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Media faces ongoing disruption: PwC

NZN 7/06/2017 Rebecca Howard

Media businesses and advertisers are struggling to keep up with changing audience behaviour across the globe - and New Zealand is no exception, according to PwC's latest report.

"The trends and consumer behaviour we see unfolding in New Zealand are largely in line with global trends, with a slight lag," PwC director of digital strategy Greg Doone said.

According to PwC's 2017-2021 global entertainment and media outlook, the major digital tipping points include internet video - as international players launch and bring premium original content - internet advertising, newspaper circulation and radio revenue.

Of the four, the situation is particularly dire for newspaper circulation as New Zealand's newspaper market will continue to ensure pronounced revenue contraction, it said.

Print copies are shedding circulation at a compound annual growth rate of minus 10.5 per cent, meaning circulation numbers will more than halve between 2012 and 2021 to 246,000 daily copies.

While PwC expects price rises and the introduction of digital charges to mitigate some of the revenue decline, it noted "advertising is in freefall", as media buyers follow consumers away.

However, while publishers have operated popular online services "monetisation is proving elusive".

Digital advertising revenue made up 13.6 per cent of total newspaper advertising revenue in 2016 and it is forecast to grow by only 2.8 per cent CAGR through 2021, PwC said.

It noted publishers say they are challenged by the dominance of Facebook and Google in online ad sales and said the industry's prospects will depend on publishers' ability to convert audiences into revenue, as well as on ownership structure.

The situation is at the forefront in New Zealand as NZME and Fairfax New Zealand have opted to appeal the Commerce Commission's rejection of their planned merger.

Radio revenue, however, is expected to remain fairly stable.

According to PwC, total radio revenue reached $290 million in 2016, up 0.9 per cent on the previous year.

"Radio has traditionally proved to be resilient to the disruptive forces in play across the rest of the media landscape," Mr Doone said.

Regarding internet video, PwC tips compound annual growth of 15.6 per cent, producing revenues of $85 million in 2021.

In New Zealand, however, it will remain less than half the size of the physical home market for DVDs and Blu-rays, according to the report.

New Zealand's internet advertising market reached $891 million in 2016 and PwC expects advertising dollars to continue to shift online, reaching a CAGR of $1.4 billion in 2021.

More than half of New Zealand's total internet advertising revenue in 2016 was generated by paid search.

Mr Doone said "what is worrying traditional media is that advertiser spending on the digital side flows disproportionately to a few large platforms like Facebook and Google".

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