Embargoed until 4 June 2014, 05.00am

News release
Beyond digital
– What’s happening in New Zealand’s entertainment and media industry? –

Digital growth in New Zealand’s entertainment and media industry continues to offset a flattening growth rate
on traditional entertainment and media content, according to PwC’s Global entertainment and media outlook
2015-2019. Spending on digital content is forecast to continue to grow at 10 per cent year-on-year to 2019, while
spending on non-digital content will increase by just 0.13 per cent year-on-year, an improvement on last year’s
forecasts which predicted an annual decline in non-digital content by an average half a per cent to 2018.
PwC’s Digital Strategy and Data Leader Greg Doone says, “For consumers it’s all about content experiences. If
digital is a simpler way of getting the content they will gravitate towards that. Given the wide variations in
consumer tastes for content, the challenge for entertainment and media companies is to blend traditional
intuitive approaches with data insights and to maximise the value of the experiences they offer.
“The prize for achieving this is heightened by the fact that the consumer has never been more up for grabs than
today. Achieving greater levels of engagement with audiences will mean the advertising dollars will follow.”
Advertising growth is primarily digital, driven by mobile, and a fact underlined by internet advertising’s position
as one of the fastest-growing segments of advertising at an average of 11.2 per cent year-on-year through to 2019,
overtaking TV advertising as the biggest share of advertising by 2017.
PwC’s outlook forecasts the total entertainment and media industry in New Zealand will grow at an average annual
rate of 3.8 per cent to 2019, compared to global growth of 5.1 per cent. Over 32 per cent of all advertising revenues

and 16.5 per cent of consumer revenues will be digitally sourced by 2019. Looking across all segments in New
Zealand to 2019, overall advertising revenues—will rise at a rate of 1.5 per cent year on year— less than consumer
spending at a growth rate of 2.9 per cent year-on-year.
Consumers migrate to new media consumption behaviours
Underlying the trends in entertainment and media spending detailed in the Outlook is the migration by New
Zealand consumers to new ways of consuming content. One of the clearest shifts is in TV and video consumption,
with consumers increasingly demanding high-quality original programming in a flexible, on-demand manner
across numerous devices—thus enabling ‘binge viewing’ and greater convenience.
“Consumers never really regard any distinction between ‘digital’ and ‘non-digital’ as relevant. They take on board
the proliferation of content and access options enabled by digital, and exploit it to seek more flexibility and
freedom in what, when and how they consume.
“It’s increasingly clear that New Zealanders see no significant divide between digital and traditional media: what
they want is more flexibility, freedom and convenience in when and how they consume their preferred content.
Consumers will call the shots more as they seek content experiences that are personally relevant to them,” says
Mr Doone.

 Three actions for success in the evolving industry landscape
Summing up the implications of this year’s Outlook for the industry, Mr Doone says: “Against a background of
shifting infrastructure, New Zealand’s entertainment and media companies need to embrace the consumption
experience as their critical success factor. What matters is the ability to combine content with a user experience
that’s differentiated and compelling on the consumer’s platform of choice.
“To achieve this blend, companies need to do three things: first, innovate around the product and the user
experience; second, develop seamless consumer relationships across distribution channels; and third, put mobile
at the centre,” concludes Mr Doone.

– ends –
Notes to editors
**See press pack attached for content and further explanation to support the 2015-2019 outlook.
About PwC Global entertainment and media outlook 2015-2019
PwC’s 16th annual update of the Global entertainment and media outlook 2015-2019, is a comprehensive online source
of global analysis for consumer and advertising spend. With like-for-like, five-year historical and five-year forecast
data and commentary across 13 industry segments in 54 countries, the Outlook makes it easy to compare and contrast
consumer and advertising spend data across segments and countries.
Segments covered by the Outlook
TV subscription fees, TV advertising, Internet access, Radio, Out-of-home advertising, Video games, Filmed
entertainment, Newspaper publishing, Magazine publishing, Business-to-business, Internet advertising, Book
publishing and Music.
Digital spending
Digital revenue consists of digital directory advertising; digital professional books; digital trade magazines; consumer,
educational and professional e-books, digital consumer magazine circulation revenue; digital trade magazine
circulation revenue; electronic home video; fixed broadband and mobile Internet access; wired and mobile Internet
advertising; digital newspaper circulation; digital out-of-home advertising; digital recorded music; online TV
advertising; digital PC and console gaming and online and mobile gaming.
For media queries, please contact:
Joanna Garty
Corporate Affairs Manager
Ph (09) 355 8245 or (027) 911 8369 - Email: joanna.k.garty@nz.pwc.com
About PwC
PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 157 countries
with more than 195,000 people who are committed to delivering quality in assurance, tax and advisory services. Find
out more and tell us what matters to you by visiting us atwww.pwc.com
©2015 PricewaterhouseCoopers. All rights reserved
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please
see www.pwc.com/structure for further details.

