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Consumers lead a digital lifestyle, demanding access to news & information, entertainment, friends and family and commercial enterprises, unbound by time, location or device
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© Copyright 2008. Yankee Group Research, Inc. All rights reserved.
Digital Media: Multiple Markets,
Multiple Opportunities
May 29, 2008
Michael Goodman
Director, Digital Entertainment
Yankee Group
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 2
Agenda
• Macro trends
• The digital home
• The connected consumer
• Emerging trends in digital media
– Video
– Music
– Web 2.0
• Outlook
• Question and Answer
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 3
Ubiquitous
Connectivity
Ubiquitous
Connectivity
Ubiquitous
Connectivity
Distribution
Connected
Devices
Digital
Content
Consumers
Ubiquitous connectivity's impact on digital media
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 4
Key issues affecting the digital media
1. Monetizing ubiquitous content: Ubiquitous connectivity means digital
assets are everywhere—how do content owners control, promote and
monetize them most effectively?
2. Cross-platform distribution: From a few well-understood silos, ubiquitous
connectivity is creating new paths to market and profit with growing
cross-platform distribution options; highly competitive choices with
differing capabilities, shifting power structures and evolving economics.
3. Anywhere Consumer™ 2012: With a greater diversity of devices and
access to content and each other, Anywhere Consumers are increasingly
less loyal, more experimental, and demand greater control over how,
when and where they access content and interact with their communities.
4. Anywhere Brands: In the emerging Anywhere environment, ubiquitous
connectivity has created a world where content, media and consumers
are everywhere. As a result the value chain for advertising and brand-
building is changing dramatically, with new players emerging and roles
changing.
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 5
Who is the Anywhere Consumer?
Anywhere consumers lead a digital lifestyle, demanding
access to news & information, entertainment, friends and
family and commercial enterprises, unbound by time,
location or device
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 6
As consumers become more connected it effects how they
interact with different forms of entertainment
U.S. Addressable Market (in Millions)
Networks 2006 2008 2010 2012
Mobile Subscribers 233.0 273.3 293.0 300.1
Active Mobile Data Users 106.8 157.1 174.4 181.0
Internet Users 210.2 226.8 247.6 270.3
Devices owned
Connected Consoles ----- 18.1 26.6 30.3
Digital Audio Players 65.3 81.5 83.1 85.0
Digital Video Players* 28.7 50.2 64.3 69.3
Handheld Game Systems 38.3 45.4 51.4 52.9
* Includes DAPs, Sony PSP and dedicated video players
Source: Yankee Group Forecasts, 2008
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 7
The devices in the home have a heavy influence on digital
media behavior
• The average household income in Advanced Digital Households is $87.5k
compared to $62.5k in Digital Homes
• 46% of respondents in Advanced Digital Households are college graduates
compared to 35% in Digital Homes
2007 2008
Advanced Digital Home 3% 9%
Digital Home 22% 30%
Advanced Digital Home – Owns an HDTV, DVR, video game console, laptop or desktop computer, and a
home network
Digital Home – Owns either an HDTV or a DVR, a laptop or desktop computer, and a video game console
Source: Yankee Group Anywhere Consumer: 2007 and 2008 US Penetration & Usage Surveys and the 2007 US Device Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 8
A new generation of digital devices are starting to enter
the digital home
% Respondents
4%
5%
11%
15%
28%
36%
9%
11%
20%
27%
40%
53%
Placeshifting
Device
Digital Media
Adapter
Blue-ray
Player
TV Tuner
Card
Home Security
Equipment
External Hard
Drive
Advanced Digital
Home
Digital Home
• Blu-ray players are hot but not
much else is
– 13% of respondents in Advanced
Digital Homes and 10% in Digital
Homes said that they intend to
purchase a Blu-ray player in the next 3
months
– 2% of respondents in Advanced Digital
Homes and Digital Homes said that
they intend to purchase an external
hard drive in the next 3 months
• Purchase intent for most advanced
devices is limited due to…
– Consumer confusion
– Unclear value proposition
– Differing standards
– Lack of interoperability
How many of the following products or services do
you have in your household?
Source: Yankee Group Anywhere Consumer: 2008 Penetration & Usage Surveys
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 9
External storage is more than consumers simply running
out of space on fixed drives
% Respondent
41% 37%
18% 17%7%
Still had room on
PC but wanted to
back up files
Back up
multimedia files
(music, pictures,
etc.)
Ran out of storage
space on PC
Back-up multiple
computers
Complement
backing up files
online
• Eighteen percent of online households have purchased an external hard
drive in the past 6 months
– 56% of these were under 300GB
• The median price of a external hard drive purchased in the past 6 months
was $74.50
• Western Digital was the most common brand purchased
Why did you buy a new external hard drive?
