2010 Australia - Digital Entertainment and Media Market

Publication Overview

This annual report offers a wealth of information on the digital entertainment and media market in Australia. The report includes analyses, forecasts, statistics and trends. It provides a comprehensive insight into the progress of the various media companies and examines the key issues in the market and the business opportunities arriving from these developments.

Subjects covered include:

  • Overview and analysis of the burgeoning social media market;
  • Analyses of Internet media companies with case studies;
  • Overview and analyses of the various players in the market;
  • The shift from IPTV to video media;
  • Activities from telcos and ISPs;

Researchers:- Paul Budde, Kate Castellari, Kylie Wansink
Current publication date:- April 2010 (2nd Edition)
Next publication date:- April 2011

Executive Summary

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.

Table of Contents

  • 1. Key Elements of a Digital Economy
    • 1.1 Infrastructure essential for the digital economy
    • 1.2 Key sectors for the digital economy
      • 1.2.1 Smart grids and the environment
      • 1.2.2 E-commerce
      • 1.2.3 E-government
      • 1.2.4 E-health
      • 1.2.5 E-education
      • 1.2.6 E-science
      • 1.2.7 Social media
    • 1.3 Key requirements of the digital economy
      • 1.3.1 Broadband
      • 1.3.2 Trans-sector approaches
      • 1.3.3 Open access
      • 1.3.4 Internet neutrality
  • 2. Impact on the Media Industry
    • 2.1 Global market overview
      • 2.1.1 Introduction
      • 2.1.2 Continental shift in competition
      • 2.1.3 New business models for media content required
      • 2.1.4 Distinct industry realignments
      • 2.1.5 TV broadcasters
      • 2.1.6 Radio broadcasters
      • 2.1.7 Newspaper publishers
      • 2.1.8 The video and DVD rental companies
      • 2.1.9 The anomaly of the mass media
    • 2.2 Australia – the media industry
      • 2.2.1 The traditional media industry
      • 2.2.2 New business models for digital media
      • 2.2.3 Digital media regulation
      • 2.2.4 Free-to-Air TV broadcasters
      • 2.2.5 Pay TV operators
      • 2.2.6 Newspaper publishers
      • 2.2.7 News Corp and subsidiaries
      • 2.2.8 Fairfax Digital
  • 3. Online Video Media
    • 3.1 Market overview
    • 3.2 ABC video downloads
      • 3.2.1 ABC iView
    • 3.3 Other initiatives
      • 3.3.1 Potential launch of all-broadcaster video portal
      • 3.3.2 iiNet
    • 3.4 Market surveys
      • 3.4.1 Video online boom in 2009 continues in 2010
      • 3.4.2 IPTV and Internet video services in Australia
      • 3.4.3 IDC IPTV forecasts
      • 3.4.4 Telepresence research from Frost & Sullivan
    • 3.5 Regulations
      • 3.5.1 IPTV and Unbundled Local Loop (ULL)
    • 3.6 Movies downloading
      • 3.6.1 Starting with Video-on-Demand (VoD) – analysis
      • 3.6.2 Social networks
  • 4. National Broadband Network – Changing the Media Model
    • 4.1 Open wholesale network key to change
    • 4.2 Industry wants wrong piece of the NBN action
    • 4.3 Industry needs to start changing
    • 4.4 New business models
    • 4.5 Breaking out of the silo
    • 4.6 Trans-sector thinking
    • 4.7 Media companies well-positioned to operate trans-sectorally
    • 4.8 Risk will be unavoidable – not taking it will be deadly
  • 5. Video Entertainment
    • 5.1 Telcos & ISPs
      • 5.1.1 BigPond Media
      • 5.1.2 Telstra’s complex convergence strategy
      • 5.1.3 Internode – Video-on-Demand and IPTV
      • 5.1.4 TransACT
      • 5.1.5 Participation TV from Optus
      • 5.1.6 Non-telco providers
  • 6. Music, MP3 & Podcasting
    • 6.1 Statistical overviews
      • 6.1.1 Online music statistics
      • 6.1.2 PwC survey to 2012 shows online music will surge
      • 6.1.3 Album sales drop as music download sales increase
      • 6.1.4 Survey on online music searching
      • 6.1.5 Australian digital music downloads to grow to $200 million a year
