And the Winner Is: the Web (Again)

Attention media moguls: Resistance is futile. Surrender yourself to the Web.

Internet advertising will be the fastest-growing media and entertainment sector in the U.S. over the next five years, racking up a compound annual growth rate of 19.5 percent, according to PricewaterhouseCoopers' Global Entertainment and Media Outlook: 2008-2012.

Internet access, videogames, TV subscriptions and license fees are also poised to grow at double-digit annual rates, the report says.

Recorded music? Forecast to fall 5.3 percent annually in the U.S. Newspapers? Revenue to drop 0.7 percent each year. The news is better for other old media, however. Consumer magazines are in line to have revenue expand 3.8 percent per year, while book publishers can look forward to 2.5 percent annual growth.

"In the U.S., consumers are showing a preference for free, or heavily discounted, ad-supported content and services in the new digital and mobile environment," said Jim O'Shaughnessy, global chairman of entertainment & media practice at PricewaterhouseCoopers.

Though growth in the entertainment and media sector as a whole is likely to slow in the U.S., PricewaterhouseCooper forecasts rapid growth elsewhere. It expects India to grow the fastest, especially considering the many corporate eyes eagerly scanning for potential partnerships with Bollywood.

The biggest push behind the growth in digital entertainment will be the growing influence of the "Net generation" - people born between 1977 and 1997. Not only do they now outnumber the Baby Boomers, they influence the older generations' interactions with digital media, making them that much more important to media businesses.

Despite the rapid growth in new media, PricewaterhouseCoopers said it still expects established and traditional media--except for recorded music--to remain the industry's primary cash cow through 2012.

"By effectively managing emerging and traditional business lines, [media companies] will be able to identify opportunities they can exploit so they can migrate to the new digital environment and meet the demands of the Net Generation," said Marcel Fenez, managing partner of PwC's global entertainment and media practice.

by Jennifer Lai