2011 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; it examines the key issues in the market and the business opportunities arising from those developments.

Subjects covered include:

  • Key elements of a digital economy;
  • Analysis of the effect that digital media and convergence is having on the media industry;
  • Overview and analysis of the various players in the market;
  • Analysis and market overview of the online video media industry;
  • Overview of the key online internet and entertainment services;
  • Activities from telcos and ISPs;
  • Analysis and identification of the key areas of focus for internet media companies;
  • Overview of key players;
  • Industry insights on IPTV and home theatre developments;
  • Leading trends in the social media and online gaming sectors;
  • Information on the companies and the services they offer in relation to mobile content;
  • Premium rate SMS;
  • The development of mobile TV at a global level.

Researchers:- Paul Budde, Kylie Wansink and Stephen McNamara
Current publication date:- April 2011 (3rd Edition)
Next publication date:- May 2012

Executive Summary

Digital media: disaggregating and transforming industries

Introduction

One positive outcome of the financial crisis was that global attention turned to new infrastructure developments. This has created a unique opportunity to shift the broadband emphasis – from a high-speed internet service to a national infrastructure for the digital economy that will underpin a range of positive social and economic developments.

E-commerce is just one sector that will benefit from improvements in infrastructure and a trans-sector approach to governance. E-government, e-health, e-education, social media and e-science are also important elements of a digital economy. These are addressed in separate reports.

Impact on the traditional media

The media industry has been in turmoil since the rise of digital media platforms, which have impacted upon many aspects of the industry’s traditional structure. The changes, combined with an economic downturn, have led to much unrest in the media sector. Major competing sectors include TV and radio broadcasting, newspaper publishers, film and video industries.

The digital media companies are the clear leaders, but to a certain extent there will be parallel developments – one driven by digital TV, using the traditional broadcasting networks, and one driven by broadband, using new fixed and mobile telco infrastructure.

The digital media industry

The success of internet media companies can be partly attributed to their willingness to compete in many different markets. While organisations like Google, Microsoft and Yahoo continue to focus on their core business of search services, these companies, as well as the other leading digital media players such as eBay, AOL, Microsoft, News Ltd, Amazon, Facebook, Apple and Twitter, also continue to look for other opportunities, arising from developments in mobility, cloud computing, e-commerce, home media, social media, online VoD, infrastructure etc.

At the same time the traditional TV media concentrates on digital TV. In terms of investment, that is where their money is going. They have been unable to keep up with the digital media activities of the new players – activities that are dominating the broadband content and services market.

Separately, other activities are emerging which we classify as digital economy (e-commerce, e-health, e-learning, smart grids, etc). These activities are covered in separate reports.

While the traditional media companies have all now established themselves in the developing digital media market, Seven, Nine and the ABC were the first to enter. The ABC in particular is increasing its market share significantly among digital viewers. Quality content is more and more crucial as digital platforms are becoming relatively commoditised. While telcos have tried to claim this territory they have continued to struggle to leverage their natural advantages.

In Australia, Fairfax Digital has continued to compete for digital viewers alongside the ABC and News Limited. In the report we cover the digital media activities of the ABC, News Limited, Freeview, ninemsn, Yahoo!7, Ten, Foxtel, Austar, Macquarie Southern Cross Media, WIN, Fairfax and Austereo.

The National Broadband Network is changing the media model

For more than a decade the traditional media has been on notice regarding the changes to be faced because of developments in the digital media market. So far it has failed to take decisive action, partly because it was afraid of cannibalisation and partly because its business models do not cater for swift business action. This has brought about a decline in revenues but, far more importantly, it has 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 media has largely been absent 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 new network 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 utilise this advantage?

The online video media

Online video media is now emerging as a killer application. Faster broadband speeds and increased uptake by consumers and businesses are driving the video demand as internet media companies and content producers fill the niche market.

The killer application is content that is being produced by the users themselves, with YouTube the second most visited site in Australia. Meanwhile IPTV products by the ISPs are still largely failing to attract a large user base. Some services such ABC’s iView are generating downloads in excess of 40% growth year-on-year, but there is certainly room for more niche products to emerge.

The most popular video downloads and streams are full-length episodes of TV shows, amateur video clips such as YouTube, music videos and feature-length films. BuddeComm estimates that video downloading and video streaming market has grown to well over 50% of all regular online video usage..

The telcos were the first to move once they began to understand what they could do with the internet. However they then became entangled in their vertically-integrated business models – trying to be all things to all people.

The new companies that arrived were not provided with an economically-viable business offering by the telcos, who preferred to enter this market on their own, through portal and ‘walled garden’ offerings. This forced the new players to develop the new market independently, with Over-The-Top (OTT) and apps solutions, thus bypassing the telcos as much as possible.

