional 2 percent decline in 2010. As economic conditions improve, we project a return to mid-single-digit growth during 201213. Overall spending will decline by 0.9 percent compounded annually to $33.5 billion in 2013 from $35 billion in 2008.

Italy at $7 billion and the United Kingdom and Germany at $6 billion each are the three largest markets in the region. Each of those countries recorded declines in 2008 that we expect will accelerate in 2009 and continue through 2010. Russia at $5.5 billion, France at $4.2 billion, and Spain at $4 billion are the next-largest markets. Russia has been expanding at double-digit annual rates during the past five years. That pattern is abruptly changing as the country experiences an economic reversal. We expect decreases during the next two years, with a return to double-digit and high single-digit growth during 201213. France declined by 3.8 percent in 2008, and restrictions on public television advertising combined with a weakening economy will lead to a 12.9 percent drop in 2009 and a 0.4 percent decrease in 2010. Thereafter, the market will expand at low- to mid-single-digit rates. Spains television advertising market had been growing at healthy rates through 2007 but plunged in 2008 as the economy fell into a deep recession. We anticipate a 9.2 percent drop in 2009 followed by a 2 percent decrease in 2010 before economic conditions improve and there is a return to mid-single-digit growth.

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Television advertising market by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 209 875 456 1,540 39,924 198 915 512 1,625 42,272 195 1,235 604 2,034 45,087 227 1,780 689 2,696 48,755 235 1,830 725 2,790 48,876 223 1,750 665 2,638 43,403 223 1,800 786 2,809 42,715 226 1,900 762 2,888 43,324 233 2,220 846 3,299 46,384 237 2,450 907 3,594 48,850 0.2 6.0 4.6 5.2 0.0 689 1,077 1,006 181 1,971 627 5,551 813 1,249 1,058 226 2,651 754 6,751 901 1,303 1,224 320 3,456 957 8,161 930 1,285 1,431 412 4,526 1,168 9,752 983 1,332 1,597 539 5,535 1,095 11,081 877 1,158 1,410 466 4,827 919 9,657 866 1,129 1,400 457 4,626 957 9,435 901 1,141 1,406 496 4,707 1,034 9,685 971 1,216 1,555 566 5,350 1,157 10,815 1,041 1,274 1,659 615 5,833 1,321 11,743 1.2 0.9 0.8 2.7 1.1 3.8 1.2 432 871 290 332 3,988 5,649 966 249 6,732 1,068 477 732 3,566 564 526 6,391 32,833 442 849 309 338 4,024 5,751 980 285 6,915 1,098 520 761 3,939 626 543 6,516 33,896 476 922 339 354 4,207 6,020 1,002 322 7,112 1,163 536 754 4,223 687 568 6,207 34,892 520 995 345 382 4,368 6,082 1,207 366 7,171 1,244 561 783 4,594 710 588 6,391 36,307 541 1,032 342 388 4,200 6,000 1,112 347 7,024 1,280 615 790 4,013 683 614 6,024 35,005 498 951 314 359 3,659 5,385 951 300 6,293 1,171 594 732 3,644 607 554 5,096 31,108 490 937 309 351 3,644 5,341 878 293 6,219 1,156 596 717 3,571 603 545 4,821 30,471 490 944 310 359 3,695 5,378 878 300 6,256 1,178 612 724 3,600 611 549 4,867 30,751 527 1,010 332 380 3,878 5,561 907 322 6,476 1,259 648 761 3,849 641 577 5,142 32,270 549 1,061 343 395 4,024 5,707 937 337 6,695 1,324 674 790 4,083 668 600 5,326 33,513 0.3 0.6 0.1 0.4 0.9 1.0 3.4 0.6 1.0 0.7 1.8 0.0 0.3 0.4 0.5 2.4 0.9 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: Association of Communications Agencies of Russia, Initiative Romania, Institutet fr Reklam- och Mediestatistik, Ofcom, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Near-term decline
Housing declines, scarce credit, weak automobile markets, falling manufacturing, and rising unemployment characterized most economies in Western Europe in 2008. Those developments led to the 3.6 percent decrease in television advertising, far larger than the 0.7 percent decline in the United States. Television advertising in Spain fell by 12.6 percent in 2008, the steepest decline of any country in the world. The Spanish television advertising market had been mirroring the housing bubble, with ad rates escalating dramatically before falling sharply. Greece was down 7.9 percent, the UK fell 5.7 percent, and decreases were also registered in Denmark, France, Germany, and Sweden. In Central and Eastern Europe, the 13.6 percent increase in 2008 continued the trend of double-digit growth. Economic growth assisted by surging oil revenues fueled television advertising in Russia during the past five years, including a 22.3 percent rise in 2008. Romania and Poland also continued to grow at double-digit rates, helped by high inflation in Romania and consumer spending growth in Poland. The Czech Republic and Hungary grew faster in 2008 than in 2007, while Turkey experienced the largest turnaround, falling by 6.3 percent in 2008 after growing by 22 percent in 2007, reflecting the rapidly deteriorating economy. Surging oil revenues also stimulated economic growth and television advertising growth in Saudi Arabia/ Pan Arab during the past five years, including the first half of 2008. During the latter part of 2008, the global recession led to a dramatic reversal in oil revenues, and television advertising growth slowed to 2.8 percent. Each area of EMEA will do worse in 2009 than in 2008, with Central and Eastern Europe recording the largest percentage-point swing: from a 13.6 percent increase in 2008 to a 12.9 percent decline in 2009. In Turkey, a declining economy, exacerbated by a sharp depreciation of Turkish currency, will hurt the television market. We expect television advertising in Turkey to fall by 16.1 percent, which will be the largest decline in EMEA.

We expect falling oil revenues in Russia and the onset of a recession to lead to a 12.8 percent decline in 2009, representing a 35.1-percentage-point reversal from 2008, the largest in EMEA. Western Europe will remain weak in 2009, with a projected 11.1 percent decline. The economy is falling rapidly in the United Kingdom, which we expect will lead to a 15.4 percent decrease in television advertising. France will decline at a projected 12.9 percent in 2009. In addition to the impact of the economy, a new reform effective in 2009 will prohibit the sale of advertising after 8 p.m. on France Tlvisions 2, 3, 4, and 5 in 2009, which will cut an additional 220 million ($320 million) from the total, some of which may be reallocated to other channels. Commercial networks will be required to pay a 3 percent tax on advertising revenues to help fund public television, and the European Commission approved a onetime bailout of France Tlvisions. The net effect will be to help public TV maintain its spending on programming. Spain will continue to decline, with a projected 9.2 percent drop, although that would represent a relative improvement compared with the 12.6 percent decrease in 2008. We expect Middle East/Africa to fall by 5.4 percent rate in 2009, with decreases in each territory. We expect the current economic malaise to continue in 2010 and look for further declinesalbeit at more modest ratesin Western Europe and Central and Eastern Europe. We expect Central and Eastern Europe to fall by 2.3 percent in 2010 compared with the 2 percent decrease projected for Western Europe, the only time during the entire 200413 period that Western Europe will not be the slowest-growing area in EMEA. We look for a jump in South Africa in 2010 related to its hosting of the FIFA World Cup and look for Middle East/ Africa as a whole to rise by 6.5 percent. For EMEA as a whole, television advertising will fall by 11.2 percent in 2009 and by an additional 1.6 percent in 2010.

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We expect economic conditions to stabilize sometime in 2010 and television advertising to begin to experience a recovery in 2011, with a 1.4 percent increase. By 201213, we look for a return to economic expansion as the current cycle fully runs its course. As economic conditions improve, we expect a return to historical growth rates during expansions. We project doubledigit gains in both Middle East/Africa and Central and Eastern Europe in 2012, and mid-single-digit increases in Western Europe, in line with historical patterns. Overall growth in EMEA will improve to 7.1 percent in 2012 followed by a 5.3 percent increase in 2013.

In Denmark, five DTT multiplexes will begin broadcasting in 2009, including three carrying new pay TV channels from Boxer; France issued DTT licenses in four regions in late 2008; and three national DTT contracts were awarded in Ireland. DTT is already a major presence in the UK, Spain, France, and Germany. There are more than 9 million DTT homes in the UK, more than 7 million in Spain, around 5 million in France, and 4 million in Germany. Viewing on DTT is growing in these countries, fueling multichannel advertising. Analog switch-off has begun in the UK, with a number of regions scheduled to experience digital switch-over in 2009 and the whole country due to be switched over by 2012. In Italy, RAI and Mediaset are launching DTT platforms to help them fend off competition from Sky Italia. The Expresso Group announced plans to introduce 12 themed DTT channels. The government is now phasing in analog switch-off from 2009 to 2012. Italy now has more than 6 million households that get their programming through DTT. In Spain, Antena 3, Telecinco, Cuatro, and Veo TV have been allocated one DTT multiplex each. La Sexta and Net TV use part of the multiplex capacity of the other TV operators. An important issue that has not yet been defined by the current legislation and that will significantly affect the development of the DTT sector, is the possibility of carrying premium services that command a separate fee, which could be an important incentive for TV operators to invest in DTT. The government has allocated 8.7 million ($12.7 million) to assist in the analog switch-off process. In France, the government has allocated 230 million ($337 million) for the digital switchover, of which 183 million ($268 million) will be used to help low-income households, the households of elderly persons, and

TV advertising growth by area in EMEA (%)


40 30 20 10 0 10 20 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Western Europe CEE MEA

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Digital terrestrial television


While macroeconomic conditions will dominate the market in the near term, the opening up of new digital terrestrial television multiplexes will create opportunities for multichannel advertising growth once economic conditions improve. With many countries either about to or having already discontinued analog broadcasting, there has been stepped-up activity in DTT.

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households headed by disabled people make the transition. Two regions are scheduled to go digital in 2009, with 12 more in 2010 and the final 12 in 2011. In Switzerland, Digital Video BroadcastingTerrestrial (DVB-T) replaced analog transmission completely as from December 2007. All of SRG SSR ide suisses programmes are transmitted in DVB-T. In Portugal, Portugal Telecom is expected to launch a DTT multiplex in 2009, and other companies are applying for DTT licenses that are expected to be awarded in 2010. There is substantial DTT activity in Central and Eastern Europe. Russia is planning to license five or more DTT channels within the next few years, Romania is planning to issue DTT licenses in 2009 or 2010, and Antenna Hungria in Hungary launched to DTT multiplexes in late 2008. Poland will be issuing three DTT multiplexes, but there were expected to have been six had the Office of Electronic Communications been able to reach an agreement with the National Broadcasting Council on the makeup of those multiplexes.

In Middle East/Africa, South Africas first DTT trial began in 2008 and is expected to continue through much of 2009. A DTT service is expected to follow. The expansion of DTT will lead to growing audience shares for multichannel programs, which in turn will boost multichannel advertising once the economy recovers. Multichannel advertising growth slowed to 8 percent in 2008 following four years of double-digit gains. We expect a 4.8 percent decrease in 2009 and a 3.2 percent gain in 2010. Then, during 201113, growth will return to high-single-digit increases, averaging 8 percent compounded annually from 2010 to 2013. For the forecast period as a whole, multichannel advertising will increase at a 4.4 percent compound annual rate to $9 billion in 2013. In Western Europe, the multichannel market will expand at a 3.8 percent compound annual rate to $7.5 billion, while in Central and Eastern Europe, spending will rise by 7.3 percent compounded annually to $1.5 billion.

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Multichannel advertising market (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total NA NA 0 4,647 NA NA 0 5,124 NA NA 0 5,755 1 NA NA 1 6,702 2 NA NA 2 7,239 5 NA NA 5 6,893 11 NA NA 11 7,115 19 NA NA 19 7,608 26 NA NA 26 8,306 33 NA NA 33 8,974 75.2 NA NA 75.2 4.4 2 182 86 42 19 NA 331 2 215 96 75 32 NA 420 3 228 117 128 52 NA 528 4 270 210 204 82 NA 770 5 306 312 291 116 NA 1,030 5 289 310 261 115 NA 980 6 293 336 265 125 NA 1,025 7 308 365 293 141 NA 1,114 9 340 435 340 176 NA 1,300 10 369 498 375 210 NA 1,462 14.9 3.8 9.8 5.2 12.6 7.3 82 761 98 120 192 419 6 8 236 208 171 44 85 260 168 1,458 4,316 94 744 108 124 205 459 7 13 346 217 191 50 81 295 185 1,585 4,704 103 808 126 134 253 487 7 29 448 229 204 53 44 330 204 1,768 5,227 120 875 134 149 306 517 10 37 611 249 219 54 46 348 218 2,038 5,931 136 908 140 155 337 540 12 35 702 256 246 67 49 342 234 2,048 6,207 135 841 135 147 349 512 10 32 755 246 243 66 51 310 216 1,860 5,908 142 829 139 148 365 534 10 33 870 243 250 69 59 313 218 1,857 6,079 152 840 146 154 407 565 12 35 1,001 259 263 76 69 324 225 1,947 6,475 168 899 159 165 446 612 13 37 1,069 277 282 81 78 343 243 2,108 6,980 182 950 171 174 483 657 15 41 1,172 304 296 90 88 361 258 2,237 7,479 6.0 0.9 4.1 2.3 7.5 4.0 4.6 3.2 10.8 3.5 3.8 6.1 12.4 1.1 2.0 1.8 3.8 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: Ofcom, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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High-definition television
A by-product of the expansion in digital platforms is the creation of capacity for high-definition-television channels. HDTV is gaining momentum in some countries while facing setbacks in others. In the UK, ITV, Channel 4, and the BBC will be launching HD services on Freeview, having been granted approval from Ofcom. Viewers will need a special set-top box to view HD programs on Freeview. There have also been 3-D initiatives in the UK: BSkyB tested a 3-D service that uses its existing HD platform and does not require a separate set-top box. BSkyB also is introducing several new premium HD channels. In France, TF 1, France 2, M6, and Arte were among the terrestrial channels that launched HD channels in 2008. Around 1 million HD-ready sets were sold in 2008 despite the declining economy. The digital switchover in France from 2009 to 2011 will allow for 11 new DTT multiplexes dedicated to HD broadcasting. In Italy, RAI introduced the first Super High Definition channel on DTT, and in Portugal, one of the five services offered by Portugal Telecom on its new DTT platform will be HD. In Germany, the recession is taking its toll on HDTV. ProSiebenSat.1 dropped the two channels it was simulcasting in HD, and there are no major free HD channels expected to be launched before 2010. In Switzerland, national broadcaster SRG SSR ide suisse offers HDTV through its HD Suisse offering. HD Suisse, launched in December 2007, is a joint channel between Schweizer Fernsehen, Tlvision Suisse Romande, Televisione svizzera di lingua italiana, and Televisiun Rumantscha. It transmitted the entire UEFA Euro 2008 football (soccer) tournament in HD. As from 2012, all of SRG SSR ide suisses television channels will be broadcast in HDTV quality through satellite and cable, in parallel with the traditional, standarddefinition quality. In Poland, News Corp. discontinued its strategic partnership with TV Puls, and TV Puls, in turn, canceled plans to launch an HD channel. In Turkey, direct-to-home provider Digital Platform (Digiturk) launched HD channels in January 2008, followed by its competitor D-Smart in August 2008. In Saudi Arabia/Pan Arab, there is a move to introduce multiple satellite feeds that focus on local markets.

Currently, most programming is distributed throughout the region over a unified satellite feed, allowing programs to reach a large potential audience. The disadvantage is that there is a wide disparity in local tastes and in local ad rates. Advertisers often pay to reach several major countries and, in effect, get the rest of the region for free. With split beams, programming can target different areas and appeal to different tastes. Advertisers will pay for the audiences they reach and want, and there will be fewer viewers provided on a free basis. The goal is to generate more advertising revenue. Although progress has been relatively slow and not uniform, HD is advancing in EMEA. We expect that HDTV will make television more appealing and will help television retain viewers despite increased competition from other media. HD also provides advertisers with a more attractive platform. While HD will help television as a whole, it will provide more of a boost to terrestrial channels. During the next two years, terrestrial channels will experience the brunt of the impact of the declining economy. Terrestrial advertising fell by 1 percent in 2008, with a 5.2 percent decline in Western Europe. In 2009 we project a 12.5 percent decrease in Western Europe, a 13.7 percent decline in Central and Eastern Europe, and a 12.3 percent decrease for EMEA as a whole. We expect a further, 2.5 percent decrease in 2010 and a relatively flat market in 2011. By 201213, a return to economic growth and the expansion of HD will boost terrestrial advertising. We project growth to average 5.7 percent annually during that period for all of EMEA, with larger increases in Central and Eastern Europe and Middle East/Africa. For the entire five-year forecast period, terrestrial advertising in Western Europe will decrease to $26 billion in 2013 from $28.8 billion in 2008, a 2 percent compound annual decline. Terrestrial advertising in Central and Eastern Europe will rise to $10.3 billion in 2013 from $10.1 billion in 2008, a 0.5 percent compound annual increase. In Middle East/Africa, growth will average 5 percent compounded annually from $2.8 billion to $3.6 billion. For EMEA as a whole, terrestrial advertising will fall at a 0.9 percent compound annual rate from $41.6 billion in 2008 to $39.9 billion in 2013.

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Terrestrial advertising market (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 209 875 456 1,540 35,277 198 915 512 1,625 37,148 195 1,235 604 2,034 39,332 226 1,780 689 2,695 42,053 233 1,830 725 2,788 41,637 218 1,750 665 2,633 36,510 212 1,800 786 2,798 35,600 207 1,900 762 2,869 35,716 207 2,220 846 3,273 38,078 204 2,450 907 3,561 39,876 2.6 6.0 4.6 5.0 0.9 687 895 920 139 1,952 627 5,220 811 1,034 962 151 2,619 754 6,331 898 1,075 1,107 192 3,404 957 7,633 926 1,015 1,221 208 4,444 1,168 8,982 978 1,026 1,285 248 5,419 1,095 10,051 872 869 1,100 205 4,712 919 8,677 860 836 1,064 192 4,501 957 8,410 894 833 1,041 203 4,566 1,034 8,571 962 876 1,120 226 5,174 1,157 9,515 1,031 905 1,161 240 5,623 1,321 10,281 1.1 2.5 2.0 0.7 0.7 3.8 0.5 350 110 192 212 3,796 5,230 960 241 6,496 860 306 688 3,481 304 358 4,933 28,517 348 105 201 214 3,819 5,292 973 272 6,569 881 329 711 3,858 331 358 4,931 29,192 373 114 213 220 3,954 5,533 995 293 6,664 934 332 701 4,179 357 364 4,439 29,665 400 120 211 233 4,062 5,565 1,197 329 6,560 995 342 729 4,548 362 370 4,353 30,376 405 124 202 233 3,863 5,460 1,100 312 6,322 1,024 369 723 3,964 341 380 3,976 28,798 363 110 179 212 3,310 4,873 941 268 5,538 925 351 666 3,593 297 338 3,236 25,200 348 108 170 203 3,279 4,807 868 260 5,349 913 346 648 3,512 290 327 2,964 24,392 338 104 164 205 3,288 4,813 866 265 5,255 919 349 648 3,531 287 324 2,920 24,276 359 111 173 215 3,432 4,949 894 285 5,407 982 366 680 3,771 298 334 3,034 25,290 367 111 172 221 3,541 5,050 922 296 5,523 1,020 378 700 3,995 307 342 3,089 26,034 2.0 2.2 3.2 1.1 1.7 1.5 3.5 1.0 2.7 0.1 0.5 0.6 0.2 2.1 2.1 4.9 2.0 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: Ofcom, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Asia Pacific

The outlook in brief


Economic downturns in a number of countries will lead to a weak TV advertising market in 200911. Multichannel penetration growth will drive multichannel advertising. High-definition television will fuel a rebound in terrestrial advertising during 201213.

Overview
The television advertising market will decline by 9.0 percent in 2009 and grow at a modest, 0.9 percent in 2010 before expanding to $37.2 billion in 2013, a 0.7 percent compound annual increase from $35.9 billion in 2008. Multichannel advertising will rise from $6.8 billion in 2008 to $10.2 billion in 2013, an 8.5 percent compound annual increase. Terrestrial advertising will decline during the next two years and rebound to $27 billion in 2013, down 1.4 percent on a compound annual basis from $29.1 billion in 2008.

Television advertising market by component (US$ millions)


Asia Pacific Terrestrial advertising Multichannel advertising Total 2004 27,368 3,958 31,326 2005 28,128 4,440 32,568 2006 28,609 5,183 33,792 2007 28,848 6,124 34,972 2008p 29,095 6,761 35,856 2009 25,793 6,844 32,637 2010 25,428 7,513 32,941 2011 25,533 8,242 33,775 2012 26,220 9,110 35,330 2013 27,048 10,157 37,205

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Television advertising market growth by component (%)


Asia Pacific Terrestrial advertising Multichannel advertising Total 2004 6.0 24.8 8.1 2005 2.8 12.2 4.0 2006 1.7 16.7 3.8 2007 0.8 18.2 3.5 2008p 0.9 10.4 2.5 2009 11.3 1.2 9.0 2010 1.4 9.8 0.9 2011 0.4 9.7 2.5 2012 2.7 10.5 4.6 2013 3.2 11.5 5.3 200913 CAGR 1.4 8.5 0.7

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Japan has the largest television advertising market in the region, at $15.4 billion in 2008, representing 43 percent of total spending. Japans television market has declined during the past four years, and we expect three additional years of decline, as the economy is again weakening. Although we expect a turnaround during 201213, advertising in 2013 will remain lower than in 2008 by 3.7 percent on a compound annual basis.

The Peoples Republic of China (PRC) has the secondlargest television market, at $7.5 billion. The Beijing Olympics contributed to a 17.8 percent rise in 2008. During the latter part of the 2008, economic growth slowed markedly as exports fell and as the stimulative impact of Olympics was no longer present. CCTV was able to secure a 15.3 percent increase in its auction of prime-time advertising for 2009one-third of which

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was from new advertisersbut the loss of around $400 million in Olympic advertising and slower growth or declines in other dayparts and channels will lead to a drop in TV advertising growth in 2009 to 3.5 percent. Thereafter, television advertising will expand at mid- to high-single-digit rates, reflecting a slower but more sustainable rate of economic growth. The market during the next five years will expand at a 6 percent compound annual rate. Australia at $3.1 billion ranked third in 2008. Television advertising in Australia declined in 2008 as the economy began to falter. We look for a decline during the next two years as the economy remains weak, followed by low-single-digit gains during the subsequent three years. Television advertising in Australia will decrease at a projected 0.5 percent compound annual rate. South Korea is the fourth-largest television advertising country in the region, at $2.6 billion. The onset of a recession led to a 2.2 percent decrease in television advertising in 2008, the third decline during the past five years. The Korean Communications Commission is planning to make the selling of advertising more competitive by introducing private companies to

represent broadcasters. Currently, Korean Broadcasting Advertising Corp., a state-run entity, receives orders from advertisers and allocates them to broadcasters. The hope is that increased competition will expand the advertising market. We expect television advertising to fall by 24.1 percent in 2009 and by an additional 2.3 percent in 2010 and then stabilize, with low-singledigit gains. Spending at $2.1 billion in 2013 will be 4.5 percent lower compounded annually from 2008. India at $2 billion was the only other territory above $1 billion in 2008. Due to the global slowdown, the economy is also slowing in India, although it is still expanding in real terms. Television advertising rose by 10.3 percent in 2008, buoyed by the success of three new, high-profile general entertainment channels and the phenomenal success of Cricket IPL 20-20 matches. The global slowdown impacted advertising in the fourth quarter of 2008, the most important quarter due to events such as Indian festivals. Financial services, consumer goods, and telecommunications are major advertisers and are expected to continue to show growth. We expect growth to average 10.2 percent on a compound annual basis during the next five years.

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Television advertising market by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 2,729 4,187 616 1,096 502 16,328 154 451 37 399 251 2,481 1,261 712 122 31,326 2005 2,822 5,103 693 1,244 578 16,319 159 468 42 456 233 2,449 1,112 752 138 32,568 2006 2,859 5,803 751 1,511 673 16,135 180 449 56 505 244 2,649 1,016 804 157 33,792 2007 3,135 6,362 758 1,781 754 15,990 216 456 92 541 219 2,690 968 806 204 34,972 2008p 3,093 7,497 899 1,964 816 15,362 264 474 110 577 226 2,631 919 791 233 35,856 2009 2,842 7,756 700 2,146 875 13,043 261 421 113 527 184 1,996 761 761 251 32,637 2010 2,800 8,258 710 2,397 971 12,560 261 407 117 530 173 1,950 745 785 277 32,941 2011 2,821 8,761 745 2,626 1,100 12,319 270 425 123 550 173 1,973 742 836 311 33,775 2012 2,905 9,336 800 2,854 1,302 12,464 292 439 130 599 177 2,023 748 902 359 35,330 2013 3,009 10,054 850 3,196 1,518 12,705 314 456 138 536 184 2,086 757 977 425 37,205 200913 CAGR 0.5 6.0 1.1 10.2 13.2 3.7 3.5 0.8 4.6 1.5 4.0 4.5 3.8 4.3 12.8 0.7

At average 2008 exchange rates. Sources: Commercial Economic Advisory Service of Australia, Korea Broadcasting Advertising Corp., New Zealand Television Broadcasters Council, PricewaterhouseCoopers LLP, State Administration for Industry & Commerce, Wilkofsky Gruen Associates

Economic growth
Excluding Japan, television advertising in Asia Pacific has grown at double-digit and high-single-digit rates during the past five years, buoyed by rapidly growing economies in India, Indonesia, Pakistan, the PRC, and Vietnam. During the past four years, television advertising in Japan declined. The disparity in growth rates between Japan and the rest of the region during the past five years averaged 9 percentage points. With the global recession affecting virtually the entire region, five countries Australia, Japan, South Korea, Taiwan, and Thailandrecorded decreases in television advertising in 2008. Moreover, plunging global oil prices are reducing inflation rates, which in turn lowers nominal GDP growth and advertising growth. We project television advertising in Japan to fall by 15.1 percent in 2009 and the region as a whole to decline by 8.3 percent. While Japan will continue to lag the

region in television advertising, we expect the disparity in average growth rates between Japan and the rest of Asia Pacific to narrow substantially.

Television advertising growth in Asia Pacific (%)


15 10 5 0 5 10 15 20 Japan Rest of the region 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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We project an 18.6 percent decrease in television advertising in Singapore in 2009 followed by a 6 percent drop in 2010. In addition to poor economic conditions, declining TV viewingreflecting high broadband penetration and heavy use of online and mobile devicesis hurting the television advertising market in Singapore. Taiwan recorded the largest drop in 2008, 5.1 percent, and we expect a steeper, 17.2 percent decline in 2009. We project decreases in excess of 20 percent in Hong Kong and South Korea in 2009. We also expect declines in Australia, Malaysia, New Zealand, the Philippines, and Thailand. India and the PRC, each of which rose at double-digit rates in 2008, will average only 4.7 percent growth in 2009. In the PRC, the prospect of slower advertising growth is affecting the funding of television projects. Investors in The Mysterious Buddha pulled $3 million from the project, causing China Film & Television Production to delay shooting. As economic conditions begin to improve, we expect faster growth or smaller declines in television advertising. Nevertheless, with the economies of India, the PRC, and other countries maturing, we do not expect a return to the scorching advances that characterized the past few years. A relatively healthy economy and strong advertising market will boost Indonesia at a 13.2 percent compound annual rate during the next five years, fastest in the region.

