Growing bandwidth spikes biz, study sez

NEW YORK — A global annual growth rate of 6.6% in the number of broadband and wireless telephone subscribers will drive the entertainment and media sector to a value of $1.8 trillion in four years, according to PricewaterhouseCoopers’ Global Entertainment and Media Outlook.

PWC, which is releasing its figures today, calculates that by 2010, there will be an additional 246 million broadband households, bringing the total to 433 million globally. There also will be 1 billion people with mobile phone service in 2010 who weren’t connected in 2005, bringing that total to 2.8 billion.

Much of this growth will come from the Asia-Pacific region, particularly China and India. Asia-Pacific will see double-digit increases in Internet, TV distribution, casino and other regulated gaming and videogames, with China surpassing Japan as the largest market in the region in 2009.

The U.S. entertainment and media market, the world’s largest, is forecast to grow at a 5.6% compound annual growth rate and reach $726 billion in 2010, with videogames and the Internet the fastest-growing segments. PWC attributes the projected growth to the acceptance of paid downloads over hard goods or pirated material and the increase in distribution channels.

“Broadband accelerates these changes, but there is still a concern about the right device,” said David Daly, director of PWC’s entertainment and media division. “The lack of device interoperability is still a hassle.”

Music is likely to experience the greatest sea change. Physical album sales are predicted to be an $8 billion-a-year business in 2010, down from $10.6 billion in 2005. Digital and mobile sales will make up 42% of all music sales in the U.S. in four years; digital singles sales will rise to $1.5 billion from $367 million.

Beginning next year, prices are forecast to begin rising, with the average cost of a single hitting $1.15 in 2010.

Global spending on music will rise $10.8 billion over the next four years to $47.9 billion. The U.S. market, which accounts for $12.3 billion of that total, will grow to $14.7 billion in 2010.

An assortment of conditions unrelated to creative quality will account for recorded music’s growth: attractive prices, increased broadband penetration, improved search capabilities on music service Web sites, new handsets and next-generation wireless networks.

To generate that growth, however, the American public will have to embrace the sorts of technological changes seen in South Korea. As cell-phone companies and content suppliers work on the issue of backup for content, PricewaterhouseCooper’s Daly sees technological advances occurring more quickly. Currently, he noted, Americans tend to hold on to cell phones twice as long as Europeans and Asians — 18 months vs. nine — which would need to change in the near future.

“Downloading, to the younger generation, is the easiest thing to do,” Daly told Daily Variety. “But we haven’t found that one great device that allows us to combine the phone, the iPod and the computer.”

A year ago, PWC predicted digital music sales would surpass physical in Asia Pacific — the first territory to do so — in 2008. It now forecasts that transformation will occur in 2010. Daly attributed the delay to issues with credit.

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