Market Watch

US Media Spending is 63 Percent Higher than Western Europe


Pay-TV for cable and satellite services accounts for largest component of spending
U.S. consumers in 2010 spent a hefty 63 percent more on entertainment media than their Western Eu­ropean counterparts, but the gap narrows considerably when pay-TV subscriptions in both areas are ex­cluded or when the role of public TV funding is factored into the equation, according to a Screen Digest TV Intelligence report, from information and analysis provider IHS.

The United States generated $134.1 billion in entertainment media spending last year, compared to $82.1 billion spent by European consumers. The top item of expenditure in both regions was pay-TV cable and satellite subscriptions, but a growing range of paid-for entertainment options was also open to consumers, helping to boost overall numbers. These other options included cinema, physical video pur­chases, physical video rentals, physical games purchases, physical music purchases, TV-based pay-per-view and video on demand, online video/games/music, and mobile games/video/music.

Combined spending on these sectors has been rising every year in both regions throughout the past decade, as shown by Figure 4. The 10-year compound annual growth rate, ending in 2010, stood at 5.0 percent for the United States and 4.2 percent for Western Europe.

Aside from the significantly higher overall expenditures on entertainment media in the United States, one noticeable difference in spending habits between the two regions was the proportion of spending gener­ated by cable and satellite TV services. Subscriptions in Europe to basic pay- and premium-TV channels ac­counted for 47 percent of total entertainment outlay in 2010, or $38.8 billion. In the United States, however, pay-TV cable and satellite accounted for a much larger 62 percent of the entire spending, or $82.9 billion— slightly more than the combined entertainment budget for the whole of Western Europe.

For both regions, however, pay-TV played a central role in contributing to full entertainment media spending. And when pay-TV subscriptions are removed from the totals, two things become clear, IHS Screen Digest analysis reveals. First, the pay-TV sector is almost single-handedly responsible for the ongo­ing growth in entertainment spending; and second, without it, spending patterns in the two regions appear remarkably similar.

Taking out the pay-TV component, spending on entertainment media equates to $51.1 billion in the United States and $43.3 billion in Europe. This means that with pay-TV excluded, U.S. consumers spent just 18 percent more than Europeans, compared with the 63 percent difference in overall expenditures if pay-TV was included.  

Just the same, with the United States having 29 percent fewer TV households than Western Europe, average U.S. households spent far more in entertainment media spending each year than Europeans. 

Reasons for Overall Big Difference in Entertainment Media Spend Between US and Europe
Several reasons account for the big difference in total entertainment media spending between the United States and Europe.

For one, Western Europe enjoys substantial public TV funding, either through government grants or TV license fees. The public TV sector as a whole generated close to $30 billion in Western Europe in 2010, while annual federal funding of U.S. not-for-profit broadcaster PBS was just 0.3 percent of the European level.

Because of heavy public spending in Europe, content in the United States found exclusively on pay-TV is often available for no extra charge to consumers in Western Europe. Once this is factored in and public TV revenues are included in the analysis of entertainment spending, the gap between the United States and Europe narrows considerably, closing to just 22.7 percent—$110 billion for Europe, against $135 billion for the United States.

Another reason contributing to lower spending on pay-TV in Europe can be traced to the conti­nent’s linguistic and cultural fragmentation. Country boundaries mean that addressable markets are much smaller, inevitably affecting operator size. For instance, Europe’s largest pay-TV operators, BSkyB in the United Kingdom and Kabel Deutschland in Germany, would rank fifth and sixth, respectively, when stacked against the top U.S. pay-TV operators.

The smaller market size also affects the range of channels being offered in Europe and causes cer­tain channels to be priced out of the market. As a result, the reduced range of local content diminishes consumer willingness to spend on pay-TV products in Europe, further contributing to overall lower expenditures there for pay-TV.

Read More > US Media Spending Dwarfs Europe’s Outlay