Multichannel advertising growth in Asia Pacific (%)


30 25 20 15 10 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

A number of countries are expanding their multichannel platforms. In Australia, Freeview, the DTT platform, was launched ahead of schedulein November 2008 although additional network multichannels will not launch until May 2009. The analog switch-off is slated to begin in 2010. In Australia, multichannel advertising revenues are earned by the subscription television industry. To date there have been no advertising revenues from multichannel DTT services, and it is expected that commercial multichannel DTT services over the forecast period will be negligible. The PRC is testing DTT, with a possible launch in the next few years. Hong Kong launched DTT in late 2007. In India, terrestrial broadcaster Doordarshan also has a free-to-air satellite platform that carries 100 or more channels. Star is making a renewed effort to enter the South India market with a multichannel service. Star launched two regional entertainment channels and also announced plans for a home-shopping channel. Zee Group launched several regional channels. And Network18 group announced plans to launch regional business news channels. In Malaysia, Radio Television Malaysia plans to introduce digital television on a regional basis within the next three years. The digital platform would have 20 channels, and each region would have its own network.

Multichannel penetration
Multichannel penetration is growing rapidly in Asia Pacific, which is expanding the reach of channels on those systems, which in turn increases their advertising potential. Multichannel advertising has grown at double-digit annual rates during each of the past five years. While this segment of the market is not immune to the impact of slower economic growth, rising audience shares will cushion that impact. We expect growth to slow to 1.2 percent in 2009 and then to average just over 10 percent annually.

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Japan has a large DTT universe of more than 23 million households, which is attracting the interest of advertisers. Despite an overall weak television advertising market, multichannel advertising in Japan rose at double-digit rates during the past two years. In Singapore, MioTV, the Internet protocol television service launched by SingTel in 2007, has a deal with Fox, Warner Bros., and Disney-ABC International Television to get access to US programs within 24 hours after they air in the United States, instead of

waiting for months for rights to air those shows. Faster access should boost viewership and advertising. We project multichannel advertising to rise to $10.2 billion in 2013 from $6.8 billion in 2008, an 8.5 percent compound annual increase. Multichannels share of total television advertising will increase from 19 percent in 2008 to 27 percent by 2013. In 2008, Japan at $2.2 billion, India at $1.7 billion, and the PRC at $1.1 billion are the only territories with multichannel advertising in excess of $1 billion.

Multichannel advertising market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 103 544 29 975 1 1,394 11 7 14 32 36 409 391 0 12 3,958 2005 133 715 38 1,095 2 1,469 13 9 25 39 35 502 344 0 21 4,440 2006 177 871 49 1,331 3 1,614 16 9 36 46 39 636 325 0 31 5,183 2007 230 1,018 61 1,581 4 1,919 20 14 60 52 38 753 329 0 45 6,124 2008p 269 1,124 83 1,739 5 2,151 27 19 77 58 41 790 322 0 56 6,761 2009 278 1,280 77 1,897 6 2,087 32 21 81 55 36 639 274 16 65 6,844 2010 294 1,445 85 2,122 7 2,261 34 24 85 64 35 663 276 40 78 7,513 2011 310 1,621 97 2,327 8 2,464 38 30 92 69 36 730 282 50 88 8,242 2012 335 1,821 108 2,531 11 2,742 44 35 98 78 39 809 292 63 104 9,110 2013 361 2,061 119 2,838 12 3,049 50 41 105 75 43 897 303 78 125 10,157 200913 CAGR 6.1 12.9 7.5 10.3 19.1 7.2 13.1 16.6 6.4 5.3 1.0 2.6 1.2 17.4 8.5

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Terrestrial advertising
Terrestrial advertising, which has been growing at low-single-digit rates during the past four years, will experience the brunt of the overall decline in television advertising because terrestrial channels are losing audience and advertising share.

We expect terrestrial advertising to fall by 11.3 percent in 2009, a decrease exacerbated by the loss of advertising associated with the Beijing Olympics in 2008. We look for a more moderate decline of 1.4 percent for 2010.

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Terrestrial advertising growth in Asia Pacific (%)


8 4 0 4 8 12 16 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Excluding Japan, terrestrial advertising has grown at mid- to high-single-digit rates in recent years, with a 7.5 percent jump in 2008, helped by the Beijing Olympics. In the PRC, terrestrial advertising in 2008 rose by 19.3 percent. The loss of those funds combined with the weakening economic environment will lead to a 6.6 percent decrease in terrestrial advertising in the rest of Asia Pacific in 2009, with a 17.1 percent drop projected for Japan. Although we expect economic conditions to remain weak in 2010, terrestrial advertising will benefit from advertising associated with the FIFA World Cup. The Delhi Commonwealth Games and the Shanghai Expo will also have a positive impact on terrestrial advertising in 2010. Improved economic conditions and the 2012 Olympics in London will provide a further lift to terrestrial advertising following the 2009 downturn.

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

An improved economic environment and the expansion of high-definition television should move terrestrial advertising back into positive territory in 201113, with the 3.2 percent increase projected for 2013 expected to be the largest increase since 2004. In Australia, Nine is spending A$30 million (US$25 million) to convert to digital and launched an HD service in early 2008. Seven and Ten had previously launched HD channels in 2007. Foxtel and Sky Network also launched HD in both Australia and New Zealand. Freeview HD was launched in New Zealand in April 2008 and reaches three-quarters of TV households, although usage is only moderate, at 162,000 households. In Hong Kong, the new DTT platform will include HD programs. Many will be simulcast, but new services also will be offered in HD. Taiwan also introduced terrestrial HD in 2008. New HD channels on satellite are expected in India as well. In the Philippines, the National Telecommunications Commission (NTC) requires DTT conversion by 2015 but is still reviewing the migration plan. ABS-CBN started testing the DTT platform in 2008. The plan will be implemented upon NTCs issuance of formal guidelines and the completion of the transition, which is expected within three years. Japan dominates the terrestrial advertising market, at $13.2 billion, 45 percent of the total. The PRC is next, at $6.4 billion followed by Australia at $2.8 billion and South Korea at $1.8 billion. Most of Indias television advertising is multichannel. Indias terrestrial market was only $225 million in 2008.

Terrestrial advertising growth in Japan and the rest of Asia Pacific (%)
15 10 5 0 5 10 15 20 Japan Rest of the region 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Near-term declines will offset gains in subsequent years, and terrestrial advertising for all of Asia Pacific will decrease from $29.1 billion in 2008 to $27 billion in 2013, a 1.4 percent compound annual decline.

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Terrestrial advertising market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 2,626 3,643 587 121 501 14,934 143 444 23 367 215 2,072 870 712 110 27,368 2005 2,689 4,388 655 149 576 14,850 146 459 17 417 198 1,947 768 752 117 28,128 2006 2,682 4,932 702 180 670 14,521 164 440 20 459 205 2,013 691 804 126 28,609 2007 2,905 5,344 697 200 750 14,071 196 442 32 489 181 1,937 639 806 159 28,848 2008p 2,824 6,373 816 225 811 13,211 237 455 33 519 185 1,841 597 791 177 29,095 2009 2,564 6,476 623 249 869 10,956 229 400 32 472 148 1,357 487 745 186 25,793 2010 2,506 6,813 625 275 964 10,299 227 383 32 466 138 1,287 469 745 199 25,428 2011 2,511 7,140 648 299 1,092 9,855 232 395 31 481 137 1,243 460 786 223 25,533 2012 2,570 7,515 692 323 1,291 9,722 248 404 32 521 138 1,214 456 839 255 26,220 2013 2,648 7,993 731 358 1,506 9,656 264 415 33 461 141 1,189 454 899 300 27,048 200913 CAGR 1.3 4.6 2.2 9.7 13.2 6.1 2.2 1.8 0.0 2.3 5.3 8.4 5.3 2.6 11.1 1.4

At average 2008 exchange rates. Sources: Commercial Economic Advisory Service of Australia, Korea Broadcasting Advertising Corp., PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Latin America

The outlook in brief


The economic slowdown will lead to a decline in television advertising in 2009 and 2010. Expanding multichannel audiences will boost multichannel advertising. New channels and increased funding will enhance terrestrial advertising once economic conditions improve.

Overview
Television advertising will decrease during the next two years by a cumulative 7.8 percent and then expand to $13.1 billion in 2013, a 1.4 percent compound annual increase from $12.2 billion in 2008. Terrestrial advertising, which accounted for 91 percent of the market in 2008, will fall by 9.7 percent through 2010 and then recover to $11.4 billion in 2013, a 0.4 percent compound annual increase from 2008. Multichannel advertising will rise to $1.8 billion in 2013 from $1.1 billion in 2008, growing at a 9.8 percent rate compounded annually.

Television advertising market by component (US$ millions)


Latin America Terrestrial advertising Multichannel advertising Total advertising 2004 5,867 420 6,287 2005 7,114 527 7,641 2006 8,272 658 8,930 2007 9,858 872 10,730 2008p 11,145 1,098 12,243 2009 10,230 1,153 11,383 2010 10,063 1,225 11,288 2011 10,199 1,413 11,612 2012 10,661 1,548 12,209 2013 11,352 1,756 13,108

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Television advertising market growth by component (%)


Latin America Terrestrial advertising Multichannel advertising Total advertising 2004 20.0 23.5 20.2 2005 21.3 25.5 21.5 2006 16.3 24.9 16.9 2007 19.2 32.5 20.2 2008p 13.1 25.9 14.1 2009 8.2 5.0 7.0 2010 1.6 6.2 0.8 2011 1.4 15.3 2.9 2012 4.5 9.6 5.1 2013 6.5 13.4 7.4 200913 CAGR 0.4 9.8 1.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Brazil is the largest market in Latin America, at $5.8 billion in 2008, followed by Mexico at $3.9 billion. Together the two countries constituted 80 percent of the market. Venezuela experienced a 23 percent decline in 2008, in large part the result of a ban on alcohol and tobacco advertising. We expect an additional 3.9 percent drop in 2009. High inflation will boost spending during the next five years by 4.1 percent compounded annually.

Decreases are expected in 2009 in each of the other territories, with Brazil, Chile, Colombia, and Mexico continuing to fall in 2010. By 2011, each country will again be growing. Argentina, which also has a high inflation rate, will be the fastest-growing market during the next five years, with a 4.2 percent compound annual increase.

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Television advertising market by country (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 344 2,306 346 736 2,334 221 6,287 2005 464 3,263 374 779 2,514 247 7,641 2006 593 3,916 407 879 2,828 307 8,930 2007 702 4,935 456 950 3,385 302 10,730 2008p 820 5,819 434 1,005 3,933 232 12,243 2009 789 5,438 392 905 3,636 223 11,383 2010 804 5,384 382 879 3,614 225 11,288 2011 852 5,547 401 892 3,681 239 11,612 2012 915 5,819 439 917 3,861 258 12,209 2013 1,009 6,254 477 955 4,130 283 13,108 200913 CAGR 4.2 1.5 1.9 1.0 1.0 4.1 1.4

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Economic slowdown
Latin Americas television advertising market did well in 2008 despite the onset of a global recession. Latin America was the fastest-growing region in 2008, with a 14.1 percent gain, even with the large decrease in Venezuela and a 5 percent decrease in Chile, two small markets. That gain was well in excess of the 2.2 percent gain in Asia Pacific, the second-fastest-growing region. Advertising associated with the Olympics helped bolster growth in 2008. By the end of 2008, the recession in the United States had begun having an adverse impact on the economies in Latin America as declining exports cut into domestic production. Additionally, falling oil revenues are hurting the economies in Venezuela and Mexico. A slowdown in economic growth and the loss of Olympic advertising will lead to declines in television advertising in 2009 in each country. We expect the overall market to fall by 7 percent, a 21.1-percentagepoint turnaround from the 14.1 percent increase in 2008. We expect a further, 0.8 percent decrease in 2010. By 2011, a stabilized global economy will generate a 2.9 percent increase in television advertising. By 201213, global economic expansion and a rebound in the US economy will fuel economic growth in Latin America. Global economic growth will also lead to a rebound in oil revenues, helping Venezuela and Mexico. We look for increases of 5.1 percent in 2012 and 7.4 percent in 2013.

Television advertising in Latin America (US$ billions)


16 12 8 4 0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Multichannel advertising
Growing cable and satellite subscribership is extending the reach of nonterrestrial programming, and an emerging digital terrestrial television universe is augmenting the multichannel market in Latin America. Triple-play packages are now available in a number of countries, including Chile, Colombia, and Mexico. Such packages make multichannel television more attractive to viewers because of the implicit discounts and the convenience of working with a single provider.

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Triple play remains limited in some countries. In Argentina, cable operators have not been offering telephone services to households even though they are allowed to do so, and Telecom Argentina is still not permitted to offer a triple-play service. In Mexico, while cable has introduced triple-play packages, Telmex, the incumbent telephone company, has not yet been granted permission to offer television. DTT has the potential to provide an additional outlet for multichannel advertising. Colombia expects to launch a DTT platform in 2009 with the assistance of Impulsa TDT of Spain in conjunction with the Colombian government. Brazil introduced DTT in late 2007 using the Japanese Integrated Services Digital Broadcasting standard. So far, progress has been spotty. The set-top box is relatively expensive, at 199 reals ($108), which is limiting adoptions. Many households also need an

ultrahigh-frequency antenna to receive the service. Through 2008 there were only about 200,000 DTT households. In Chile, there have been delays in selecting a DTT standard, and the platform is not yet available. In Mexico, TV Azteca launched a 24-hour telenovela satellite channel, creating a new venue for advertising. Televisa Networks and BBC Worldwide introduced two channels from BBC: BBC Entertainment and CBeebies, a channel for preschoolers. Multichannel advertising has been growing rapidly from a small base. In 2008, it rose by 26 percent. The slowing economy will lead to a drop to mid-singledigit gains during the next two years. For the forecast period as a whole, we project multichannel advertising to advance at a 9.8 percent compound annual rate. The market will total $1.8 billion in 2013 from $1.1 billion in 2008.

Multichannel advertising market (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 43 71 28 147 113 18 420 2005 67 114 31 171 124 20 527 2006 98 157 37 197 141 28 658 2007 112 247 43 223 217 30 872 2008p 139 349 43 256 287 24 1,098 2009 142 380 42 231 331 27 1,153 2010 153 404 41 237 362 28 1,225 2011 167 499 46 245 423 33 1,413 2012 183 553 52 257 464 39 1,548 2013 207 657 59 272 516 45 1,756 200913 CAGR 8.3 13.5 6.5 1.2 12.4 13.4 9.8

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Terrestrial advertising
As in other regions, terrestrial advertising will feel most of the impact of the economic cycle. We expect terrestrial advertising to fall by 8.2 percent in 2009 and by a further, 1.6 percent in 2010. Investment in television production and television programming should help the terrestrial market over the longer run, translating into advertising growth once economic conditions stabilize. In Brazil, TV Record, the second-largest network, is investing 200 million reals ($109 million) in its production facility, with the aim of increasing its production of dramas.

In Mexico, Telemundo abandoned its effort to launch a network in Mexico and instead made a deal with Televisa to show programs from Telemundo on Channel 9. In Colombia, a new channel is expected to be launched in 2009, which could provide an additional terrestrial outlet. We expect growth during 201113 to offset the nearterm declines, and we project terrestrial advertising to rise to $11.4 billion in 2013 from $11.1 billion, a 0.4 percent compound annual increase.

Terrestrial advertising market (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 301 2,235 318 589 2,221 203 5,867 2005 397 3,149 343 608 2,390 227 7,114 2006 495 3,759 370 682 2,687 279 8,272 2007 590 4,688 413 727 3,168 272 9,858 2008p 681 5,470 391 749 3,646 208 11,145 2009 647 5,058 350 674 3,305 196 10,230 2010 651 4,980 341 642 3,252 197 10,063 2011 685 5,048 355 647 3,258 206 10,199 2012 732 5,266 387 660 3,397 219 10,661 2013 802 5,597 418 683 3,614 238 11,352 200913 CAGR 3.3 0.5 1.3 1.8 0.2 2.7 0.4

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Recorded music

274 Summary 276 North America 281 Europe, Middle East, Africa (EMEA) 291 Asia Pacific 299 Latin America

Summary

Recorded music
The recorded music market consists of consumer spending on physical formatsalbums, single sound recordings, and music videosas well as digital distribution. Digital distribution consists of music distributed to mobile phones and of music downloaded from the Internet through licensed services. Mobile phone music includes ringtones, ring backs, and ring tunes, also known as master ring tones; mastertones and true tones; and music videos and full tracks that can be played on mobile phones. Mobile music also includes a share of fees paid for bundled services that include music as part of the service bundle. The recorded music market does not include fees paid by satellite radio providers. Also not included are music publishing, live performance, and merchandising revenues, which are likely to become more significant in the future. Spending is measured at retail, which can be substantially higher than the wholesale or trade value revenues that are often reported.

North America will decline by 4.4 percent compounded annually during the next five years to $7.2 billion in 2013 from $9 billion in 2008. EMEA is the largest region, at $11.1 billion in 2008, and will remain the largest despite a 3.6 percent decrease compounded annually to $9.2 billion in 2013. Asia Pacific will overtake North America in 2009 to become the second-largest region, rising to $8.7 billion in 2013, a 0.4 percent compound annual increase from $8.6 billion in 2008. Latin America will decline at a 0.4 percent compound annual rate to $938 million in 2013 from $957 million in 2008.

Market size and growth by component


Digital distribution will increase from $7.6 billion in 2008 to $14.8 billion in 2013, a 14.2 percent compound annual advance. Internet distribution will be the faster-growing component of the digital market, rising at a 21.2 percent compound annual rate to $8.8 billion in 2013 from $3.4 billion in 2008. Mobile phone distribution will increase by 7.1 percent compounded annually from $4.3 billion in 2008 to $6 billion in 2013. In North America and EMEA, the mobile phone market will be lower in 2013 than in 2008. Physical distribution will decline at a 12.5 percent compound annual rate to $11.3 billion in 2013 from $22 billion in 2008. Globally, physical distribution will fall behind digital distribution in 2012.

Market size and growth by region


Global spending on recorded music will decrease from $29.6 billion in 2008 to $26.1 billion in 2013, a 2.5 percent compound annual decline. Asia Pacific will be the only region where spending will be higher in 2013 than in 2008. In each region, gains in digital will ultimately offset or neutralize continued declines in spending on physical music. Asia Pacific will be the first region to experience a turnaround, with spending beginning to increase in 2011. Latin America will begin to advance in 2012. In North America, spending will begin to edge up in 2013, and in EMEA (Europe, Middle East, Africa), spending will stabilize in 2013. High piracy rates in Latin America and Asia Pacific hold down the physical market, allowing the expanding digital market to be a more important driver of total spending. Digital distribution will overtake physical distribution in North America and Asia Pacific in 2011. Physical distribution will remain the dominant component in EMEA through 2013. In Latin America, the digital market will nearly match physical distribution by 2013.

Principal drivers
Physical distribution will decline in each region because of competition from legitimate digital services and piracy. The digital market is dominated by Internet distribution in North America and EMEA and by mobile distribution in Asia Pacific and Latin America. The availability of music without copyright protection software and a growing broadband universe will boost Internet distribution. The adoption of graduated-response systems, which involve Internet service providers (ISPs) issuing warnings to file sharers that escalate in severity, with the ultimate threat of disconnecting a persons Internet access, will cut into digital piracy in North America and EMEA. Bundled

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services and low-cost or free mobile music will cut into the paid mobile music market in North America and EMEA. Lower-cost Internet distribution and side loading will cannibalize mobile music in those regions in the near term. Over time, the mobile music market will evolve into a subscription-based service. In Asia Pacific and Latin America, mobile music faces less competition from Internet distribution, which will continue to be hampered by high piracy rates. Wireless network upgrades and advanced handsets will fuel mobile music spending in those regions. The music industry is evolving into a

service where the bulk of the revenues will be generated by concerts, merchandising, and advertising. The music itself will be used to draw customers to live performances, in some cases by giving away music for free. Advertisersupported music services that give listeners access to a virtually unlimited array of songs will become more prominent. Despite declines in revenue, overall consumption of music is actually increasing. New business models that monetize that increase will sustain the industry over the long run.

Data for the global recorded music market by region and for the global recorded music market by component can be found within the Executive Summary on pages 40-42.

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275

North America

The outlook in brief


The availability of digital music without copy protection software will boost Internet distribution. Bundled services, side loading, and free streaming will cut into the mobile phone music market. The migration to digital distribution will result in steep declines in physical distribution.

Physical distribution will drop from $6.2 billion in 2008 to $2.1 billion in 2013, a 19.4 percent compound annual decrease. Digital distribution will increase at a 12.5 percent compound annual rate to $5.1 billion from $2.8 billion in 2008. Digital distribution will overtake physical distribution in 2011. Licensed music downloaded over the Internet will expand from $1.9 billion in 2008 to $4.4 billion in 2013, a 17.5 percent compound annual increase. Digital music distributed to mobile phones will total $720 million in 2013 from $868 million in 2008, a 3.7 percent decline compounded annually.

Overview
The recorded music market will contract at a 4.4 percent compound annual rate to $7.2 billion in 2013 from $9 billion in 2008.

Recorded music market by component (US$ millions)


North America Physical distribution Digital distribution Internet Mobile phones Digital total Total recorded music 313 277 590 13,590 668 435 1,103 13,114 1,128 800 1,928 12,516 1,534 928 2,462 11,025 1,945 868 2,813 9,022 2,390 780 3,170 8,031 2,823 714 3,537 7,384 3,325 688 4,013 7,102 3,848 697 4,545 7,064 4,359 720 5,079 7,188 2004 13,000 2005 12,011 2006 10,588 2007 8,563 2008p 6,209 2009 4,861 2010 3,847 2011 3,089 2012 2,519 2013 2,109

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Recording Industry Association of America, Wilkofsky Gruen Associates

Recorded music market growth by component (%)


North America Physical distribution Digital distribution Internet Mobile phones Digital total Total recorded music 340.8 174.3 243.0 5.3 113.4 57.0 86.9 3.5 68.9 83.9 74.8 4.6 36.0 16.0 27.7 11.9 26.8 6.5 14.3 18.2 22.9 10.1 12.7 11.0 18.1 8.5 11.6 8.1 17.8 3.6 13.5 3.8 15.7 1.3 13.3 0.5 13.3 3.3 11.7 1.8 17.5 3.7 12.5 4.4 2004 2.1 2005 7.6 2006 11.8 2007 19.1 2008p 27.5 2009 21.7 2010 20.9 2011 19.7 2012 18.5 2013 16.3 200913 CAGR 19.4

Sources: PricewaterhouseCoopers LLP, Recording Industry Association of America, Wilkofsky Gruen Associates

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The US market will decline by a cumulative 22.5 percent through 2012 and at a 4.7 percent compound annual rate through 2013. Those declines will shrink the US market to $6.6 billion in 2013 from $8.4 billion in 2008.

Canadas market will turn positive a year earlier than the US market, helped by a rapidly expanding Internet component. Nevertheless, spending at $592 million in 2013 will be 1 percent lower on a compound annual basis from $624 million in 2008.

Recorded music market by country (US$ millions)


North America United States Canada Total 2004 12,728 862 13,590 2005 12,270 844 13,114 2006 11,728 788 12,516 2007 10,326 699 11,025 2008p 8,398 624 9,022 2009 7,457 574 8,031 2010 6,838 546 7,384 2011 6,560 542 7,102 2012 6,505 559 7,064 2013 6,596 592 7,188 200913 CAGR 4.7 1.0 4.4

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Recording Industry Association of America, Wilkofsky Gruen Associates

Internet distribution
The recession did not appear to affect the licensed Internet music market in 2008. Spending rose by 25 percent in the United States to $1.8 billion and by 61.3 percent in Canada to $121 million. The Canadian market is about two years behind the US market with respect to its development and is still experiencing explosive growth from a small base. While single tracks remain the dominant category, digital albums and subscription services that offer streaming gained traction in both countries in 2008. Atlantic Records in 2008 became the first major label to generate a majority of its revenues through digital distribution. We expect that digital revenues will account for a majority of all recorded music revenues in Canada in 2010 and in the United States in 2011. Interest in music does not appear to be abating. In the United States, total unit sales, including physical units and digital tracks and albums, increased by 4.4 percent in 2008. Single-track downloads rose by 28 percent, album downloads increased by 34 percent, and music video downloads grew by 47 percent. The ability to monetize that interest, however, is becoming increasingly challenging. Despite the large growth in Internet revenues, overall spending fell by 18.2 percent in 2008. Digital music does not command the prices of physical music, which makes it difficult to maintain revenue as physical sales fall.

Unauthorized file sharing remains a major impediment for both physical and licensed digital sales. The music industry has been taking legal action against infringers and is now exploring a graduated-response approach, which surveys show may be effective. In December 2008, the Recording Industry Association of America announced an arrangement with the attorney general of New York State to require Internet service providers to issue warnings against subscribers who share unauthorized files. The warnings escalate if behavior does not change, and subscribers may ultimately lose Internet access for continued abuse. The industry also has deals with MySpace and YouTube to license music to those sites in return for a share of the advertising. A number of new streaming sites entered the market in 2008, including MySpace Music, Spotify, We7, and Datz Music Lounge. Last.fm and Pandora entered the market in 2007. These sites sell advertising in exchange for providing music for listeners either at low subscription fees or on a free basis. Given the weak advertising market, it remains to be seen whether ad revenues will be meaningful enough to sustain these efforts. In Canada, Lala was relaunched in 2008. Users can stream songs they already own at no charge and can buy a virtual copy for 10 cents that can be streamed over the Internet but cannot be downloaded. Actual files can be purchased and downloaded for 89 cents.

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An impediment to online distribution was digital rights management (DRM) software embedded in digital music files that limits the ability of buyers to play purchased music on mobile devices from different manufacturers and limits the number of copies a buyer can make. In a deal between Apple and the major music companies reached in early 2009, the music companies agreed to eliminate DRM, and Apple agreed to a variable pricing policy for iTunes tracks that the labels wanted. Labels will now set prices at three price points69 cents, 99 cents, and $1.29. Amazon also has variable pricing and sells music on a DRM-free basis. Most songs will be available at the lower price point, which should further stimulate the market, while new releases will be sold at the premium price, which could boost revenue. At the same time, the increased flexibility of DRM-free music should make downloading more appealing. Internet distribution will also be helped by a growing broadband household universe because it is much faster to download music through a broadband connection. During the next five years, there will be more than 30 million additional broadband households in North America, which will significantly expand the potential market for Internet distribution of music.

Broadband households in North America (millions)


140 120 100 80 60 40 36.0 20 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 46.0 58.4 74.4 83.0 86.5 90.0 97.7 108.0 115.8

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

We project the licensed Internet distribution market in the United States to more than double during the next five years to $4 billion in 2013, a 16.8 percent compound annual increase from 2008. Internet distribution in Canada will more than triple from $121 million in 2008 to $389 million in 2013, growing by 26.3 percent on a compound annual basis. Overall Internet distribution in North America will total $4.4 billion in 2013, growing at a 17.5 percent compound annual rate from $1.9 billion in 2008.