    • 6.2 Key players
      • 6.2.1 Apple
      • 6.2.2 ninemsn assault on the online music market
      • 6.2.3 Telstra’s BigPond Music
      • 6.2.4 Vodafone
      • 6.2.5 Hutchison 3
      • 6.2.6 Nokia
  • 7. Critical Assessment of Social Media
    • 7.1 Market overview
      • 7.1.1 Insatiable appetite for communication
      • 7.1.2 Social media after the financial crisis
      • 7.1.3 Second Life, Twitter, LinkedIn, Plaxo, Facebook, MySpace, Wikipedia
      • 7.1.4 Mobile social networking
      • 7.1.5 Online gaming beyond virtual worlds
      • 7.1.6 In-game advertising
      • 7.1.7 Personalising social media
      • 7.1.8 Personal social networks
      • 7.1.9 Incorporate social media within the organisation/group
      • 7.1.10 Open Social Foundation
      • 7.1.11 Conclusions
  • 8. Mobile Media
    • 8.1 Providers
      • 8.1.1 Mobile Operators
      • 8.1.2 Service providers
    • 8.2 Premium Rate SMS
      • 8.2.1 The market in 2010
      • 8.2.2 Smart phone Apps market
      • 8.2.3 Subscription-based content services
      • 8.2.4 Consumer protections for premium SMS
      • 8.2.5 Key players in the PSMS market
      • 8.2.6 Premium SMS revenues
    • 8.3 Mobile TV & video
      • 8.3.1 Mobile TV is dead – long live mobile video
      • 8.3.2 Mobile TV standards
      • 8.3.3 Snapshot of mobile TV around the world
      • 8.3.4 Mobile TV/video published statistics and forecasts
    • 8.4 IPTV
      • 8.4.1 Introduction
      • 8.4.2 The future of IPTV
      • 8.4.3 Leading markets – brief IPTV case studies
      • 8.4.4 Business models
      • 8.4.5 Telcos versus media companies
      • 8.4.6 Value-added multimedia
      • 8.4.7 Video-on-Demand (VoD)
      • 8.4.8 IPTV market statistics and forecasts
      • 8.4.9 IPTV services revenue statistics and forecasts
      • 8.4.10 IPTV standards
  • 9. Internet & Entertainment Services
    • 9.1 Google & leading Internet media companies
      • 9.1.1 Market overview
      • 9.1.2 Digital media and entertainment services
      • 9.1.3 Demand for faster networks
      • 9.1.4 General trends
      • 9.1.5 Areas of growth through to 2012
      • 9.1.6 Distribution trends
      • 9.1.7 Key online entertainment services
      • 9.1.8 Other key online services
      • 9.1.9 Digital Rights Management (DRM)
      • 9.1.10 Analyses of the companies
      • 9.1.11 Internet media companies
      • 9.1.12 Key trends for digital media companies
      • 9.1.13 Google
      • 9.1.14 Brief case study: eBay
      • 9.1.15 Brief case study: Skype
      • 9.1.16 Other issues
  • 10. Glossary of Abbreviations
  • Table 1 – Worldwide advertising spend versus online advertising spend – 2009 - 2010
  • Table 2 – Growth of Hulu video streams – 2008 - 2009
  • Table 3 – Online news readership versus print news in the US – 2006; 2008
  • Table 4 – Australian Internet distribution recorded music market sales – 2007 - 2012
  • Table 5 – Australian mobile phone recorded music market sales – 2007 - 2012
  • Table 6 – Worldwide market share of mobile social network users – 2008; 2013
  • Table 7 – Worldwide online gaming revenue and annual change – 2000 - 2008; 2012
  • Table 8 – Online gaming revenue market share – leading regions – 2012
  • Table 9 – US video game revenue for console, PC, online and wireless – 2008
  • Table 10 – Worldwide mobile gaming revenue – 2004 - 2009; 2013
  • Table 11 – Worldwide mobile game users – global monthly averages – 2005; 2010
  • Table 12 – Worldwide online gambling revenue – 1997; 2001; 2004; 2006; 2008, 2010
  • Table 13 – Total value of bets placed via mobile gambling worldwide – 2006; 2009; 2010
  • Table 14 – Online game advertising spend worldwide – 2007 - 2008; 2012
  • Table 15 – Australian Apps Market revenue estimates – 2009 - 2015
  • Table 16 – Estimated revenues – PSMS market – 2004 - 2010
  • Table 17 – PSMS estimated market share by operator – 2009
