Video games to triple music market by 2014

The global video games market will expand to three times the size of the recorded music market by 2014, according to a new study highlighting further profound shifts in consumers’ and advertisers’ media spending over the next five years.

Growth in online, mobile and casual gaming will drive a compound annual growth rate of 10.5 per cent in consumer spending on video games – the strongest growth in the media sector, says PwC’s annual Global Entertainment and Media Outlook.

This will take the industry’s revenues from $51bn to $84bn by 2014, PwC forecasts, contrasting with revenues of $28bn for recorded music.

The forecast comes as the games industry is gathering in Los Angeles for the E3 trade show this week after a weak year in which US sales fell and global growth sputtered to 2.2 per cent.

“It’s a combination of technology, availability, new types of games and the fact games are leading the way in terms of micropayments,” said Marcel Fenez, leader of PwC’s entertainment and media practice.

However, after a decade of tumbling compact disc sales, PwC expects record labels’ revenues to stabilise, as growth in digital downloads finally returns the industry to modest growth of 0.5 per cent next year, albeit from a far lower base.

Sales of physical music formats such as CDs will decline by a further $7.4bn by 2014 but revenue from digital distribution should increase by $9bn in the same period, Mr Fenez said.

The report shows signs of hope for content owners in the fight against piracy. The music industry, which suffered earlier and more severely than other media owners from illegal digital file-sharing, saw Asian sales rebound by 9 per cent last year, thanks in part to South Korean’s threat to cut off internet access for copyright infringers.

PwC’s forecasts reinforce expectations that the US and Japan, the two engines of the global media industry in the past, will be among the slowest growing markets in the coming years, driving media multinationals to invest more heavily in markets such as China and Brazil, which are expected to lead the global growth charts.

UK newspaper advertising sales, among the hardest-hit categories, will reach bottom within two years, PwC estimates, as digital revenues finally compensate for print’s decline.

UK newspaper revenues will hit their low point at $9bn in 2011, but will reach $9.31bn by 2014.

“It’s not a doom story,” said Phil Stokes, PwC’s UK entertainment and media head. “But if that is what is happening to the top line, you need to get the cost base in order. [Publishers’] margins will decline unless [they] take action.”

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