Licensed Internet recorded music market (US$ millions)


North America United States Canada Total 2004 303 10 313 2005 653 15 668 2006 1,085 43 1,128 2007 1,459 75 1,534 2008p 1,824 121 1,945 2009 2,214 176 2,390 2010 2,595 228 2,823 2011 3,047 278 3,325 2012 3,515 333 3,848 2013 3,970 389 4,359 200913 CAGR 16.8 26.3 17.5

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Recording Industry Association of America, Wilkofsky Gruen Associates

Music on mobile phones


The mobile music market is in transition. The ringtone market is falling precipitously, ring backs are surging, and spending on full tracks is declining due to the ability to side load tracks. Ringtones are suffering from the natural slowdown in the wireless market as penetration approaches saturation and by the fact that current ringtone users do not need new ringtones. Ring backs are growing in popularity, but the market remains

small. In the United States, mobile music unit sales fell by 6.5 percent in 2008, and falling prices led to a 7.4 percent decrease in spending. Full tracks, which had become the dominant component of the mobile music market, are being adversely affected by high price points. Full tracks can be purchased at half the price over the Internet and either played on portable devices or side loaded to mobile phones.

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New services such as Amazon MP3 in the United States offer low-priced music on a DRM-free basis that can be played on any MP3 or mobile phone. It appears that consumers are not resistant to carrying both iPods and mobile phones, which makes purchasing music on mobile phones less appealing. Handset manufacturers are using music as part of a bundled service in order to reduce churn. In 2008, Nokia launched Comes with Music, and Sony Ericsson introduced PlayNow Plus. Comes with Music handsets allow subscribers to download unlimited music from the Universal music catalog to their phones or computers. PlayNow Plus handsets come preloaded with 1,000 songs. The cost of the music is included as part of the contract, and at the end of the contract, a certain number of songs can be kept. Advertiser-supported streaming services such as Last. fm and Pandora also are available on mobile phones. These services make music available to mobile phones either at no direct cost or at a substantial reduction compared with previous costs for downloading music. Spending on mobile music fell by 7.4 percent in the United States to $816 million. In Canada, growth slowed to 10.6 percent in 2008 from 80.8 percent in 2007. The combination of economic pressures and the availability of cheap or free music will lead to a decline in music revenues in Canada in 2009 and a steeper decrease in the US. Business models in the mobile music market are in flux. We do not expect that advertising will be sufficient to support mobile music by itself. At the same time,

competition across platforms and from new services will limit the amount that can be charged for songs and albums. We expect mobile music will be offered principally as a subscription service not unlike mobile Internet access. Such services as Verizon Vcast have been turned over to Rhapsody and include unlimited music for $14.99 per month. As part of a service contract, subscribers will have access to music. When subscriptions grow in importance, spending on mobile music will increase. In the near term, we expect spending on mobile music to decline. In the US, we project a cumulative decrease of 21.2 percent through 2011 and in Canada will look for decreases of 13.5 percent during the next two years. As the market evolves into a reasonably priced subscription-based service, we look for spending to trend upward from a lower base. We project spending in the US to increase by 4.7 percent from 2011 to 2013. In Canada, we expect spending to stabilize in 201112 and grow by 4.4 percent in 2013. For the forecast period as a whole, mobile music in 2013 will total $673 million in the United States, down 3.8 percent on a compound annual basis from $816 million in 2008. In Canada, mobile music will decline at a 2 percent compound annual rate from $52 million in 2008 to $47 million in 2013. Overall spending on mobile music in North America will decline at a 3.7 percent compound annual rate to $720 million in 2013 from $868 million in 2008.

Mobile phone recorded music market (US$ millions)


North America United States Canada Total 2004 271 6 277 2005 422 13 435 2006 774 26 800 2007 881 47 928 2008p 816 52 868 2009 732 48 780 2010 669 45 714 2011 643 45 688 2012 652 45 697 2013 673 47 720 200913 CAGR 3.8 2.0 3.7

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Recording Industry Association of America, Wilkofsky Gruen Associates

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Total digital music


Notwithstanding the projected decrease in mobile music, we expect the overall digital music market to average double-digit annual growth during the next five years. In the United States, spending of $4.6 billion in 2013 will represent a 12 percent compound annual increase from $2.6 billion in 2008.

In Canada, digital music will increase from $173 million in 2008 to $436 million in 2013, growing by 20.3 percent compounded annually. For North America as a whole, the digital music market will rise at a 12.5 percent compound annual rate from $2.8 billion in 2008 to $5.1 billion in 2013.

Digital recorded music market (US$ millions)


North America United States Canada Total 2004 574 16 590 2005 1,075 28 1,103 2006 1,859 69 1,928 2007 2,340 122 2,462 2008p 2,640 173 2,813 2009 2,946 224 3,170 2010 3,264 273 3,537 2011 3,690 323 4,013 2012 4,167 378 4,545 2013 4,643 436 5,079 200913 CAGR 12.0 20.3 12.5

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Recording Industry Association of America, Wilkofsky Gruen Associates

Physical distribution
Spending on physical music fell by 27.5 percent in 2008 and at double-digit rates during the past three years. From 2004 to 2008, physical music fell by 52.6 percent in the United States and by 46.7 percent in Canada. The physical music market is being hurt on virtually all fronts. Digital music is substantially less expensive, individual songs are virtually unavailable in physical formats, piracy remains an ongoing problem, and retail outlets for physical music are becoming scarce. Major chains such as Tower Records and Sam Goody have already closed, and Virgin Megastore announced it plans to leave the United States in 2009. Even big-box retailers such as Wal-Mart are allocating less space to recorded music and carrying fewer titles. In short, physical music is becoming more difficult to buy.

One of the remaining advantages of physical musicits ability to play on any deviceis being eroded by the elimination of DRM software for Internet downloads and mobile music. For these reasons we do not expect physical music to rebound, although we expect declines to moderate somewhat. We project that spending on physical music in the United States will fall at a 19.4 percent compound annual rate to $2 billion in 2013 from $5.8 billion in 2008. In Canada, physical distribution will drop from $451 million in 2008 to $156 million in 2013, a 19.1 percent decrease compounded annually. The overall North American market will total only $2.1 billion in 2013 from $6.2 billion in 2008 and $13 billion in 2004. During the next five years, decreases will average 19.4 percent on a compound annual basis.

Physical recorded music market (US$ millions)


North America United States Canada Total 2004 12,154 846 13,000 2005 11,195 816 12,011 2006 9,869 719 10,588 2007 7,986 577 8,563 2008p 5,758 451 6,209 2009 4,511 350 4,861 2010 3,574 273 3,847 2011 2,870 219 3,089 2012 2,338 181 2,519 2013 1,953 156 2,109 200913 CAGR 19.4 19.1 19.4

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Recording Industry Association of America, Wilkofsky Gruen Associates

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Europe, Middle East, Africa (EMEA)

The outlook in brief


The elimination of copy protection software, the introduction of graduated-response measures against piracy, and broadband growth will fuel digital download spending. Bundled service and growth in side loading will cut into mobile music spending in the near term. The migration to licensed digital distribution will lead to further declines in physical distribution.

Physical distribution will decline at a 10.9 percent compound annual rate, falling to $5.3 billion in 2013 from $9.4 billion in 2008. Digital distribution will grow at an 18.9 percent compound annual rate from $1.7 billion in 2008 to $3.9 billion in 2013, constituting 43 percent of total sales in 2013 compared with 15 percent in 2008. Internet distribution will rise to $3.2 billion in 2013 from $887 million in 2008, a 29.5 percent compound annual increase. Distribution to mobile phones will decline by 19.4 percent during the next two years and then expand by 12.9 percent during the subsequent three years to $698 million in 2013, a 1.9 percent compound annual decrease from $767 million in 2008.

Overview
The recorded music market will contract at a 3.6 percent compound annual rate to $9.2 billion in 2013 from $11.1 billion in 2008.

Recorded music market by component (US$ millions)


EMEA Physical distribution Digital distribution Internet Mobile phones Digital total Total recorded music 40 114 154 14,775 153 265 418 14,166 312 468 780 13,396 585 602 1,187 12,176 887 767 1,654 11,062 1,239 655 1,894 10,091 1,679 618 2,297 9,597 2,209 625 2,834 9,354 2,719 658 3,377 9,218 3,229 698 3,927 9,215 2004 14,621 2005 13,748 2006 12,616 2007 10,989 2008p 9,408 2009 8,197 2010 7,300 2011 6,520 2012 5,841 2013 5,288

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Recorded music market growth by component (%)


EMEA Physical distribution Digital distribution Internet Mobile phones Digital total Total recorded music 700.0 159.1 214.3 4.3 282.5 132.5 171.4 4.1 103.9 76.6 86.6 5.4 87.5 28.6 52.2 9.1 51.6 27.4 39.3 9.1 39.7 14.6 14.5 8.8 35.5 5.6 21.3 4.9 31.6 1.1 23.4 2.5 23.1 5.3 19.2 1.5 18.8 6.1 16.3 0.0 29.5 1.9 18.9 3.6 2004 4.9 2005 6.0 2006 8.2 2007 12.9 2008p 14.4 2009 12.9 2010 10.9 2011 10.7 2012 10.4 2013 9.5 200913 CAGR 10.9

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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The United Kingdom has the largest market in the region, at $2.4 billion in 2008, followed by Germany at $2.3 billion and France at $1.6 billion. Those three countries constituted 56 percent of total recorded music spending in EMEA. Steep price cuts for physical music in the UK helped limit unit sales declines but led to a 29 percent drop in spending on physical music in 2008. Gains in the licensed Internet distribution market will help offset continued declines in physical spending. The overall market will fall to $2 billion in 2013, a 3.9 percent compound annual decrease. Germanys physical market has declined at slower rates than in most other countries in Western Europe during the past five years. Although we expect continued erosion in physical spending, a growing digital market will lead to a turnaround in 2012, when we expect Germany to pass the UK to become the largest market in EMEA. Nevertheless, spending of $2.1 billion in 2013 will remain 1.9 percent lower on a compound annual basis from 2008. In contrast with Germany, the physical market in France has plunged at precipitous rates, falling by 41 percent from 2004 to 2008. Growth in Internet distribution will limit decreases in total spending to single-digit levels

beginning in 2010. We project a 7.4 percent compound annual decrease during the next five years, the largest decline of any country in EMEA, with spending dropping to $1.1 billion in 2013. We project recorded music spending in all of Western Europe to decrease at a 3.6 percent compound annual rate to $8 billion in 2013 from $9.6 billion in 2008. Hurt by a weak economy in the near term and a limited digital market, Central and Eastern Europe are projected to fall at a 4.7 percent compound annual rate to $853 million in 2013 from $1.1 billion in 2008. In Middle East/Africa, we look for a relatively modest, 0.8 percent compound annual decrease, the result of slower declines in physical spending in South Africa compared with most other countries in EMEA. South Africa is the only country where we expect spending to be higher in 2013 than in 2008. Overall spending in Middle East/Africa will total an estimated $343 million in 2013 from $357 million in 2008. Because of relatively slow growth in digital spending in Central and Eastern Europe and Middle East/Africa, EMEA will be the only region where we project digital spending to remain substantially lower than physical spending during the next five years.

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Recorded music market by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 56 92 185 333 14,775 59 93 206 358 14,166 56 88 213 357 13,396 53 87 219 359 12,176 51 82 224 357 11,062 46 75 212 333 10,091 44 70 210 324 9,597 45 70 224 339 9,354 46 68 229 343 9,218 46 66 231 343 9,215 2.0 4.2 0.6 0.8 3.6 66 69 139 18 581 185 1,058 61 64 139 21 481 157 923 57 58 157 24 529 165 990 54 56 157 24 519 168 978 50 54 181 25 607 166 1,083 44 49 167 23 504 149 936 41 44 156 20 472 138 871 41 44 155 21 473 137 871 40 42 153 21 466 136 858 40 43 154 21 455 140 853 4.4 4.5 3.2 3.4 5.6 3.3 4.7 345 391 221 158 2,361 2,565 173 173 793 602 329 151 916 300 312 3,594 13,384 333 386 213 155 2,217 2,558 167 174 788 502 289 133 897 268 326 3,479 12,885 317 415 215 128 2,013 2,496 163 175 730 471 261 112 818 248 308 3,179 12,049 301 410 208 124 1,794 2,418 157 157 592 441 251 101 439 228 293 2,925 10,839 284 392 200 112 1,553 2,282 144 141 471 413 237 92 393 219 283 2,406 9,622 264 361 186 101 1,373 2,144 125 121 387 379 219 84 357 198 273 2,250 8,822 250 345 175 95 1,280 2,060 115 114 342 356 207 81 349 186 262 2,185 8,402 242 334 171 93 1,192 2,042 112 113 320 338 198 83 366 184 253 2,103 8,144 236 327 172 97 1,107 2,058 108 120 322 323 191 86 411 190 240 2,029 8,017 240 322 178 100 1,058 2,076 110 116 339 312 186 93 483 199 233 1,974 8,019 3.3 3.9 2.3 2.2 7.4 1.9 5.2 3.8 6.4 5.5 4.7 0.2 4.2 1.9 3.8 3.9 3.6 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Internet distribution
Licensed Internet distribution had previously been sold with digital rights management (DRM) software that limited the ability of users to transfer songs to mobile devices and restricted the ability of users to burn CDs or otherwise copy music. The result was that buyers of licensed product had less flexibility in using that product than did people who obtained music through file-sharing services. That trend is now changing, and licensed distribution is being sold largely without DRM software. Tesco, Dada, HMV MP3, Play.com, and 7Digital are among the online retailers that sell DRM-free music. Retailers report that sales jumped when DRM was eliminated, particularly for digital albums, which represent an expanding component of the market. Spending on licensed Internet music rose 51.6 percent in 2008. Countries are investigating new strategies to combat piracy. In France, legislation has been introduced to create a graduated-response system. Internet service providers will issue warnings to customers who are heavy abusers of copyright. Those who ignore two warnings will face sanctions of up to a year of lost Internet access. Research suggests that warnings from ISPs are effective. In the UK, a memorandum of understanding was reached in 2008 between major ISPs and the recording industry under which ISPs sent out thousands of warning letters to customers about illegal downloads and promoted legitimate services. In early 2009, a tax on broadband access was proposed, with the proceeds used to generate data on copyright abusers. In Belgium, a court ordered Scarlet (formerly Tiscali) to make it impossible for customers to use file-sharing services for illegal purposes, with the onus on the ISP to use filtering technology to distinguish unauthorized files. In Finland, a court ordered TeliaSonera to suspend Internet access by customers who upload large numbers of illegal files. The industry is optimistic that these new approaches that center on ISPs will be more effective than previous efforts. In 2008, the International Federation of the Phonographic Industry removed 3 million infringing Internet links, up from 500,000 in 2007.

The market will also benefit from an expanding broadband household universe. The number of broadband households in EMEA will increase by 92 million during the next five yearsa 70 percent increase that will significantly expand the potential market for music downloading, as it is much faster and easier to download from a broadband connection.

Broadband households in EMEA (millions)


240 210 180 150 120 90 60 30 0 37 82 58 108 132 142 154 173 198 224

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

The UK has the largest Internet distribution market in EMEA, at $450 million in 2008, with Germany next, at $116 million, followed by France at $88 million, together accounting for 74 percent of spending in EMEA. Competition among a large number of online retailers and surging album sales are boosting spending in the UK, which rose by 50.5 percent in 2008. Digital albums also are fueling growth in Germany, with spending rising by 31.8 percent in 2008. France posted a comparable, 31.3 percent increase, buoyed by subscription streaming services that augmented the market. We expect that DRM-free product, more effective antipiracy efforts, and the expanding broadband universe will propel licensed Internet distribution. We project spending to rise from $887 million in 2008 to $3.2 billion in 2013, a 29.5 percent compound annual increase.

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Licensed Internet recorded music market (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 40 1 1 153 2 2 312 1 2 4 7 585 2 3 10 15 887 3 5 17 25 1,239 5 8 28 41 1,679 9 14 50 73 2,209 11 16 64 91 2,719 13 18 74 105 3,229 45.4 43.1 49.2 47.6 29.5 2 1 3 1 1 3 8 3 16 2 2 7 1 20 7 39 3 3 12 2 31 11 62 5 5 18 2 48 16 94 8 9 30 4 80 27 158 10 10 37 5 97 33 192 11 12 42 6 107 38 216 40.6 43.1 43.1 43.1 39.9 40.3 40.8 1 4 16 1 1 2 15 40 1 3 2 1 18 45 7 6 1 1 1 4 62 152 4 4 4 3 51 61 1 1 15 15 5 1 3 2 8 129 307 9 10 6 4 67 88 3 3 13 18 9 3 7 5 18 299 562 13 18 12 7 88 116 4 6 19 20 15 6 16 11 32 450 833 22 26 19 12 117 165 7 10 28 25 22 10 35 15 51 588 1,152 32 40 27 18 176 230 12 18 44 32 29 16 61 24 69 716 1,544 44 59 39 25 234 322 18 29 66 44 36 23 107 41 83 808 1,978 59 80 55 34 293 410 25 44 102 57 43 32 177 61 92 872 2,436 76 102 75 44 351 498 34 47 146 73 51 42 266 83 102 918 2,908 42.4 41.5 44.3 44.4 31.9 33.8 53.4 50.9 50.4 29.6 27.7 47.6 75.4 49.8 26.1 15.3 28.4 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Less than US$500,000. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: BV Phono, NVPI, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Mobile phone distribution


Although mobile phone distribution continued to grow at the healthy rate of 27.4 percent in 2008, we expect spending to decline during the next two years principally because of the introduction of bundled services that enable customers to access music in a package. Wireless carriers are changing their approach and are now using music less as a generator of incremental revenues than as a means to reduce churn. In Denmark, for example, TDC introduced PLAY in 2008a music service that bundles music with mobile broadband and experienced a significant reduction in churn. In France, Neuf Cegetel, Orange, and SFR introduced bundled services; BSkyB announced plans for bundled services in the UK and Ireland; and TeliaSonera is launching bundled services in several countries in 2009. Comes with Music from Nokia, introduced in the UK in 2008, is a handset that comes with access to songs. The cost of the songs is included in the price of the handset, but users do not directly pay for the music. Spotify, We7, and Last.fm are ad-supported free services available in the UK, and MySpace Music and PlayNow Plus are expected to enter the market in 2009. Spotify is free with a 30-second ad shown every 20 minutes. There is also an option to pay 9.99 ($18.35) per month without ads. In Italy, mobile spending fell by 36 percent in 2008 and by 43 percent since 2006. High price points have discouraged spending, particularly as there is a proliferation of lower-cost options available online. Comes with Music is expected to be available in 2009, which will further cut into mobile music spending. In addition to those new services, side loadingthe transferring of songs from a computer to a mobile

phoneis growing as more songs become available on a DRM-free basis. Internet downloads are much less expensive than purchases of songs through a wireless carrier. Now that side loading is no longer facing DRM, we expect the practice to expand, which will shift spending from mobile services to Internet downloads. Over time, we expect mobile music to evolve into a subscription service that is part of an overall mobile data package that includes mobile Internet access and, possibly, mobile television. Bundled services are succeeding in the telephone/broadband/television markets, and we expect they will come to dominate the mobile market as well. In that environment, a portion of the subscription fee for the overall bundle will cover the cost of the music, and users will have extensive access to stream music through their mobile devices. During the next two years, we expect a drop in spending on music purchases through mobile networks. By 2011, we expect that subscription services that include music will become large enough to offset declines in traditional spending. Nevertheless, spending in 2013 will remain lower than in 2008. For the forecast period as a whole, mobile music spending will decrease from $767 million in 2008 to $698 million in 2013, a 1.9 percent compound annual decline. Western Europe will total $462 million in 2013, a 0.9 percent decrease on a compound annual basis from $483 million in 2008. Central and Eastern Europe, where near-term economic conditions are very weak and there are fewer new services entering the market, will decrease from $256 million to $207 million, a 4.2 percent decline on a compound annual basis. Middle East/Africa will edge up at a 0.7 percent compound annual rate to $29 million in 2013 from $28 million in 2008.

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Mobile phone recorded music market (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 114 2 3 2 7 265 4 6 4 14 468 6 10 6 22 602 8 12 8 28 767 7 12 8 27 655 7 11 7 25 618 7 11 8 26 625 8 12 8 28 658 8 12 9 29 698 0.0 0.0 2.4 0.7 1.9 12 12 2 2 5 1 40 5 55 4 4 11 2 67 11 99 6 6 18 3 97 19 149 7 8 27 4 185 25 256 6 8 26 4 131 23 198 6 7 25 3 126 22 189 6 7 25 4 127 22 191 6 7 26 4 132 23 198 7 8 28 4 135 25 207 0.0 0.0 0.7 0.0 6.1 0.0 4.2 3 20 NA 19 2 9 14 35 102 9 3 2 64 NA 32 1 3 16 1 19 53 203 20 7 4 1 79 53 1 51 7 4 1 31 2 28 66 355 29 12 5 3 78 47 3 45 12 5 3 32 3 35 119 431 37 15 6 3 88 44 1 3 29 13 6 3 26 5 39 165 483 34 13 5 1 85 40 1 1 22 10 6 1 23 4 37 147 430 32 12 5 1 80 37 1 1 20 9 5 1 23 3 36 138 404 31 12 5 1 80 37 3 1 20 9 6 3 23 3 36 138 408 31 13 5 3 82 38 3 3 22 10 6 3 25 4 37 147 432 32 15 5 3 85 41 4 3 25 12 6 4 28 4 39 156 462 2.9 0.0 3.6 0.0 0.7 1.4 32.0 0.0 2.9 1.6 0.0 5.9 1.5 4.4 0.0 1.1 0.9 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Less than US$500,000. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Recorded music | EMEA

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Total digital spending


Total digital recorded music spending in EMEA will increase from $1.7 billion to $3.9 billion, an 18.9 percent compound annual increase. Western Europe will rise from $1.3 billion to $3.4 billion, 20.7 percent compounded annually. Digital spending in Central and Eastern Europe will rise to $423 million in 2013 from $295 million in 2008, a 7.5 percent compound annual increase. Middle East/Africa will have the fastest-growing digital market in percentage terms, with a projected 25.5 percent increase compounded annually, from $43 million to $134 million.

Even if efforts to reduce unauthorized file sharing succeed, we do not expect it will help the physical market, because spending will most likely shift to licensed digital services. The physical market has largely abandoned singles because they are not economical. Relatively few songs are now released as singles, and retailers are discontinuing them. In 2008, Woolworths in the UK stopped selling singles. The digital market, by contrast, generates most of its volume by selling single songs that are not available at any price in the physical market. Physical distribution also is much more expensive than digital distribution, and DRM-free music will make digital distribution even more appealing. For these reasons, we do not expect a rebound in physical music. We expect spending to fall at a 10.9 percent compound annual rate to $5.3 billion in 2013 from $9.4 billion in 2008. Compared with 2004, spending in 2013 will be 64 percent lower.

Physical distribution
Physical distribution fell 14.4 percent in 2008, its steepest decline during the past five years. The physical market has been hurt by physical piracy, particularly in Central and Eastern Europe, where counterfeit CDs reduced spending for licensed product. In Western Europe, the shift to digitalboth legitimate and unauthorizedhas led to large reductions in physical sales.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Digital recorded music market (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 154 2 3 3 8 418 4 6 6 16 780 7 12 10 29 1,187 10 15 18 43 1,654 10 17 25 52 1,894 12 19 35 66 2,297 16 25 58 99 2,834 19 28 72 119 3,377 21 30 83 134 3,927 16.0 14.9 35.8 25.5 18.9 12 12 2 2 5 1 40 5 55 4 4 11 2 69 12 102 7 7 21 3 105 22 165 9 10 34 5 205 32 295 9 11 38 6 162 34 260 11 12 43 5 174 38 283 14 16 55 8 207 49 349 16 17 63 9 229 56 390 18 20 70 10 242 63 423 14.9 14.9 15.5 14.9 3.4 14.5 7.5 3 1 24 16 19 1 2 9 1 16 50 142 10 6 4 1 82 45 39 7 4 17 2 23 115 355 24 11 8 4 130 114 1 2 66 22 9 2 34 4 36 195 662 38 22 11 7 145 135 3 6 58 30 14 6 39 8 53 418 993 50 33 18 10 176 160 5 9 48 33 21 9 42 16 71 615 1,316 56 39 24 13 202 205 8 11 50 35 28 11 58 19 88 735 1,582 64 52 32 19 256 267 13 19 64 41 34 17 84 27 105 854 1,948 75 71 44 26 314 359 21 30 86 53 42 26 130 44 119 946 2,386 90 93 60 37 375 448 28 47 124 67 49 35 202 65 129 1,019 2,868 108 117 80 47 436 539 38 50 171 85 57 46 294 87 141 1,074 3,370 16.7 28.8 34.8 36.3 19.9 27.5 50.0 40.9 28.9 20.8 22.1 38.6 47.6 40.3 14.7 11.8 20.7 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Less than US$500,000. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Recorded music | EMEA

289

Physical recorded music market (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 56 92 185 333 14,621 57 90 203 350 13,748 52 82 207 341 12,616 46 75 209 330 10,989 41 67 206 314 9,408 36 58 187 281 8,197 32 51 175 258 7,300 29 45 166 240 6,520 27 40 157 224 5,841 25 36 148 209 5,288 9.4 11.7 6.4 7.8 10.9 66 69 139 18 569 185 1,046 59 62 134 20 441 152 868 53 54 146 22 460 153 888 47 49 136 21 414 146 813 41 44 147 20 402 134 788 35 38 129 17 342 115 676 30 32 113 15 298 100 588 27 28 100 13 266 88 522 24 25 90 12 237 80 468 22 23 84 11 213 77 430 11.7 12.2 10.6 11.3 11.9 10.5 11.4 342 391 220 158 2,337 2,549 173 173 774 601 327 151 907 299 296 3,544 13,242 323 380 209 154 2,135 2,513 167 174 749 495 285 133 880 266 303 3,364 12,530 293 404 207 124 1,883 2,382 162 173 664 449 252 110 784 244 272 2,984 11,387 263 388 197 117 1,649 2,283 154 151 534 411 237 95 400 220 240 2,507 9,846 234 359 182 102 1,377 2,122 139 132 423 380 216 83 351 203 212 1,791 8,306 208 322 162 88 1,171 1,939 117 110 337 344 191 73 299 179 185 1,515 7,240 186 293 143 76 1,024 1,793 102 95 278 315 173 64 265 159 157 1,331 6,454 167 263 127 67 878 1,683 91 83 234 285 156 57 236 140 134 1,157 5,758 146 234 112 60 732 1,610 80 73 198 256 142 51 209 125 111 1,010 5,149 132 205 98 53 622 1,537 72 66 168 227 129 47 189 112 92 900 4,649 10.8 10.6 11.6 12.3 14.7 6.2 12.3 12.9 16.9 9.8 9.8 10.8 11.6 11.2 15.4 12.9 11.0 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

290

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Asia Pacific

The outlook in brief


Advanced wireless networks and handsets that facilitate music will fuel mobile phone distribution. Broadband expansion will propel Internet distribution. Piracy and increased competition from licensed services will lead to accelerated declines in physical distribution.

Physical distribution will decline at a 9.5 percent compound annual rate to $3.4 billion in 2013 from $5.6 billion in 2008. Digital distribution will rise to $5.3 billion in 2013, up 12.5 percent on a compound annual basis from $3 billion in 2008. Digital spending will overtake physical spending in 2011 and by 2013 will account for 61 percent of total recorded music spending. Mobile phone distribution accounted for 83 percent of digital spending at $2.5 billion in 2008. Spending will increase to $4.3 billion in 2013, an 11.5 percent advance on a compound annual basis from 2008. Internet distribution will grow to $1.1 billion by 2013 from $493 million in 2008, a 16.7 percent compound annual increase.

Overview
Recorded music spending will remain essentially flat during the next five years, edging up at a 0.4 percent compound annual rate to $8.7 billion in 2013 from $8.6 billion in 2008.

