The study shows that digital spending will increase at an approximate 21% compound annual growth rate during the next five years, compared with the 6.5% compound annual growth for the non-digital components of the market.
The Outlook says that though comprising 20,4% of overall spending last year, digital channels will generate 52% of the total increase in spending during the next five years. By 2016, digital spending will comprise 32,6% of the total entertainment and media market in SA.
Launching the SABS set top box standard at the ICT Indaba in June, Communications Minister Dina Pule confirmed the government's commitment to ensuring that the digital migration process starts later this year.
The digital migration process is expected to be completed in 2014 with the International Telecommunication Union's deadline of 2015 for the shutdown of analogue television.
The government recently selected digital video broadcasting-terrestrial second generation (DVB-T2) with moving picture experts group (MPEG-4) compression as the digital terrestrial television (DTT) standard to be adopted.
"MPEG-4, standardised in 1998, is designed to transmit video via a narrow bandwidth and can mix video with text and graphics. DVB-T2 has a higher transmission capacity than
DVB-T, which will allow it to carry high-definition channels," says Vicky Myburgh, entertainment and media industries leader for PwC SA.
"The DVB-T2 standard makes more efficient use of the spectrum, allowing a wider range of choice in television broadcasts, better picture quality and enhanced sound."
Louis de Jager, manager in PwC's entertainment and media division, says DTT will see the introduction of a number of free television channels and new players in the market, which will open up the advertising space with advertising spend forecast to increase significantly.
Furthermore, he says content is likely to experience a boom as programming quality will be crucial to attracting viewers, which is expected to boost and help grow the local industry.
"New market entrants can only be good for the industry including content providers, advertisers and consumers. The challenge for broadcasters will be to find what it is that consumers are looking for and then provide it in such a way that their viewers remain loyal, because the range will increase."
De Jager says broadcasters are going to have to know their viewers and what content they desire to nurture their loyalty, or they will merely flip to another channel.
"It is all about knowing how, what and when the consumer wants to view, and then providing it in such a way that the consumers feel they are in control."
Myburgh says the core challenge for entertainment and media companies lies in how to remain relevant to their consumers and business customers in a way that differentiates them from their competitors.
"There are long-term structural and organisational changes that are needed right across the industry."
Despite ongoing economic uncertainty, according to The Outlook the past year has seen global and South African sales of smartphones reach record levels once again, which underlines the growing revenue opportunities in the digital delivery of entertainment and media content, as well as advertising, to increasingly connected and mobile customers.
The Outlook also states that changing consumer behaviour is driving developments, and consumers' ongoing migration to digital modes of consumption was accelerated by the economic downturn.
"We believe that the industry is at the end of the beginning of its digital journey," he says.
"Entertainment and media companies have made a commitment to the delivery of digital entertainment and are now in the process of making the necessary changes to their products and organisations."
The Outlook reports that one clear trend is the continued strength of the medium formerly known as television - or, more accurately today, video. The consumption of professional video content has never been more popular, partly reflecting the explosion in the ways people access it.
"The growing number of ways and contexts in which people can experience video content is raising questions about the value proposition and pricing of TV-only content bundles - especially given the advent of a rising generation of savvy and increasingly urbanised customers who still love television, but want more flexibility, first in ways they access and pay for content and, second, what content they get."
New consumers, according to The Outlook, demand, consume and function in a world of globally connected social media. In addition, they are increasingly adept at incorporating the various elements of content and connectivity into their media consumption mix, which points towards the multichannel, multi-content and multi-experience future.
PwC terms this the media hub, wherein a mass of content is available for an agreed price on all devices and where the live experience - be it the Soccer World Cup or Lady Gaga in concert - comes at a premium.
"With the advent of smart devices, the concept of the media hub has now gained a so-called second screen for sharing and enjoying these experiences anywhere. With formerly print-based media such as magazines and newspapers launching smart-device apps, these forms of content could also become part of the overall media package as part of a multi-segment media bundle accessed via the media hub and its connected screens," says The Outlook.
Furthermore, it says with social media incorporated into the media hub concept, consumers can take the logical next step from "watching everything wherever and whenever I want" to having friends and family log in to share the experience.
"This could lead to an environment in which all content is streamed as a cheap, easily available, cloud-based utility-style service, with streamed and shared live experience becoming the premium form of content. The digital locker may also play a role, enabling consumers to store recorded content remotely and access it on any device.
"In such a world, the multi-content, multi-device media hub could assume the role that television held as the nexus of the collective social experience.
"However, while the analogue television in the living room put the family circle at the centre of the shared content experience, the media hub will shift the centre of gravity towards a more geographically spread community of friends with shared interests, often of similar ages. This extended circle of friends could become the media hub's killer application, glued together by the shared content experience."
The Outlook says the first signs of the socialised multi-screen future are already emerging in the take-up of smart devices, with consumers now willing to watch premium video content on the go.
It says that in addition to cutting into PC sales, the tablet provides a metaphor for the feel of a future with ever-available mobile video and non-video content. Portability, accessibility to content, on-demand capability, high resolution and acceptable screen size - all formerly conflicting goals - have finally been reconciled.
"Smart devices bring transformational opportunities across segments. For example, television companies could give consumers a customisable tablet-smartphone app that brings the consumers' own personal media on the television, with the consumers' favourite shows, movies and apps," says The Outlook.
It emphasises that the overriding trend across the world is that consumers' engagement with connected digital experiences is continuing to grow.
As a reflection of this connected digital experience, Myburgh says research shows the internet is expected to be the fastest-growing sector within the next five years, with a projected 20.3% compound annual increase.
"Broadband and mobile access growth coupled with double-digit increases in internet advertising will drive this market. Television is expected to be the next fastest-growing segment with a projected 10.3% compound annual increase.
"Furthermore, radio and sports are expected to show compound annual increases of 6.5%, with sports largely driven by rising media rights and strong growth in sponsorships. Spending in the industry is expected to reach a record level of R141.7bn in 2016, a 10.2% compound annual increase from R87.4bn in 2011," he says.
De Jager says the adoption of internet radio by listeners as a complement to traditional radio has boosted radio with the addition of new content and new ways of accessing commercial and community stations.
He says internet and community radio stations, together with the use of social media, allow advertisers to reach a niche market with targeted advertisements. Growth in radio advertising is expected to exceed growth compared to other media due to the increase in the number of radio stations.
Myburgh says that by embracing digital as the engine of their business, companies can position themselves to meet consumers' demands through any channel and format.
The DVB-T2 standard makes more efficient use of the spectrum, allowing a wider range of choice in broadcasts, better picture quality and enhanced sound
The media hub will shift the centre of gravity towards a more geographically spread community of friends with shared interests, often of similar ages.
Source: Business Day via I-Net Bridge
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