  • Table 18 – Comparison of analysts’ mobile TV/video subscriber forecasts – 2009; 2011; 2013
  • Table 19 – Worldwide mobile ad spending – 2008; 2013
  • Table 20 – Worldwide mobile TV ad spending – 2008; 2013
  • Table 21 – IPTV subscribers in China – 2004 - 2012
  • Table 22 – PCCW NOW TV subscribers and ARPU – 2003 - 2009
  • Table 23 – IPTV subscribers and proportion of DSL base in France – 2004 - 2008
  • Table 24 – Forecast IPTV subscribers in Italy – 2006 - 2010
  • Table 25 – Worldwide IPTV equipment spending – 2007; 2013
  • Table 26 – Worldwide IPTV subscribers – comparison of analysts’ forecasts – 2008 - 2014
  • Table 27 – Worldwide IPTV STB sales – 2007 - 2008
  • Table 28 – Estimated worldwide IPTV services revenue – 2009; 2014
  • Table 29 – Worldwide Internet users and annual change – 2000 - 2010
  • Table 30 – Worldwide broadband subscribers and annual change – 2005 - 2010
  • Table 31 – Worldwide online gambling revenue – 1997; 2001; 2004; 2006; 2008, 2010
  • Table 32 – Worldwide digital music revenue – 2007 - 2009
  • Table 33 – Worldwide revenue from online video – 2008; 2012
  • Table 34 – Number of online banking users worldwide – 2009; 2012
  • Table 35 – Number of consumers using health monitoring – North America; Western Europe – 2008; 2012
  • Table 36 – US online travel spending – 2006; 2008 - 2009; 2013
  • Table 37 – Visitors to top web properties worldwide – 2008
  • Table 38 – Worldwide search engine market share – Q1 2009
  • Table 39 – Worldwide online advertising spending – 2007 - 2009
  • Table 40 – Online advertising spending in the USA – 2000 - 2009
  • Table 41 – Online advertising revenues – top four portals in the US – 2006 - 2008
  • Exhibit 1 – Faster broadband speeds offer more than just fast Internet
  • Exhibit 2 – Explanation: optical fibre
  • Exhibit 3 – Brief company profile – Social game developer – Zynga
  • Exhibit 4 – Twitter usage facts
  • Exhibit 5 – Wikipedia
  • Exhibit 6 – Key players in gaming industry sectors worldwide
  • Exhibit 7 – Examples of top online games sites in the US – 2008
  • Exhibit 8 – Examples of popular mobile games
  • Exhibit 9 – Anarchy Online by Funcom
  • Exhibit 10 – The Obama campaign
  • Exhibit 11 – Examples of Web 2.0 developments
  • Exhibit 12 – Be.interactive clients and partners
  • Exhibit 13 – Be.interactive mobile services
  • Exhibit 14 – From Legion Interactive to Be.interactive
  • Exhibit 15 – Key national and major smaller players in the PSMS market
  • Exhibit 16 – Revenue mix PSMS
  • Exhibit 17 – First example of video media collaboration
  • Exhibit 18 – Mobile TV/Video – Unicast and MBMS
  • Exhibit 19 – Confusing Mobile TV Technologies
  • Exhibit 20 – Open Mobile Video Coalition
  • Exhibit 21 – Mobile TV/Video – emerging across the world
  • Exhibit 22 – IPTV applications
  • Exhibit 23 – Examples of top IPTV carriers worldwide
  • Exhibit 24 – Examples of popular online dating sites
  • Exhibit 25 – Apple iTunes – key statistics
  • Exhibit 26 – Online music sector – key statistics
  • Exhibit 27 – Examples of online VoD sites
  • Exhibit 28 – Advantages of e-learning
  • Exhibit 29 – Popular health related websites in the US
  • Exhibit 30 – Applications of Microsoft’s Virtual Earth
  • Exhibit 31 - Online travel sector market summary
  • Exhibit 32 – Examples of leading Internet Media companies
  • Exhibit 33 – Key areas of focus for Internet media companies
  • Exhibit 34 – Examples of alternative search engines
  • Exhibit 35 – Definition: Cloud computing
  • Exhibit 36 – Amazon Web Services
  • Exhibit 37 – Online ad deal between Google and Yahoo aborted
  • Exhibit 38 – Google’s mobile operating system – Android
  • Exhibit 39 – Google’s key activities – 2006 - 2007
  • Exhibit 40 – Interesting items sold on eBay

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Number of pages 181

Status Archived

Last updated 14 Apr 2010
Update History

Analyst: Paul Budde

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