 New Zealand insights from PwC’s Global entertainment
and media outlook 2015-2019
Press pack: content to support the 2015-2019 outlook news
release
13 entertainment and media segments making up PwC’s Global entertainment and
media outlook 2015-2019:
Business to Business:
New Zealand’s B2B market was worth $862 million in 2014, rising from $774 million in 2010. Total B2B revenue
is forecast to rise to $1,025 million by 2019, a CAGR (compounded annual growth rate) of 3.5%.
Directories are seeing a shift from print to digital as the number of New Zealanders with access to the Internet
increases. By 2019, 97% of households will have broadband connection and mobile Internet subscription
penetration will be 71.5%, up from 53.5% in 2014.
As a result, print directory advertising revenue is forecast to fall by a CAGR of -4.4% over the next five years.
Digital directory advertising is set to overtake print in 2017 and grow by a CAGR of 10.8% over the forecast
period. By 2019, 56.0% of total directory advertising revenue will be from digital.
Business information is the second-largest B2B sub-component and will remain largely unchanged over the
forecast period, despite New Zealand being ranked second for ease of doing business by the World Bank in 2014.
Total business information revenue will be $257 million in 2019, up from $222 million in 2014, a CAGR of 2.9%.
Growth is to some extent inhibited by the relatively low forecast CAGR of 4.6% for New Zealand’s nominal GDP
between 2014 and 2019.
Trade shows revenue is the smallest B2B sub-component and only accounts for around 4% of total B2B revenue,
with New Zealand lacking large-scale international exhibitions.

Book publishing
Total books revenue in New Zealand, consisting of consumer, educational and professional books revenue, will
be $514 million in 2019, up from $411 million in 2014, a CAGR of 4.6%.
New Zealand’s printed book industry remains relatively robust even though our country is at the long end of the
supply chain, which makes imported books expensive. E-readers have taken a while to have an impact on our
market but industry commentators say e-book sales have “taken off” in the last 12 months and now represent a
significant portion of local sales: e-books represented 18% of total consumer books revenue in 2014 and this will
rise to 36% by 2019 with consumer books electronic revenue reaching $72 million in 2019.

 With the migration to digital, print revenues will decline, as they have in other mature book markets. By 2019,
consumer books print/audio revenues will stand at $129 million, down from $141 million in 2014, having fallen
at a CAGR of -1.7%.

Magazine publishing
New Zealand’s total magazine revenue, comprising total consumer magazine revenue and total trade magazine
revenue, will be $621 million by the end of the forecast period, up from $571 million in 2014, a CAGR of 1.7%.
Rising tablet ownership is driving the growth of digital revenue. Digital consumer magazine circulation revenue will
grow at a CAGR of 26.3%, rising from $23 million in 2014 to $75 million in 2019, while print consumer magazine
circulation revenue will fall by a -1.0% CAGR. There are around 3,000 magazine titles in the New Zealand market with
approximately 300 published locally. Remaining titles are imported mainly from the US, Australia and the UK.
Digital consumer magazine advertising revenue will also increase over the forecast period from $44 million in 2014 to
$80 million in 2019, a CAGR of 12.9%. Advertising on magazine websites has helped digital consumer magazine
advertising revenue to achieve a greater proportion of total consumer magazine advertising revenue, 19% in 2014, than
the digital circulation revenue would suggest.

