Media Revenue to Hit $2.2 Trillion By 2012: PwC

Filed at 6:17 a.m. ET

NEW YORK (Reuters) - Global entertainment and media revenue is forecast rising by an average of 6.6 percent a year to $2.2 trillion by 2012, boosted by advertising-supported digital and mobile media and an explosion in the adoption of broadband.

According to the PricewaterhouseCoopers (PwC) annual forecast released on Wednesday, advertising tied to the burgeoning interest in watching videos on the Internet and on devices, such as Apple Inc's iPod, will account for 24 percent of growth in the sector and is projected to grow fastest at a compound annual growth rate of 19.5 percent to 2012.

Total entertainment and media revenue growth is seen outpacing global gross domestic product, which will increase 5.7 percent, according to the report.

Despite the acceleration of digital businesses, revenue from traditional media venues such as television will still dominate global market share, if not growth. Digital and mobile revenue will account for only 11 percent of total spending, or $234 billion, in the next five years.

PwC's report presents a more stable view of large media and entertainment companies. Those shares have sunk more than 13 percent since the beginning of the year -- at a steeper rate than the Standard & Poor's 500 Index <.SPX> -- on fears that the weak economic climate could curtail consumer spending and spark an advertising recession.

Last week, Lehman Brothers argued that with entertainment company valuations near 10-year lows, it might be a good time for investors to shop for deals, such as News Corp .

One surprise: Advertising on over-the-air television globally -- the sector viewed by Wall Street as one of the most vulnerable in a weakened economy -- is expected to rise 5 percent on a compounded annual growth basis to 2012, making it the most resilient to threats posed by digital growth.

"The oft-reported death of traditional media remains greatly exaggerated," according to the report.

The weakest area in the next five years will be the music industry. Ravaged by online piracy, recorded music sales are expect to fall by 0.6 percent to 2012, but is seen growing again by 2011, when digital sales will overtake CD sales.

What's unlikely to be solved in the next five years? "While companies are making bold moves to follow consumers into the digital/mobile future, they continue to wrestle with the challenge of creating business models that adequately monetize their efforts," the report said.

PwC's report, which surveys 15 major industry segments in 59 countries, underscored a trend over the past few years. The United States will continue to account for the biggest share of revenue by country, or $759 billion by 2012, but will grow the slowest at about 4.8 percent, outpaced by the Asia Pacific and Latin America.