digital media - multiple markets, multiple opportunities

© 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

[email protected]

Digital Media: Multiple Markets, Multiple

Opportunities© Copyright 2008. Yankee Group Research, Inc. All rights reserved.

Agenda

• Macro trends

• The digital home

• The connected consumer

• Emerging trends in digital media

– Video

– Music

– Web 2.0

• Outlook

• Question and Answer



Ubiquitous

Connectivity

Ubiquitous

Connectivity

Ubiquitous

Connectivity

Distribution

Connected

Devices

Digital

Content

Consumers

Ubiquitous connectivity's impact on digital media



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.



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



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



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



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



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



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



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



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



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



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?




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?




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?



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




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

e-mail

Talk on phone

Which of the following activities do you do while watching TV?




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…?




% 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




% 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




% 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



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


• 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.



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

Facebook

MSN Groups

Use social networks


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.



• 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?




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



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



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



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)



Charting the Evolution of Anywhere

Question & Answer

Michael Goodman

Director, Digital Entertainment

Yankee Group

[email protected]

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