Filmed entertainment
New Zealand’s total filmed entertainment revenue will be worth $584 million by 2019, up from $541 million in
2014, a CAGR of 1.5%.
Total cinema revenue will rise due to increases in both admissions and the average ticket price. Box office
revenue will reach $219 million by 2019, up from $180 million in 2014, a CAGR of 3.9%, while cinema
advertising revenue will rise from $8 million in 2014 to $10 million in 2019, a CAGR of 5.3%.
Bolstered by Netflix’s arrival as well as the presence of other strong players, total electronic home video revenue
is forecast to rise at a CAGR of 12.7% over the forecast period to reach $150 million in 2019, 26% of total filmed
entertainment revenue.
Total electronic home video through-TV-subscription revenue will rise by a CAGR of 5.4% between 2014 and
2019 to reach $65 million. However, the total electronic home video OTT/streaming revenue will rise much
faster, at a CAGR of 21.4%, to reach $85 million in 2019. It will exceed the subscription revenue in 2017.
Physical home video is the one area that will decline throughout the forecast period. Total physical home video
revenue will fall by a 5.4% CAGR over the next five years to $205 million in 2019, down from $271 million in
2014. Both physical home video – sell-through and physical home video – rentals revenues will decline – the
former by-3.3% CAGR and the latter by -9.3% CAGR.

Internet access
New Zealand had a high fixed broadband penetration rate of 93.5% in 2014, equating to 1.4 million households.
At June 2014, 88% of connections were based on DSL. The Government is committed to migrating to fibre to the
home/building (FTTH/B) via the Ultra-Fast Broadband (UFB) network, which it is building in partnership with
four ‘Local Fibre Companies’. By end September 2014, the UFB network passed 536,000 households (over one
third of the total) and had signed up 55,000 customers. The Government aims to increase the coverage target for
the network from 75% to 80% of New Zealand’s homes by 2020.
UFB network deployment will help increase the number of fixed broadband households to 1.5 million at end
2019, while fixed broadband access revenue will increase from $777 million in 2014 to $982 million in 2019.

 The mobile Internet access market has been boosted by the launch of LTE services in 2013 by Telecom NZ (which
re-branded to ‘Spark’ since August 2014) and Vodafone. In 2014, both operators also launched LTE using digitaldividend spectrum in the 700MHz band, and a third operator, 2degrees, launched LTE in June 2014, beginning
in Auckland.
LTE will help increase the number of mobile Internet subscribers to 3.4 million by 2019 (71.5% penetration rate),
from 2.4 million in 2014. Mobile Internet revenue will grow from $556 million to $1,050 million over the same
period.

Internet advertising
New Zealand’s total Internet advertising revenue saw 10.8% year-on-year growth in 2014, reaching $435 million.
Total Internet advertising revenue will grow by a CAGR of 11.2% over the forecast period and by 2019, the market
will be worth $737 million.
Paid search, display and classified have broadly similar shares of New Zealand’s total Internet advertising
market, with paid search Internet advertising revenue accounting for the largest share at 32.4% in 2014. Google
is the leading search engine, responsible for around 94% of all searches. Paid search will retain the largest
revenue share throughout the period.
Mobile is the fastest-growing Internet advertising revenue sub-component, with an expected CAGR of 26.5%
between 2014 and 2019. Mobile Internet advertising revenue will more than triple over the time period as mobile
Internet penetration is set to reach 71.5% by 2019. But despite the fast growth, mobile will only account for 4.4%
of total Internet advertising revenue in 2019.

Newspaper publishing
Although New Zealand papers are forecast to lose average daily unit circulation print at a -7.4% CAGR to 2019,
cover price increases are expected to hold total newspaper circulation revenue decline to a -2.2% CAGR.
However, the publishers’ other key revenue stream is not faring so well. Their advertising take is in pronounced
and ongoing shrinkage, expected to fall from $489 million in 2014 to $317 million in 2019, at a -8.3% CAGR.
Where total newspaper advertising revenue represented nearly 70% of total newspaper revenue in 2010, it is
expected to fall to just 57.4% by 2019.
Print newspaper reach has fallen in New Zealand. To follow consumers, advertisers are putting more money into
the Internet, TV and radio at the expense of printed media. With just 8% of total newspaper revenue here coming
from digital channels, they must work hard to hold on to old customers and develop new income streams.
Paid digital access has not been implemented in New Zealand as prevalently as publishers in Australia. Both of
the major local newspaper publishers have been talking for some time about introducing a digital subscription
model. NZME, owner of the New Zealand Herald, engaged consultants to advise on a digital subscriptions model
and is considering a launch in 2015.
A Victoria University study showed only 0.5% of consumers would definitely pay for a New Zealand news site.
Willingness rose to 12.5% if offered the prospect of bundled music, TV and movie access, suggesting adding value
is the key to growing subscriber income.

