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Wednesday, July 06, 2011
Digital Entertainment Spend To Exceed $50bn by 2014

By 2014 consumer spend on digital content across video (including paid for online and pay TV VoD), gaming and music will reach nearly $52bn, accounting for 46% of total global spend across packaged and digital media.

This compared with the 24% share in 2010, demonstrates that this $113bn industry is going digital.

"While packaged media is declining, it certainly isn't falling off a cliff," explained Futuresource Senior Analyst, Mai Hoang at this year's Futuresource Entertainment Summit. "The decline in packaged media across video, gaming and music has attracted a lot of debate regarding the future of entertainment content, but packaged media still plays a huge part in total sales. Combined with the availability of new platforms, digital and packaged media together will still achieve $112bn in revenue in 2014.

"In 2010, packaged video generated $42bn globally, and although decline is apparent in the video industry, packaged will continue to produce significant revenues in the coming years, with spend still at $33bn in 2014, accounting for 72% of total consumer spend."

Sell-through currently accounts for the majority of total revenues in packaged media, though rental plays its part, this trend is set to continue as Hoang revealed.

"2014 will see sell-through account for 70% of total physical video spend, of which Blu-ray contributes over 50%, compared to just 13% in 2010. Globally, DVD and Blu-ray rental is still significant, although popularity varies greatly between territories - in Japan, rental accounts for over half of total spend while in the European markets, rental barely accounts for 10% share."

While Blu-ray is gaining traction growth in the new format will not be enough to compensate for the decline in DVD. Any growth in the home entertainment industry will need to come from digital content distribution, though key challenges for digital video include the wide availability of other online content, in particular free content, and the ongoing consumption of illegal video.

"An estimated 400 billion videos were watched online last year in the US, most of which were viewed for free via services like YouTube and Hulu," said Hoang. "In Western Europe, paid for online video accounted for just 2% of total video spend and 5% in the US, but the market is gaining ground and expected to increase to 12% and 16% respectively by 2014."

In Western Europe Apple, Microsoft and Sony are the main contenders in the paid for online video market, while smaller service providers continue to fuel the competitive environment. As a result the market is hugely fragmented, with a variety of services offering very different business models. Objectives among online service providers also vary greatly and many services have struggled, with some exiting the market entirely over the last two to three years.

In conclusion, Hoang stated that a number of strategies are being trialled to build bridges between digital and physical content, including industry initiatives to push digital through bundling, experimentation with release windows and exclusive downloadable content. "For digital, the online user experience needs to be as seamless and enjoyable as possible for the video industry to maximise the future opportunities and make this revenue stream really perform," said Hoang.

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