Recorded music market by component (US$ millions)


Asia Pacific Physical distribution Digital distribution Internet Mobile phones Digital total Total recorded music 29 327 356 7,783 171 636 807 7,722 256 974 1,230 7,890 368 2,101 2,469 8,626 493 2,476 2,969 8,552 585 2,802 3,387 8,386 694 3,175 3,869 8,360 817 3,566 4,383 8,441 946 3,920 4,866 8,553 1,065 4,274 5,339 8,720 2004 7,427 2005 6,915 2006 6,660 2007 6,157 2008p 5,583 2009 4,999 2010 4,491 2011 4,058 2012 3,687 2013 3,381

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Recorded music market growth by component (%)


Asia Pacific Physical distribution Digital distribution Internet Mobile phones Digital total Total recorded music 97.0 114.5 1.9 489.7 94.5 126.7 0.8 49.7 53.1 52.4 2.2 43.8 115.7 100.7 9.3 34.0 17.8 20.3 0.9 18.7 13.2 14.1 1.9 18.6 13.3 14.2 0.3 17.7 12.3 13.3 1.0 15.8 9.9 11.0 1.3 12.6 9.0 9.7 2.0 16.7 11.5 12.5 0.4 2004 4.3 2005 6.9 2006 3.7 2007 7.6 2008p 9.3 2009 10.5 2010 10.2 2011 9.6 2012 9.1 2013 8.3 200913 CAGR 9.5

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Recorded music | Asia Pacific

291

Japan is the dominant territory, at $6.6 billion in 2008, 77 percent of total recorded music spending in Asia Pacific. Spending dipped by 0.8 percent in 2008 as an 8.6 percent decrease in physical spending was nearly offset by an 18.6 percent increase in digital. Japan has the largest mobile music market in the world, at $2.1 billion in 2008, which represents 51 percent of global spending on mobile music. In the near term, a declining physical market will offset an expanding digital market as it did in 2008. By 2011, digital growth will offset physical declines. Spending in 2013 will increase to $6.7 billion, a 0.2 percent compound annual gain. Australia is the second-largest country, at $662 million in 2008. The physical market accounts for 86 percent of recorded music spendingsecond highest in the region behind India. Declines in physical spending will offset growth in digital through 2012. Spending in 2013 will total an estimated $562 million, down 3.2 percent on a compound annual basis from 2008. South Korea, the third-largest market, at $409 million, has a high piracy rate and a small legitimate physical market that accounts for only 13 percent of spending, lowest in the region. South Korea has the largest Internet distribution market in Asia Pacific in both absolute and share terms. Its $218 million in legitimate Internet downloads constituted 53 percent of total spending in 2008. With the legitimate physical market playing virtually no role, we project an expanding digital market to generate an overall 4.4 percent compound annual increase during the next five years.

India is the only country in Asia Pacific where legitimate physical spending has been increasing in recent years. Although the market flattened in 2008 and we do not expect much growth going forward, physical spending will not pull the market down. At the same time, the digital market is relatively undeveloped in India. Although growth in percentage terms will be significant, at 34.8 percent compounded annually, the actual contribution of digital to spending will be modest. We project total spending in India, the fourth-largest market in 2008, to grow at a 7.2 percent compound annual rate to $242 million in 2013. The Peoples Republic of China (PRC) has a legitimate market of only $145 million in 2008, which represents a tiny fraction of all activity. More than 99 percent of the files downloaded in the PRC are illegal. There also is widespread physical piracy, as the PRC is a major source of production of pirated discs. Mobile music accounts for half of legitimate spending, and digital as a whole represents 61 percent of spending. With the physical market relatively small, declines in that sector, which we project at 14.5 percent compounded annually, will not have a major impact on total spending. Digital spending in the PRC during the next five years will expand at a 20.4 percent compound annual rate, and the total market will grow by 11.4 percent compounded annually, the largest percentage gain in the region. Nevertheless, legitimate spending will remain a small component of total activity.

292

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Recorded music market by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 823 188 84 153 83 5,667 37 111 21 32 56 178 173 177 NA 7,783 2005 744 147 86 160 81 5,722 34 112 22 33 50 255 135 141 NA 7,722 2006 797 156 81 164 86 5,841 32 99 21 30 46 309 101 127 NA 7,890 2007 713 142 81 169 84 6,650 33 89 20 29 44 358 93 121 NA 8,626 2008p 662 145 80 171 83 6,595 35 82 19 28 46 409 80 117 NA 8,552 2009 616 150 76 173 80 6,497 38 74 19 28 43 412 68 112 NA 8,386 2010 582 161 76 182 79 6,492 41 69 18 28 41 421 63 107 NA 8,360 2011 565 185 75 199 79 6,531 45 67 19 29 41 443 59 104 NA 8,441 2012 560 216 74 222 80 6,570 48 63 19 28 40 474 56 103 NA 8,553 2013 562 249 74 242 81 6,656 52 58 18 27 39 507 54 101 NA 8,720 200913 CAGR 3.2 11.4 1.5 7.2 0.5 0.2 8.2 6.7 1.1 0.7 3.2 4.4 7.6 2.9 0.4

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Mobile phone distribution


The mobile phone market in Asia Pacific is dominated by Japan, which accounted for 86 percent of total mobile music spending in 2008. Mobile singles and a growing mobile subscription market are fueling growth in Japan, which rose by 17.4 percent in 2008 despite the weak economy. The strength of the mobile music market in Japan reflects the fact that mobile phones are the predominant means of accessing the Internet in Japanese society, with people routinely using their mobile phones to access the Internet, watch television, and download books. Music is another widely used mobile Internet application. Wireless network upgrades by NTT DoCoMo and the introduction of the iPhone, which facilitates music downloads, should sustain growth. We project mobile music in Japan to increase to $3.7 billion by 2013, an 11.6 percent compound annual increase.

South Korea is a distant second in mobile phone music spending, at $136 million in 2008. A national HighSpeed Downlink Packet Access networkintroduced in 2007facilitates music downloads and contributed to a 27.1 percent increase in 2008. We look for a slowdown during the next two yearsas the recession cuts into growthfollowed by a subsequent pickup when the economy improves. We project the mobile music market to grow to $186 million in 2013, a 6.5 percent compound annual increase. The PRC has the third-largest mobile phone distribution market in Asia Pacific, at $72 million in 2008. Restructuring of the telecommunications market will make the wireless market more competitive, and the introduction of third-generation (3G) services in 2009 should boost the mobile market. We project a 21 percent compound annual increase to $187 million in 2013, propelling the PRC just ahead of South Korea.

Recorded music | Asia Pacific

293

The remainder of the region is small and in its early phases of development. Virtually all countries are upgrading their networks to offer faster speeds and more services. As the new networks are rolled out, wireless carriers will offer advanced applications, including the option to download music, which will stimulate spending throughout the region. Wireless network upgrades are being accompanied by the launch of new handsets, some of which are specifically designed to be used for listening to music. They have the capacity to store thousands of songs and can play them in high-quality stereo.

In contrast with North America and EMEA, Internet distribution of music is not a strong competitor of mobile music in Asia Pacific, reflecting the lower proportion of households with Internet access in the region. Consequently, we are not seeing a transition to lower-cost Internet downloads. We project mobile phone music spending in Asia Pacific to increase at an 11.5 percent compound annual rate to $4.3 billion in 2013 from $2.5 billion in 2008.

Mobile phone recorded music market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 8 5 3 4 261 2 1 1 2 28 5 7 NA 327 2005 10 20 6 7 13 493 1 4 2 2 4 57 7 10 NA 636 2006 22 45 8 8 24 739 3 6 2 3 5 87 9 13 NA 974 2007 28 55 13 10 27 1,803 5 5 3 5 7 107 14 19 NA 2,101 2008p 23 72 17 11 29 2,117 6 4 4 6 10 136 16 25 NA 2,476 2009 19 86 20 12 30 2,415 7 4 5 7 11 141 16 29 NA 2,802 2010 18 104 22 16 31 2,754 8 4 5 8 12 145 17 31 NA 3,175 2011 18 129 23 25 33 3,092 9 5 6 9 13 154 18 32 NA 3,566 2012 20 158 24 37 35 3,382 10 6 6 9 13 168 18 34 NA 3,920 2013 23 187 25 48 38 3,671 10 6 6 9 13 186 18 34 NA 4,274 200913 CAGR 0.0 21.0 8.0 34.3 5.6 11.6 10.8 8.4 8.4 8.4 5.4 6.5 2.4 6.3 11.5

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

294

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Internet distribution
The licensed Internet distribution market is not nearly as well developed as the mobile market. Spending totaled only $493 million in 2008, less than 20 percent the size of the mobile music market. Illegal downloading is dramatically cutting into spending on licensed Internet music. Unauthorized files are estimated to represent 95 percent of all downloads and more than 99 percent in the PRC. New Zealand in April 2008 introduced a graduatedresponse system to combat online piracy. Under the proposed system, Internet service providers will be required to identify subscribers who are persistent downloaders of unauthorized files and to issue warning letters. If warnings are not heeded, responses escalate and can include termination of Internet privileges. Despite enactment in April 2008, the process stalled. It did not come into force as expected in March 2009 because of objection from telecommunications companies and ISPs about its workability. The New Zealand government is still reexamining the legislation, and its outcome is uncertain. In Japan, a consortium of trade associations in the music and film industry and ISPs are considering adopting a graduated-response system as well. The market also is being hampered by some users discomfort in using credit cards to purchase products over the Internet. Despite those impediments, the market is posting large percentage gains. Spending in 2008 rose by 34 percent. The entrance of Apples iTunes Music Store in several territories is stimulating the market. Spending in Japan more than doubled in 2007 and rose by 43 percent in 2008. In Australia, the market rose by 82 percent in 2008. In the PRC, by contrast, spending has been flat during the past two years. Several major Web sites were forced to curtail their music markets because of copyright infringement, and others are exploring advertiser-supported models because they are finding it difficult to induce customers to pay for music.

In the Philippines, music downloading kiosks are being set up by record companies. Sony BMG runs Music to Go, while Star Records is considering developing its own dedicated kiosks. Over the longer run, broadband growth will expand the potential for music downloading in Asia Pacific because it is faster and easier to download music through a broadband connection. There were 145 million broadband subscribers in Asia Pacific in 2008. During the next five years, an additional 119 million will substantially expand the market, enlarging the potential universe for Internet music distribution by 82 percent. We project spending on music distributed over the Internet to grow to $1.1 billion by 2013, a 16.7 percent compound annual increase. Although the percentage growth will be significant, Internet distribution will remain a relatively small component of the market, accounting for 12 percent of total spending in 2013.

Broadband subscribers in Asia Pacific (millions)


300 250 200 150 100 50 0 59 79 97 119 145 168 193 215 239 264

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Recorded music | Asia Pacific

295

Licensed Internet recorded music market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 4 12 13 NA 29 2005 10 8 1 5 1 29 1 1 1 95 17 2 NA 171 2006 24 16 2 5 2 42 2 2 1 1 1 137 18 3 NA 256 2007 39 15 4 6 3 91 4 4 1 1 2 181 11 6 NA 368 2008p 71 16 6 7 5 130 8 6 1 2 4 218 11 8 NA 493 2009 100 17 7 8 7 169 12 7 2 3 4 227 11 11 NA 585 2010 134 18 10 11 9 211 16 9 2 4 5 240 11 14 NA 694 2011 167 22 13 16 11 251 21 13 3 5 7 259 11 18 NA 817 2012 201 29 15 25 14 290 25 15 4 6 8 281 12 21 NA 946 2013 234 36 18 32 15 328 30 17 4 6 9 299 13 24 NA 1,065 200913 CAGR 26.9 17.6 24.6 35.5 24.6 20.3 30.3 23.2 32.0 24.6 17.6 6.5 3.4 24.6 16.7

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

296

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Total digital spending


Total digital recorded music spending in Asia Pacific will reach $5.3 billion in 2013 from $3 billion in 2008, a 12.5 percent compound annual increase.

Japan, which has the largest digital market, at $2.2 billion in 2008, will increase to $4 billion in 2013, a 12.2 percent compound annual gain. South Korea will rise from $354 million to $485 million, a 6.5 percent gain compounded annually.

Digital recorded music market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 8 5 3 0 4 265 0 2 1 1 2 40 18 7 NA 356 2005 20 28 7 12 14 522 2 5 2 2 5 152 24 12 NA 807 2006 46 61 10 13 26 781 5 8 3 4 6 224 27 16 NA 1,230 2007 67 70 17 16 30 1,894 9 9 4 6 9 288 25 25 NA 2,469 2008p 94 88 23 18 34 2,247 14 10 5 8 14 354 27 33 NA 2,969 2009 119 103 27 20 37 2,584 19 11 7 10 15 368 27 40 NA 3,387 2010 152 122 32 27 40 2,965 24 13 7 12 17 385 28 45 NA 3,869 2011 185 151 36 41 44 3,343 30 18 9 14 20 413 29 50 NA 4,383 2012 221 187 39 62 49 3,672 35 21 10 15 21 449 30 55 NA 4,866 2013 257 223 43 80 53 3,999 40 23 10 15 22 485 31 58 NA 5,339 200913 CAGR 22.3 20.4 13.3 34.8 9.3 12.2 23.4 18.1 14.9 13.4 9.5 6.5 2.8 11.9 12.5

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Recorded music | Asia Pacific

297

Physical distribution
The physical distribution market fell by 9.3 percent in 2008, its largest decline during the past five years. Each country except India recorded decreases, and India was flat. Japan and Australia have the largest physical distribution markets, at $4.3 billion and $568 million, respectively. In contrast with the PRC and South Korea, physical piracy is less of a major problem in Japan and Australia, which accounts for their large physical markets. Nevertheless, both territories are declining. In Australia, following a rebound in 2006, spending fell by 24 percent during the past two years. In Japan, physical sales have been declining for years, and the decrease in 2008 was 8.6 percent.

In the remaining territories, piracy and licensed digital music contributed to declines in physical distribution during the past five years. Piracy is particularly acute in Indonesia, Malaysia, the PRC, South Korea, and Thailand, reducing spending in those territories well below actual levels of consumption. Continued piracy and growth in legitimate licensed digital services will further cut into physical distribution during the next five years. We project physical spending to fall at a 9.5 percent compound annual rate comparable to the decline in 2008. Spending will drop from $5.6 billion in 2008 to $3.4 billion in 2013.

Physical recorded music market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 815 183 81 153 79 5,402 37 109 20 31 54 138 155 170 NA 7,427 2005 724 119 79 148 67 5,200 32 107 20 31 45 103 111 129 NA 6,915 2006 751 95 71 151 60 5,060 27 91 18 26 40 85 74 111 NA 6,660 2007 646 72 64 153 54 4,756 24 80 16 23 35 70 68 96 NA 6,157 2008p 568 57 57 153 49 4,348 21 72 14 20 32 55 53 84 NA 5,583 2009 497 47 49 153 43 3,913 19 63 12 18 28 44 41 72 NA 4,999 2010 430 39 44 155 39 3,527 17 56 11 16 24 36 35 62 NA 4,491 2011 380 34 39 158 35 3,188 15 49 10 15 21 30 30 54 NA 4,058 2012 339 29 35 160 31 2,898 13 42 9 13 19 25 26 48 NA 3,687 2013 305 26 31 162 28 2,657 12 35 8 12 17 22 23 43 NA 3,381 200913 CAGR 11.7 14.5 11.5 1.1 10.6 9.4 10.6 13.4 10.6 9.7 11.9 16.7 15.4 12.5 9.5

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

298

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Latin America

The outlook in brief


New music sites and 3G launches will drive spending on mobile phone distribution. An expanding broadband universe will expand the market for legitimate Internet distribution. Piracy and growth in legitimate digital formats will lead to declines in physical distribution.

Physical distribution will decline from $762 million in 2008 to $476 million in 2013, a 9 percent decrease compounded annually. Digital distribution will reach $462 million in 2013, growing at an 18.8 percent compound annual rate from $195 million in 2008. Mobile phone music spending will total $314 million in 2013 from $153 million in 2008, a 15.5 percent compound annual increase. Licensed Internet distribution will generate $148 million by 2013, rising at a 28.6 percent compound annual rate from $42 million in 2008.

Overview
The recorded music market will decline during the next three years by 9.8 percent and then expand by 8.7 percent to $938 million, down 0.4 percent on a compound annual basis from $957 million in 2008.

Recorded music market by component (US$ millions)


Latin America Physical distribution Digital distribution Internet Mobile phones Digital total Total recorded music 20 20 1,180 1 27 28 1,171 2 42 44 1,141 15 103 118 977 42 153 195 957 56 168 224 906 69 182 251 869 90 205 295 863 116 248 364 880 148 314 462 938 2004 1,160 2005 1,143 2006 1,097 2007 859 2008p 762 2009 682 2010 618 2011 568 2012 516 2013 476

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Recorded music market growth by component (%)


Latin America Physical distribution Digital distribution Internet Mobile phones Digital total Total recorded music 81.8 81.8 13.8 35.0 40.0 0.8 100.0 55.6 57.1 2.6 650.0 145.2 168.2 14.4 180.0 48.5 65.3 2.0 33.3 9.8 14.9 5.3 23.2 8.3 12.1 4.1 30.4 12.6 17.5 0.7 28.9 21.0 23.4 2.0 27.6 26.6 26.9 6.6 28.6 15.5 18.8 0.4 2004 13.1 2005 1.5 2006 4.0 2007 21.7 2008p 11.3 2009 10.5 2010 9.4 2011 8.1 2012 9.2 2013 7.8 200913 CAGR 9.0

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Recorded music | Latin America

299

Brazil and Mexico were the largest markets, at $373 million and $335 million, respectively, in 2008. Brazil rose 1.9 percent fueled by a surging digital market that more than doubled in 2008, offsetting a 14.5 percent decline in physical distribution. In Mexico, the digital gain was a more muted, 34.6 percent, not enough to offset a 12.5 percent decrease in physical spendingand leading to an overall 5.6 percent decline.

Argentina has the third-largest market, at $105 million in 2008, down 9.5 percent from 2007. Argentina does not have a significant digital market; digital spending constituted less than 4 percent of the total. Physical spending had been increasing through 2007 before falling by 10.6 percent in 2008.

Recorded music market by country (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 78 605 45 66 372 14 1,180 2005 100 529 42 71 413 16 1,171 2006 108 479 38 73 423 20 1,141 2007 116 366 38 80 355 22 977 2008p 105 373 38 82 335 24 957 2009 103 365 36 79 300 23 906 2010 101 356 34 75 281 22 869 2011 100 367 33 75 264 24 863 2012 99 393 32 75 256 25 880 2013 99 446 32 76 260 25 938 200913 CAGR 1.2 3.6 3.4 1.5 4.9 0.8 0.4

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Mobile phone distribution


The mobile phone distribution market rose by 48.5 percent in 2008 to $153 million, more than triple the $42 million total in 2006. New mobile music stores are expanding the market. In 2008, America Mobile launched Ideas Telcel in a number of countries, Telefnica introduced Emocin Movistar in Colombia and expects to expand to other countries in 2009, and PlayPhone started a site in Brazil. The launch of 3G services is making music downloads easier and more convenient. In Brazil, 3G licenses were auctioned in 2007, and 3G services were introduced in 2008. In Colombia, Movistar and Colombia Movil launched 3G in 2008, Telcel in Mexico expanded its 3G service area, and in Argentina, Telecom Argentina upgraded its wireless network to 3G and to expand coverage.

Music handsets, too, are driving the market. Manufacturers have introduced phones specifically designed to play music. Music phones now represent around 20 percent of all handset sales. Brazil and Mexico have the largest markets, at $68 million and $63 million, respectively, in 2008. Colombia was a distant third, at $11 million, and the remaining countries are each at $5 million or less. Upgrades to 3G and increased availability of music through new stores will continue to drive spending. In the near term, the recession will keep increases at less than 10 percent. When the economy recovers, we expect growth to return to double digits, with gains in excess of 20 percent annually projected for 201213. We project spending on mobile phone music to increase to $314 million in 2013, a 15.5 percent compound annual gain.

300

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Mobile phone recorded music market (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 1 9 1 2 7 20 2005 1 12 1 3 10 27 2006 2 16 1 4 18 1 42 2007 3 37 4 9 49 1 103 2008p 4 68 5 11 63 2 153 2009 5 76 6 12 67 2 168 2010 5 84 6 13 72 2 182 2011 6 95 7 15 79 3 205 2012 7 122 8 17 90 4 248 2013 8 163 10 20 108 5 314 200913 CAGR 14.9 19.1 14.9 12.7 11.4 20.1 15.5

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Licensed Internet distribution


The Internet distribution market in Latin America is not well developed. High piracy rates, a small broadband household base, and few licensed services have limited the market. In 2008, total spending on licensed music was only $42 million, a total that was nearly triple the level in 2007. As recently as 2006, there was virtually no legitimate Internet spending on music. During the past two years, the broadband universe nearly doubled, which expanded the potential market. Growth in broadband began to attract licensed online music stores, including iMusica, Terra Internet, and UOL in Brazil. We expect the broadband market to more than double during the next five years to 44 million households in 2013 from 20 million in 2008.

As broadband continues to grow, we expect that the potential market will become large enough to attract more licensed music services, which in turn will drive legitimate spending. We project the licensed Internet music market will increase to $148 million in 2013, a 28.6 percent compound annual increase. Brazil will account for 82 percent of that gain and will remain the dominant market, at $120 million, 81 percent of the total in 2013. Mexico, at $22 million, will be the only other country with a significant market. Spending in each of the remaining countries will be $3 million or less. High piracy rates will continue to impede licensed spending.

Broadband households in Latin America (millions)


50 40 32 30 20 10 0 4 7 11 16 20 23 27 38 44

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Recorded music | Latin America

301

Licensed Internet recorded music market (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2005 1 1 2006 1 1 2 2007 11 1 3 15 2008p 33 1 1 7 42 2009 44 1 2 9 56 2010 1 54 1 2 11 69 2011 1 71 1 2 14 1 90 2012 1 92 1 3 18 1 116 2013 1 120 1 3 22 1 148 200913 CAGR 29.5 0.0 24.6 25.7 28.6

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Total digital spending


Total spending on digital music will total $462 million in 2013 from $195 million in 2008, an 18.8 percent compound annual increase. Brazil will have the largest digital market, at $283 million, an increase of 22.9 percent on a compound annual basis from $101 million in 2008. Mexico will

increase from $70 million to $130 million, a 13.2 percent increase compounded annually. We do not expect any other country to reach $25 million in digital music spending during the next five years. Digital spending will nearly reach physical spending by 2013, accounting for 49 percent of the market.

Digital recorded music market (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 1 9 1 2 7 20 2005 1 12 1 3 11 28 2006 2 17 1 4 19 1 44 2007 3 48 4 10 52 1 118 2008p 4 101 6 12 70 2 195 2009 5 120 7 14 76 2 224 2010 6 138 7 15 83 2 251 2011 7 166 8 17 93 4 295 2012 8 214 9 20 108 5 364 2013 9 283 11 23 130 6 462 200913 CAGR 17.6 22.9 12.9 13.9 13.2 24.6 18.8

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

302

PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Physical distribution
Physical distribution spending plunged by 30.5 percent during the past two years, principally because of steep declines in Brazil and Mexico. In Brazil, physical spending has been falling since 2004, and decreases accelerated during the past two years, with a cumulative 41.1 percent decrease. In Mexico, the physical market had been increasing through 2006 before turning around and falling by 34.4 percent from 2006 to 2008. Chile, like Brazil, has been falling steadily since 2004. In Argentina, Colombia, and Venezuela, by contrast, spending was higher in 2008 than in 2004. Venezuela continued to advance in 2008, Colombia was flat, and Argentina began to decline.

High piracy rates have depressed the physical distribution market for years, and beginning in 2007, a digital market in Brazil and Mexico is creating legitimate competition for physical distribution. We expect Brazil and Mexico to experience the steepest declines in physical spending because they will be the only countries with a significant digital alternative. We project a 9.7 percent compound annual decrease in Brazil and a 13.3 percent compound annual decline in Mexico. High inflation will limit decreases in nominal terms in Argentina and Venezuela. For Latin America as a whole, we project spending on physical music to fall at a 9 percent compound annual rate to $476 million in 2013 from $762 million in 2008.

Physical recorded music market (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 77 596 44 64 365 14 1,160 2005 99 517 41 68 402 16 1,143 2006 106 462 37 69 404 19 1,097 2007 113 318 34 70 303 21 859 2008p 101 272 32 70 265 22 762 2009 98 245 29 65 224 21 682 2010 95 218 27 60 198 20 618 2011 93 201 25 58 171 20 568 2012 91 179 23 55 148 20 516 2013 90 163 21 53 130 19 476 200913 CAGR 2.3 9.7 8.1 5.4 13.3 2.9 9.0

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Filmed entertainment

306 Summary 307 North America 316 Europe, Middle East, Africa (EMEA) 331 Asia Pacific 342 Latin America

Summary

Filmed entertainment
The filmed entertainment market consists of consumer spending at the box office for theatrical motion pictures, plus spending on rentals of videos at video stores and other retail outlets (the in-store rental market) and the purchase of home video products in retail outlets and through online stores (the sell-through market). It also includes online film rental subscription services, such as those in which physical DVDs are delivered via overnight mail, and streaming services whereby films are downloaded via a broadband Internet connection. The figures do not include either music videos (which are counted in the Recorded Music chapter) or video-ondemand, pay-per-view, or movie distribution by cable, satellite, or telephone companies (which are covered in the Television Subscriptions and License Fees chapter).

spending will total $38.8 billion in 2013 from $34.7 billion in 2008, a 2.2 percent increase compounded annually. Instore rental spending will be relatively flat at $17.6 billion in 2013 compared with $17.7 billion in 2008, edging down at only a 0.1 percent compound annual rate. Online rental subscriptions will expand at an 18.2 percent compound annual rate to $6.7 billion from $2.9 billion in 2008. Digital downloads will rise to $1.4 billion in 2013 from only $286 million in 2008, a 37.7 percent compound annual increase from a small base.

Principal drivers
Box office spending will be enhanced by a growing share of 3-D releases that generate higher prices and higher ticket sales than standard, 2-D films do. Modern theaters and more screens in a number of countries in EMEA, Asia Pacific, and Latin America will also boost spending. The adverse economy will cut into physical sell-through in the near term. Over the longer run, growth in Blu-ray highdefinition (HD) videos will offset a declining DVD market and propel overall sell-through. Rentals will benefit from a weak economy in the near term as their lower prices will be more attractive. Over the longer run, competition from video-on-demand and online distribution will cut into in-store rentals. The convenience of online rental services will boost spending. Faster broadband speeds and devices that allow TV viewing will propel a small digital download market. Piracy will continue to hold down spending, particularly in Asia Pacific and Latin America. Piracy is getting worse in the Philippines and Thailand and continues to significantly cut into legitimate spending in the Peoples Republic of China, South Korea, and Indonesia. Piracy also is a problem in Western Europe, with Spain and France experiencing declines as a result of growing piracy. A key factor affecting the market in any given year is the quality of releases and their appeal to consumers, a development we cannot predict. Filmed entertainment will be the rare segment where we expect somewhat faster growth in 2009 than in 2008. That is due to improved box office spending from a larger array of 3-D releases and a modest gain in rental spending as the recession leads consumers to low-cost rentals for entertainment.

