Fueling the demand for Digital Copy - A new report from TNS Worldpanel & Sony DADC

Digital CopyTM is a certification mark of DEG: The Digital Entertainment Group

Fueling the demand for Digital CopyA new report from TNS World Panel Entertainment & Sony DADC

Preface 2

Executive Summary 3

Survey Results

What has the research discovered? 4

Market dynamics 6

Who are potential Digital Copy consumers? 9

How do consumers rate the traditional Digital Copy experience? 13

How do users view their Digital Copies and what type of content do they watch? 16

Appendix

Sony DADC's Digital Copy with PID 18

About Sony DADC 18

1

Contents

Today, consumers have a far greater choice of entertainment

formats. From traditional DVD, they can upgrade to High De-

finition Blu-ray, while the market is moving towards Video on

Demand and Digital Downloads in the future.

Companies need a multi format strategy and a clear migrati-

on path from traditional packaged media today to a range of

packaged and electronically distributed media channels in the

future.

Digital Copy is a key technology in this change process since

it creates a bridge between packaged media and consumers’

increasingly mobile lifestyles. It empowers consumers: enabling

them to watch their favourite movies exactly when, where and

how they wish.

At Sony DADC, we have made Digital Copy a key development

focus. We believe that in developing Digital Copy with PID and

eBridge Analytics, we have created significant and unique ad-

ded value to this key technology.

As Digital Copy establishes itself in Europe, we invite content

owners and publishers to work with us. Together we can add

significant value and new revenue streams to the home enter-

tainment market.

Traditional packaged media has an almost unknown audience.

Now, for the first time, Digital Copy with PID and eBridge Ana-

lytics enables consumers to register and develop a relationship

based on permission marketing with the content publisher.

The first step in building a new business model that integrates

this revolutionary technology is to get to know your market and

your customers. This report outlines a key market research pro-

ject which Sony DADC commissioned from TNS Worldpanel.

It makes interesting reading. Enjoy learning about this exciting

new business opportunity.

Christian Dankl Lucy Burton

Head of Business Development Consumer Insight Director

Sony DADC TNS World Panel Entertainment

2

Preface

Digital Copy – an intelligent form of Digital Rights Management

(DRM) which enables file transfer to other devices - is taking the

home video market by storm.

Whether the original content is on a standard-def DVD or in

high-def Blu-ray Disc, Digital Copy fits into our increasingly

mobile lifestyles, where more time is spent viewing content on

devices other than TVs.

The success of Digital Copy in the U.S. is illustrated by its wi-

despread adoption by the major studios where it has become a

mainstream feature of many new releases in both Blu-ray and

DVD.

Why is it important to consumers and the Home Enter-tainment industry?

Will it be influential in shaping the future development of the

Home Entertainment market? Yes, it could have an immediate

impact of adding around £36 million to the UK market during

the next 12 months, and enables publishers to construct their

own unique customer database.

Are UK consumers interested in portable media consumption

– yes, devices such as notebooks, PSPs and iPod are having a

significant effect.

Is there room to improve on the traditional form of Digital

Copy? Yes, despite its undoubted success, Digital Copy does

still have its Achilles heel – in its traditional form it requires the

user to input a 16-25 character alphanumeric key before the file

transfer will happen.

Will content publishers benefit from a new enhanced form of

Digital Copy? Yes, it offers major opportunities to extend the

lifecycle of packaged media; it creates a neat bridge to digital

media and it offers extended marketing opportunities such as

email marketing and cross promotions, which have not been

exploited by traditional forms of Digital Copy.

Digital Copy with PID is a new and radically different applica-

tion of this DRM technology. It provides all of these facilities for

publishers, plus it provides consumers with a one click unlock

mechanism that enables them to transfer digital content files

from their disc to a host of different portable devices.

In the UK, Digital Copy with PID provides an opportunity to

place the Home Entertainment on a renewed growth path.

A major research project from TNS Worldpanel

In order to confirm its potential, Sony DADC commissioned a

major research project from TNS Worldpanel. It looks at con-

sumer perceptions – who is interested in this technology and

what is its potential to shape the industry. This report outlines

the project’s key findings.

What is Digital Copy?

3

Copyright © 2009 Revolver Group. All rights reserved.