Source: Yankee Group Anywhere Consumer: 2008 US Device Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 10
Home networks are being underutilized
% Respondents
88%
69%
36%25% 22%
12% 8% 7%
86%
60%
27%14% 15%
7% 6% 5%
Multiple
Computers
Printer Game
Console
DVR Television Home Stereo External
Hard Drive
Home
Monitoring
Advanced Digital Home Digital Home
• Most users who recently set-up their network are using them for basic
broadband sharing
• Improved integration, more liberal business rules and the development of
standards between CE devices, PC and internet delivered content will
accelerate the adoption of digital media
– 30% of internet users said they would be more likely to view internet video if they could
watch it on their TV
What devices are currently connected to your home network?
Source: Yankee Group Anywhere Consumer: 2007 US Device Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 11
Bringing the personal experience beyond the home is the
next logical step
Connectivity in the home is addressed by WiFi, but beyond the home
device connectivity is limited
2007 2008
Connected Consumer 3% 8%
Entertainment-To-Go ----- 9%
Connected Consumer – Owns an digital camera, digital camcorder, laptop, mobile phone, handheld game
system and a mp3 player
Entertainment-to-go – Owns a handheld game system, a digital audio player (mp3 player) and a mobile
phone which they use to play games, listen to music or watch video
Source: Yankee Group Anywhere Consumer: 2007 and 2008 US Penetration & Usage Surveys
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 12
Connected Consumers and Entertainment-To-Go consumers are
significantly more connected than the typical consumer
% Respondents93%
41%
16% 15% 19%
91%
40%22% 20% 20%
Home Work School Mobile Device Public WiFi
Connected Consumer Entertainment-To-Go
Connected Consumers and Entertainment-To-Go consumers are more
than twice as likely to have access to the internet outside the home
than the typical consumer
– 84% of consumers 18 and older have internet access at home, followed by 29% at work,
10% at school, 6% on a mobile device, and 8% use public WiFi
From where do you currently access the internet?
Source: Yankee Group Anywhere Consumer: 2008 US Penetration & Usage Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 13
Form and functionality beat connectivity
• Consumers do not see much
value in mobile video
1. Not interested in using phone to
watch video -76%
2. Don’t want to pay a monthly fee –
68%
3. Screen is too small to watch video –
59%
4. Only use phone to make calls – 55%
5. Too expensive – 45%
6. Already pay too much for wireless
service – 41%
• Digital Audio Players and
Handheld Game Systems have
done a better job integrating into
consumers digital lifestyle
% Respondents
77% 79%
59%
6%
25%21%
Mobile Phone Digital Audio
Player
Handheld
Game System
Aware Video is Available
Use to Watch Video
Did you know that you could watch video on your …?
Do you use your _____ to watch video ?
Source: Yankee Group Anywhere Consumer: 2007 US Entertainment Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 14
Top ten online behaviors
% Respondents
40%
40%
44%
44%
44%
46%
55%
68%
72%
83%
Send pictures to friends/family via email
Watch video
Listen to music
Store digital pictures on PC
Get medical information
Get sports news/information
Play games
Pay bills
Make a purchase for personal use
Get the latest news/current events
Which of the following have you used a PC for in the past month?
Source: Yankee Group Anywhere Consumer: 2007 US Entertainment Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 15
The PC has emerged as a viable platform for video
distribution
% Watch video on PC
1%
3%
3%
3%
5%
12%
34%
Copy video from my PC to my mobile phone
Recorded a TV program to a PC
Rip video from a DVD to a computer
Copy video from my PC to a portable device
Burn video to a DVD
Download video
Watch video online
• In addition to internet delivered video, DVRs and VOD also provide on-
demand solutions
– 43% of online households have used VOD from their cable or IPTV service provider
– 27% of online households own a DVR
• The challenge for broadcast and cable programmers is it maintain their
brand in an on-demand world
Which of the following have you done in the past three months?
Source: Yankee Group Anywhere Consumer: 2007 US Entertainment Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 16
Internet delivered video represents both a threat and an
opportunity to broadcast and cable networks
% Watch online video
9%
11%
16%
17%
27%
38%
41%
47%
51%
54%
57%
Online Ads
Sporting Events
Adult Entertainment
Full Length Movies
Sports Highlights
Full Episodes of TV Shows
News Highlights
Music Videos
Movie Trailers
Clips from TV Shows
User Generated Videos
Source: Yankee Group Anywhere Consumer: 2007 U.S. Entertainment Survey
What types of video do you watch online?