Out-of-home advertising
New Zealand’s total out-of-home (OOH) advertising revenue was $73 million in 2014. The market is forecast to grow
by a CAGR of 2.8% and will see total OOH advertising revenue of $83 million in 2019.

 We have a developed OOH advertising market benefitting from an affluent population and an economy which has
performed relatively strongly since 2011. The market has seen a significant shake-up in recent years with APN News &
Media selling 52% of APN Outdoor, the country’s leading OOH advertiser, to Quadrant Private Equity in 2013. It sold
the remaining 48% stake to Quadrant in 2014.
Digital OOH (DOOH) advertising revenue stood at $17 million in 2014. Over the forecast period DOOH advertising
revenue is forecast to grow by a CAGR of 6.5% and reach $23 million in 2019, accounting for 27.4% of total OOH
advertising revenue. The market continued to expand in 2014 with the launch of Clear Channel’s Connect DOOH in
June, and APN Outdoor announcing plans in October to erect the country’s largest digital billboard in Auckland
Airport.
New Zealand’s smartphone penetration is high at 65.2% in 2014 and there is also a newly launched near-field
communications (NFC) payments scheme here which will provide advertisers with the opportunity not only to engage
with consumers directly via games, coupons or entertainment, but also to become a point of sale, fuelling DOOH
advertising revenue.

Radio
New Zealand’s total radio revenue was $257 million in 2014, up 2.6% from 2013. Advertising revenue accounts for the
entire radio market and only a modest CAGR of 1.5% is forecast between 2014 and 2019, when the market reaches
$277 million.
The two largest commercial radio networks in New Zealand are Mediaworks Radio and New Zealand Media and
Entertainment (NZME). They operate ten and seven stations, respectively. It is estimated that the two companies
cover 85% of the audience share. The state-owned broadcaster Radio New Zealand (RZN) operates three stations.
New Zealand is the only country in the world outside Australia and the US that has access to the Internet radio service
Pandora. Pandora NZ reported 255,000 registered users by October 2014, boosting online radio advertising revenue.
Pandora also began selling advertising to New Zealand businesses in March 2014.
State-owned broadcast and telecoms company Kordia has been running DAB tests in Auckland and Wellington since
2006, delivering a mix of DAB and DAB+. It is expected that DAB+ will be chosen as the standard for when DAB is
rolled out more widely.

Music
New Zealand’s music market was worth $179 million in 2014, down from $188 million from the previous year
and $209 million in 2010. Total music revenue is forecast to diminish by a CAGR of -1.1% to reach $170 million
in 2019.
New Zealand’s recorded music market has many similarities to Australia. Total recorded music revenue dipped
to $67 million in 2014, down from $90 million in 2010. Digital recorded music revenue surpassed physical in
2013. As elsewhere, physical recorded music revenue is expected to fall sharply in the years ahead, but the
expected gains from digital recorded music revenue are not going to be enough to make up the difference: by
2019, digital recorded music revenue is forecast to reach $44 million, up from $39 million in 2014, while
physical recorded music revenue will be just $18 million, down from $28 million in 2014. As a result, total
recorded music revenue will fall from $67 million in 2014 to $62 million in 2019, a CAGR of -1.4%.
The digital music services that operate in Australia also do so in New Zealand and the heads of the major music
companies in Australia also have duties in New Zealand.
New Zealand’s proximity to Australia has helped create opportunities for the wider music industry. All the major
tours to Australia now also have a New Zealand connection. Auckland’s 12,000-capacity world-standard Vector

 Arena has played a role in this and the live music scene in Christchurch is recovering well following the 2011
earthquakes. Ed Sheeran, the Black Keys and Ricky Martin played the Horncastle Arena (formerly the CBS
Canterbury Arena), while Dunedin hosted Rod Stewart for the first time in April (at Forsyth Barr Stadium).
New Zealand artists, like those from Australia, are enjoying international success. Lorde’s breakthrough is well
reported, but the likes of Broods, The Naked and Famous, Ladyhawke, Kimbra, Gin Wigmore and Marlon
Williams have enhanced our country’s reputation as a music hotbed.