Carried out by TNS Worldpanel, the research which polled 3,000 consumers during April and May has provided a valu-able insight into UK consumers’ increasing on-the-move lifestyles. Among the study’s key findings are:

n Digital copy buyers are valuable to the DVD market, so it is

worthwhile ensuring their needs are met.

n There is potential growth of a further 1.6m digital copy

buyers over the next year, bringing in £36m of additional

revenue to the market if the titles are priced appropriately.

n There are two distinct targets – tech savvy families, and early

adopters.

n The top 3 Digital Copy genre preferences of:

n tech savvy families are Action/Adventure film, TV

comedy & Children‘s animated film

n early adopters are TV comedy, TV drama & Action/

Adventure film

n The current 25 digit code used within traditional forms of

Digital Copy could be a barrier to further expansion to a

more mainstream audience.

n The overwhelming majority (78%) of respondents felt that a

convenient one-click unlock mechanism would be important

to them

n These people are likely to be shopping online or in grocers,

and TV is a big growth opportunity.

n Despite their high ownership of video iPods, video enabled

phones, and PSPs; PCs and notebooks remain the most

important destination for downloads.

Executive Summary

Survey Details

n TNS Worldpanel has a panel of 15,000 individuals who

regularly record their purchasing of Home Entertainment

products, including DVDs and Blu-Ray.

n Using our LinkQ capabilities, we contacted 3,000 of these

individuals who had previously viewed a digital copy of a

film or TV show

n We then asked them a series of questions about their

attitudes towards Digital Copy

n The data that follows comes from this survey, but also looks

at the general purchasing behaviour of these individuals

from the previous year

n Our panel is the most robust and accurate way of

contacting such individuals, and analysing their behaviour

Field work period: April - May 2009

4

Survey ResultsSurvey Results

5

Survey Results Survey ResultsSurvey Results

Worldpanel believes that currently Digital Copy Viewers ac-

count for 2.7 per cent of the DVD buying population in the UK,

creating a market of 728,000 consumers.

However, this is a relatively high value market since each consu-

mer spends more on DVDs. They account for 6.1 per cent of the

market, or in financial terms they generate £125 million.

Interestingly, 40 per cent of respondents to the survey stated

that Digital Copy was their most preferred additional feature

on a DVD.

Market Dynamics

Total Entertainment Total Albums Total Videos Computer Games

Average spend 52 w/e 29 March 2009, digital copy viewers vs Total DVD buyers © WorldpanelTM, TNS 2009

Digital Copy viewers All DVD buyers

There are very valuable consumers – spending more than twice than average on Home Entertainment, and 130% more on video

Total Entertainment Total Albums Total Videos Computer Games

Average price paid 52 w/e 29 March 2009, digital copy viewers vs Total DVD buyers © WorldpanelTM, TNS 2009


Some of the additional spend comes from the fact they spend more on each video they purchase than the average video buyer

6


Digital copy viewers are more likely to buy full price DVDs than

non viewers (68% of volume compared to 58%).

They are also more likely to buy on impulse (49% of volume

compared to 45%).

So, these are very valuable consumers to the market in terms

of revenue.

When asked 37 per cent of people said that they would be

interested in buying a DVD with Digital Copy, which equates to

around 17.8 million people in the UK.

However, only 13.4 million of these currently buy DVDs. If we

subtract the current viewers, this still leaves a potential market

of 12.7 million interested customers who have not seen Digital

Copy already. 64 per cent of these are prepared to pay £1-2

more for digital Copy.

If 20 per cent of this target market buys the DVD or Blu-ray Disc

at an additional £1.50 price this would create a market of 1.6

million consumers with a value of £36 million (even with ave-

rage prices falling at a rate of 6 per cent annually).

7


8


Digital copy viewers are more likely to be upmarket males, overwhelmingly under the age of 44.

They are more likely to have children living in the household.

Who are potential Digital Copy consumers?