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 17
For TV content, broadband video is just another DVR
• Thirty eight percent of consumers who watched video online in the past month, watched episodes of TV shows
• Women prefer online TV for practical reasons
– Eighty-seven percent of women, who watch full TV episodes online, do so because they missed the broadcast, compared to 80% of men
– Thirty-four percent watch because they were interrupted, compared to 29% of men
• Men like to watch the same episodes over again
– Forty-two percent of men who watch TV episodes online, do so to see an episode again, compared to 28% of women
– Twenty-four percent like watching older shows, compared to 11% of women
% of consumers who watched full TV episodes
83%
56%
36% 35%31%
18%11%
Mis
sed a
n Epis
ode
Cat
chin
g up
with
Old
er E
pisode
Fewer
com
mer
cial
s
Wan
ted to
wat
ch p
rogra
m a
gain
Inte
rrupt
ed w
hile w
atch
ing
on TV
Like
older
show
s
Can
wat
ch o
utsid
e ho
me
Why Do You Watch TV Episodes Online
Source: Yankee Group Anywhere Consumer: 2007 U.S. Entertainment Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 18
Today the television and the internet peacefully coexist
Percent Respondents
8%
16%
32%
38%
42%
62%
65%
66%
SMS
Listen to radio
IM
Read newspaper
Read magazine
Surf the web
Talk on phone
Which of the following activities do you do while watching TV?
Source: Yankee Group Anywhere Consumer: 2007 U.S. Entertainment Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 19
Digital audio players are the device of choice for portable
music
% Respondents
17%
0%
14%
18%
51%
Don't Know
Replace your mp3 player
or digital audio player with
a handheld game system
Will not replace my mp3
player or digital audio
player
Replace your mp3 player
or digital audio player with
a music phone
Buy another mp3 player or
digital audio player
DAP Owners
• Teens and young adults are not
much more likely to adopt cell
phones as their primary portable
music player
– 25% of teens and 15% of young adults
would consider switching to a music
capable phone
– Even in Europe, which is much more
“mobile-centric” consumers are not
much more willing to replace their
digital audio players with music
phones
• Eighty-eight percent of digital
audio player owners are
very/somewhat satisfied with their
player
– Ninety-five percent of iPod owners are
very/somewhat satisfied
Do you think you will…?
Source: Yankee Group Anywhere Consumer: 2007 U.S. Entertainment Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 20
% Respondents
7%
9%
29%
33%
44%
57%
Other
I can't transfer my music to another brand of
portable music player
I don't want to use a handheld game system
as a portable music player
I trust the manufacturer of my portable
music player
I don't want to use my mobile phone as a
portable music player
I really like the portable music player I have
Reasons for buying another DAP when current one dies
Why do you think you will buy another mp3 player or digital audio player?
Solid industrial design and good service-device integration
give consumer little reason to switch
Source: Yankee Group Anywhere Consumer: 2007 U.S. Entertainment Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 21
% Listen to Music on PC
1%
2%
8%
28%
58%
4%
16%
33%
47%
78%
Download Music to
Phone
Trade CDs w/Friends
Borrow CDs From
Friends
Download Music to PC
Buy CDs
Sources For New Music
One Main Source For New Music
• On average, DAP owners store just
under two-thirds of their music
files on their player
– DAP owners have, on average,
1,334 music tracks stored on
their PCs but only 841 tracks
stored on their digital audio
player
• Young adults (age 18-24) are
nearly twice as likely (46%) to
downloaded music to their PC
• Fifty-seven percent of respondents
who downloaded music to their PC
do so from licensed music
services
Where do you usually get the music you listen to? (select all that apply)
Which way do you use MOST OFTEN to get the music you listen to? (select one)
The PC is key to the acquisition, storage and management
of digital music
Source: Yankee Group Anywhere Consumer: 2007 U.S. Entertainment Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 22
% Respondents
1%
4%
9%
25%
Podcasts
Online Video
Blogs
Photos
UGC Creators
Please indicate if you did any of the following
activities online in the past month
Online User Generated Content and
Communities Trends
Activity Percent of
Respondents
Answered a question on a
social Q&A page
7%
Created mashup 3%
Participated in a Second
Life community
2%
Online content creators are a small but vocal minority
UGC Creators are those consumers who are creating,
uploading and posting content to the web.
Source: Yankee Group Anywhere Consumer: 2007 US Web/Data Survey
• Content creation is a niche undertaking
by consumers with the knowledge,
expertise and time to create and post
content to the web
• The exception is photos – not surprising
considering the number of services and
applications available to consumers to
post photos, as well as the ubiquity of
digital photography
• Despite the hype, Second Life
participation is a very niche online
activity with only 2% of users
participating monthly
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 23
However, strong interest in consuming and using UGC
exists
% Respondents
8%
28%
31%
32%
Podcasting
Blog
Online Video
Photos
UGC Consumers
Please indicate if you did any of the following
activities online in the past month
Source: Yankee Group Anywhere Consumer: 2007 US Web/Data Survey
• Strong interest exists for
viewing UGC among
consumers
• This gives the relatively few
content creators a tremendous
audience for their work
• Viewing photos, video and
reading blogs are the most
popular activities for UGC
consumers
– Because these activities are often
created and posted by friends and
relatives they draw in loyal viewers
who will return to consume more
content from those they know and
trust
UGC Consumers are those individuals that are viewing,
listening to or reading photos, videos, podcasts or blogs.
