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PWC Predicts Rosy Future for Internet Content

While current worries about the economy may have dampened growth predictions for 2001, the online ad and media industry's long-term prospects remain bright, according to a recent study by PricewaterhouseCoopers.

In the firm's latest "Entertainment and Media Outlook" study, analysts are predicting that the Internet will experience continued growth in both advertising and access revenues, despite the recent drop in Internet sector market values.

Over a five-year forecast period, PWC's anticipates a 7.1 percent compound annual growth rate for the generic media and entertainment industry -- with online advertising leading the charge by producing growth rates of nearly double that.

"The Internet now plays a key role in the business model of virtually every entertainment and media industry segment," said Kevin Carton, global leader of PWC's entertainment and media practice. "As with any new distribution model there is some turbulence, but we believe in the Internet's transformational impact on this industry -- particularly as a distribution medium given increasing broadband and wireless access."

Not only will the U.S. online advertising and Web access market rebound to see 14 percent CAGR by 2005 -- when it hits $38 billion -- Carton says that Internet advertising and access spending will grow faster than any other segment of media and entertainment in the world -- including sports, film, television and theme parks.

That's great news for players like AOL Time Warner, Terra Lycos and Excite@Home, which make money both from access and from ads (though Excite@Home has publicly said it plans to reduce its Web media business, citing concerns over near-term losses.)

Additionally, PWC said it's expecting double-digit growth in the amount spent globally on Web advertising and access, with overall income jumping from $40 billion in 2000 to $90 billion in 2005.

In Latin America, PWC analysts said they expect increasing Web access to transform the smallest online ad market into the fastest-growing, with a projected 40.6 percent CAGR. Meanwhile, the Asia-Pacific region will follow at 26.3 percent CAGR, while the Europe, Middle East and African market will be see a 17.4 percent compound annual growth rate.

"Online distribution of content will continue to be a principal driver of growth, creating opportunities throughout all segments of the entertainment and media industry, which in itself is a key component of the world economy," Carton said.