DigitalCopy

viewers

All DVDbuyers

DigitalCopy

viewers

All DVDbuyers

DigitalCopy

viewers

All DVDbuyers

% Respondents vs all DVD buyers © WorldpanelTM, TNS 2009

65 - 7455 - 6445 - 5435 - 4425 - 3420 - 24< 20

Ag

ESE

x

SoC

io

ECo

No

MiC

g

Ro

Up DE

C2C1AB

MaleFemale

Digital Copy viewers are more likely to be upmarket males, under the age of 44 – the classic early adopter profile

SEx SoCio ECoNoMiC gRoUp AgE



Three or more childrenTwo childrenOne childNo children

9

SoCio-ECoNoMiC gRoUpSA Professional people, very senior management in business or commerce or top-level civil servants. Approximately 3% of the population.B Middle management execs in large organisations, principle officers in local government and civil service, owners of small businesses. Approx 14% of the population.C1 Junior management, owners of small establishments and all others in non-manual positions. Approx 26% of the population.C2 All skilled manual workers, and those manual workers with responsibilities for other people. Approximately 25% of the population.D All semi-skilled and unskilled manual workers and apprentices and trainees to skilled workers. Approx 19% of the total population.E All those entirely dependent on the state long-term, through sickness, unemployment, old age or any other reason and casual workers and those without a regular income. Approximately 13% of the population.


Almost half the DVDs they purchase are for family viewing purposes, they are slightly more likely to make unplanned purchases,

and to pay full price.

In effect, there are two distinct groups of digital copy buyers – those with a family, and more traditional early adopters.



OtherFamily UsePersonal UseGift

10

© WorldpanelTM, TNS 2009

More likely to think they are going to have less disposable

income in 2009

Less likely to be concerned about their disposable income

in 2009

Portable DVD PlayerVideo iPod

PSP

Blu-ray PlayerHome Cinema System

Mobile with video player

Both shop online and in grocers more than average

Both more likely to own expensive Home Entertainment hardware than average

FAMily EARly ADopTERS


Both are more likely to be current downloaders – especially the families.

Almost three quarters of their purchases are made online or in supermarkets.

All DVD buyers

Digital Copy viewers


OtherInternetMail OrderGrocersGeneralistTotal Music/VideoSpecialist

11

33% have paid to download a film or TV programme to view it once (rental)

*market average 7%

23% have paid to download a film or TV programme to view it once (rental)

20% have paid to download a film or TV programme

to keep it*market average 5%

18% have paid to download a film or TV programme

to keep it




12


Con

veni

ent

Inco

nven

ient


65 - 7455 - 6445 - 5435 - 4425 - 3420 - 24< 20

Without doubt, Digital Copy appeals to consumers. Clear proof

of this can be seen in the rapid speed with which the major

studios have adopted it for their new releases on both DVD and

Blu-ray Disc.

In its traditional form it requires the user to input a 16-25 cha-

racter alphanumeric key before the file transfer will happen.

When asked whether they found the current 25 digit code sys-

tem convenient, older consumers were more likely to disagree.

This could be a potential barrier to more mainstream adoption,

which could affect the additional revenue digital copy could

bring to the market.

When asked, “If you were offered the choice of a one-click

unlock mechanism to avoid typing in the 25 digit code how

important would this feature be for you?”

The overwhelming majority (78%) of respondents felt that a

one-click unlock mechanism would be important to them.

How do consumers rate the traditional Digital Copy experience?

13


Again, ease of use is important to reach out beyond the early adopter market.

14

85% felt the one click mechanism was important to them

72% felt the one click mechanism was important to them




15


So, we know that consumers appreciate Digital Copy and that

they overwhelmingly prefer a one-click unlock mechanism.

Now we look at what devices consumers prefer to transfer the

Digital Copy movie to.

PCs or notebooks are the overwhelming favourite device for

people to download to with ipod/iphone and PSPs being next

on the list.

But is this just a reflection of the hardware people own?

Even those who own alternative technology to download the copy to would prefer to download to a PC or notebook

as their first choice.

How do users view their Digital Copiesand what type of content do they watch?

Most preferred 2nd most preferred 3rd most preferred


OtherArchosMobile PhonePSPiPod/iPhonePC/Notebook

„Could you now please tell us which devices you would prefer to transfer the digital copy movie to?“

Video iPod or MP4 player owner

Mobile phone with video player owner

PSP owner


ArchosMobile PhonePSPiPod/iPhonePC/Notebook

16

Survey Results

The family market is more likely to be keen on downloading to a PSP.

And finally, we look at the viewing preferences of each market segment.

