Digital innovations to boost film spending - PWC

LOS ANGELES, June 21 (Reuters) Digital cinema and high-definition DVD sales are expected to fuel worldwide consumer spending on filmed entertainment through 2011, PriceWaterhouseCoopers said in its latest five-year outlook today.

The report, called ''Global Entertainment and Media Outlook: 2007-2011,'' forecast average annual growth of 4.9 per cent to 103.3 billion dollars from 81.2 billion dollars in 2006, with the Asia Pacific region growing fastest at an average annual pace of 6.8 per cent.

Download-to-own services are expected to provide a relatively small but rapidly growing revenue stream in the United States, Europe, Africa and the Middle East, while piracy will take a bite off revenue in Asia and Latin America, the report said.

In the United States, digital cinema, with its superior images and ease of distribution, will reinvigorate the box office to the tune of 11.7 billion dollars by 2011, the report said.

US box office grosses hit an all-time high of 9.53 billion dollars in 2004 and are recovering from a three-year downturn.

The proliferation of digital cinema -- expected to reach 40 per cent of all US screens by the middle of next decade -- will shorten theatrical runs as studios push for wider releases and bring DVDs to market sooner to benefit from film ad campaigns.

Movie theater owners, long opposed to shortening the DVD release window, may continue to resist this strategy, which they believe cuts into box office revenues, but ''digital distribution will minimize the potential adverse impact of a quicker home video release,'' the report said.

Digital 3D screens will have an impact later in the decade, as the number of available screens grows enough to allow wide releases of 3D films now in the production pipeline for 2009.

''One reason we think it will have an impact is that it doesn't compete with home video,'' said Mary Shelton Rose, a partner in Price Waterhouse Coopers' Entertainment and Media Practice.

Sales of physical DVDs will fall as alternate distribution channels grow but will continue to dominate all types of US home video sell-through, which will grow at an average rate of 5.1 per cent to 21.9 billion dollars by 2011.

High-definition DVD sales -- slowed by pricey hardware and a format war between Sony Corp.'s Blu Ray and Toshiba Corp.'s HD DVD -- will accelerate toward the end of the forecast period but will not produce the boomlet that some studios were expecting, Shelton Rose said.

US in-store DVD rentals, the forecast's weak spot, will decline at an average of 1.1 per cent to end 2011 at 7.1 dollars billion, versus 7.5 billion dollars in 2006, Price Waterhouse Coopers said.

The growth of the US online rental subscription business dominated by Blockbuster Inc. and Netflix Inc. was expected to more than compensate for in-store losses. Online rental revenue is expected to rise, on average, by 23.1 per cent a year, to 3.4 billion dollars by 2011, with subscribers reaching 20 million.

The prices for download-to-own movies are expected to start falling in 2009 while sales expand rapidly to 80 million movies at an average price of 7 per dollars film by 2011.

Total spending on download-to-own movies will grow to an estimated 560 million dollars from 32 million dollars in 2006, while sales of download-to-own TV shows are expected to rise to 600 million, dollars the report said.

REUTERS LPB RK0958