Tablet takes edge off media's decline

According to an analysis by PricewaterhouseCoopers, the Australian entertainment and media industry will grow 22 per cent over the next five years, slightly higher than the US, Britain, France, Germany and Japan, but well below the Asia-Pacific region, expected to grow 39 per cent.

Magazines, newspapers and recorded music are all forecast to show negative growth in consumer spending, with the biggest drop in music, down 3.9 per cent by 2015.

David Wiadrowski of PwC said Australian businesses were missing out on the growth being experienced in the Asia-Pacific region.

"Consumer spending on entertainment and media products and services will reach $248 billion by 2015 in the Asia-Pacific region. It is time for Australian businesses to think about how best to share in the boom taking place on our doorstep."

Tablets were a bright spot in the forecast. The report forecasts that by 2015 one in every four Australians will own a tablet.

Mr Wiadrowski said that by 2015, it would be common for every household to have multiple tablets, with the devices increasingly used as mobile devices.

Online advertising was also tipped to show strong growth, as confidence in the platform grows. The internet advertising market is predicted to grow at an average rate of 13.4 per cent, reaching $4.3 billion by 2015. The report described free-to-air television as being in "a second golden age" thanks to the success of digital multichannels.

It predicted that free-to-air television would experience strong growth in general revenue and advertising revenue, but cautioned that a key challenge would be managing the implications of the government's convergence review.

Mr Wiadrowski said a challenge for media and entertainment executives in the digital age remained convincing consumers to pay for content.

"We are in a golden age for consumers as entertainment and media organisations look to find new models to meet the needs of empowered consumers who are increasingly time-poor but digital savvy."

Even before this week's sharemarket hammering hit media companies hard, the analysts at Morgan Stanley research were telling clients to avoid buying shares in Australian media companies most, that is but not all.

The research note to clients this week said advertising revenue remained weak and cost pressures were increasing for many media companies, while structural change was quickening across the board.

While Morgan Stanley said there were some "tactical" opportunities for investors, it was downbeat on the sector in general, which is "mature and in long-term structural decline".

It argued that APN News & Media, Austar, Seven West Media and Southern Cross Media were the "least preferred" of Australian media stocks.

Conversely, its "most preferred" stocks include Fairfax Media, owner of The Age, because its cash flow was "underappreciated" and its current market value below its "intrinsic value", helped by its online division that includes Trade Me.