Consumers will be spending in excess of 50pc more on entertainment content in 2011 than they did last year as digital delivery outgrows all other aspects of home entertainment, according to a report from Understanding & Solutions.
The analyst firm said there’s an upsurge in content combined with much-improved delivery infrastructures.
Recent industry activity and the take-up of home video in the form of online video on demand, linear programming and mobile TV, combined with revolutions in gaming and music, are laying the foundations for significant take-up of digital content.
“We’ll see the highest percentage growth coming from mobile and online,” said Alison Casey, business director: content and services, Understanding & Solutions. “However, in volume terms, both will remain relatively small-scale until after 2011 when compared with established platforms such as broadcast Pay TV.
“More importantly, multiple formats will co-exist, as different delivery methods and platforms will suit different consumers in different situations. With content moving seamlessly from mobile to online to TV the challenge for the industry will be to ensure revenues aren’t cannibalised as consumers will only want to pay for their content once.”
Casey said that although these platforms bring new challenges, digital delivery will outgrow all other aspects of home entertainment, helping to increase the global digital content industry’s revenues by 8pc a year until 2011.
If the process is managed effectively Casey said content holders would yield additional revenue streams from both new and catalogue content, though formats will have to evolve. In the mobile sector, for example, it will be short-form, repurposed content that will be most successful.
“This new multi-platform world is creating a revenue shift,” she said. “Theatre owners, retailers and broadcasters will continue to be important but the new media infrastructure providers – including telcos, ISPs, mobile operators and social networking services – will begin to take a larger slice of the revenues.”
However, of all the different players vying for a position in the delivery of digital entertainment it is the existing pay TV operators that are in the strongest position. Unlike the mobile operators and telcos, content is already their primary focus and this will be a key lever for consumer uptake.
Although illegal video and music files account for a large proportion of content downloading, new legitimate services have created viable revenue streams. Online, mobile and pay TV are beginning to provide a platform for legal content delivery, often generating legitimate revenues in emerging markets for the first time.
“This is particularly true for mobile,” Casey said, “and by 2011 approximately 75pc of all mobile subscribers will live outside the US, Western Europe and Japan. Historically, territories such as China and India have generated small revenues from packaged media sales and the new digital revenues in these markets could surpass those generated from physical media.”
The emergence of user-generated content is also providing an alternative to paid-for content and competing for consumers’ time online. These services, accessed by millions of users worldwide, will increasingly achieve revenues for the service providers through advertising.
This transition to digital delivery will not happen overnight but has major implications for content holders, service providers and consumers.
With more choice and diversity the market segments will become progressively more fragmented and companies will need to work smarter to ensure the revenues continue to flow, she concluded.
By John Kennedy