The global film business,driven by an expanding home entertainment sector, is set for annual growth of7.5% over the next five years. By 2008 it will be worth $108bn, compared with$75bn last year, according to consultancy and research firm PriceWaterhouseCoopers(PWC) in its annual Global Entertainment & Media Outlook (2004-2008).
The growth that PWC is forecasting makes film one of thefastest moving sectors, outstripping the wider entertainment and mediabusiness, which it pegs at 6.3% annualised growth.
Europe, Middle East & Africa (EMEA) is set to be thefastest growing region. With annual growth of 10.3% giving a value of $36.9bnin 2008, EMEA will go some way towards catching up the still dominant US, whichwill grow annually at 6.3% to $46.6bn. Asia is set to be worth $17.3bn by 2008.
The biggest driver of film industry growth is expected tobe the DVD sell-through market, which is taking over from VHS. Retail DVD isalso reducing the importance of the rental sector though PWC also identifiessubscription services as set to become significant around the world with theexception of Latin America.
Significantly PWC says: "with the popularity of US films,local films are the key to box office revenue growth in most regions outsidethe US, with their success generally determining whether the market in aparticular region will expand or contract." The group also says that cinemarefurbishment and the advent of digital projection will expand the film marketsin Asia, Latin America and EMEA.
Commenting on the theatrical sector, PWC noted that dayand date releasing worldwide is helping boost international revenues for somefilms. Although box office generally was down in 2003 compared with 2002, thenumber of US films to achieve $100m internationally rose from 21 to 24. itwarns that "worldwide day-and-date releasing' raises print and marketing costsand puts pressure on producers to create international hits, which leads tohigher negative costs." PWC says that the solution appears to be inco-productions, which diversify risk, although it may be referring toco-productions between Hollywood studios rather than internationalco-productions. It expects more high budget films to be produced and that thiswill in turn drive audiences.
In its US appraisal, PWC says that on-line distributionof films was worth $360m last year as services such as Movielink gathered anaverage of 1.5 million clients. By 2008, PWC forecasts subscriber numbers willrise to 15 million and their spend be worth $2.7bn. Stronger local films, DVD growth, day-and date releasinginto sell-through and rental markets and subscription services will leadEurope's growth - although it also points up vastly differing rates of growthacross the EMEA region.
EastEurope, in particular Russia, is forecast to grow at 11.6% a year, compared to9.8% for West Europe and 5.7% for the Middle East and Turkey. The UK is by farthe largest component, valued at $7.8bn a year, it dwarfs France ($3.9bn) andGermany ($2.7bn) - and puts it in sight of the Japanese market, which is slowergrowing (3.9%) and is forecast to be worth $9.07bn in 2008. In Spain and Italy,the value of home entertainment last year overtook theatrical box office forthe first time, a trend that PWC does not see being reversed in its forecastperiod.
PWC sees the Asian market growing thanks to new screensand DVD sell through, but held back by piracy. China and Hong Kong are thefastest movers with growth over 11%, while the regional ranking in terms ofmarket size is set to remain unchanged led by Japan, ahead of Australia andthen South Korea.
Admissions growth is forecast at a modest 2.6% across theAsian region, but with the majority of the growth coming in countries with lowticket prices, such as China and India,the value of the theatrical market is only set to grow an annualised 4.6%. Homevideo penetration on the other hand is forecast to grow from 28% of householdsto 43% in 2008, or by an additional 122 million households. Piracy and a shiftto DVD are expected to seriously dent the video rental business.