In addition the telcos lack the necessary media background. However, Telstra in particular remains resolute about its position in this new market and the company has made significant investments in the market under its BigPond brand.

In only a few instances do we see an opportunity for IPTV – the reality is that the telcos will find it pretty tough competing with cable and pay TV operators.

The condition of other telcos, and non-telco players also, in this market is not much better. Also covered in this report are Optus, NineMSN, Yahoo!7TV, Hulu, iiNet,  Internode, SBS and TransACT. Non-telcos include Foxtel and VOD.

Music, MP3 and podcasting

While music was one of the key drivers behind the early developments in digital media, faster speeds are now enabling video streaming to overtake music downloading in the fixed and mobile networks. Nevertheless music, music streaming, podcasting and MP3s are still being downloaded in larger large numbers, with estimates of illegal downloading and sharing estimated to increase fivefold in the five years from 2011.

Mobile is one of the preferred technologies for listening to and downloading music. Most will use free or cheap internet sites to gain access to music. Only about 20% of Australians actually pay for downloaded music.

There are some reports that claim this is also a fair indication of the future direction of the video entertainment and wireless broadband (mobility) market. In 2011 cloud-based music may be a way to deliver music anywhere and anytime over the air, and to capture the other 80% of the users who are using digital media online. With service providers overseas such as Grooveshark or Spotify providing free access to over 10 million tracks, interspersed occasionally with ads, business models like these will be hard to contend with.

Social networks and gaming

The exciting social media developments have become an important part of internet media development. Facebook has managed to capture the largest share of the market in recent years, but the industry is not sitting still and the new social networks that are emerging aim to improve upon the originals models. In addition, online gaming, particularly games based on virtual simulations, are increasingly becoming linked with social networking services.

Mobile social networking is also receiving a lot of attention.

Mobile media

The report also provides information on the major mobile media providers and the services they offer in relation to mobile content. The market for on-deck services has reduced, due to off-deck market developments following the release of the iPhone and Android phones.

Nevertheless the market has seen some change over the last few years, as company mergers and acquisitions bring consolidation to the industry. As a result of this the major mobile media providers are now becoming the digital media providers on the internet as they provide access to their services from mobile devices.

With the advent of capped mobile services and new smartphones 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 premium SMS (PSMS) market the mobile operators maintain an iron grip through their m-payment facilities. However this has, at the same time, prevented them from taking up new business opportunities.

The report provides the activities of the mobile operators and those of the service providers. Companies and service providers include – Telstra BigPond Mobile, Optus, VHA (Vodafone and 3), MessageNet, The Photon Group subsidiaries of Be.interactive (previously Legion Interactive also BlueSkyFrog), Red Oxygen, Oxygen8 Communications (previously Opera Telecom), Jester Digital (Jamba and Jamster), MobileActive, Mnet Yahoo!7, Sybase 365, Netsize Group, mBlox, Jumbuck Entertainment, Mobile Messenger, 5th Finger, SMS Central and Communicator

Mobile TV

During the past few years many industry commentators have expressed the hope that mobile TV, representing a convergence of the mobile and broadcasting sectors, would lead to considerable changes in the way people used the technologies and services offered by both industries. However a number of barriers remain to prevent consumers taking up mobile TV services in sufficient numbers for ‘tipping points’ to be reached. These include a continuing lack of awareness of the mobile TV and video services on offer, plus their cost.

Furthermore, video-based content is being included to a greater extent in various apps, and charging for video-based services separately is thus becoming increasingly difficult. This particularly applies to telcos – they were the first players to start with mobile portals and walled internet gardens, but they entirely misjudged the business models required to develop their own revenue around these new developments.

Market highlights:

  • In 2010 worldwide internet users reached around 1.6 billion and forecasts predict that by 2014 there will be around 2.3 billion regular internet users worldwide.
  • While the overall global advertising spend declined by around 6% in 2009, in 2010 there were some signs of recovery and spending may stabilise somewhat in 2011.
  • Following the internet revolution, which began with the fixed telecoms network, we are now seeing the mobile telecoms network being ‘invaded’ by new content providers, and soon there will be a new range of digital media companies seeking to leverage the apps market based on smartphones.
  • The newspaper publishers are among those hardest hit by the massive changes that are taking place as a result of rapidly changing digital technologies.
  • Faster broadband speeds and increased uptake by consumers and businesses are driving the video demand as internet media companies, together with content producers, fill the niche market.
  • In the next few years the overall global entertainment and publishing industry (online and offline) is expected to be worth more than US$2 trillion – driven in particular by a wave of growth in online video games/gambling, music, social networking/UGC, online video, etc.
  • Premium rate SMS (PSMS) services have developed into a US$200 million+ market.
  • In 2011 mobile TV/video is commercially available in some markets, with further launches and trials taking place in all regions of the world.

