2010 Australia - Digital Entertainment and Media Market

We are getting a clearer view of where the media industry is going.

The picture is still slightly blurred but it is becoming increasingly apparent that the traditional TV media is concentrating on digital TV. Investment-wise that’s where their money is going. They have been unable to keep up with the digital media activities of the new players, who are dominating the broadband content and services market.

Separately, other activities are beginning to emerge – activities that we classify as digital economy (e-commerce, e-health, e-learning, smart grids, etc). These topics are covered in separate reports.

The traditional media companies have all established themselves in the emerging digital media market, with Seven, Nine and the ABC being the first to enter. However, the ABC more rapidly increased their market share among digital viewers.

Quality content is even more crucial as digital platforms are becoming relatively commoditised.

Telcos have tried to claim this territory but they continue to struggle to leverage their natural advantages. In Australia, Fairfax Digital, alongside the ABC and News Limited, has continued to compete for digital viewers.

However these traditional media companies have been on notice for more than a decade regarding the changes they would face with the developments in the digital media market. So far they have not taken decisive action, partly because they were afraid of cannibalisation and partly because their business models do not cater for swift business action. This has produced a decline in their revenues, but far more importantly they have failed to seize a share of the new market, which is now dominated by newcomers such as Google, YouTube, and Facebook.

The National Broadband Network is the next stage.

Again the traditional media have largely been missing from this debate, but the NBN will create new changes, with new options. The traditional media players can take a leadership role, looking at the trans-sector opportunities the NBN has on offer – or they can simply copy their outdated models onto the NBN, perhaps by using the wholesale services of a telco.

Initial indications are that they are looking at more of the same rather than moving towards media innovation. The media companies do have strong brands and millions of customers, but how can they use this advantage?

Online video media

Over recent years video applications over broadband have emerged, as Internet media companies and content producers seek to exploit the added speed and capacity of broadband infrastructure. The killer application on these networks is video-based communication, mainly produced by users themselves.

The telcos were the first cabs off the rank, as soon as they realised what they could do with the Internet. However they became entangled in debating the need for a good broadband infrastructure prior to offering new media services. Also, the telcos lack the necessary media background. Telstra, in particular, remains adamant about its position in this new market. Under its BigPond brand it has made significant investments in the market. However, after an initial spurt, the market has quietened down and the action is now around providing access rather than content.

Music, MP3 and podcasting

Music has been the key driver behind the early developments in the digital media, both in mobile and fixed networks. While mobile is the preferred technology for listening to music the business models are not conducive to helping people become accustomed to using these networks for music delivery. Most will use free or cheap Internet sites to gain access to music.

A totally unprepared music industry has suffered serious damage from the switch to electronic music, and it is only just beginning to recover. MP3, or podcasting, has gone well beyond the music application and millions of podcasts (some in video format) are downloaded daily. All this is also a fair indication of the future direction of the video entertainment and wireless broadband (mobility) market.

Social media networks

Social media developments are fascinating and exciting. They show the great potential of the new communication and information tools that are becoming available, thanks to the Internet, Web 2.0, email and broadband infrastructure. However, for these new social media tools to succeed they need to be fully integrated into our daily communication.

Current social media sites such as Facebook, MySpace, LinkedIn, Plaxo, Twitter, YouTube, Wikipedia, Google and Second Life are great incubators for these new services; they provide us with new tools and allow us to experiment.

Online gaming, particularly games based on virtual simulations, are increasingly becoming linked in with social networking services.

Mobile media

The report also provides information on the mobile companies and the services they offer in relation to mobile content. It covers the activities of both the mobile operators and the service providers. Companies included are: Telstra BigPond Mobile, Optus Zoo, Vodafone Live, Hutchison 3, MessageNet, Be.interactive (previously BlueSkyFrog), Red Oxygen, Oxygen8 Communications (previously Opera Telecom), Jamster, Jumbuck, MobileActive and mNet.

This market has remained fairly static over the past few years, with more and more activities moving ‘off deck’. The major mobile media providers, therefore, are now the digital media providers on the Internet who have established mobile device access to their services.

However business models remain shaky for mobile content providers utilising the mobile operators’ portals, with operators still taking a significant proportion of total revenues. However, as consumers move to tariffs which include mobile data caps customers will tend to use applications provided outside the network operator’s portal.

The same phenomenon affected the computer-based Internet. In the very early stages of the Internet’s growth portal-based traffic was the norm; however this changed very quickly as users migrated to services provided independently by other service providers. Here the Over The Top (OTT) services are rapidly overtaking applications and services previously provided by traditional telcos and media companies.

The same process is now underway in Australia with respect to the mobile Internet. Mobile operators earned significant revenue from the first generation of mobile media services such as ringtones and wallpaper; however these revenues are declining and there are now significant opportunities for mobile operators and other organisations to provide new, popular and revenue-generating services. However the mobile operators fear losing their ability to share revenues with content providers while simultaneously being forced to invest heavily in improvements to the networks that are required to support future services.

Premium rate SMS

Premium rate SMS services have developed into a $200 million market. However this is a far cry from the predictions made in the late 1990s, which anticipated a multibillion-dollar market. Despite a decade of mobile data hype the access charges to PSMS remain far too high and in 2009 the market began to contract.

With the advent of capped mobile services and new smart phones such as the iPhone we now see users moving to the Internet to access a far wider variety of apps-based mobile content and communication services. In the PSMS market the mobile operators maintain an iron grip on this market through their m-payment facilities. The high costs limit the market to the more lucrative areas of gaming, adult services, horoscopes, etc.

Subscription-based services were introduced to address the bill shock problems produced by these high charges, but in some cases this has only made matters worse. Only those with high margins to spare can participate in this market. International entrants have increased their market share to above the 50%. Companies included in this section are: Sybase 365, Netsize Group, mBlox, Jumbuck Entertainment, iTouch, Mobile Messenger, 5th Finger, SMS Central and Communicator.

Market highlights:

• The mobile media market has exploded since the arrival of the iPhone;
• ABC’s iView has been far more successful in IPTV than others;
• Online users who stream video content at least once a week has risen by more than 120%;
• Revenue from the PSMS market will exceed $210 million in 2010.

Data in this report is the latest available at the time of preparation and may not be for the current year.