Market size and growth by region


We project filmed entertainment spending in North America, EMEA (Europe, Middle East, Africa), Asia Pacific, and Latin America will rise at a 4 percent compound annual rate, reaching $102.2 billion in 2013 from $83.9 billion in 2008. Asia Pacific will be the fastest-growing region, increasing by 5.7 percent compounded annually to $23.3 billion in 2013 compared with $17.7 billion in 2008. North America will grow by 3.4 percent compounded annually to $45.1 billion in 2013 from $38.2 billion in 2008. Spending in EMEA will increase from $25.5 billion in 2008 to $30.7 billion in 2013, growing at a 3.7 percent compound annual rate. Filmed entertainment in Latin America will total $3.1 billion in 2013, up from $2.5 billion in 2008, representing a 4.5 percent gain compounded annually.

Market size and growth by component


Global box office spending will increase from $28.3 billion in 2008 to $37.7 billion in 2013, a 5.9 percent compound annual increase. Box office will outpace overall home video spending, which will expand at a projected 3 percent compound annual rate to $64.5 billion from $55.6 billion in 2008. Physical sell-through spending will decline during the next two years and then rebound, with mid- to highsingle-digit growth projected for 201213. Sell-through

Data for the global filmed entertainment market by region and for the global filmed entertainment market by component can be found within the Executive Summary on page 43.
306 PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

North America

The outlook in brief


Films in 3-D will drive the box office market. High-definition DVDs will boost home video market when economic conditions improve. Downloads to TV sets and enhanced subscription rental services will fuel online video distribution.

Physical sell-through will decline during the next two years and then rebound to $18 billion in 2013 from $16.7 billion in 2008, a 1.6 percent compound annual increase. In-store rental spending will edge down at a 0.4 percent compound annual rate from $8.5 billion in 2008 to $8.3 billion in 2013. Online rental subscription services will nearly double to $4.5 billion in 2013 from $2.3 billion in 2008, a 14.5 percent gain compounded annually. Digital downloads will nearly triple from $253 million in 2008 to $753 million in 2013, expanding at a 24.4 percent compound annual rate. The overall home video market will advance at a 2.6 percent compound annual rate, reaching $31.5 billion in 2013 from $27.7 billion in 2008.

Overview
The overall filmed entertainment market will expand at a compound annual rate of 3.4 percent from $38.2 billion in 2008 to $45.1 billion in 2013. Box office growth will average 5.2 percent compounded annually from $10.6 billion in 2008 to $13.6 billion in 2013.

Filmed entertainment market by component (US$ millions)


North America Box office Home video Physical sell-through In-store rentals Online rental subscriptions Digital downloads Total home video Total 18,334 8,917 672 27,923 37,985 18,386 8,407 967 27,760 37,374 18,738 8,332 1,202 24 28,296 38,213 18,202 8,441 1,821 113 28,577 38,992 16,682 8,471 2,269 253 27,675 38,243 15,735 8,505 2,804 327 27,371 38,411 15,512 8,500 3,281 426 27,719 39,232 15,963 8,455 3,731 505 28,654 40,756 16,726 8,396 4,155 623 29,900 42,687 18,016 8,297 4,472 753 31,538 45,135 2004 10,062 2005 9,614 2006 9,917 2007 10,415 2008p 10,568 2009 11,040 2010 11,513 2011 12,102 2012 12,787 2013 13,597

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Filmed entertainment market growth by component (%)


North America Box office Home video Physical sell-through In-store rentals Online rental subscriptions Digital downloads Total home video Total 16.1 9.2 115.4 7.7 5.5 0.3 5.7 43.9 0.6 1.6 1.9 0.9 24.3 1.9 2.2 2.9 1.3 51.5 370.8 1.0 2.0 8.4 0.4 24.6 123.9 3.2 1.9 5.7 0.4 23.6 29.2 1.1 0.4 1.4 0.1 17.0 30.3 1.3 2.1 2.9 0.5 13.7 18.5 3.4 3.9 4.8 0.7 11.4 23.4 4.3 4.7 7.7 1.2 7.6 20.9 5.5 5.7 1.6 0.4 14.5 24.4 2.6 3.4 2004 0.1 2005 4.5 2006 3.2 2007 5.0 2008p 1.5 2009 4.5 2010 4.3 2011 5.1 2012 5.7 2013 6.3 200913 CAGR 5.2

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

The United States will expand at a 3.3 percent compound annual rate to $40.9 billion in 2013 from $34.8 billion in 2008, while Canada will rise from

$3.4 billion to $4.2 billion, a 4.2 percent increase compounded annually.

Filmed entertainment market by country (US$ millions)


North America United States Canada Total 2004 34,647 3,338 37,985 2005 34,076 3,298 37,374 2006 34,862 3,351 38,213 2007 35,517 3,475 38,992 2008p 34,806 3,437 38,243 2009 34,940 3,471 38,411 2010 35,654 3,578 39,232 2011 37,016 3,740 40,756 2012 38,710 3,977 42,687 2013 40,908 4,227 45,135 200913 CAGR 3.3 4.2 3.4

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Box office
The box office market held up reasonably well in 2008 despite the economic downturn, rising by 1.7 percent in the United States and falling by only 1.1 percent in Canada. This relatively strong performance demonstrates that the roster of titles and ticket prices have more influence than the economy does on box office growth. That said, it is difficult to assess the impact of the economy on box office spending, because the box office market is one of the few areas in entertainment and media where virtually all content is new each year.

Historically, the economic cycle has had little or no systematic impact on box office, which suggests that a rising economy does not necessarily help the market and a falling economy does not necessarily hurt it. Rather, the appeal of the roster of films plays a large role in determining the overall level of spendingmore so than in any other segment. While the economy may not play a significant role, several other trends have emerged. The transition to digital projection and the conversion of digital cinemas into 3-D-capable venues are providing a measurable boost to spending.

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As the share of 3-D screens increases, average prices will rise as more screens will command premium rates. In fact, higher prices accounted for the steady box office performance in 2008. In the US, the 4.4 percent price increase from 2007 to 2008 offset a 2.6 percent drop in admissions. In Canada, the 4.2 percent price increase nearly offset the 5.1 percent decrease in admissions. Virtually all films with a 3-D version generate proportionally more revenue from 3-D screens than from 2-D screens. Journey to the Center of the Earth, for example, generated 57 percent of its opening weekend box office gross on 3-D screens, even though only 30 percent of the screens were 3-D. Similar ratios have characterized most 3-D releases to date. In addition to selling more tickets, exhibitors are charging premium prices for 3-D, which accounts for their disproportionate revenue. The roster of 3-D releases is scheduled to increase substantially during the next two years. In 2009, 17 films will be released with 3-D versions compared with 7 in 2008, and in 2010, 30 films in 3-D are scheduled. To take advantage of 3-D, studios are converting prior films to 3-Dat a cost of around $12 million per film. Toy Story, Toy Story 2, and all six of the Star Wars films will be reissued in 3-D. Shrek 4, the next installment in that successful franchise, will also be released in 3-D in 2010. The potential for 3-D is currently limited by a shortage of screens. There are around 5,000 digital screens in the United States and about 100 in Canada, but not all have been upgraded to 3-D. Monsters vs Aliens was released in 2009 on 1,550 3-D screens in the US and Canada out of its total theater count of 4,104.

To address the shortfall, in October 2008 five studios Disney, Fox, Lionsgate, Paramount, and Universal entered into a $1-billion deal with Digital Cinema Implementation Partnersa joint venture of AMC, Cinemark, and Regalto convert 15,000 screens in the US to digital. That deal, however, was subsequently derailed because financing could not be obtained. Consequently, the expected conversion to digital will be delayed, and the hoped-for boost from the increase in 3-D releases will be delayed as well. Once converted, digital screens still need to be upgraded to 3-D. As films are increasingly distributed digitally, box office revenues may rise, since physical prints are no longer needed and the same title can be shown on more screens. In Canada, Cineplex Entertainment and National CineMedia are converting most of their theaters to digital. It is expected that virtually the entire exhibition industry will be converted to digital within the next few years. Over time, the increasing share of 3-D screens will boost average prices, a pattern we expect will materialize during 201213. In the near term, we look for more-moderate price growth because of the recession. In the United States, where most of the 3-D conversion will occur, we project average ticket prices to increase at a 4.6 percent compound annual rate to $9.00 in 2013 from $7.18 in 2008. In Canada, prices were high in the early part of the decade, actually fell from 2004 to 2005, and remained lower in 2008 than in 2004. We project a 3.1 percent compound annual increase from $6.94 to $8.07.

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309

Average admission price (US$)


North America United States Canada Total 2004 6.21 7.08 6.27 2005 6.42 6.50 6.43 2006 6.55 6.57 6.55 2007 6.88 6.66 6.86 2008p 7.18 6.94 7.16 2009 7.50 7.13 7.47 2010 7.80 7.32 7.76 2011 8.15 7.50 8.10 2012 8.55 7.78 8.49 2013 9.00 8.07 8.93 200913 CAGR 4.6 3.1 4.5

At average 2008 exchange rates. Sources: Motion Picture Association of America, PricewaterhouseCoopers LLP, Statistics Canada, Wilkofsky Gruen Associates

Although the release roster will ultimately be the principal driver of admissions in any year, we expect that the increase in the number of 3-D films will have a positive impact on admissions. At the same time, the economic environment is having an impact on film financing and causing studios to cut back on their production schedule, but the impact on admissions is unclear. Cutbacks could have a modest adverse effect on admissions, although there is no direct correlation. That said, fewer films being released can also be a benefit, as there is less fragmentation of the market. In Canada, Telefilm Canada introduced a new development program that funds previously successful producers to develop films. The focus is on producing

local films that will be commercially viable. In general, the better the local films, the better the overall box office performance even though local films constitute a small minority of the content. On balance we expect modest admissions growth during the next two years and somewhat faster increases during 201113 as the pace of digital conversions picks up. For the entire five-year forecast period, we project admissions to rise by 0.6 percent compounded annually in the United States and at a 1 percent compound annual rate in Canada. As a result, total admissions in North America will increase to 1.52 billion in 2013 from 1.48 billion in 2008.

Admissions (millions)
North America United States Canada Total 2004 1,484.0 119.6 1,603.6 2005 1,376.0 120.3 1,496.3 2006 1,395.0 118.5 1,513.5 2007 1,400.0 118.0 1,518.0 2008p 1,364.0 112.0 1,476.0 2009 1,365.0 112.5 1,477.5 2010 1,370.0 113.0 1,483.0 2011 1,380.0 114.0 1,494.0 2012 1,390.0 116.0 1,506.0 2013 1,405.0 118.0 1,523.0 200913 CAGR 0.6 1.0 0.6

Sources: Motion Picture Association of America, PricewaterhouseCoopers LLP, Statistics Canada Wilkofsky Gruen Associates

Box office spending will expand at a projected 5.2 percent compound annual rate in the United States to $12.6 billion in 2013 from $9.8 billion in 2008. In Canada, growth will be a more modest, 4.1 percent compounded annually, as 3-D will play somewhat less

of a role. Spending will rise from $777 million in 2008 to $952 million in 2013. The overall North American market will increase from $10.6 billion in 2008 to $13.6 billion in 2013, a 5.2 percent increase compounded annually.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Box office market (US$ millions)


North America United States Canada Total 2004 9,215 847 10,062 2005 8,832 782 9,614 2006 9,138 779 9,917 2007 9,629 786 10,415 2008p 9,791 777 10,568 2009 10,238 802 11,040 2010 10,686 827 11,513 2011 11,247 855 12,102 2012 11,885 902 12,787 2013 12,645 952 13,597 200913 CAGR 5.2 4.1 5.2

At average 2008 exchange rates. Sources: Motion Picture Association of America, PricewaterhouseCoopers LLP, Statistics Canada, Wilkofsky Gruen Associates

Physical home video


Sell-through In contrast with the box office market, the physical sell-through marketwhich includes online sales of physical DVDswas affected by the declining economy, as DVD purchases tend to be impulse buys. Sell-through sales fell by 8.9 percent in the United States and by 3.8 percent in Canada, for an overall decline of 8.4 percent for North America in 2008. DVDs also faced competition from a surging video games market, which operates on its own cycle and benefited in 2008 from increased penetration of the latest generation of consoles and of new games released for those consoles. The hope was that with Blu-ray having become the single high-definition standard, a surge in Blu-ray sales would offset declining DVD sales. The installed base of Blu-ray players did not expand as fast as was expected, in large part because the hardware is expensive and the economy is weak. Nevertheless, as Blu-ray hardware penetration grows and as the high-definition TV (HDTV) household universe increases, there is a significant potential for Blu-ray to affect the sell-through market in the same way that DVDs revitalized a sagging VHS market a decade ago. DVDs were introduced in 1997 and became a presence in the US in 1998. In 1999a year of strong economic growth and a period when sell-through was booming the DVD household universe reached 2.9 million and DVD sell-through generated $1.4 billion, 3.5 times its level in 1998. Moving to the present, there were 2.9 million stand-alone Blu-ray players in 2008, not counting the 8.3 million PlayStation 3 players. Blu-ray

software sales totaled $750 million, four times the 2007 level. Adjusting for the different economic climates and for the sluggishness of the overall sell-through market that currently affects both hardware and software, we believe the expansion path of the DVD can act as a guide to project the impact of Blu-ray. The experience of 3-D films in theaters demonstrates that people are willing to pay extra for enhanced product. A few dollars extra in the theater, of course, is different from an outlay of several hundred dollars for HD hardware. During the next two years, the weak economy will depress hardware purchases, and the high price points for Blu-ray discs will limit growth. We expect declining DVD sales to continue to outpace rising Blu-ray sales, and overall sell-through spending will decline over 200910. Beginning in 2011, as economic conditions improve, the Blu-ray universe will grow faster, which will boost Blu-ray disc sales. Hardware prices have already begun to come downplayers are now available for less than $300which will help expand penetration. We expect overall sell-through spending to turn around in 2011 and post a low-single-digit gain, with accelerating increases projected for 2012 and 2013. The tightening of release windows also will benefit sell-through. Films are now entering the video market within a few months of their box office release, thereby enabling them to capitalize on the initial box office marketing effort. Once the economy improves, we expect that shorter release windows will have a positive impact on sell-through spending. Films are also reaching the video-on-demand market faster than in the pastin some cases, concurrent with, or even prior to, their home video release. Video-ondemand will become a more competitive factor during the next five years.

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311

We project the US market to decline by a cumulative 7.4 percent during the next two years and then rebound with a 16 percent increase during the subsequent three years. By 2013, sell-through spending will total an estimated $16 billion, up 1.4 percent on a compound annual basis from $14.9 billion in 2008. Despite that increase, projected spending in 2013 will still be lower than during 200407.

We anticipate a similar pattern in Canada. Sell-through spending will fall by 3.9 percent through 2010 and then expand by 17.8 percent during 201113, for an overall compound annual increase of 2.5 percent to $2 billion from $1.8 billion in 2008. Sell-through spending in North America as a whole will average 1.6 percent compound annual growth from $16.7 billion in 2008 to $18 billion in 2013.

Physical sell-through market (US$ millions)


North America United States Canada Total 2004 16,646 1,688 18,334 2005 16,670 1,716 18,386 2006 16,975 1,763 18,738 2007 16,350 1,852 18,202 2008p 14,900 1,782 16,682 2009 14,000 1,735 15,735 2010 13,800 1,712 15,512 2011 14,200 1,763 15,963 2012 14,850 1,876 16,726 2013 16,000 2,016 18,016 200913 CAGR 1.4 2.5 1.6

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

In-store rental The in-store rental market may be benefiting from the weak economy. When disposable income is tight, rentals represent an economical alternative. Consumers have cut back on their video purchases while maintaining lower-cost rental spending. Rental spending from 2007 to 2008 edged up 0.3 percent in the United States and 0.6 percent in Canada. The rental market also is being fueled by the rollout of low-cost rental kiosks in supermarkets and other locations. Blockbuster in the United States is installing 10,000 kiosks. Blu-ray will also weave its way into the rental market, which will make rentals more appealing. The in-store rental market faces substantial competition, which is inhibiting growth. Video-on-

demand is growing rapidly and cutting into the rental potential. There is also an emerging online rental subscription market that is proving to be convenient and popular. As that market expands, it will squeeze in-store rentals. On balance, we expect the rental market to be relatively steady, benefiting from its lower price point and the greater convenience resulting from the increased number of kiosks. We project US rentals to rise by 0.4 percent in 2009 and then to decline at modest rates, falling to $7.5 billion in 2013 from $7.7 billion in 2008, a 0.4 percent decrease compounded annually. In Canada, rental spending will increase during the next two years and then trend down, falling at a 0.6 percent compound annual rate from $821 million in 2008 to $797 million in 2013.

In-store rental market (US$ millions)


North America United States Canada Total 2004 8,120 797 8,917 2005 7,615 792 8,407 2006 7,535 797 8,332 2007 7,625 816 8,441 2008p 7,650 821 8,471 2009 7,680 825 8,505 2010 7,670 830 8,500 2011 7,630 825 8,455 2012 7,580 816 8,396 2013 7,500 797 8,297 200913 CAGR 0.4 0.6 0.4

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Online distribution
Videos can also be obtained directly over the Internet through digital downloads and through online rental subscriptions. Digital download market The digital download market has been hampered by long download timesit can take two hours or more to download a movie on a standard broadband connectionand the fact that people prefer watching movies on a television rather than a computer screen. Both hurdles are being addressed. The Internet access market is transitioning to faster speeds that can accommodate movie downloads. Services are being introduced with speeds of up to 50 megabits per second, which allows movie downloads in just a few minutes. While such speeds are currently not widely available, as systems get upgraded with fiber, more people will have high-speed broadband as an option. As penetration increases, movie downloads will become more feasible. United States The Apple TV was introduced in 2007, and in 2008 several new providers introduced devices that allow movies downloaded to a computer to be viewed on a TV set. Netflix in conjunction with Roku offer a $100 set-top box that streams movies to a TV. Blockbuster followed with a direct-to-TV player. HD films are also becoming available. Apple TV offers both conventional and HD selections, and Netflix offers

HD films that can be viewed using Xbox 360 or Bluray. Blockbuster launched Blockbuster on Demand that uses a similarly priced device from 2Wire that is capable of downloading HD films. While advances will propel the market, we expect the potential will remain limited during the next five years. In the near term, the economy will be an impediment to fast broadband and incremental hardware expenses. Over the longer run, while penetration will increase with an improved economy, a minority of Internet subscribers will be able to download at speeds of 50 Mbps. These handicaps will keep spending relatively low through 2013, although we anticipate significant growth from a small base. In the United States, consumers spent an estimated $252 million downloading movies in 2008. We expect that total to rise to $713 million in 2013, a 23.1 percent increase compounded annually. Canada In Canada, the digital download market is just getting started. Through the Apple TV platform and Bell Canada, iTunes launched a movie download service in 2008, and Canada has a high broadband penetration, which will provide a large potential market for streaming. We expect that digital downloads will generate $40 million in 2013. North America The overall digital download market in North America will total $753 million in 2013, up 24.4 percent on a compound annual basis from $253 million in 2008.

Digital download market (US$ millions)


North America United States Canada Total 2006 24 24 2007 113 113 2008p 252 1 253 2009 325 2 327 2010 420 6 426 2011 495 10 505 2012 600 23 623 2013 713 40 753 200913 CAGR 23.1 109.1 24.4

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Online subscription rentals Online subscription rental services deliver DVDs directly to the home via overnight mail. They allow users to keep DVDs as long as they want, and they provide free return mail. Subscribers order videos online, and when one is returned, the next is sent. In addition to saving on the time and cost of going to the video store, these services eliminate late fees and provide guarantees of title availability. The rental option still has appeal for people who do not necessarily want to view movies multiple times. In the United States, Netflix, the developer of this market, is the leader. Blockbuster is the other principal provider. In Canada, Zip.ca is the market leader. The online subscription rentals market is benefiting from the increased interest in rentals during a period of economic decline. Both providers also offer streaming at no additional charge, which is helping attract subscribers.

Blockbuster added video game rentals to its service, which is helping expand its subscriber base. Additionally, Blockbuster lets users return videos to the store and pick up new videos without having to go through the mail. Online rental subscriptions in the United States rose by 22.9 percent in 2008 to $2.2 billion. That total will rise to an estimated $4.1 billion in 2013, a 12.8 percent increase compounded annually. In Canada, the market more than doubled to $56 million in 2008. We project it will rise to $422 million in 2013, a 49.8 percent compound annual increase from a small base. Overall spending will rise to $4.5 billion from $2.3 billion in 2008, a 14.5 percent compound annual increase.

Online rental subscriptions market (US$ millions)


North America United States Canada Total 2004 666 6 672 2005 959 8 967 2006 1,190 12 1,202 2007 1,800 21 1,821 2008p 2,213 56 2,269 2009 2,697 107 2,804 2010 3,078 203 3,281 2011 3,444 287 3,731 2012 3,795 360 4,155 2013 4,050 422 4,472 200913 CAGR 12.8 49.8 14.5

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Total home video


Overall home video spending in North America including physical sell-through, in-store rentals, digital downloads, and online rental subscriptionstotaled $27.7 billion in 2008, down 3.2 percent from 2007. Spending will decline by 1.1 percent in 2009 and then expand at low- to mid-single-digit rates, rising to $31.5 billion in 2013, a 2.6 percent increase compounded annually.

The US home video market will grow at a 2.5 percent compound annual rate from $25 billion in 2008 to $28.3 billion in 2013. In Canada, home video spending will reach $3.3 billion in 2013 from $2.7 billion in 2008, a 4.2 percent increase compounded annually.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Home video market (US$ millions)


North America United States Canada Total 2004 25,432 2,491 27,923 2005 25,244 2,516 27,760 2006 25,724 2,572 28,296 2007 25,888 2,689 28,577 2008p 25,015 2,660 27,675 2009 24,702 2,669 27,371 2010 24,968 2,751 27,719 2011 25,769 2,885 28,654 2012 26,825 3,075 29,900 2013 28,263 3,275 31,538 200913 CAGR 2.5 4.2 2.6

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

From 2004 to 2008, the share of filmed entertainment revenues in North America generated by physical home video fell from nearly 70 percent to 61.3 percent, with video-on-demand and online subscription rental increasing their combined share to 12.4 percent from only 4.3 percent in 2004. We expect a larger drop in the physical home video share during the next five years to 52.8 percent. The combined share for video-on-demand, online subscription rentals, and digital downloads will double to 20 percent, and the box office share will increase to 27.3 percent in 2013 from 25.7 percent in 2008 as a result of 3-Ds growing penetration.

Shares of filmed entertainment revenue in North America (%)


North America Box office Physical home video Online subscription rentals Digital downloads Video-on-demand 2004 25.8 69.8 1.7 2.6 2008 25.7 61.3 5.5 0.6 6.9 2013 27.3 52.8 9.0 1.5 9.5

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Europe, Middle East, Africa (EMEA)

The outlook in brief


Digital cinemas, 3-D rollouts, and support of local film industries will expand the box office market. Blu-ray videos will spur the home video market when economic conditions improve. Broadband expansion and faster speeds will boost online streaming and online subscription rentals.

Home video physical sell-through will decline in 2009 and then advance to $14.9 billion in 2013, up 2.9 percent on a compound annual basis from $12.9 billion in 2008. Home video in-store rentals will fall by 4.3 percent compounded annually to $2.1 billion in 2013 from $2.6 billion in 2008. Online subscription rentals will grow at an 11.8 percent compound annual rate to $791 million from $453 million in 2008. Digital downloading will generate $484 million in 2013 from $30 million in 2008. Overall home video spending will total $18.2 billion in 2013 from $15.9 billion in 2008, a 2.7 percent increase compounded annually.

Overview
Filmed entertainment spending in EMEA will total $30.7 billion in 2013, averaging 3.7 percent growth compounded annually. Box office spending will rise by 5.4 percent compounded annually to $12.5 billion in 2013 from $9.6 billion in 2008.

Filmed entertainment market by component (US$ millions)


EMEA Box office Home video Physical sell-through In-store rentals Online rental subscriptions Digital downloads Total home video Total 14,249 3,624 166 18,039 27,152 13,371 3,431 247 2 17,051 25,465 12,996 3,079 293 5 16,373 25,384 13,175 2,691 319 17 16,202 25,374 12,884 2,572 453 30 15,939 25,533 12,572 2,501 545 54 15,672 25,719 12,631 2,425 632 93 15,781 26,261 13,024 2,332 704 176 16,236 27,269 13,750 2,208 757 305 17,020 28,744 14,864 2,061 791 484 18,200 30,668 2004 9,113 2005 8,414 2006 9,011 2007 9,172 2008p 9,594 2009 10,047 2010 10,480 2011 11,033 2012 11,724 2013 12,468

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Filmed entertainment market growth by component (%)


EMEA Box office Home video Physical sell-through In-store rentals Online rental subscriptions Digital downloads Total home video Total 11.8 3.0 315.0 9.2 8.9 6.2 5.3 48.8 5.5 6.2 2.8 10.3 18.6 150.0 4.0 0.3 1.4 12.6 8.9 240.0 1.0 0.0 2.2 4.4 42.0 76.5 1.6 0.6 2.4 2.8 20.3 80.0 1.7 0.7 0.5 3.0 16.0 72.2 0.7 2.1 3.1 3.8 11.4 89.2 2.9 3.8 5.6 5.3 7.5 73.3 4.8 5.4 8.1 6.7 4.5 58.7 6.9 6.7 2.9 4.3 11.8 74.4 2.7 3.7 2004 8.2 2005 7.7 2006 7.1 2007 1.8 2008p 4.6 2009 4.7 2010 4.3 2011 5.3 2012 6.3 2013 6.3 200913 CAGR 5.4

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Western Europe, at $22.9 billion, accounted for 90 percent of filmed entertainment spending in EMEA in 2008. Growth in Western Europe during the next five years will average 3.4 percent compounded annually to $27.1 billion in 2013. Central and Eastern Europe (CEE) will be the fastestgrowing area, averaging 6.9 percent growth compounded annually. Spending will rise from $2.2 billion in 2008 to $3 billion in 2013. Middle East/Africa will expand at a 3.8 percent compound annual rate to $514 million. The United Kingdom is the largest market in the region, at $6.5 billion in 2008. France is next, at $3.8 billion, followed by Germany at $3.5 billion, Italy at $1.9 billion, Spain at $1.6 billion, and Russia at $1.4 billion. These six territories constitute 74 percent of filmed entertainment spending in EMEA. A second consecutive rainy summer in the UK brought people to the movies. Mamma Mia! became the highest-grossing film in UK history, surpassing Titanic. A Christmas surge in Blu-ray discs led to an overall growth in sell-through in the UK, the only territory in Western Europe to record an increase. In France, a strong roster of local films boosted box office by 7 percent, which was not sufficient to offset a steep decline in home video.

Local films also contributed to box office growth in Germany, while home video recorded only a modest decline. In Italy, by contrast, local films did poorly in 2008 following a strong 2007, and overall box office plunged 10.3 percent. In Spain, piracy continues to hurt all components of the market, leading to sharp declines in box office and home video. Overall spending fell 13.1 percent, the largest decrease in EMEA in 2008. The Netherlands will be the only other country in Western Europe to reach $1 billion during the next five years, helped by a boost in box office and sell-through during 201213. Russia continued to surge in 2008, with a 27.5 percent gain, the largest increase in EMEA. Box office jumped by 46 percent buoyed by the opening of modern screens, by higher prices, and by double-digit growth in admissions. A strong performance by local films propelled box office in Turkey and the overall market by 22.1 percent in 2008. No other territory recorded a double-digit gain.