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 Can we fast-track the digital economy?
    • 1.3 Key sectors for the digital economy
      • 1.3.1 Background information
      • 1.3.2 Smart grids and the environment
      • 1.3.3 E-commerce
      • 1.3.4 E-government
      • 1.3.5 E-health
      • 1.3.6 E-education
      • 1.3.7 E-science
      • 1.3.8 Social media
    • 1.4 Key requirements of the digital economy
      • 1.4.1 Broadband
      • 1.4.2 Trans-sector approaches
      • 1.4.3 Open access
      • 1.4.4 Internet neutrality
    • 1.5 Conclusion: digital economy services
  • 2. Impact on the Media Industry
    • 2.1 Global industry overview
      • 2.1.1 Market summary
      • 2.1.2 Market insights
      • 2.1.3 Whatever happened to media convergence?
      • 2.1.4 Media companies need to disaggregate and rebuild
      • 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 The Australian 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 (FTA) TV broadcasters
      • 2.2.5 Pay TV operators
      • 2.2.6 Newspaper publishers - analysis
      • 2.2.7 News Corp and subsidiaries
      • 2.2.8 Fairfax Digital
  • 3. The Online Video Media Market
    • 3.1 Market overview and analysis
    • 3.2 ABC video downloads
      • 3.2.1 Overview
      • 3.2.2 ABC iView
    • 3.3 FOXTEL VoD
    • 3.4 ninemsn video downloads
    • 3.5 Yahoo!7TV video streams
    • 3.6 Other initiatives
      • 3.6.1 Hulu
      • 3.6.2 iiNet
      • 3.6.3 Special Broadcasting Service (SBS)
    • 3.7 Market surveys
      • 3.7.1 Video online boom trend will continue in 2011
      • 3.7.2 IPTV and internet video services report
      • 3.7.3 IDC IPTV forecasts
      • 3.7.4 Telepresence research from Frost & Sullivan
    • 3.8 Regulations and standards
      • 3.8.1 IPTV and unbundled local loop (ULL)
      • 3.8.2 Digital Video Ad Serving Template (VAST)
    • 3.9 Movies downloading
      • 3.9.1 Starting with video-on-demand (VoD) – analysis
  • 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. Digital Entertainment Markets
    • 5.1 Market and industry overview
    • 5.2 Video entertainment market
      • 5.2.1 Telcos and ISPs
      • 5.2.2 Google and internet media insights
    • 5.3 Music, MP3 and podcasting markets
      • 5.3.1 Statistical overviews
      • 5.3.2 Brief analysis of trends globally and in Australia
      • 5.3.3 Key players
    • 5.4 IPTV and home theatre markets
      • 5.4.1 IPTV market summary
      • 5.4.2 IPTV market insights
      • 5.4.3 Broadband TV – a game changing moment?
      • 5.4.4 Examples of leading IPTV countries
      • 5.4.5 Home theatre market summary
      • 5.4.6 Home theatre market insights
      • 5.4.7 Examples of leading cable and satellite developments
    • 5.5 Social media networks
      • 5.5.1 Social networks market summary
      • 5.5.2 Mobile social networking
      • 5.5.3 Social networks market insights
      • 5.5.4 Brief case studies
      • 5.5.5 Online and mobile gaming market
  • 6. Mobile Media Markets
    • 6.1 Key service providers
      • 6.1.1 Mobile operators
      • 6.1.2 Service providers
    • 6.2 The premium rate SMS market
      • 6.2.1 The market in 2011
      • 6.2.2 Previous analysis (updated in 2011)
      • 6.2.3 Smart phone apps market
      • 6.2.4 Subscription-based content services
      • 6.2.5 Consumer protection
      • 6.2.6 Key players in the premium rate SMS (PSMS) market
      • 6.2.7 PSMS revenues
    • 6.3 Mobile TV development
      • 6.3.1 Mobile TV market summary
      • 6.3.2 Mobile TV market insights
      • 6.3.3 Developed market: Western Europe case study
      • 6.3.4 Developing market: South Africa case study
  • 7. Glossary of Abbreviations
  • Table 1 – Worldwide advertising spend versus online advertising spend – 2009 – 2012
  • Table 2 – Growth of Hulu video streams – various months – 2008 - 2010
  • Table 3 – Most popular formats for receiving news in the USA – 2010
  • Table 4 – Australia – Fairfax Digital financial overview – 2009 -2011
