China will overtake Japan to become the world's second-largest entertainment and media market by the end of 2018, next only to the United States, according to the Global Entertainment and Media Outlook 2014-18, published by global consultancy PricewaterhouseCoopers on Tuesday.

Overall spending in the E&M segments in China is forecast to grow at 10.9 percent compound annual growth rate through to 2018, including an 11.8 percent CAGR in overall advertising spending. On the other hand, the global E&M industry is foreseen to grow by an overall 5 percent CAGR through 2018.

"The coming of age of China as the world's second-largest entertainment and media market in 2018 is a reflection of the consumption power of a growing middle class that is both the target of increasing brand activity as well as a potent force itself in the demand for all forms of entertainment," said Marcel Fenez, PwC's global leader in entertainment and media division.

Advertising, especially in the digital sector, is leading the way in the growth of China's E&M industry. PwC said that 55 percent of total advertising revenue is forecast to be digital in 2018, while total E&M spending on digital, excluding spending on Internet access, is forecast to grow at a 15.5 percent CAGR between 2013 and 2018, and account for 53 percent of China's entertainment and media spending growth.

Spending on digitally delivered content will account for only 22 percent of total consumer spending in 2018, excluding spending on Internet access, compared with 55 percent of total advertising spending. However, the growth of 24/7 access and micro-transactions suggest that the key to monetizing the digital consumer is to adopt flexible business models that offer more choices, the PwC report said.

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