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Filmed entertainment market by country (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 148 154 111 413 27,152 146 157 97 400 25,465 145 163 103 411 25,384 146 166 101 413 25,374 150 170 107 427 25,533 151 174 114 439 25,719 155 178 120 453 26,261 160 184 127 471 27,269 165 191 135 491 28,744 171 200 143 514 30,668 2.7 3.3 6.0 3.8 3.7 135 146 284 10 647 123 1,345 119 130 233 10 771 126 1,389 129 124 298 12 847 173 1,583 136 112 316 13 1,090 163 1,830 130 111 325 14 1,390 199 2,169 130 111 324 15 1,495 214 2,289 130 113 328 17 1,571 233 2,392 135 116 338 18 1,704 253 2,564 140 119 350 20 1,881 273 2,783 149 124 368 23 2,076 295 3,035 2.8 2.2 2.5 10.4 8.4 8.2 6.9 340 695 535 332 4,817 3,905 188 468 2,215 947 562 293 2,092 670 489 6,846 25,394 306 637 549 175 4,418 3,613 184 465 2,091 847 589 251 2,000 665 433 6,453 23,676 321 655 585 203 4,333 3,565 189 549 2,010 883 642 270 1,921 749 460 6,055 23,390 308 641 563 206 3,914 3,501 202 575 2,050 908 631 251 1,844 822 403 6,312 23,131 314 646 554 204 3,806 3,548 211 575 1,922 922 647 252 1,602 833 397 6,504 22,937 314 643 554 200 3,720 3,596 217 573 1,929 902 639 250 1,590 832 392 6,640 22,991 317 647 559 197 3,760 3,659 223 581 1,963 906 641 252 1,609 839 390 6,873 23,416 327 664 582 206 3,859 3,764 234 602 2,022 915 664 261 1,633 859 405 7,237 24,234 338 687 613 214 4,059 3,912 249 621 2,115 962 701 271 1,696 897 422 7,713 25,470 356 727 649 229 4,363 4,083 263 652 2,246 1,009 750 286 1,775 947 448 8,336 27,119 2.5 2.4 3.2 2.3 2.8 2.8 4.5 2.5 3.2 1.8 3.0 2.6 2.1 2.6 2.4 5.1 3.4 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Box office
Although Hollywood films account for a majority of ticket sales in most countries, the performance of local films often determines whether box office spending rises or falls. Hollywood films did well internationally in 2008. Nevertheless, in countries where local films did not do well, such as Italy and Spain, overall box office spending fell. On the other hand, strong local films helped buoy box office in France, Germany, and Turkey. The economy did not appear to have much of an impact on box office spending. In most territories, box office in 2008 either rebounded from a down year in 2007 or grew faster. With respect to film production, the economy may be having an effect. In Russia, a number of projects in production at Mosfilm, the countrys largest studio facility, got postponed or canceled because of the international financial crisis and difficulties in obtaining financing. Governments view the film industry as an important contributor to the economy and take steps to support that industry. While support of local films does not guarantee they will appeal to consumers, incremental funding can improve the chances they will succeed. One of the most successful efforts is Germanys new Film Fund, established in 2007. The fund is attracting international players, and more resources are being put into German-language films. Fox is expanding its German operations, Universal began a Germanlanguage operation, and Fremantle Media announced it plans to relaunch UFA Cinema and make eight German films annually beginning in 2010. In the UK, the Film Council Development Fund is investing more than 2 million ($3.7 million) in local production companies to develop feature films. Ireland recently announced increased tax incentives for film production, which will enhance Irelands attractiveness as a location for film production. The Swiss government is increasing its subsidy for script development, the Swedish Film Institute provides support for local projects, Russia has announced more than $150 million in annual support for local films, and Poland provides grants to support domestic productions and

coproductions with a foreign partnerall of them efforts that are believed to be boosting the industry. Momentum is also building for conversion of screens to digital and the implementation of 3-D in anticipation of an increase in 3-D releases. In the UK, Cineworld is converting more than 70 screens to digital, and Odeon and UCI converted 30 screens to 3-D. Arts Alliance Media raised funds from private investors and from Econocom Financial Services to finance digital conversions throughout Europe. Arts Alliance Media also teamed up with Arqiva Satellite & Media to distribute digital films via satellite. Digital cinemas have a number of advantages. Because digital prints are substantially less expensive than standard duplication, more prints can be made for less money, which will allow new releases to be available in more theaters than is currently economically feasible. This means that films will be accessible to more people closer to the films initial release, which should have a positive impact on their box office performance. The Netherlands in early 2009 had the first virtual print distribution through Arts Alliance Media. Digital prints also provide a better-quality picture and do not deteriorate after repeated screenings. These characteristics should improve the theatrical experience and boost admissions. The key driver, however, is the revenue potential of 3-D. Films in 3-D command higher prices, sell more tickets, and generate substantially more money per screen than standard films do. The issue has not been pressing in the past because only a few films were available in 3-D. That is about to change as Hollywood ramps up its 3-D production. During the next two years, 47 films are scheduled to be released in 3-D from Hollywood, and there is beginning to be interest among local producers as well. There is now concern that the limited number of 3-D screens will cause films to not realize their revenue potential. Consequently, interest in digital and 3-D conversions is increasing, although the ability to finance such conversions has become more difficult as credit is less available.

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In Central and Eastern Europe, modernization of theaters is proving to be a significant driver. Russia has built a number of modern theaters that allow for higher prices. During the past two years, admissions in Russia rose by 38 percent, and box office spending increased by 84 percent. Although we do not expect that pace to continue, we still look for admissions to rise by nearly 30 percent during the next five years. In Norway, municipal film promotion agency FILM&KINO is scheduled to start its national digital rollout in 2009 at an estimated total cost of KR400 million ($58 million), which will be shared with distributors and producers. We expect that digital and 3-D cinemas in Western Europe, modern theaters in CEE, and increased funding for local films will enhance admissions. We project admissions to increase at a 2.7 percent compound annual rate to 1.3 billion in 2013. Led by Russia and Turkey, CEE will be the fastestgrowing area in EMEA, with a projected 4.4 percent compound annual increase in admissions to 269 million from 217 million in 2008. Admissions in Western Europe will increase from 862 million to 958 million, a 2.1 percent rise compounded annually. Admissions in Middle East/Africa will rise at a 2.6 percent compound annual rate to 88 million from 78 million in 2008. These forecasts reflect our analysis of underlying trends. They do not take into account the performance of the slate of prospective releases, which can significantly enhance or offset admissions in any given year.

Admission prices
Admission prices in 2008 averaged $9.25 in Western Europe in 2008 compared with $6.38 in Central and Eastern Europe and $3.10 in Middle East/Africa. The average price in Russia soared by 26 percent in 2008, reflecting the impact of modern theaters and a much larger percent of admissions in those high-priced venues. From 2004 to 2008, the average price in Russia rose by a cumulative 65 percent. We do not expect increases on that order and project a more modest, 4 percent compound annual increase during the next five years. In general, we expect smaller price increases during the next two years as exhibitors moderate hikes in a difficult economic environment. During the latter part of the forecast period, when the share of 3-D screens becomes meaningful and those screens attract a larger share of admissions, we expect faster price growth. The average price in EMEA rose 3.6 percent in 2008, the largest increase during the past five years. Most of that rise was fueled by Russia. Excluding Russia, the average price increased by only 2.5 percent. We project increases averaging 2.4 percent compounded annually during 200911 and gains averaging 3.1 percent during 201213. For the entire five-year forecast period, prices will advance at a 2.7 percent compound annual rate, rising from $8.30 in 2008 to $9.48 in 2013.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Admissions (millions)
EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 9.5 36.9 28.3 74.7 1,210.3 8.8 37.1 29.2 75.1 1,099.9 8.8 39.2 29.8 77.8 1,149.5 8.9 40.0 26.5 75.4 1,145.7 9.0 40.5 28.0 77.5 1,156.0 9.1 41.0 29.0 79.1 1,178.3 9.2 42.0 30.0 81.2 1,202.9 9.4 43.0 31.0 83.4 1,237.4 9.6 44.0 32.0 85.6 1,274.7 9.9 45.0 33.0 87.9 1,314.8 1.9 2.1 3.3 2.6 2.6 12.0 13.7 33.3 4.0 76.5 29.7 169.2 9.5 12.1 23.5 2.8 83.1 27.3 158.3 11.5 11.7 32.0 2.8 89.5 34.8 182.3 12.8 10.1 32.6 2.9 106.6 31.1 196.1 11.6 10.0 33.7 2.8 123.9 34.5 216.5 11.8 10.0 34.0 2.8 126.0 36.0 220.6 12.0 10.1 34.5 2.8 130.0 38.0 227.4 12.3 10.2 35.5 2.8 140.0 40.0 240.8 12.7 10.3 36.5 2.9 150.0 42.0 254.4 13.2 10.4 38.0 3.0 160.0 44.0 268.6 2.6 0.8 2.4 1.4 5.2 5.0 4.4 19.4 24.1 12.7 6.9 195.3 156.7 14.0 17.3 116.3 23.0 11.9 19.8 143.9 16.6 17.2 171.3 966.4 15.7 22.1 11.8 6.1 175.7 127.3 13.2 16.4 105.6 20.6 11.3 18.6 127.7 14.6 15.1 164.7 866.5 17.3 23.8 12.8 6.7 189.0 136.7 13.4 17.9 107.0 23.4 11.9 19.4 121.7 15.3 16.5 156.6 889.4 15.7 22.3 12.1 6.5 178.0 125.4 14.0 18.4 120.2 23.1 10.7 19.0 116.9 15.2 14.3 162.4 874.2 16.2 22.5 12.3 6.7 188.8 129.4 14.5 18.8 107.0 24.2 11.7 19.2 96.1 15.4 15.0 164.2 862.0 16.3 22.6 12.5 6.8 195.0 133.0 14.8 19.3 110.0 24.4 11.7 19.4 96.0 15.5 15.3 166.0 878.6 16.6 22.7 12.7 6.9 200.0 136.0 15.1 19.7 113.0 24.6 11.8 19.7 96.1 15.8 15.6 168.0 894.3 17.0 23.0 13.0 7.1 205.0 140.0 15.5 20.3 116.0 24.9 11.9 20.1 96.3 16.1 16.0 171.0 913.2 17.3 23.5 13.3 7.3 210.0 144.0 16.0 20.9 120.0 25.2 12.2 20.5 96.6 16.4 16.5 175.0 934.7 17.6 24.0 13.6 7.5 215.0 148.0 16.5 21.5 125.0 25.5 12.5 21.0 96.9 16.7 17.0 180.0 958.3 1.7 1.3 2.0 2.3 2.6 2.7 2.6 2.7 3.2 1.1 1.3 1.8 0.2 1.6 2.5 1.9 2.1 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: Centre National de la Cinmatographie, Danish Film Institute, FILM&KINO, Finnish Chamber of Films, German Federal Film Board, Ministry of Culture of the Czech Republic, National Film Office of Hungary, Nederlandse Federatie voor de Cinematografie, PricewaterhouseCoopers LLP, Spanish Ministry of Culture, Swiss Federal Statistical Office, UK Film Council, Wilkofsky Gruen Associates

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Average admission price (US$)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 9.75 1.50 2.80 3.04 7.53 10.03 1.55 2.24 2.81 7.65 10.31 1.60 2.36 2.88 7.84 10.58 1.65 2.48 3.00 8.01 10.86 1.70 2.60 3.10 8.30 11.14 1.75 2.72 3.19 8.53 11.42 1.80 2.84 3.28 8.71 11.70 1.85 2.96 3.38 8.92 11.98 1.90 3.08 3.48 9.20 12.25 1.95 3.20 3.58 9.48 2.4 2.8 4.2 2.9 2.7 5.39 4.05 6.21 2.47 4.04 4.14 4.55 5.44 4.23 6.15 3.43 4.75 4.60 4.91 5.56 4.40 6.37 4.05 5.03 4.98 5.24 5.73 4.58 6.57 4.66 5.31 5.25 5.48 5.91 4.75 6.68 5.16 6.68 5.78 6.38 6.08 4.92 6.75 5.56 7.24 5.94 6.76 6.26 5.10 6.81 5.95 7.44 6.13 6.94 6.43 5.27 6.88 6.35 7.64 6.32 7.13 6.61 5.44 6.95 6.95 8.05 6.51 7.44 6.79 5.62 7.01 7.54 8.45 6.70 7.76 2.8 3.4 1.0 7.9 4.8 3.0 4.0 8.85 8.27 11.97 10.98 8.53 8.34 8.05 8.27 8.31 9.80 11.66 5.41 7.04 11.64 13.39 8.26 8.40 9.15 8.27 12.32 10.83 8.59 8.56 8.27 8.41 8.34 9.59 12.31 5.56 7.27 11.68 13.62 8.59 8.57 9.37 8.34 12.86 11.05 8.68 8.71 8.63 8.78 8.39 9.76 12.85 5.71 7.65 11.84 13.85 8.94 8.81 9.59 8.49 13.15 11.37 8.74 8.84 9.22 9.29 8.44 10.14 13.31 5.85 8.06 11.91 14.03 9.29 9.00 9.80 8.71 13.35 11.41 8.82 8.99 9.66 9.73 8.50 10.39 13.75 6.00 8.39 11.99 14.22 9.64 9.25 9.95 8.93 13.54 11.56 8.93 9.15 9.95 10.02 8.56 10.68 14.28 6.15 8.71 12.06 14.40 10.01 9.45 10.10 9.15 13.74 11.71 9.03 9.29 10.24 10.32 8.63 11.00 14.82 6.29 9.07 12.18 14.40 10.38 9.66 10.32 9.44 14.13 11.85 9.15 9.44 10.61 10.68 8.71 10.98 15.35 6.44 9.44 12.40 14.77 10.84 9.89 10.54 9.73 14.62 12.07 9.37 9.66 10.98 11.05 8.85 11.71 15.97 6.66 9.88 12.71 15.00 11.29 10.20 10.83 10.10 15.11 12.29 9.59 9.88 11.34 11.41 9.00 12.07 16.59 6.88 10.39 13.05 15.23 11.75 10.51 2.0 3.0 2.5 1.5 1.7 1.9 3.3 3.2 1.1 3.0 3.8 2.8 4.4 1.7 1.4 4.0 2.6 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Box office market (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 93 55 79 227 9,113 88 58 65 211 8,414 91 63 70 224 9,011 94 66 66 226 9,172 98 69 73 240 9,594 101 72 79 252 10,047 105 76 85 266 10,480 110 80 92 282 11,033 115 84 99 298 11,724 121 88 106 315 12,468 4.3 5.0 7.7 5.6 5.4 65 56 207 10 309 123 770 52 51 144 10 394 126 777 64 52 204 12 450 173 955 73 46 214 13 566 163 1,075 69 47 225 14 827 199 1,381 72 49 229 15 912 214 1,491 75 51 235 17 968 233 1,579 79 54 244 18 1,070 253 1,718 84 56 254 20 1,207 273 1,894 90 58 266 23 1,352 295 2,084 5.5 4.3 3.4 10.4 10.3 8.2 8.6 171 199 152 76 1,667 1,307 113 143 967 225 139 107 1,013 193 230 1,414 8,116 143 183 145 66 1,509 1,090 110 138 881 198 139 104 929 171 206 1,414 7,426 162 199 164 75 1,639 1,191 116 157 897 228 153 111 931 181 229 1,399 7,832 151 189 159 75 1,556 1,109 129 171 1,014 234 142 111 942 181 200 1,508 7,871 160 196 164 76 1,665 1,163 140 183 910 252 161 116 806 185 213 1,583 7,973 162 202 169 79 1,741 1,216 148 193 942 260 167 119 836 187 221 1,662 8,304 168 208 174 80 1,806 1,264 155 203 976 271 175 124 872 192 224 1,743 8,635 176 217 184 85 1,875 1,321 164 217 1,010 274 183 129 909 200 236 1,853 9,033 183 228 195 88 1,967 1,390 176 231 1,062 296 195 136 954 208 247 1,976 9,532 190 243 205 92 2,060 1,462 187 246 1,125 307 207 145 1,007 218 259 2,116 10,069 3.5 4.4 4.6 3.9 4.3 4.7 6.0 6.1 4.3 4.0 5.2 4.6 4.6 3.3 4.0 6.0 4.8 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: Centre National de la Cinmatographie, Danish Film Institute, FILM&KINO, Finnish Chamber of Films, German Federal Film Board, Ministry of Culture of the Czech Republic, National Film Office of Hungary, Nederlandse Federatie voor de Cinematografie, PricewaterhouseCoopers LLP, Spanish Ministry of Culture, UK Film Council, Wilkofsky Gruen Associates

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Box office spending


Box office spending will expand at a projected 5.4 percent compound annual rate to $12.5 billion in 2013 from $9.6 billion in 2008. Growth in Western Europe will average 4.8 percent compounded annually, with spending increasing from $8 billion in 2008 to $10.1 billion in 2013. Central and Eastern Europe will rise from $1.4 billion in 2008 to $2.1 billion in 2013, an 8.6 percent compound annual increase. Russia will account for 75 percent of that gain. Middle East/Africa will total $315 million in 2013 from $240 million in 2008, a 5.6 percent increase compounded annually.

The success of Blu-ray in the UK suggests that HD has the potential to revitalize the industry in the same way that DVDs boosted sell-through when it was introduced. Currently, the installed base for Blu-ray is too small to offset the declining DVD market. The economic downturn discouraged Blu-ray hardware purchases in 2008, although having a single HD standard will help the market over the long run. In addition to Blu-ray players, the market also needs an installed base of HDTV sets. Analog switch-offs in a number of countries are leading households to buy digital TV sets, which generally are HD ready. The installed base of HD households is growing. In the UK, for example, more than 12 million HD-ready TVs have been sold. Although Blu-ray is penetrating the market through video game consoles, it is not yet clear that gamers are using their consoles to play movies. Sales of stand-alone players are still small, and the weak economy will likely limit growth during the next two years. Accordingly, we expect the sell-through market to remain weak, falling by 2.4 percent in 2009 and remaining relatively flat in 2010. We expect economic conditions to improve by 2011 and anticipate a relatively strong economy during 201213. With disposable incomes rising, and with Bluray hardware prices falling, we expect hardware sales to pick up and the installed base to expand. As it does, software sales will increase. Beginning in 2011, gains in Blu-ray will begin to offset declines in DVD, and by 201213, we look for mid- to high-single-digit growth. We expect the UK to lead growth in Western Europe, with a projected 5 percent compound annual increase, as it appears to be adopting Blu-ray faster than other countries. Piracy will continue to restrain growth in France and will lead to reduced spending in Spain. Germany will decline in 2009 and will record accelerating increases thereafter as Blu-ray gains penetration. We project physical sell-through in Western Europe to increase at a 2.8 percent compound annual rate to $13.8 billion in 2013 from $12 billion in 2008. CEE will expand by 4.2 percent compounded annually to $921 million from $751 million in 2008. Middle East/Africa will grow by 3.7 percent compounded annually to $109 million in 2013. Physical sell-through for all of EMEA will increase from $12.9 billion in 2008 to $14.9 billion in 2013, a 2.9 percent compound annual increase.

Physical home video


Sell-through The physical sell-through market has been weak for a number of years, and the adverse economy contributed to a decline in 2008. Spending fell 2.2 percent in 2008. During the past few years, there have been no significant drivers of growth. The installed home video household base is stable; many households have already accumulated a video library of films they would like to own and are now buying only current hits; and online piracy is cutting into legitimate sales. In Western Europe, piracy is particularly severe in Spain. More than 350 million movie files were illegally downloaded in 2008, hurting both physical sales and legitimate digital download services. Sales plunged 19.3 percent in 2008, the steepest decline in EMEA. Piracy is also cutting into the market in France. Each day, an estimated half a million films are downloaded illegally. Spending on legitimate product fell by 9.5 percent in 2008 and by a cumulative 32 percent since 2004. In France, Spain, and other countries, high piracy rates have led to sharp price declines in legitimate product. Most of the decrease in spending has been due to price cuts rather than unit sales declines. The UK was the only territory in Western Europe to record an increase in physical sell-through spending in 2008. DVD unit sales were steady, and a late surge in Blu-ray high-definition discs led to a 3.1 percent increase in overall spending. Forty percent of Blu-ray sales in the UK occurred in December 2008, and annual sales were nearly five times higher in 2008 than in 2007.
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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

Physical sell-through market (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 29 48 11 88 14,249 31 49 11 91 13,371 28 50 12 90 12,996 26 51 13 90 13,175 26 52 13 91 12,884 25 53 14 92 12,572 25 54 14 93 12,631 25 57 14 96 13,024 25 61 15 101 13,750 26 67 16 109 14,864 0.0 5.2 4.2 3.7 2.9 58 64 54 NA 338 NA 514 57 61 67 NA 377 NA 562 56 55 73 NA 397 NA 581 55 57 81 NA 524 NA 717 53 56 79 NA 563 NA 751 50 54 75 NA 583 NA 762 48 54 73 NA 603 NA 778 49 54 74 NA 634 NA 811 50 56 77 NA 674 NA 857 54 60 83 NA 724 NA 921 0.4 1.4 1.0 NA 5.2 NA 4.2 146 391 275 206 2,868 2,107 35 190 761 515 294 143 622 303 240 4,551 13,647 143 359 292 92 2,612 2,000 37 205 717 481 327 102 578 310 208 4,255 12,718 139 356 309 110 2,429 1,913 38 278 673 489 362 114 563 372 211 3,969 12,325 139 348 294 114 2,166 1,948 40 293 688 511 397 105 571 382 185 4,187 12,368 135 337 275 110 1,961 1,939 37 278 659 505 390 101 461 372 166 4,316 12,042 132 322 265 102 1,793 1,932 34 263 629 483 373 95 424 357 152 4,362 11,718 129 315 260 100 1,756 1,946 34 260 622 476 364 92 410 349 148 4,499 11,760 130 319 270 104 1,771 1,990 35 266 637 490 377 94 402 353 150 4,729 12,117 136 329 285 111 1,866 2,063 38 278 673 520 399 98 417 372 157 5,050 12,792 146 351 309 121 2,049 2,159 42 300 732 563 435 105 439 402 171 5,510 13,834 1.6 0.8 2.4 1.9 0.9 2.2 2.6 1.5 2.1 2.2 2.2 0.8 1.0 1.6 0.6 5.0 2.8 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: British Video Association, Danish Film Institute, GfK Group, NVPI, PricewaterhouseCoopers LLP, Statistics Finland, Videobransjens Felleskontor, Wilkofsky Gruen Associates

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In-store rentals The in-store rental market in EMEA has been declining since 2002 and continued to fall in 2008. The 4.4 percent drop in 2008 was the smallest since 2004. During 200607, rental spending fell at double-digit annual rates. We believe there is a countercyclical element to the rental market. Although rental spending fell faster than sell-through in 2008, the rental trend showed a relative improvement, suggesting that some consumers opted for lower-priced rentals for entertainment. During the next two years, we look for declines of 3 percent or less as the economy remains weak. We then expect accelerated declines during 201113, when economic conditions improve and spending shifts in favor of sell-through.

The in-store rental market will also face growing competition from online subscription and digital download services as well as from a growing videoon-demand market. In-store rental spending in Western Europe will decline at a 4.5 percent compound annual rate to $1.9 billion in 2013 from $2.4 billion in 2008. Central and Eastern Europe will decrease from $37 million in 2008 to $30 million in 2013, a 4.1 percent compound annual decline. Middle East/Africa will drop from $96 million to $90 million, a 1.3 percent compound annual rate. For EMEA as a whole, in-store rental spending will decrease at a 4.3 percent compound annual rate to $2.1 billion in 2013 from $2.6 billion in 2008.

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In-store rental market (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total EMEA total 26 51 21 98 3,624 27 50 21 98 3,431 26 50 21 97 3,079 26 49 22 97 2,691 26 49 21 96 2,572 25 49 21 95 2,501 25 48 21 94 2,425 25 47 21 93 2,332 25 46 21 92 2,208 24 45 21 90 2,061 1.6 1.7 0.0 1.3 4.3 12 26 23 NA NA 61 10 18 22 NA NA 50 9 17 21 NA NA 47 8 9 21 NA NA 38 8 8 21 NA NA 37 8 8 20 NA NA 36 7 8 20 NA NA 35 7 8 20 NA NA 35 6 7 19 NA NA 32 5 6 19 NA NA 30 9.0 5.6 2.0 NA NA 4.1 22 101 104 48 271 448 38 130 468 199 124 41 439 167 18 847 3,465 19 89 105 16 278 468 35 114 461 157 115 42 461 172 18 733 3,283 18 91 102 16 241 416 32 104 400 151 115 41 388 178 18 624 2,935 16 92 97 15 168 401 29 98 307 143 80 31 293 228 16 542 2,556 16 94 96 15 146 395 28 95 293 136 78 29 278 229 15 496 2,439 16 95 96 15 139 388 28 94 285 124 77 29 263 229 15 477 2,370 15 95 96 13 132 380 26 91 278 117 75 28 249 228 14 459 2,296 15 94 95 12 124 373 26 88 271 102 73 28 234 224 13 432 2,204 13 91 94 10 117 366 25 80 256 88 71 26 220 220 12 395 2,084 12 88 92 9 110 351 23 73 241 73 67 25 205 212 11 349 1,941 5.6 1.3 0.8 9.7 5.5 2.3 3.9 5.1 3.8 11.7 3.0 2.9 5.9 1.5 6.0 6.8 4.5 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: British Video Association, Danish Film Institute, GfK Group, NVPI, PricewaterhouseCoopers LLP, Videobransjens Felleskontor, Wilkofsky Gruen Associates

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Online distribution
Movies can also be accessed through digital download services that allow users to download films to their computers. Devices that can transfer films to the TV are also helping the market. Apple added movie downloads to its iTunes service, which contributed to online download growth throughout Europe in 2008. Jaman opened a site in 2008 in the UK with a catalog of 1,000 titles and plans to launch sites in other countries as well. BSkyB in the UK and Canal Plus in France are other leading providers. The digital download market will benefit from growing broadband penetration, which will expand the potential market for streaming. At the same time, piracy will cut into legitimate sales.

The market was dominated in 2008 by the UK, Germany, and France, which together generated $23 million in legitimate spendingmore than threequarters of the overall total for Europe. We do not expect digital downloads to become a major revenue stream, because piracy remains a problem. Nevertheless, we look for the market to generate momentum during the latter part of the forecast period when more households have fast broadband services. We expect the UK to continue to dominate, with a projected $204 million in 2013 followed by France at $95 million. Germanys markethaving initially been driven by rentalremains predominantly rental instead of purchase-to-own, and average prices are much lower than in other countries, accounting for a relatively low spending total despite significant activity. Overall spending will rise from only $30 million in 2008 to $484 million in 2013.

Digital download market (US$ millions)


Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total 2005 2 NA NA 2 2006 4 NA NA 1 5 2007 2 5 NA NA 1 1 2 1 5 17 2008p 5 8 NA NA 1 2 2 1 1 10 30 2009 12 10 NA NA 2 4 3 1 2 20 54 2010 1 26 12 NA NA 4 7 4 3 2 34 93 2011 1 1 1 45 17 NA NA 9 13 6 6 4 1 72 176 2012 1 3 1 1 62 23 NA NA 22 23 8 17 9 1 134 305 2013 3 5 1 3 95 37 NA NA 39 33 11 32 19 2 204 484 200913 CAGR 80.2 35.8 108.1 75.2 40.6 100.0 80.2 82.8 74.4

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Online rentals Along with streaming movies, online subscription rentalswhereby subscribers order films online for delivery via mailare also becoming an important component of the rental market. Services typically offer a range of prices for different levels of monthly rental activity. Online subscription services provide a convenient alternative to going to the video rental outlet. They also will be able to offer high-definition DVDs, which may be difficult for the streaming market for households that do not have ultrafast broadband. Several companies entered the market during the past two years. In Germany, for example, Amango, Glorimedia, LOVEFiLM International, and Videobuster now offer online rental services.

