Growth of the market forfilmed entertainment in Europe is set to more than double the average for thewider entertainment and media sectors over the next five years.
According to management consultant PricewaterhouseCoopers in its annual Entertainment and Media Outlook:Europe report, compound annual growth for the entertainment sector willaverage 3.4% to reach Euros243bn by 2007. It will overcome the obstacles of ageing technology, therecent advertising slum and even online piracy. Film, however, is forecast togrow at an average of 7.1% in the six largest European territories, and hitEuro20.2bn in 2007, compared with Euros14.3bn in 2002.
Film spending growth is set to be driven by a 4.2%compound annual growth rate (significantly down on 2001 and 2002), but biggerthan average rises in Italy and The Netherlands and the UK, already by farEurope's biggest film market.
Sell through home entertainment, particularly DVD, forthe big six countries is forecast to average 10.7% for the next five years andwill be a significant driver of overall film sector growth. That is a slowdowncompared with the early years of the DVD explosion, but still representsdouble-digit growth. The UK sell-through market is forecast to hit Euros5.2bnin 2007, accounting for 44% of the market.
PricewaterhouseCoopers forecaststhat rentals will remain flat at Euros2.3bn, affected by consumers switching tobuying and also by illegal file sharing and video piracy. Including rentals,home video will grow by an average 8.5%.
In the mature theatrical sector, ticket price rises willbe the biggest single contributing factor to growth, although the firm is alsoforecasting average attendances per capita to nudge up from a current 2.6visits per year to 2.7 by 2007.
PricewaterhouseCoopers' key forecastsThe Netherlands and the United Kingdom are projected to be the fastest growing markets of the six with compound annual increases of 8.8%and 8.2%respectively between 2003 and 2007. The Netherlands will be boosted by an expanding rental market along with continued sell-through growth. The United Kingdom, which has the highest home video household penetration rate, will benefit from its relatively high share of the faster-growing home video sector in total filmed entertainment spending. Germany, France and Italy will expand at compound annual rates ranging from 6.1% to 6.9 per cent, while Spain, whose home video penetration rate is expected to grow modestly, will rise at an estimated annual rate of 5.1 per cent. The overall filmed entertainment market across the six countries will grow at a 7.1%compound annual rate, rising to Euros20.2bn by 2007. PWC expects box office spending for the six countries as a whole to rise from Euros4.9bn in 2002 to Euros6.1bn by 2007, a 4.2% compound annual increase over the period. Growth in excess of 5% annually is anticipated in the Netherlands, the United Kingdom and Italy, primarily because of larger price increases at the box office, while gains of less than 4% annually are expected in the remaining countries. Overall admissions in the six countries will increase at a projected 1.3% compounded annually, rising to 859 million by 2007. We expect France, with continued modest price growth, to lead the way with a 2.1% annual rate of 2.9%, with France and Germany posting increases averaging less than 2% annually while the remaining countries will show annual gains of 3% or more. Price growth will be the principal driver of increased box office spending in each country except France, where admissions growth (2.1%) will account for a larger proportion of the increase than price increases (1.8%). PWC expects the overall home video household universe in the six countries to increase from 91.9 million in 2002 to 98.8 million in 2007, and penetration to grow from 74.9% to 78.8%. Sell-through home entertainment growth for the six countries will average 10.7% annually through to 2007, with faster increases in the near term.