Subscription TV revenues are set to grow in the next five years, according to a new report, despite heavy online and free-to-air competition.

The pay-TV sector’s compounded annual growth rate will be 5.1 per cent, while free-to-air TV advertising will increase by 2.3 per cent, PricewaterhouseCoopers predicts in their Entertainment and Media Outlook for 2010-2015, released today.

The news follows Ernst & Young's report, indicating advertising revenue for subscription television had increased 7.4 per cent in the past year.

The subscription TV sector is about to get a shakeup due to a planned merger between Foxtel and Austar, which is set to occur later this year or in early-2012. Austar released its first-half financial results last week, which saw the pay-TV provider record an increase in subscriber numbers and net profit (due to sales to NBN Co).

The accounting giant says Australia’s entertainment and media industry will grow 22 per cent over the next five years, and will top $37.5 billion by 2015.

“PwC expects continued revenue declines in structurally-challenged segments, except for books, resulting in negative average growth rates over the five-year forecast period,” PwC’s head of technology, information, communications and entertainment, David Wiadrowski, said in a statement.

In the tech-savvy world we now live in, consumers are watching more content on various platforms and as a result, PwC predicts by 2015, one in every four Australians will own a tablet computer. More than a quarter of those will reportedly use the devices to watch television and films.

“While tablets may initially be adopted at a rate of one per household, PwC believes that it will be common by 2015 for each household to have multiple devices,” Wiadrowski says.

He says all sectors were adjusting to the digital world we are now engrossed in.

“Entertainment and media executives are facing a dual challenge: on the one hand engaging empowered consumers – who often expect content for free – and on the other dealing with culture slashes internally, as enthusiastic digital 'natives' enter the workforce and encounter experienced, but sometimes resistant, content creators,” he said.

“By 2015, PwC believes most of the successful entertainment and media companies will have digital collaboration infused into their DNA.

“We are seeing this now as traditional media organisations embrace digital distribution: newspaper companies are hiring video producers and technologists are partnering with content companies to enrich consumers’ experience with greater interactivity.”

The example of Nine and Seven teaming up with MSN and Yahoo!, respectively, was given, indicating such partnerships were important and would continue.

PwC says the gaming market will have the strongest growth, increasing by 9.5 per cent as the market lures new gamers in through tablets, social media and mobile phones.

“Consumer spending on entertainment and media products and services will reach $248 billion by 2015 in the Asia-Pacific region,” Wiadrowski says.

"It is time for Australian businesses to think about how best to share in the boom taking place on our doorstep.”

The consumer magazines and recorded music sectors are expected to shrink.

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