The UK, Italy, and Spain were the largest online rental markets in 2008, together constituting $214 million, or nearly half of the Western European total. We expect online rental spending to rise from $453 million in 2008 to $791 million in 2013, an 11.8 percent compound annual increase. Total home video The overall home video market will expand at a 2.7 percent compound annual rate, rising to $18.2 billion in 2013 from $15.9 billion in 2008. Western Europe will total $17.1 billion in 2013, up 2.6 percent on a compound annual basis from $15 billion in 2008. CEE will grow at a 3.8 percent rate compounded annually to $951 million, and Middle East/Africa will rise to $199 million, a 1.3 percent compound annual gain.

Online subscription rental market (US$ millions)


Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total 2004 1 4 4 2 11 43 2 5 19 8 5 2 18 7 1 34 166 2005 1 6 7 1 19 53 2 8 32 11 8 3 32 12 1 51 247 2006 2 9 10 2 24 41 3 10 40 15 12 4 39 18 2 62 293 2007 2 12 13 2 22 38 4 13 40 19 10 4 38 30 2 70 319 2008p 3 19 19 3 29 43 6 19 59 27 16 6 56 46 3 99 453 2009 4 24 24 4 35 50 7 23 71 31 19 7 66 57 4 119 545 2010 4 29 29 4 40 57 8 27 83 35 23 8 75 68 4 138 632 2011 5 33 33 4 44 63 9 31 95 36 25 10 82 78 5 151 704 2012 5 36 38 4 47 70 10 32 102 35 28 11 88 88 5 158 757 2013 5 40 42 4 49 74 11 33 109 33 30 11 92 96 5 157 791 200913 CAGR 10.8 16.1 17.2 5.9 11.1 11.5 12.9 11.7 13.1 4.1 13.4 12.9 10.4 15.9 10.8 9.7 11.8

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Home video market (US$ millions)


EMEA Western Europe Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Western Europe total Central and Eastern Europe Czech Republic Hungary Poland Romania Russia Turkey Central and Eastern Europe total Middle East/Africa Israel Saudi Arabia/Pan Arab South Africa Middle East/Africa total Total 55 99 32 186 18,039 58 99 32 189 17,051 54 100 33 187 16,373 52 100 35 187 16,202 52 101 34 187 15,939 50 102 35 187 15,672 50 102 35 187 15,781 50 104 35 189 16,236 50 107 36 193 17,020 50 112 37 199 18,200 0.8 2.1 1.7 1.3 2.7 70 90 77 NA 338 NA 575 67 79 89 NA 377 NA 612 65 72 94 NA 397 NA 628 63 66 102 NA 524 NA 755 61 64 100 NA 563 NA 788 58 62 95 NA 583 NA 798 55 62 93 NA 603 NA 813 56 62 94 NA 634 NA 846 56 63 96 NA 674 NA 889 59 66 102 NA 724 NA 951 0.7 0.6 0.4 NA 5.2 NA 3.8 169 496 383 256 3,150 2,598 75 325 1,248 722 423 186 1,079 477 259 5,432 17,278 163 454 404 109 2,909 2,523 74 327 1,210 649 450 147 1,071 494 227 5,039 16,250 159 456 421 128 2,694 2,374 73 392 1,113 655 489 159 990 568 231 4,656 15,558 157 452 404 131 2,358 2,392 73 404 1,036 674 489 140 902 641 203 4,804 15,260 154 450 390 128 2,141 2,385 71 392 1,012 670 486 136 796 648 184 4,921 14,964 152 441 385 121 1,979 2,380 69 380 987 642 472 131 754 645 171 4,978 14,687 149 439 385 117 1,954 2,395 68 378 987 635 466 128 737 647 166 5,130 14,781 151 447 398 121 1,984 2,443 70 385 1,012 641 481 132 724 659 169 5,384 15,201 155 459 418 126 2,092 2,522 73 390 1,053 666 506 135 742 689 175 5,737 15,938 166 484 444 137 2,303 2,621 76 406 1,121 702 543 141 768 729 189 6,220 17,050 1.5 1.5 2.6 1.4 1.5 1.9 1.4 0.7 2.1 0.9 2.2 0.7 0.7 2.4 0.5 4.8 2.6 2004 2005 2006 2007 2008p 2009 2010 2011 2012 2013 200913 CAGR

At average 2008 exchange rates. Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Syria, and the United Arab Emirates. Sources: British Video Association, Danish Film Institute, FILM&KINO, GfK Group, NVPI, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Asia Pacific

The outlook in brief


New multiplexes and conversions to digital and 3-D will fuel box office spending. High-definition videos will boost home video spending during the latter part of the forecast period when economic conditions improve. New services will propel online rentals and a fledgling digital download market.

Box office will rise from $6.8 billion to $9.9 billion, a 7.8 percent increase compounded annually. Home video physical sell-through will grow at a 2.5 percent compound annual rate to $5 billion from $4.4 billion in 2008. Home video in-store rentals will rise at a 1.5 percent compound annual rate to $6.7 billion from $6.2 billion. Online rental subscriptions will grow at a 51.9 percent compound annual rate to $1.4 billion in 2013. Digital downloads will generate $179 million in 2013. The overall home video market will increase from $10.8 billion to $13.3 billion, a 4.2 percent gain compounded annually.

Overview
Filmed entertainment spending will expand at a 5.7 percent compound annual rate to $23.3 billion in 2013 from $17.7 billion in 2008.

Filmed entertainment market by component (US$ millions)


Asia Pacific Box office Home video Sell-through In-store rental Online rental subscriptions Digital downloads Total home video Total 4,392 5,575 5 9,972 15,507 4,521 5,412 14 9,947 15,604 4,192 5,788 36 1 10,017 16,216 4,339 6,077 70 3 10,489 16,944 4,448 6,193 178 3 10,822 17,663 4,361 6,303 392 7 11,063 18,164 4,398 6,397 568 16 11,379 19,022 4,504 6,500 850 33 11,887 20,266 4,705 6,587 1,141 101 12,534 21,687 5,032 6,671 1,439 179 13,321 23,264 2004 5,535 2005 5,657 2006 6,199 2007 6,455 2008p 6,841 2009 7,101 2010 7,643 2011 8,379 2012 9,153 2013 9,943

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Filmed entertainment market growth by component (%)


Asia Pacific Box office Home video Sell-through In-store rental Online rental subscriptions Digital downloads Total home video Total 5.0 5.7 14.8 1.6 2.9 2.9 180.0 0.3 0.6 7.3 6.9 157.1 0.7 3.9 3.5 5.0 94.4 200.0 4.7 4.5 2.5 1.9 154.3 0.0 3.2 4.2 2.0 1.8 120.2 133.3 2.2 2.8 0.8 1.5 44.9 128.6 2.9 4.7 2.4 1.6 49.6 106.3 4.5 6.5 4.5 1.3 34.2 206.1 5.4 7.0 7.0 1.3 26.1 77.2 6.3 7.3 2.5 1.5 51.9 126.5 4.2 5.7 2004 7.0 2005 2.2 2006 9.6 2007 4.1 2008p 6.0 2009 3.8 2010 7.6 2011 9.6 2012 9.2 2013 8.6 200913 CAGR 7.8

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Japan is the dominant market in the region, at $8.7 billion in 2008, nearly half of total spending in Asia Pacific. Australia is next largest, at $2.4 billion, followed by India at $1.8 billion and South Korea at $1.3 billion. Japan generated its third consecutive increase in 2008 with a 1.1 percent advance. Its large physical rental market continued to expand in 2008, offsetting a drop in sell-through and a modest decline in box office. Australia recorded its second consecutive double-digit advance, rising by 12.9 percent in 2008. Home video continued to grow rapidly, buoyed by the popularity of TV DVDs, which are boosting both sell-through and rental. The market also was enhanced by rapidly growing online subscription rentals. India rose by 10 percent in 2008, its third double-digit advance during the past four years. Rising admission prices boosted box office spending, offsetting a disappointing roster of local films that led to flat admissions and a 21 percent decrease in home video.

South Korea experienced its second consecutive weak performance at the box office as local films continued to lose share. Local films accounted for 43 percent of admissions in 2008 compared with 65 percent in 2006. Piracy continues to cannibalize what is left of the home video market, and it is hampering a legitimate digital download business. The Peoples Republic of China (PRC) was the fastestgrowing territory in 2008, with a 24 percent increase. New cinemas and the growing appeal of local films contributed to the second consecutive 27 percent increase in box office spending. The home video market in the PRC is plagued by piracy, and legitimate spending is only a small fraction of the overall level of consumption. As a result of piracy over the years, of recent political turmoil in Thailand, and of the global economic recession, the number of Thai films produced decreased from 55 titles in 2007 to 35 titles in 2008.

Filmed entertainment market by country (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 1,958 349 308 1,102 98 8,702 86 243 116 129 170 1,171 768 307 NA 15,507 2005 1,892 430 313 1,282 105 8,493 101 235 118 138 167 1,223 783 324 NA 15,604 2006 1,898 563 319 1,491 113 8,510 107 249 121 148 179 1,380 801 336 1 16,216 2007 2,131 702 342 1,599 120 8,641 126 272 123 156 197 1,353 819 361 2 16,944 2008p 2,405 868 354 1,759 124 8,738 136 281 127 164 200 1,332 817 354 4 17,663 2009 2,486 1,008 359 1,804 129 8,909 143 290 130 156 202 1,370 812 360 6 18,164 2010 2,603 1,161 370 2,091 134 9,099 150 300 135 163 206 1,417 820 366 7 19,022 2011 2,743 1,307 387 2,521 141 9,480 163 312 140 170 214 1,470 836 373 9 20,266 2012 2,923 1,463 411 2,941 148 9,936 176 326 145 178 229 1,554 863 383 11 21,687 2013 3,111 1,631 445 3,427 155 10,432 191 344 148 186 243 1,643 900 395 13 23,264 200913 CAGR 5.3 13.4 4.7 14.3 4.6 3.6 7.0 4.1 3.1 2.5 4.0 4.3 2.0 2.2 26.6 5.7

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Box office
Admissions New multiplexes are driving admissions in a number of countries, and the installation of digital projection equipment will provide a boost during the next five years. Digital cinemas have a number of advantages, including better picture and sound than standard prints have. Digital prints are much less expensive than standard prints, making it economical for films to be distributed to a larger number of theaters. Digital also provides a platform for 3-D, which is emerging as the principal driver of box office spending. Prices and admissions are higher for 3-D films, giving them a significant revenue advantage over standard films. To capture the revenue potential of 3-D, exhibitors are now devoting more resources to digital and 3-D conversions. GDC Technology, a Hong Kongbased company, announced it plans to install 6,000 digital projection systems throughout Asia, financed in part by Hollywood studios. In the PRC, the pace of new cinema construction continued in 2008, with the screen count rising by 16 percent. Local productions and coproductions also proved to be popular, generating 61 percent of total admissions. Eight films reached the 100-million-renminbi ($14.4-million) threshold in 2008 compared with only three films in 2007. The pace of the construction of new screens is expected to continue, with the Wanda Group announcing plans to build 100 cinemas in 2009. In addition, the PRC is a leader in digital screens, with around 700, second highest in the world behind the United States. That figure includes around 150 3-D screens. The government is actively promoting 3-D, which enabled Disney to bypass the 20-film Hollywood quota and release Bolt in 3-D in September. The government also is pushing for digital cinemas in smaller towns and in rural areas. Admissions in the PRC rose 23 percent in 2008, the fifth consecutive increase in excess of 20 percent. We expect admissions to expand at an 11.3 percent compound annual rate to 725 million in 2013 from 424 million in 2008.

New multiplexes also contributed to admissions growth in Hong Kong and Taiwan. In Hong Kong, admissions rose by 7.3 percent in 2008. Four major multiplexes opened in 2007, and several others entered the market in 2008. Interest in 3-D conversions also is growing, spurred by the expected increase in the number of 3-D releases from Hollywood. Taiwan posted a 2.2 percent increase in admissions, helped by the addition of digital screens and a revitalized interest in local films. Taiwan had around 20 digital screens in operation in 2008, doubling the total from the previous year. As with many other markets, recent installations are being driven by individual 3-D titles. With the onset of the economic downturn, however, Taiwanese exhibitors are slowing their digital investment while hoping for signs of a studio-supported financing plan. In India, new multiplex construction and digital conversions are continuing. BIG Cinemas announced plans to convert 500 screens to digital during the next two years, with 300 expected by year-end 2009. By 2013, more than half of all screens in India will have digital projection. The impact of digital screens will be felt in rapidly rising admission prices. Admissions will increase to a projected 3.4 billion in 2013, a 0.6 percent compound annual increase. In Australia, conversion to digital and 3-D is picking up. Three-dimensional blockbuster films such as Journey to the Center of the Earth generated a great deal of consumer excitement and higher-than-average revenues in 2008. Within the next 5 to 10 years, virtually all screens will have been converted to digital. A new government incentive plan, known as the producer offset, offers a 40 percent rebate for approved productions. It is expected to attract more international and local film investment. In Japan, although admissions slipped by 2.2 percent in 2008, local films did well, contributing 7 of the top 10 releases. High-end cinemas are also attracting interest. Shinjuku Piccadilly opened a luxury cinema in Tokyo in 2008 with luxury rooms, large seats, concert-style speakers, and high prices. Tokyu Recreation has a deal with Imax to build four big-screen theaters. There were around 100 digital screens in 2008, a figure that will increase as conversions pick up. We expect admissions

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to return to a positive path in Japan, with a projected 2.3 percent compound annual increase during the next five years. Singapore also benefited from new screens in 2008 and generated a 2.8 percent increase in admissions. Singapore is pushing digital and 3-D. The Singapore Film Commission established a S$10-million (US$7million) 3-D development fund to boost 3-D filmmaking activities in Singapore and build an industry of 3-D practitioners. The government has also announced plans to develop a 19-hectare plot of land into a new

studio facility called Mediapolis that could be used by local independent producers and foreign companies. Digital conversion also is occurring in South Korea. By 2013, more than half of all screens are expected to be digital. We project admissions in Asia Pacific to rise at a 2.1 percent compound annual rate to 4.8 billion in 2013 from 4.4 billion in 2008. India and the PRC will account for 84 percent of that growth.

Admissions (millions)
Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 91.0 175.0 18.0 3,100.0 42.0 170.1 23.0 17.0 34.0 62.5 16.0 130.0 22.0 31.0 NA 3,932 2005 82.0 220.0 16.8 3,200.0 43.3 160.5 26.0 15.0 32.0 61.0 14.8 140.3 22.1 32.5 NA 4,066 2006 82.0 280.0 16.6 3,200.0 46.2 164.3 28.0 16.0 30.0 62.9 15.6 163.9 22.6 32.7 1.0 4,162 2007 83.0 345.0 17.7 3,250.0 47.4 160.0 30.4 16.0 29.0 65.0 18.0 157.6 23.0 36.0 2.0 4,280 2008p 88.0 424.0 19.0 3,250.0 48.0 156.5 32.0 16.2 28.5 65.5 18.5 149.2 23.5 33.0 3.0 4,355 2009 89.0 490.0 20.0 3,250.0 49.0 158.0 33.0 16.5 28.0 67.5 19.0 150.0 24.0 33.3 4.0 4,431 2010 90.0 560.0 21.0 3,275.0 50.0 160.0 34.0 16.8 28.2 68.0 19.5 152.0 25.0 33.4 5.0 4,538 2011 91.0 620.0 22.0 3,300.0 51.0 165.0 36.0 17.2 28.6 68.5 20.0 155.0 26.0 33.6 6.0 4,640 2012 92.0 675.0 23.0 3,300.0 52.0 170.0 38.0 17.6 29.0 69.0 20.5 160.0 27.0 33.8 7.0 4,714 2013 93.0 725.0 24.0 3,350.0 53.0 175.0 40.0 18.0 29.4 69.5 21.0 165.0 28.0 34.0 8.0 4,833 200913 CAGR 1.1 11.3 4.8 0.6 2.0 2.3 4.6 2.1 0.6 1.2 2.6 2.0 3.6 0.6 21.7 2.1

Sources: Korean Film Commission, Motion Picture Distributors Association of Australia, Motion Picture Distributors Association of New Zealand, Motion Picture Producers Association of Japan, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Admission prices Low prices in high-admission countries such as India and the PRC hold down the overall average for Asia Pacific to only $1.57. In Japan, by contrast, the average was $12.03, and it was above $8 in Australia and Taiwan and above $6 in Hong Kong, New Zealand, Singapore, and South Korea. For most countries, we look for prices to grow faster during 201113 than during 200910, reflecting growing penetration of high-priced digital and 3-D screens in the

admissions mix. We expect double-digit price growth in India as the industry converts to digital. In the Philippines, Congress has approved House Bill 5624, reducing the amusement tax on cinema tickets from 30 percent to 10 percent to reduce admission prices. This tax break is aimed at reviving the local film industry, which has been hampered by high taxes. The overall average price will rise by 5.6 percent compounded annually to $2.06 in 2013.

Average admission price (US$)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 8.33 1.26 6.55 0.33 1.80 11.98 2.25 6.28 0.51 1.34 5.65 5.13 8.08 3.49 NA 1.41 2005 8.34 1.31 6.89 0.37 1.86 11.93 2.52 6.32 0.52 1.49 5.72 5.26 8.24 3.61 NA 1.39 2006 8.58 1.34 7.02 0.42 1.92 11.91 2.52 6.49 0.54 1.58 5.93 5.61 8.40 3.73 1.08 1.49 2007 8.77 1.39 7.28 0.44 2.01 11.98 2.85 6.67 0.55 1.65 6.00 5.81 8.56 3.85 1.20 1.51 2008p 8.99 1.43 7.37 0.50 2.07 12.03 3.00 6.85 0.57 1.74 6.22 6.08 8.72 3.97 1.32 1.57 2009 9.19 1.47 7.45 0.50 2.11 12.08 3.14 7.02 0.58 1.57 6.36 6.35 8.87 4.09 1.38 1.60 2010 9.40 1.52 7.58 0.57 2.17 12.13 3.29 7.20 0.59 1.66 6.53 6.62 9.03 4.21 1.44 1.68 2011 9.61 1.56 7.74 0.68 2.24 12.17 3.44 7.37 0.61 1.75 6.71 6.89 9.19 4.36 1.50 1.81 2012 9.86 1.61 7.93 0.80 2.30 12.27 3.59 7.55 0.62 1.84 6.92 7.26 9.38 4.51 1.56 1.94 2013 10.16 1.67 8.15 0.90 2.38 12.37 3.74 7.72 0.64 1.93 7.21 7.62 9.60 4.66 1.62 2.06 200913 CAGR 2.5 3.2 2.0 12.5 2.8 0.6 4.5 2.4 2.3 2.1 3.0 4.6 1.9 3.3 4.2 5.6

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Box office spending Japan has the largest box office market in Asia Pacific, at $1.9 billion in 2008, with India next at $1.6 billion. We expect the PRC and India to be the fastest growing of the major countries, with compound annual increases of 14.8 percent and 13.2 percent, respectively, during the next five years. We expect India to overtake Japan in 2011 to become the leading

market. Together, India and the PRC will generate 64 percent of total box office spending growth in Asia Pacific during the next five years. Excluding India and the PRC, box office spending in Asia Pacific will grow at a projected 4.4 percent compound annual rate. For Asia Pacific as a whole, box office spending will increase from $6.8 billion in 2008 to $9.9 billion in 2013, a 7.8 percent compound annual growth rate.

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Box office market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 758 221 118 1,023 75 2,038 52 107 17 83 90 667 178 108 NA 5,535 2005 684 287 116 1,184 81 1,915 65 95 17 91 85 738 182 117 NA 5,657 2006 703 376 116 1,344 89 1,957 70 104 16 99 93 919 190 122 1 6,199 2007 728 478 129 1,430 95 1,917 87 107 16 107 108 915 197 139 2 6,455 2008p 791 605 140 1,625 99 1,882 96 111 16 114 115 907 205 131 4 6,841 2009 818 721 149 1,632 103 1,908 104 116 16 106 121 952 213 136 6 7,101 2010 847 849 159 1,869 108 1,940 112 121 17 113 127 1,007 226 141 7 7,643 2011 875 966 170 2,260 114 2,009 124 127 17 120 134 1,069 239 146 9 8,379 2012 908 1,086 182 2,637 120 2,086 137 133 18 127 142 1,161 253 152 11 9,153 2013 945 1,208 196 3,014 126 2,164 150 139 19 134 151 1,257 269 158 13 9,943 200913 CAGR 3.6 14.8 7.0 13.2 4.9 2.8 9.3 4.6 3.5 3.3 5.6 6.7 5.6 3.8 26.6 7.8

At average 2008 exchange rates. Sources: Korean Film Commission; Motion Picture Distributors Association of Australia; Motion Picture Distributors Association of New Zealand; Motion Picture Producers Association of Japan; State Administration of Radio, Film, and Television; PricewaterhouseCoopers LLP; Wilkofsky Gruen Associates

Physical home video


The home video market in Asia Pacific does not represent overall usage because so much of the activity is pirated in many countries. In the PRC, where piracy is considered to be most severe, an estimated 93 percent of total sales are pirated sales. Pirated content is also estimated to account for more than 90 percent of home video consumption in Indonesia. Illegal recording of films in theaters is reportedly increasing in Thailand and the Philippines, and Blu-ray films are being illegally recorded on blank DVDs instead of Blu-ray discs. In South Korea, piracy has undermined the sell-through market, which fell by 49 percent from 2004 to 2008. Warner Home Video Korea closed its operations at the end of 2008. Disney, Fox, Paramount, and Universal had previously left the market. Sony announced it was

leaving as well but then returned at year-end 2008 in a licensing arrangement with United Entertainment Korea. Japan and Australia dominate the legitimate sellthrough market, together accounting for 75 percent of total spending in 2008. Japans market fell by 4.9 percent in 2008, hurt by the falling economy, which in the fourth quarter posted its largest decline in years. We expect further decreases during the next two years. We then look for a rebound during the latter part of the forecast period as Blu-ray sales pick up. Japan has a large installed base of Blu-ray game consoles, which households are beginning to use to play Blu-ray movies. The market also needs an installed base of HDTVs, whose sales will be hurt in the near term by the slumping economy. Although growth in this segment of the market will not be sufficient to offset declining DVD sales during the next few years, we expect they will begin to do so in 2013.

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The Australian sell-through market, by contrast, is booming, growing by 14.9 percent in 2008 following a 22.2 percent increase in 2007. TV DVDs have been fueling growth, although that component of the market appears to be flattening. In 2009, films are expected to be released simultaneously on DVD and video-on-demand, which could cut marginally into DVD sales. The falling economy will also dampen spending. We expect growth to drop to low single digits during the next two years and then improve to midsingle-digit increases as Blu-ray disc sales become more meaningful and provide a boost to the market. Significant Blu-ray manufacturing capacity will launch in Australia in 2009. We expect sell-through spending in Australia to advance at a 4.6 percent compound annual rate from $1.3 billion in 2008 to $1.6 billion in 2013. In India, the home video market is converting to sellthrough from rental, which constituted 100 percent of sales in 2004. By 2013, sell-through will represent 92

percent of the market. Sell-through spending will jump from $43 million in 2008 to $377 million in 2013. The Philippines has launched a new antipiracy campaign entitled Dont Wait Until Its Too Late! which is intended to reduce losses suffered by the Philippine film industry. This program penalizes firsttime offenders of the antipiracy law with imprisonment of one to three years and a fine of P50,000 to P100,000 ($1,122 to $2,244). We project overall sell-through spending in Asia Pacific to decline by 2 percent in 2009 and stabilize in 2010 with an 0.8 percent advance. During the subsequent three years, spending will increase by an estimated 14.4 percent, benefiting from improved economic conditions and the emergence of Blu-ray. Spending will rise from $4.4 billion in 2008 to $5 billion in 2013, a 2.5 percent increase compounded annually.

Physical sell-through market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 886 74 167 0 2 2,631 23 91 41 15 64 69 301 28 NA 4,392 2005 903 86 173 1 2 2,705 25 95 42 15 67 59 317 31 NA 4,521 2006 890 124 180 1 2 2,328 27 94 44 16 71 48 333 34 NA 4,192 2007 1,088 158 189 15 2 2,184 29 112 45 17 75 39 349 37 NA 4,339 2008p 1,250 194 190 43 2 2,077 30 116 47 17 71 35 339 37 NA 4,448 2009 1,266 215 186 87 2 1,932 29 117 49 17 67 32 326 36 NA 4,361 2010 1,312 237 187 157 2 1,836 28 119 52 17 66 29 320 36 NA 4,398 2011 1,379 262 193 202 2 1,787 29 124 55 17 66 29 323 36 NA 4,504 2012 1,471 294 205 253 3 1,768 30 130 58 18 71 30 336 38 NA 4,705 2013 1,563 330 225 377 3 1,778 32 140 58 19 76 32 358 41 NA 5,032 200913 CAGR 4.6 11.2 3.4 54.4 8.4 3.1 1.3 3.8 4.3 2.2 1.4 1.8 1.1 2.1 NA 2.5

At average 2008 exchange rates. Sources: GfK Australia, Japan Video Software Association, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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In-store rentals Asia Pacific is the only region where rental spending exceeds sell-through. The reason is that Japans instore rental market is more than twice that of its sellthrough market, and Japan dominates total home video spending in Asia Pacific. At $4.6 billion in 2008, Japan constituted 75 percent of total rental spending in Asia Pacific in 2008. In contrast with Japans sell-through market, the countrys rental market has been expanding during the past three years, including a 3.2 percent advance in 2008. In a weak economy, lower-cost rentals hold up better than higher-priced sell-through. We expect continued growth during the next five years, averaging 2 percent compounded annually to $5.1 billion. Although much smaller, the rental market in South Korea also is much larger than its sell-through market. Piracy has hurt sell-through more than rental because low-cost rentals are less subject to competition from pirated versions that often sell at or above the rental

price. Nevertheless, rental spending in South Korea has been declining because of piracy, and we expect it will continue to decline. In India, the migration to sell-through is leading to sharp declines in rental spending. Rental spending plunged by 41 percent in 2008, and we project an 18.4 percent compound annual decrease through 2013. Australia was the only other country to register a double-digit increase in 2008, with a 12.6 percent advance. TV DVDs have become popular rental items and are driving rental spending. We expect growth in Australia to drop to mid single digits during the next three yearsas this component of the market cools and then to slow to low-single-digit gains in 201213 as online subscriptions and video-on-demand cut into in-store rentals. The rental market for all of Asia Pacific will expand at a 1.5 percent compound annual rate to $6.7 billion in 2013 from $6.2 billion in 2008.