Top 5 titles bought in last year by target markets

Family Digital Copy viewers No Family Digital Copy viewers

% Respondents © WorldpanelTM, TNS 2009

ArchosMobile PhoneiPod/iPhonePSPPC/Notebook

n Action/Adventure Film 13.0n TV Comedy 12.0n Childrens Animated Film 9.2n Other Film 7.9n Comedy Film 7.8n Sci-Fi Film 7.3n TV Drama 6.5n Drama Film 6.5n TV Sci-Fi 5.9n Family Film 4.9n Children‘s TV 4.5

overindex vs. market

n TV Comedy 14.1n TV Drama 13.9n Action/Adventure Film 10.6n Comedy Film 10.5n Horror Film 7.8n Family Film 6.3n Childrens Animated Film 5.7n Sci-Fi Film 5.7n TV Sci-Fi 5.7n Drama Film 4.6n Other Film 4.3





n Mamma Mian Family Guyn Indiana Jones (Crystal Skull)n Iron Mann Futurama

n Lostn Doctor Whon CSIn Mamma Mian Futurama

17

Survey Results

Digital Copy has scored a resounding success, especially in

the U.S. market where it has been introduced for some time.

However, like many first generation applications it does have its

weaknesses and unexploited Marketing potential.

To overcome these challenges and make the technology more

consumer friendly, Sony DADC offers its customers a refi-

ned version of Digital Copy which integrates it alongside the

company’s proprietary PID system.

The beauty of Sony DADC’s Digital Copy with PID lies in its sim-

plicity. PID is Postscribed ID technology, which is applied to each

disc during the manufacture process. The PID is automatically

read by the player and does away with the need for cumberso-

me serial codes.

So, at the click of a mouse, the consumer can copy the movie over

to a laptop hard drive or many other media storage devices.

“Digital Copy provides a safe way of protecting discs from unauthorised copying whilst empowering consu-mers to watch their movie as they wish,” comments Sonja

Hauck, Product Manager Video at Sony DADC.

Digital Copy with PID

comes with eBridge

Analytics, a Sony DADC

online platform that

shows detailed statis-

tics about the usage of

Digital Copy.

In a short time, the publisher can construct a sophisticated pro-

file of the consumer base, understanding like never before how

they interact with their movies and what their preferences are

within a diverse media driven world.

Digital Copy with PID provides a 'best in class' experience for

both consumers and publishers.

“Digital Copy with PID combined with eBridge Analytics, fulfils two major needs of today’s Home Entertainment marketers: to get valuable feedback about their consu-mers’ preferences as well an opportunity to differenti-ate their product in a retail environment,” commented

Christian Dankl, Head of Business Development at Sony DADC.

Sony DADC is a leading disc and digital solution provider for the

entertainment, education and information industries, offering

world-class optical media replication services, digital and physi-

cal supply chain solutions and software services.

The world’s largest optical media production network consists

of twenty-seven optical media production, distribution and di-

gital facilities worldwide.

European distribution facilities are located in Frankfurt, Paris,

Madrid, Gothenburg and Enfield, UK. Manufacturing sites are

located in Salzburg and Southwater, UK.

For more information about Digital Copy or to discuss ways in

which our team at Sony DADC can support your business deve-

lopment activity, please contact your local Sony DADC office.

Sony DADC‘s Digital Copy with PID

About Sony DADC

Appendix

LicenseServer

License rights check(limited number of key downloads)

DRM encrypted file on disc Activation of DRM license

Bound to 1 device/download

Disc sends unique disc ID (PID) information to license server

Activation of DRM license bound to one device or one download.

1

2

3

PID

Activated license. Watch portable

movie!

18

Austria, Germany & Switzerland

Sony DADCSonystrasse 20

5081 Anif / Salzburg, Austria

Phone Austria: +43 6246 880 555

Phone Germany: +49 6074 498 106

[email protected]

United Kingdom

Sony DADC UKKent House, 14-17 Market Place, 5th floor

London W1W 8AJ

United Kingdom

Phone: +44 20 7307 9775

[email protected]

France

Sony DADC France140, rue Gallieni

92100 Boulogne Billancourt

France

Phone: +33 1 6413 8242

[email protected]

Nordic Region

Sony DADC NordicsSluseholmen 2-4

2450 Copenhagen

Denmark

Phone: +45 7070 2725

[email protected]

[email protected]/digitalcopy

Documents

Fueling the demand for Digital Copy - A new report from TNS Worldpanel & Sony DADC