Digital Media Trends to Watch

Changes in Content Consumption Joe Bates

Director of ResearchConsumer Electronics Association

4th Annual Digital Media Conference June 22, 2007

Agenda

• About CEA• Trend #1: Disruptive Distribution• Trend #2: Greater Consumer Control / Choice• Trend #3: Greater Realism• Trend #4: Greater Connectivity• Trend #5: Greater Portability• Presentation URL / Contact Info

• NOTE: All 2006 figures are estimates, all 2007 and beyond are projected

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About CEA

Disruptive Distribution

Physical Media

Music?

Digital Media

Video?

Physical Media

Music?

Digital Media

Video?

Purchasing

Usage

The Shifting Media Continuum

OVERALL

Late Mass

Early Mass

Early Adopters

Late Adopters

80%

84%

85%

81%

70%

20%

16%

15%

19%

30%DigitalDownload

PhysicalDVD Copy

Base: All Online US Households

Video Download vs. Physical DVD

27%

29%

34%

36%

49%

52%

28%

33%

27%

37%

37%

68%

CDsDVDs

Fewer restrictions with physical media

Afraid something may happen to the digital file

Physical copy easier to share with friends/family

Want to immediately play without any hassle

Like in-person shopping experience

Like to display collection of DVDs or CDs

Reasons for Preferring Physical Media

Greater Consumer Choices & Control

Millions of Unit Shipments

0.81.9

7.0

13.3

16.918.1

16.9

0.2 0.3 0.2 0.51.6

2.7

4.8

6.47.4

8.0 8.2

0.03

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

DVD Recorders

DVR

Digital Recording Options

• FREE Streaming Network Shows

• Amazon Video• iTunes Video• Vongo• CinemaNow• MovieLink• Xbox Live• Google/You Tube• Bebo

Emerging Home Services

4%

1%

16%

17%

20%

29%

29%

44%

46%

47%

54%

88%

91%

None

Other

Access PC Documents

Video Conferencing

Email

Access the Internet

Listen to PC Audio

View Digital Photos

Play Video Games

View PC Video

Watch Content on DVR

Watch TV Programs

Watch DVDs/VHS

Desired Activities Using Home TV

• Satellite Radio

• Satellite Video (vehicle)

• HD Radio

• Mobile TV (over the air)

Co

urte

sy X

M S

ate

llite

Ra

dio

Emerging On The Go Services

Greater Realism

Millions of Unit TV Shipments

0

5

10

15

20

25

30

35

1999 2000 2001 2002 2003 2004 2005 2006 2007

High Definition

Standard Definition

The Shift to HDTV

Revenues in Billions

$0.0

$5.0

$10.0

$15.0

$20.0

1999 2000 2001 2002 2003 2004 2005 2006 2007

Gaming Hardware Gaming Software

Combined HW/SW

Revenues of $13 Billion

in 2006

PS2, XBOX, Game Cube

Launch

Xbox 360, PS3, Wii Launch

The Era of HD Gaming

Next Generation DVD Forecast*Millions of Units

0.31.0

4.2

11.6

2006 2007 2008 2009

*Includes only component based HD-DVD and Blu-Ray players

Packaged HD Movies

Greater Connectivity

• Wide area connections (WiMax, WiFi/Hotspots, Cell, Broadband, SlingMedia)

• Local area connections (Ethernet, WiFi, HDMI)

• Personal networks (RF, Bluetooth, OE integration)

• Connecting services (VOIP, vlogs, blogs, social networks)

Growth of Networks

Household Penetration of Connections

2%

10%

25%

40%

51%

1%5%

15%

25%30%

1997 2000 2003 2006 2007

Broadband

Home Network

The Need for Speed

9%

20%

19%

25%

28%

44%

65%

1%

1%

3%

4%

6%

28%

83%PresentFuture

Desktop PC

Laptop PC

Television

DVR

Media Server

Appliances

Security System

Products Connected to Internet

Greater Portability

14%

38%

46%58%

74%80%

Millions of Unit Shipmentsw/ Percent Video Playback

0.5 0.7 1.7 3.07.1

24.8

33.0

38.3 39.0

33.829.8

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

14%38%

46%

58%74%

80%

Portable MP3 Growth

Consumer PC Market Composition(Millions of Units Shipped)

0

5

10

15

20

25

30

2002 2003 2004 2005 2006 2007

Desktop PC

Laptops/Notebooks

Portable Computing

32%

35%

36%

37%

38%

40%

40%

41%

44%

48%

52%

58%

Books on tape/CD

Text messages

Instant messenger

Satellite radio

Television programming

Music in digital file formats

Games

Broadcast radio (AM or FM)

Digital photos

Movies from DVDs

Music from CDs

Internet websites

Base: Online adults who own a portable entertainment device

(+15)

(+8)

(+5)

(-18)

(+20)

(+1)

(+11)

(+1)

(+35)

(+13)

Future Portable Entertainment Uses

Thank You!

jbates@CE.org