TV advertising
Total TV advertising revenue rose 2.9% in 2014 to reach $497 million, and further growth at a 3.3% CAGR means
that this will reach a new peak of $584 million in 2019.
Broadcasting in New Zealand is largely self-regulated and there is no legal obligation governing the amount of TV
airtime that can be dedicated to advertising. As a result, there is a large amount of flexibility for broadcasters. But
the sector has adopted its own principles and practices, which means that 12.5 minutes per hour – plus two
minutes for channel or programme promotions – is considered acceptable.
Analogue terrestrial TV signals were switched off in December 2013, providing new opportunities for advertisers
due to the increasing range of thematic channels on the digital terrestrial TV (DTT) platform and the ability to
target more niche market segments. This will ensure terrestrial TV advertising revenue continues to dominate,
taking 81.9% of total TV advertising revenue in 2019. While this is down slightly on 2014 as multichannel TV
advertising revenue expands at a slightly faster rate, terrestrial TV advertising revenue will still pass prerecession levels to reach a new high of $478 million in 2019.
Public broadcaster Television New Zealand (TVNZ) competes with commercial broadcaster Mediaworks and Sky
in the terrestrial market. Sky’s acquisition of Prime TV in 2006 brought the pay-TV operator into the terrestrial
sector. Mediaworks and TVNZ have called on the Government to force Sky to relinquish control of Prime, or at
least prevent it from bidding on certain sporting events due to its wider market dominance.
Mediaworks has merged its sales teams across its TV, Radio and Digital divisions in an attempt to open up new
commercial opportunities for its clients such as cross-platform advertising.

TV subscriptions
New Zealand is a small TV market with a dominant subscription TV operator (Sky Network Television), a single
cable TV operator (formerly Telstra Saturn, now owned by Vodafone) and free-to-air (FTA) multichannel TV on
digital terrestrial TV (DTT) and satellite from Freeview NZ. The number of subscription TV households will rise
from 915,000 at the end of 2014 to 1.2 million at the end of 2019, a CAGR of 5.4%. This expansion will boost TV
subscription revenue from $693 million in 2014 to $902 million in 2019, a CAGR of 5.4%.
Sky Network TV has a virtual monopoly on the subscription TV market, with Vodafone’s InHome cable service
estimated to have only 49,000 subscribers. Cable lacks geographical coverage while IPTV remains a nascent
service.
Sky Network TV reached 865,055 subscribers by mid-2014, up from 855,898 a year earlier. Sky takes around
77% of subscription TV subscribers directly but also supplies most of the remaining market via wholesale
agreements. Some 81.5% of Sky’s revenue comes from residential satellite subscriptions, while advertising
accounts for just 8.2%, underscoring the importance of sustained net growth and upselling customers to
premium products such as multiroom and HD.
Sky also owns Igloo, a low-cost pay DTT option launched in late 2012, having purchased TVNZ’s remaining
stake. Sky announced in its annual results that the service had 8,760 paying subscribers.

 TelstraClear's Christchurch and Wellington cable TV network Telstra Saturn – which is largely a rebroadcast of
Sky TV – has been rebranded by new owner Vodafone as part of its Vodafone TV offerings. Those offerings
include a platform that delivers content over the new Ultra Fast Broadband network, but again the content
supplier will be Sky. Vodafone has said its agreement with Sky does not prevent it from seeking content from
other providers, but that it has no intention to do so.
Competition is increasing from a number or recent or soon-to-be launched services. These include Spark’s overthe-top (OTT) service Lightbox, VideoEzy’s ondemand service, an expanded Coliseum Sports offering, TVNZ
positioning itself for possible paid content via its on demand service and Freeview is due to announce a hybrid
broadband/broadcasting arrangement in 2015.
Sky is developing a Netflix clone, Neon, although there have been a number of delays to its launch, and Netflix
launched in New Zealand in early 2015.

Video games
New Zealand’s total video games revenue was $170 million in 2014, up from $154 million in 2010. The figure is
forecast to grow by a CAGR of 5.1% to reach $218 million in 2019.
Traditional gaming revenue makes up the majority of the market at 64.0% of total video games revenue in 2014.
This will fall to 61.7% by 2019 as more consumers switch to mobile gaming and the free-to-play model on
consoles and PCs. It should be noted that non-AAA game releases in New Zealand often occur later than in the
rest of the world, which may encourage consumers to order from other territories, artificially shrinking the
market.
Social/casual gaming revenue will continue to rise in New Zealand as the population increasingly engages with
mobile gaming and gaming on social networks. Social/casual gaming revenue will rise from $48 million in 2014
to $60 million in 2019, a CAGR of 4.6%.