In-store rental market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 313 54 23 79 21 4,029 11 45 58 31 16 435 289 171 NA 5,575 2005 300 57 24 97 22 3,865 11 44 59 32 15 426 284 176 NA 5,412 2006 292 63 23 146 22 4,203 10 49 61 33 15 413 278 180 NA 5,788 2007 293 66 24 154 23 4,493 10 49 62 32 14 399 273 185 NA 6,077 2008p 330 69 24 91 23 4,638 10 49 64 33 13 390 273 186 NA 6,193 2009 347 72 24 84 24 4,734 10 50 65 33 13 386 273 188 NA 6,303 2010 364 75 24 64 24 4,831 10 50 66 33 12 381 274 189 NA 6,397 2011 380 78 24 57 25 4,927 10 49 68 33 12 372 274 191 NA 6,500 2012 385 80 24 48 25 5,024 9 48 69 33 13 363 274 192 NA 6,587 2013 389 83 24 33 26 5,121 9 48 71 33 13 354 273 194 NA 6,671 200913 CAGR 3.3 3.8 0.0 18.4 2.5 2.0 2.1 0.4 2.1 0.0 0.0 1.9 0.0 0.8 NA 1.5

At average 2008 exchange rates. Sources: Japan Video Software Association, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Online distribution
Online rental subscriptions Video rentals can also be acquired online. Online subscription rental services have been launched in Australia, New Zealand, Japan, India, and Singapore. Subscribers order films online, and the films are then distributed by mail. These services expand the market by reaching people who may not have access to video rental outlets. In Australia, BigPond Movies (Telstra) and Quickflix are the leading services. Although currently small, they are growing rapidly.

In Singapore, several services entered the market in 2008. VideoEzy Singapore dropped its mail delivery service in some areas because it was too slow and began delivering by motorcycle. We expect that the convenience of these services and their reach will propel the market. We project spending to increase from $178 million in 2008 to $1.4 billion in 2013, a 51.9 percent compound annual increase. Japan and Australia dominated the market in 2008 with 97 percent of total spending and will continue to do so through 2013.

Online subscription rental market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 1 NA NA NA NA 4 NA NA NA NA NA NA NA NA 5 2005 5 NA NA NA NA 8 NA 1 NA NA NA NA NA NA NA 14 2006 13 NA NA NA NA 21 NA 2 NA NA NA NA NA NA 36 2007 21 NA NA NA NA 45 NA 4 NA NA NA NA NA NA 70 2008p 33 NA NA NA 139 NA 5 NA NA 1 NA NA NA NA 178 2009 52 NA NA 1 NA 331 NA 7 NA NA 1 NA NA NA NA 392 2010 73 NA NA 1 NA 483 NA 10 NA NA 1 NA NA NA NA 568 2011 95 NA NA 2 NA 739 NA 12 NA NA 2 NA NA NA NA 850 2012 115 NA NA 3 NA 1,005 NA 15 NA NA 3 NA NA NA NA 1,141 2013 136 NA NA 3 NA 1,280 NA 17 NA NA 3 NA NA NA NA 1,439 200913 CAGR 32.7 55.9 27.7 24.6 51.9

At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Digital downloads Digital download services also are being introduced where films can be downloaded to own or to rent. Digital downloads are available in Australia, Japan, the PRC, and South Korea and are expected in India in 2009. In Australia, Blockbuster and VideoEzy are expected to introduce download services in 2009. Films will be downloadable to mobile phones and then transferred to TV sets for viewing. Apple began offering movie downloads through its iTunes store. Films are available for rental or purchase and can be viewed on iPods, iPhones, PCs, or TV sets. They cannot be burned to DVDs. The market in Australia is currently negligible, but we expect it will expand to $78 million by 2013. In the PRC, Warner is offering films online on a rental basis for less than $1. Films will be available soon after their theatrical release, in part to stem DVD piracy. In India, digital downloads will be available in 2009, but the low broadband penetration will limit spending. We

do not expect a meaningful market in India during the next five years. In Japan, Blu-ray video game consoles allow movies to be downloaded and viewed on TV sets. Downloads to Blu-ray are driving the digital download market, which we expect will expand to $89 million by 2013. South Korea has a high broadband penetration and fast download speedstwo key ingredients for a download market. However, that market is not developing because high piracy rates are crowding out legitimate services. We project the digital download market to grow from only $3 million in 2008 to $179 million in 2013. Total home video The total home video marketincluding physical sellthrough, in-store rentals, online rental subscriptions, and digital downloadswill expand at a projected 4.2 percent compound annual rate. Spending will rise from $10.8 billion in 2008 to $13.3 billion in 2013.

Digital download market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total
At average 2008 exchange rates. Less than US$500,000. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

2006 0 NA NA NA 1 NA NA NA NA NA NA NA NA 1

2007 1 NA NA NA 2 NA NA NA NA NA NA NA NA 3

2008p 1 NA NA NA 2 NA NA NA NA NA NA NA NA 3

2009 3 NA NA 4 NA NA NA NA NA NA NA NA 7

2010 7 NA NA 9 NA NA NA NA NA NA NA NA 16

2011 14 1 NA NA 18 NA NA NA NA NA NA NA NA 33

2012 44 3 NA NA 53 NA NA NA NA NA 1 NA NA NA 101

2013 78 10 NA NA 89 NA NA NA NA NA 2 NA NA NA 179

200913 CAGR 139.0 113.6 126.5

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Home video market (US$ millions)


Asia Pacific Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Total 2004 1,200 128 190 79 23 6,664 34 136 99 46 80 504 590 199 NA 9,972 2005 1,208 143 197 98 24 6,578 36 140 101 47 82 485 601 207 NA 9,947 2006 1,195 187 203 147 24 6,553 37 145 105 49 86 461 611 214 NA 10,017 2007 1,403 224 213 169 25 6,724 39 165 107 49 89 438 622 222 NA 10,489 2008p 1,614 263 214 134 25 6,856 40 170 111 50 85 425 612 223 NA 10,822 2009 1,668 287 210 172 26 7,001 39 174 114 50 81 418 599 224 NA 11,063 2010 1,756 312 211 222 26 7,159 38 179 118 50 79 410 594 225 NA 11,379 2011 1,868 341 217 261 27 7,471 39 185 123 50 80 401 597 227 NA 11,887 2012 2,015 377 229 304 28 7,850 39 193 127 51 87 393 610 231 NA 12,534 2013 2,166 423 249 413 29 8,268 41 205 129 52 92 386 631 237 NA 13,321 200913 CAGR 6.1 10.0 3.1 25.2 3.0 3.8 0.5 3.8 3.1 0.8 1.6 1.9 0.6 1.2 NA 4.2

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Latin America

The outlook in brief


Support of local productions will sustain box office spending. Rising DVD penetration will boost home video.

Box office spending will increase from $1.3 billion in 2008 to $1.7 billion in 2013, a 5 percent compound annual growth. Home video sell-through will advance at a 4.4 percent compound annual rate to $862 million in 2013 from $694 million in 2008. Home video rental spending will total $533 million in 2013, a 3.2 percent increase compounded annually. Overall home video will average 4 percent compounded annually from $1.1 billion in 2008 to $1.4 billion in 2013.

Overview
Filmed entertainment spending will rise at a 4.5 percent compound annual rate to $3.1 billion in 2013 from $2.5 billion in 2008.

Filmed entertainment market by component (US$ millions)


Latin America Box office Home video Sell-through Rental Total home video Total 504 558 1,062 2,190 515 574 1,089 2,190 582 649 1,231 2,420 637 689 1,326 2,586 694 455 1,149 2,486 703 438 1,141 2,539 716 453 1,169 2,628 752 470 1,222 2,754 802 499 1,301 2,917 862 533 1,395 3,098 2004 1,128 2005 1,101 2006 1,189 2007 1,260 2008p 1,337 2009 1,398 2010 1,459 2011 1,532 2012 1,616 2013 1,703

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Filmed entertainment market growth by component (%)


Latin America Box office Home video Sell-through Rental Total home video Total 8.6 2.2 5.1 12.7 2.2 2.9 2.5 0.0 13.0 13.1 13.0 10.5 9.5 6.2 7.7 6.9 8.9 34.0 13.3 3.9 1.3 3.7 0.7 2.1 1.8 3.4 2.5 3.5 5.0 3.8 4.5 4.8 6.6 6.2 6.5 5.9 7.5 6.8 7.2 6.2 4.4 3.2 4.0 4.5 2004 20.9 2005 2.4 2006 8.0 2007 6.0 2008p 6.1 2009 4.6 2010 4.4 2011 5.0 2012 5.5 2013 5.4 200913 CAGR 5.0

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Mexico overtook Brazil in 2008 to become the largest market, at $1.1 billion, up 5 percent from 2007. Strong local films buoyed box office spending and home video rentals, offsetting a sluggish sell-through market.

Brazil declined by 16.7 percent in 2008 to $912 million, the result of a steep decline in rentals. The decrease in Brazil offset gains in each of the other territories, and overall spending in Latin America fell by 4 percent

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in 2008. Although rental spending fell by more than half and a further drop is anticipated for 2009, Brazil remains the largest rental market in Latin America. The rental market will stabilize in 2010, and Brazil will return to an expansion path, growing at a 4.1 percent compound annual rate through 2013. Argentina and Venezuela were the fastest-growing countries in 2008, at 10 percent and 8.2 percent,

respectively, principally because of inflationary box office price growth. Continued price inflation will be the principal driver of spending growth during the next five years. High piracy rates have prevented legitimate digital download and online rental subscription services from getting established.

Filmed entertainment market by country (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 180 956 87 84 837 46 2,190 2005 177 908 82 91 881 51 2,190 2006 186 1,031 90 115 941 57 2,420 2007 201 1,095 91 127 1,011 61 2,586 2008p 221 912 93 133 1,061 66 2,486 2009 237 907 92 140 1,092 71 2,539 2010 254 937 94 146 1,119 78 2,628 2011 272 991 97 154 1,157 83 2,754 2012 294 1,048 102 164 1,220 89 2,917 2013 315 1,114 107 174 1,293 95 3,098 200913 CAGR 7.3 4.1 2.8 5.5 4.0 7.6 4.5

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Box office
Admissions With the exception of Mexico, which posted a 5.1 percent increase in 2008, admissions were relatively flat in each of the other territories. Increases were 0.5 percent or less, and decreases were 1.1 percent or less. Local films again did well in Mexico, leading to the second consecutive increase of more than 5 percent. US films were also popular, and new multiplexes contributed to admissions growth as well in 2008. Mexico has the largest box office market in Latin America, at 183 million, accounting for more than half of all admissions. In Brazil, the Sector Fund, a government program, will support investment in local production, which will shield the market from the impact of the financial meltdown as most local films are financed in large part from government support. The Sector Fund expects to invest $32 million in 2009 in local films.

In Argentina, film subsidies were raised by 40 percent in late 2008 to help producers deal with explosive inflation. Argentine film agency INCAA (Instituto Nacional de Cine y Artes Audiovisuales) will now pay up to 3.5 million pesos ($2.9 million) per film compared with 2.5 million pesos ($2.1 million) in 2008. INCAA also placed more restrictions on exhibitors to support local films. Local films must now be screened for a minimum of two weeks. In addition to shortfalls in production budgets, local films are at a disadvantage with respect to prints. Hollywood films generally provide more than 100 prints in Argentina, giving them wide exposure. Local films, by contrast, generally have only 35 prints, limiting their reach. Industry regulations helped local films increase their share from 9 percent in 2007 to 11.5 percent in 2008. Those gains came at the expense of the market as a whole, as total admissions fell by 1.1 percent. We expect these local initiatives will help sustain admissions. We project admissions to expand at a 1.6 percent compound annual rate to 389 million in 2013 from 359 million in 2008.

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Admissions (millions)
Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 42.0 114.0 11.5 16.0 164.0 19.0 366.5 2005 37.5 93.5 9.9 16.4 162.7 18.9 338.9 2006 37.0 90.3 11.2 20.2 165.5 19.7 343.9 2007 36.0 89.3 10.5 21.0 174.2 19.2 350.2 2008p 35.6 89.6 10.4 21.2 183.0 19.3 359.1 2009 36.0 90.0 10.5 21.4 185.0 19.4 362.3 2010 36.5 91.0 10.7 21.6 187.0 19.5 366.3 2011 37.0 92.0 11.0 22.0 190.0 19.7 371.7 2012 37.5 94.0 11.3 22.5 195.0 20.0 380.3 2013 38.0 96.0 11.6 23.0 200.0 20.3 388.9 200913 CAGR 1.3 1.4 2.2 1.6 1.8 1.0 1.6

Sources: Motion Picture Association of America, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Average prices Average admission prices are soaring in Argentina and rising by high single digits in Venezuela, in both cases reflecting high inflation rates. In Colombia, mid-single-digit increases also reflect inflationary gains. Excluding these territories, prices are growing at low-single-digit rates. In Argentina, average prices rose by more than 15 percent in 2007 and by nearly 20 percent in 2008. We look for the economic downturn to moderate inflation, and we project increases averaging 9.2 percent compounded annually through 2013.

Beyond inflation, the introduction of new theaters will continue to support rising prices, but the incremental impact will lessen as the installed base of modern theaters expands. On balance, we project a 3.3 percent compound annual increase in average prices, matching the increase in 2008. By 2013, the average admission ticket will cost $4.38 compared with $3.72 in 2008.

Average admission price (US$)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 1.83 3.64 3.13 4.52 2.97 2.18 3.08 2005 1.89 3.89 3.18 4.77 3.14 2.42 3.25 2006 2.05 4.19 3.23 5.00 3.30 2.65 3.46 2007 2.37 4.35 3.28 5.28 3.37 2.88 3.60 2008p 2.84 4.42 3.32 5.53 3.43 3.11 3.72 2009 3.15 4.49 3.37 5.78 3.55 3.35 3.86 2010 3.47 4.57 3.42 6.03 3.64 3.58 3.98 2011 3.79 4.70 3.47 6.28 3.73 3.81 4.12 2012 4.10 4.79 3.51 6.53 3.82 4.04 4.25 2013 4.42 4.89 3.56 6.78 3.91 4.27 4.38 200913 CAGR 9.2 2.0 1.4 4.2 2.7 6.5 3.3

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Box office spending Argentina paced box office growth in 2008 with an 18.8 percent increase as the 19.8 percent price hike offset the 1.1 percent drop in admissions. Otherwise, the disparity between admissions and box office was less dramatic. We project box office spending to increase from $1.3 billion in 2008 to $1.7 billion in 2013, a 5 percent compound annual increase.

Mexico and Brazil will continue to dominate the market. Together they constituted 77 percent of box office spending in 2008, a share that will dip to 73 percent in 2013. Argentina will continue to be the fastest-growing market, with a projected 10.7 percent compound annual increase, due almost entirely to price growth.

Box office market (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 77 415 36 72 487 41 1,128 2005 71 364 31 78 511 46 1,101 2006 76 378 36 101 546 52 1,189 2007 85 388 34 111 587 55 1,260 2008p 101 396 35 117 628 60 1,337 2009 114 404 35 124 656 65 1,398 2010 127 415 37 130 680 70 1,459 2011 140 433 38 138 708 75 1,532 2012 154 450 40 147 744 81 1,616 2013 168 470 41 156 781 87 1,703 200913 CAGR 10.7 3.5 3.2 5.9 4.5 7.7 5.0

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Home video
Sell-through The home video market in Latin America has been hampered by high piracy rates that significantly cut into legitimate spending and historically by low DVD household penetration. During the past two years, DVD penetration doubled. There are now around 30 million DVD households in Brazil and more than 15 million in Mexico. Brazil ranks in the top five in DVD households but is not in the top 10 in spending because of piracy. Home video spending in Brazil was only 19 percent larger than in Mexico in 2008 even though Brazil had twice as many DVD households. The sell-through market in Brazil surged by 20 percent in 2008, the result of a shift in spending from rental to sell-through. Home video spending was buoyed in

2006 by new TVs and DVD players that were purchased for the FIFA World Cup. Those purchases significantly expanded the household base, which in turn drove sell-through spending. During the past three years, sell-through in Brazil rose by a cumulative 60 percent. We expect slower growth during the next two years, reflecting the weak economy, and faster growth during 201113, when economic conditions improve. In Mexico, the economic slowdown cut into sell-through spending in 2008. Growth slowed to 0.7 percent following two years of increases in excess of 8 percent. We expect declines during the next two years, modest growth in 2011, and a return to mid- to high-single-digit growth in 201213. For the region as a whole, we project sell-through spending to expand at a 4.4 percent compound annual rate to $862 million in 2013 from $694 million in 2008.

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Physical sell-through market (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 12 209 36 9 236 2 504 2005 11 204 37 10 251 2 515 2006 12 245 40 11 272 2 582 2007 13 272 43 12 294 3 637 2008p 13 326 44 12 296 3 694 2009 13 340 43 12 292 3 703 2010 13 353 43 12 291 4 716 2011 14 381 45 12 296 4 752 2012 15 408 48 13 314 4 802 2013 16 435 52 14 341 4 862 200913 CAGR 4.2 5.9 3.4 3.1 2.9 5.9 4.4

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Rentals The rental market in Brazil plunged by 56 percent in 2008, leading to an overall decline of 34 percent. Excluding Brazil, rentals were up 4.3 percent. In Brazil, the jump in the DVD household base initially led to a surge in rental spending. From 2005 to 2007, rental spending rose by 28 percent. In 2008, the market abruptly shifted from rental to sell-through, and rentals tumbled. We expect a further 14 percent decline in 2009 before an equilibrium between rental and sell-through is reached. Then the rental market will expand at accelerating rates, benefiting from an expanding economy. In Mexico, the rental market has expanded at midsingle-digit rates during the past two years, helped by

the reinstatement of an exclusive rental window for midperforming titles. Exclusive rental windows, when the film is available only for rental during a specified period between theatrical release and sell-through, had been discontinued a number of years ago to stimulate sellthrough. We expect that pattern to generally continue, with a 4.5 percent compound annual increase. Penetration growth in DVD players will benefit the rental market as well as sell-through. We project rental spending to expand by 3.2 percent compounded annually to $533 million in 2013 from $455 million in 2008. The total home video market will increase from $1.1 billion in 2008 to $1.4 billion in 2013, a 4 percent compound annual increase.

In-store rental market (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 91 332 15 3 114 3 558 2005 95 340 14 3 119 3 574 2006 98 408 14 3 123 3 649 2007 103 435 14 4 130 3 689 2008p 107 190 14 4 137 3 455 2009 110 163 14 4 144 3 438 2010 114 169 14 4 148 4 453 2011 118 177 14 4 153 4 470 2012 125 190 14 4 162 4 499 2013 131 209 14 4 171 4 533 200913 CAGR 4.1 1.9 0.0 0.0 4.5 5.9 3.2

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Home video market (US$ millions)


Latin America Argentina Brazil Chile Colombia Mexico Venezuela Total 2004 103 541 51 12 350 5 1,062 2005 106 544 51 13 370 5 1,089 2006 110 653 54 14 395 5 1,231 2007 116 707 57 16 424 6 1,326 2008p 120 516 58 16 433 6 1,149 2009 123 503 57 16 436 6 1,141 2010 127 522 57 16 439 8 1,169 2011 132 558 59 16 449 8 1,222 2012 140 598 62 17 476 8 1,301 2013 147 644 66 18 512 8 1,395 200913 CAGR 4.1 4.5 2.6 2.4 3.4 5.9 4.0

At average 2008 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

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Video games

350 Summary 353 North America 364 Europe, Middle East, Africa (EMEA) 378 Asia Pacific 388 Latin America

Summary

Video games
The video game market consists of consumer spending on console games (including handheld games), personal computer games, online games, and wireless games as well as video game advertising. The category excludes spending on the hardware and accessories used for playing the games. Retail purchases of a game are included in either the PC or console game categories. If those games are then played online for a subscription fee, the subscription fee is counted in the online game category.

Principal drivers
The current generation of consoleswhich includes the Wii, the Xbox 360, and PlayStation 3will drive the market for the next few years. The continued success of the latest handheld devicesthe Nintendo DS (dual screen) and PlayStation Portable (PSP)is also supporting the market. The online market is being driven by the rising penetration of broadband households as well as the current generation of consoles that include online capabilities as a primary focus. Users of the current consoles can compete against each other through the Internet and can also purchase additional games or additional game content such as costumes or game objects from the consoles marketplaces. While the ability to purchase additional games is not new, what is new is the increasingly rich forms of content, graphics, and interaction they provide. We expect that by 2012, the next generation of consoles will have begun to be introduced, which will spur renewed growth in console games. The increasing popularity of massive multiplayer online games (MMOGs)with their subscription fees, in-game advertising, and microtransactionsis also aiding the growth of the market. Casual games are a further important component of the online market, helping expand the demographic base and stimulate spending. Newer mobile phone handsets that are capable of downloading games and that provide larger screens and better graphics will drive demand for wireless games. At the same time, the growth of third-generation (3G) networks, with their faster speeds, will provide an environment that will enable wireless games to approach the quality of console games. Although the market for PC games will continue to deteriorate as consumers turn their attention to newer technologies, the purchase of a PC game is often the requirement for entry into the world of MMOGs. Video game advertising is emerging as an additional revenue stream. The growth of the online game market will fuel growth in dynamic in-game advertising.

Market size and growth by region


The video game market in North America, EMEA (Europe, Middle East, Africa), Asia Pacific, and Latin America will expand from $51.4 billion in 2008 to $73.5 billion in 2013, growing at a 7.4 percent compound annual rate. EMEA, the largest region, at $18.1 billion in 2008, is projected to grow by 6.9 percent on a compound annual rate through 2013 and reach $25.3 billion. North America, the secondlargest region in 2008, with $16.2 billion, is projected to grow by 5.8 percent compounded annually to $21.6 billion. Asia Pacific will be the fastest-growing region during the next five years, at 9.4 percent compounded annually from $15.7 billion in 2008 to $24.7 billion in 2013, surpassing North America in 2010 to become the second-largest region. Latin America is projected to grow to $2.0 billion in 2013 from $1.3 billion in 2008, a 9.2 percent compound annual gain.

Market size and growth by component


Global console games, the largest category, at $30.4 billion in 2008, will expand at a 5.5 percent compound annual rate to $39.7 billion in 2013. PC games will continue to decline, falling at a 1.2 percent rate compounded annually to $4.1 billion from $4.3 billion in 2008. Online and wireless games will be the fastest-growing end-user categories, with compound annual increases of 10.6 percent and 13.8 percent, respectively. Online games will total $13.7 billion in 2013, and wireless games, $13.4 billion. There is an emerging video game advertising market, which totaled $1.4 billion in 2008, a figure that will increase to $2.6 billion in 2013, growing at a 13.8 percent compound annual rate.

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Console/handheld hardware
The introduction of a new generation of consoles drives the console game market in all regions. The Xbox 360 from Microsoft, the Wii from Nintendo, and the PlayStation 3 from Sony all began to be introduced in 2005 and were available in all regions by 2007. Those new consolescombined with the popular handheld devicesdrove the console/handheld game market to a 28.4 percent increase in 2007, followed by an additional 19.4 percent increase in 2008 to $30.4 billion. Growth will slow in 200911 as the cycle of the current generation of consoles matures. We expect the next generation of consoles to begin to be introduced in 2012, which will provide another boost to the market. Japan is the leading market in video game development, with Nintendo and Sony developing many games for their consoles. The United Statesled by Microsoft, Electronic Arts, TakeTwo, and Activision Blizzardalso has a strong game development market, as do the UK, France, and Canada.

PlayStation 3
The PlayStation 3 (PS3) was launched in November 2006 in the United States, Japan, Hong Kong, Taiwan, Mexico, and Canada, and in March 2007 in EMEA, Australia, and Singapore, with subsequent launches in the remaining territories later in 2007. As with the Xbox 360, Sony has introduced a number of different PS3 models since the PS3s introduction. The newest, 80-gigabyte and 160 GB models make the PS3 more competitive with the Xbox 360 with respect to price, but they usually contain larger hard drives and Blu-ray disc players. Additionally, Sony provides an online environment where game developers control their own activities. The PS3 has sold about 20 million units worldwide as of the end of 2008.

Nintendo Wii
The Wii, which was launched in November 2006, is being marketed as a game machine, as opposed to the Sony and Microsoft machines, which are being promoted as media centers for home entertainment. Nintendo is trying to expand the universe of game players to include younger children, older adults, and women. The Wii has outsold the Xbox 360 worldwide despite coming to market a year later than its competitor and is the only one of the three consoles that has not lowered its price yet. It is expected that the current cycle of consoles will last longer than previous cycles because demand remains high and none of the manufacturers have even hinted at plans for the next round of consoles. The current games are vastly superior to games produced for the previous generations of consoles and would be hard to improve upon. We would expect Nintendo to be the first to introduce a new version of its console because the Wii is the only one of the three consoles that does not have highdefinition playback.

Microsoft Xbox 360


Microsoft was the first company to introduce its newestgeneration console, the Xbox 360, when it was launched prior to the holiday season in 2005 in North America, Europe, and Japan. Following price reductions in Japan, Microsoft introduced price reductions on each of its consoles in North America in September 2008. The entrylevel Xbox 360 is now priced below the Wii, leading to a marked increase in sales for the Xbox 360 in the fourth quarter of 2008. Microsoft promotes its Xbox Live service as a unique feature of its consoles. With the service, gamers can download hundreds of games as well as television shows and movies. Consumers can watch programming on their television sets, as opposed to computers, as is common with other download services. There are more than 17 million members of the Xbox Live community. The Microsoft Xbox 360 has sold a total of 28 million units worldwide as of the end of 2008around 8 million more than the PS3. In North America, the Xbox 360 has a wide lead over the PS3, while in Europe, sales of the two consoles are very close. By contrast, in Japan, the Xbox 360, which appeals primarily to Western gamers, has not performed well.

Handheld devices
Despite the interest in the new generation of consoles, the market for portable game consoles continued to show strength. The Nintendo DS is the leading portable device on a worldwide basis because of its simplicity, which has broadened its appeal beyond hard-core gamers. The DS has two screens, providing players with two views of the action.

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The DS has broadened the market, attracting women and older players with its Touch Generation brand of games, which includes a number of games in the Nintendogs and Brain Training franchises, both of which are exclusive to the Nintendo DS. The other major game in the sophisticated portable market is the Sony PSP (PlayStation Portable), a handheld game device equipped with a 4.3-inch LCD screen that plays music and movies on a new proprietary minidisc called the universal media disc (UMD) that holds 1.8 GB of data. In October 2008, Sony introduced the PSP-3000, the newest version of the handheld device. It looks like the Slim & Lite version released in 2007 but has new features, including an internal microphone and an enhanced display.

The microphone can make calls using Skype without the need for a handset, can communicate with other PSP players, and can be used in such games as the language translation game TalkMan. The PSP with Remote Play lets users watch programs on the PSP by accessing the information wirelessly from the PS3, in which the programs are recorded by PlayTV. It started selling in late 2008 in Europe. Sonys next-generation handheld console, the Nintendo DSi, was introduced in Japan in late 2008 and is expected to be released in EMEA and North America in 2009. The DSi has two cameras, a music player, and applications that enable users to download games. The DSi is also backward compatible, allowing users to play DS games.

Data for the global video game market by region and for the global video game market by component can be found within the Executive Summary on pages 44 and 45.

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PricewaterhouseCoopers | Global entertainment and media outlook: 20092013

North America

The outlook in brief


The console video game market is being driven by the newest generation of platforms. The online game market will benefit from new business models, the increased use of the newest consoles that enhance online activity, and rising penetration of broadband homes. The deployment of game-friendly mobile phone handsets will expand the market for wireless games. The market for PC games will continue to stagnate as interest shifts to other forms of games. Attractive video game demographics, dynamic advertising, and video game viewer ratings will attract advertising.

Consumer spending on games will expand at a 5.4 percent compound annual rate to $20.1 billion from $15.5 billion in 2008, while advertising will rise from $765 million in 2008 to $1.4 billion, a 13 percent increase compounded annually. Console/handheld games will continue to dominate the market, increasing at a compound annual rate of 5.5 percent to $15.5 billion in 2013