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Emerging Markets Driving Movie Consumption

13 Mar, 2012 By: Erik Gruenwedel

Rampant piracy and lower adoption continue to hinder home entertainment growth globally

Walt Disney Studios’ sci-fi adventure movie John Carter may have generated just 12% ($30 million) of its $250 million mega-budget on opening weekend in the United States, but the film recorded an impressive 28% ($70 million) at foreign box offices, including the highest opening ever for a movie in Russia.

The tally represents a growing trend in Hollywood that revenue growth across all distribution channels, excluding home entertainment, is being driven by emerging markets instead of North America and Western Europe. Indeed, total movie consumption is projected to increase 2.6% this year to $64.2 billion from $62.6 billion in 2011, according to new data from IHS Screen Digest.

Movie spending in Central and Eastern Europe will rise at a compound annual growth rate of 8.9% from 2010 to 2015, while Asia-Pacific spending will expand by 6.5% and Latin America by 4.2%. By comparison, movie spending in North America will grow 0.2% and Western Europe 1.1% during the same period.

The theatrical sector — which accounted for $31 billion, or 50%, of movie spending in 2011 — will generate $41 billion annually by 2015, equivalent to 59% of total movie spending. Almost $6 billion of that increase will have come from the developing regions of Asia-Pacific, Central and Eastern Europe, and Latin America, with a further $4 billion generated in North America and Western Europe. Despite the declines in some other sectors, this growth will help swell transactional movie spending to almost $70 billion in 2015.

“The expansion in global movie spending is being driven almost entirely by consumers in the growing economies of Asia-Pacific, Latin America, and Central and Eastern Europe,” said Richard Cooper, senior analyst for video at IHS. “This is occurring despite the fact that the three regions combined accounted for only about one-third of total global movie spending in 2011. The remaining two-thirds of the spending was generated by consumers in the mature markets of North America and Western Europe—where growth has stalled.”

Meanwhile, home entertainment spending continues to decline globally as stagnant growth in North America and Western Europe is undermined by lower adoption and rampant piracy in developing markets. Sales of DVD and Blu-ray Disc movies accounted for less than 30% of all movie spending in these regions in 2011, down from almost 40% at the market’s peak in 2004, according to IHS.

Notably, movie rental consumption in North America increased in 2011 — the first rise in eight years — due largely to the popularity of low-cost kiosk vendors Redbox and Blockbuster Express.

Electronic sellthrough and transactional video-on-demand rentals accounted for just 2% of 2011 movie consumption in North America, less so in Western Europe. Rampant piracy and limited content selections continue to hinder EST and transactional VOD in emerging markets, including Japan, despite widespread adoption of Apple products and Xbox.


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