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 24
As an aging population joins social networks, the
demands of users are changing
% Respondents
6%
10%
12%
12%
12%
14%
16%
20%
31%
32%
35%
68%
Post video
Meet people to date/have a relationship with
Make professional connections
Find new music or videos online
Look for a new job
Connect w/communities and organizations
Blog
Share info about me and my interests
Send IMs
Meet new people with similar interests
Post photos
Connect with friends, colleagues, relatives
Top 5 Social
Networking Sites
MySpace
Yahoo! Groups
MSN/Windows Live
Spaces
MSN Groups
Use social networks
Source: Yankee Group Anywhere Consumer: 2007 US Web/Data Survey
1. Don’t know anyone on
social networks
2. Lack of time to participate
3. Fear of viruses or spam
Top concerns about social
networks:
Those ages 35 and up are
statistically more concerned
about a fear of viruses and
spam than those younger
people.
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 25
• Consumers are increasingly comfortable with online storage for documents,
calendars and photos:
– 18% of consumers are using online tools to collaborate to create documents, videos or photos at
home
– Those ages 18-34 are statistically more likely to have created a web-based and web-stored word
processing document, spreadsheet or calendar at home
– Most consumers still backup most of their data manually such as on CDs, external hard drives or
USB thumb drives
• In order to identify workplace versus personal trends, Yankee Group asked
respondents about their use of spreadsheets, word processing documents and online
calendars.
Online collaboration and storage is about to take off
At Home At Work At Home and Work
Web-based and web-stored spreadsheet 9% 4% 5%
Web-based and web- stored word
processing document 12% 4% 7%
Web-based and web-stored calendar of
personal appointments, events, meetings 15% 5% 6%
Have you used any of the following?
Source: Yankee Group Anywhere Consumer: 2007 US Web/Data Survey
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 26
Outlook
Entertainment Rules for the next five years
• The need for multiple file formats, DRM, and business models will continue
to hinder this market (ie DVD’s digital copy)
• Content will become free – enabling newer use cases and flexible video
usage than ever before (both in the home and beyond)
• Consumers will store their most valuable content with them on a device – to
ensure the content is always readily available regardless of their
connectivity options
• The handset (beyond iPhone) continues to be an unattractive multimedia
device for users
• Physical formats remain and must be factored in
• Timeshifting is a regular behavior and placeshifting is emerging
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 27
Outlook
Connectivity is impacting digital imaging
• Photography is taking place on multiple devices and leading to interesting
ways to capture, share, and store images
– Connected Cameras. Allowing users to directly upload photos sharing sites
(and perhaps to home servers in the future)
– WiFi SD Cards. For users of disconnected cameras WiFi cards allow for direct
uploading
– Connectivity to social networks & photo sharing sights. Allowing for
immediate sharing of content, is creating new ways for users to share
experiences
– Geotagging. Providing location based information for photos and video
creates a new dimension in metatagging content. WiFi and cellular signals
could be used to provide such information without specific geotagging
hardware
• The home remains integral for long term archiving of photos ands
represents another medium for which devices should connect with to
back-up content
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 28
Outlook
• There are a number of obstacles preventing interoperability becoming a
reality
– Lack of video standards (H.264, DiVX, WMV, MPEG)
– Digital rights management (Zune, Fairplay AAC, DiVX)
– Device connectivity
• DLNA is the most interesting solution to the connectivity gap in the home
– but it only addresses some of the issues around hardware, not around
software (and its educational outreach has been non-existent thus far)
• Interoperability of portable devices in the home and beyond is an
additional challenge that has not yet been addressed
Ease of interoperability is key to the realization of the
digital home
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 29
Outlook
Open networks are the future but issues must be resolved
– Business models
– Partnerships
– Speeds
– Education
• Connectivity in the home is addressed by WiFi, but beyond the home device connectivity is limited
– Open networks impact on in-home connectivity
– Planning necessary for CE manufacturers
• Device Manufacturers will be faced with difficult decisions
– Lack of ubiquitous WiFi beyond the home is the challenge
– To Incorporate multiple connectivity standards (3G, EVDO, WiMax) or not
– Bundle remote connectivity into cost or charge a subscription fee
– What value foes connectivity add? (Intel example)
Digital Media: Multiple Markets, Multiple
Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved. Page 30
Charting the Evolution of Anywhere
Question & Answer
Michael Goodman
Director, Digital Entertainment
Yankee Group