2008 Australia - Entertainment and Media Markets

The Digital Media Market

Over the last two years the traditional media companies have well and truly established themselves in the emerging digital media market. While telcos tried to claim this territory, in the end they failed. Interesting new developments can be expected following the initiative taken by Lachlan Murdoch.

Seven has indicated it will launch a TiVo service and it has also bought two telco companies. Fairfax media has grown from strength to strength. It is obvious that key new developments will come from the industry. In this report we cover Lachlan Murdoch, News Limited, PBL, Seven, Yahoo!7, Ten, SCB, WIN, Fairfax and Austereo. For more information, see chapter 1.2, page 9.

The most hotly debated topic in the digital media industry is how to make money. The telco industry is still full of complaints on this subject, but the media industry has made some quantum leaps. This has been driven, on the one hand, by role models such as Google, Yahoo, YouTube, eBay, Skype and others. But the traditional media companies have also made great progress, using their traditional media to launch events and then supplementing them with broadband-based services such as portals, blogs, vpods, chat-rooms, SMS, etc. New advertising models, permission-based marketing and premium sales activities are being used to attract people to these events and services. For more information, see chapter 2, page 28.

The telcos were the first cabs off the rank, once they began to realise what they could do with the Internet. However, they quickly became entangled in the debate about the need for a good broadband infrastructure before new media services could be offered. As well as this, the telcos lack the requisite media background. Nevertheless, Telstra in particular remains adamant about its position in this new market and it has made significant investments in the market under its BigPond brand. Others covered in this report: Optus, Internode, Adam Internet, Unwired and TransAct. Non-telcos include: Roo Media, Video Ezy, Of the World TV and VOD Pty Ltd. For more information, see chapter 2.3, page 42.

Digital Media Entertainment Services

New video applications are emerging as the Internet media companies seek to exploit the added speed and capacity of broadband infrastructure. With the increase in speed and capacity a whole range of new applications will be entering the market over the next decade. Console games have changed dramatically, with games, music and movies merging and integrating. Growing penetration of broadband and mobile 3G networks will also promote growth in online gaming. This report includes the digital media developments in online gaming, gambling, online dating and adult entertainment. In 2007, a record growth year for video game sales in Australia, the country’s video game industry produced $1.3 billion in sales. For more information, see chapter 2, page 28.

Music has been the major 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 associated 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. For more information, see chapter 2.6.6, page 62.

People naturally want to communicate, and the Internet has always provided a forum for User Generated Content – from the early bulletin boards to today’s video blogs that allow for new levels of interaction. Websites such as MySpace, MSN Spaces and Facebook are proving to be hugely popular around the world. Sites that initially began as social networks, such as Facebook, are also expanding into video-based services in order to compete with services offered by sites such as YouTube. Mobile social networking services are also being developed. With an estimated 230 million active memberships to such sites worldwide, there is no sign of this growth abating at present. For more information, see chapter 2.8, page 70.

Key highlights

·         The involvement of Lachlan Murdoch in the Australian media landscape could well be a catalyst for further developments in the new media.

·         Printed media are performing better than TV stations in the digital world.

·         Broadcasters are still slow in adapting to the digital media.

·         Seven’s mixture of activities, including Yahoo, TiVo, engin and Unwired, will be an interesting case to watch in 2008.

·         The role of telcos and ISPs continues to reside in infrastructure and basic access.

·         Pay TV will remain a niche market and will not move much beyond 25% penetration.

·         User Generated Content (UGC) will penetrate the traditional market and an increasing amount of content production will be outsourced.

·         Over three-quarters of digital content will be created by the users (UGC).

·         Services offered in this sector are rapidly become a major market segment (databases, software, e-albums, specialised e-devices).

·         Social networks have seen massive growth and, with 230 million users worldwide, offer great opportunities for the commercialisation of digital media.

·         While the concept of social networks is here to stay, the format will start to change, with fragmentation expected.

·         Privacy, safety and piracy are seen as key issues by the new Australian government. Legislation will be introduced in 2008 to better manage this.

·         How to best commercialise the ‘Long Tail’ still remains an unsolved business issue;

·         Video entertainment will be the key to success, but this will not be based on (IP) TV models.

·         Music as an e-application has seen a comeback. Video will be the next battleground.

·         Environmental concerns re the e-living room will need to be addressed. Smart grids might assist in finding solutions.

·         Customers are happy to pay for devices but reluctant to pay for services, Nokia’s bundled approach will be an interesting one to watch in 2008.

·         Mobile Internet portals will attract mobile users on capped data plans, finally opening up commercial business models for mobile content.

·         There will 5 million broadband-enabled households towards the end of 2008.

·         The lack of affordable high-speed broadband (including its effect on quality) is holding back the market.

Total broadband subscribers – 2005 - 2009

(Source: BuddeComm)