  • Table 5 – Estimated video streams by selected providers in Australia – 2008 - 2011
  • Table 6 – Visitors to top ten web properties worldwide – 2008; 2009; 2010
  • Table 7 – Worldwide search engine market share –Q1 2010; 2011
  • Table 8 – Worldwide advertising spending – all mediums – 2008 - 2012
  • Table 9 – Worldwide online advertising spending – 2007 - 2012
  • Table 10 – Google advertising revenue – 2009; 2010
  • Table 11 – Worldwide smart phone operating systems by market share – 2007 - 2010
  • Table 12 – Australian mobile phone recorded music market sales – 2007 - 2012
  • Table 13 – BPM standard download pricing in Australia – 2011
  • Table 14 – BigPond mobile music standard download pricing in Australia– 2011
  • Table 15 – IPTV subscribers in China – 2004 - 2012
  • Table 16 – PCCW NOW TV subscribers and ARPU in Hong Kong – 2003 - 2009
  • Table 17 – IPTV subscribers; proportion of DSL base in France – 2004 - 2011
  • Table 18 – KPN digital TV subscribers in Netherlands – 2008 - 2010
  • Table 19 – KPN IPTV subscribers in Netherlands – 2009 - 2010
  • Table 20 – Forecast IPTV subscribers in Italy – 2006 - 2010
  • Table 21 – Worldwide networked TV shipments – 2008 - 2009; 2012
  • Table 22 – Basic cable and digital subscribers in USA – 2000 - 2010
  • Table 23 – Top 20 cable MSOs ranked by subscribers and market share in USA – 2009
  • Table 24 – BSkyB subscriber statistics in United Kingdom - 2005 - 2009
  • Table 25 – BSkyB revenue by sector in United Kingdom - 2008 - 2009
  • Table 26 – BSkyB annualised ARPU in United Kingdom - 2005 - 2009
  • Table 27 – BSkyB revenue, operating profit and EBITDA in United Kingdom - 2007 - 2009
  • Table 28 – Satellite DBS subscribers by major network in USA – 2000 - 2010
  • Table 29 – DISH ARPU, churn and subscriber acquisition costs in USA – 2005 - 2009
  • Table 30 – DIRECTV ARPU, churn and subscriber acquisition costs in USA – 2005 - 2009
  • Table 31 – Time spent online in social networks by top 10 countries – 2009 - 2010
  • Table 32 – Worldwide market share of mobile social network users – 2008; 2013
  • Table 33 – Top 3 countries using Facebook by unique monthly users – 2009
  • Table 34 – Unique monthly users – Facebook versus MySpace – 2009 - 2010
  • Table 35 – Worldwide online gambling revenue – 1997; 2001; 2004; 2006; 2008, 2010
  • Table 36 – Total value of bets placed via mobile gambling worldwide – 2006; 2010; 2015
  • Table 37 – Cost of a music download for Vodafone pre/postpaid versus 3 subscribers in Australia – 2011
  • Table 38 – Estimated revenues in Australia – PSMS market – 2004 - 2011
  • Chart 1 – Australia – Fairfax Digital revenue broadcasting versus online – 2008 - 2010
  • Chart 2 – Amount of online content access by Australians – 2010
  • Chart 3 – Audience market share of Australian video websites – 2010
  • Chart 4 – Australian internet distribution recorded music market sales – 2007 - 2012
  • Chart 5 – Australian apps market revenue estimates – 2009 - 2015
  • Chart 6 – Australian mobile user app usage – 2010
  • Chart 7 – Estimates of smartphone units in Australia – 2011; 2013; 2015
  • Chart 8 – PSMS estimated market share by operator in Australia – 2011
  • Chart 9 – Worldwide mobile TV subscribers - 2009; 2011; 2013
  • Exhibit 1 – Faster broadband speeds offer more than just fast internet
  • Exhibit 2 – Explanation – optical fibre
  • Exhibit 3 – Selected examples of countries with planned ICT infrastructure investment
  • Exhibit 4 – Seven Network’s digital media strategies – 2006 - 2009
  • Exhibit 5 – Key areas of focus for internet media companies
  • Exhibit 6 – Definition: Cloud computing
  • Exhibit 7 – Cloud computing generates huge interest
  • Exhibit 8 – Other key historical Google activities – 2006 - 2007
  • Exhibit 9 – Examples of top IPTV carriers worldwide
  • Exhibit 10 – The Obama campaign
  • Exhibit 11 – Foursquare
  • Exhibit 12 – Twitter usage facts
  • Exhibit 13 – Examples of key players in gaming industry sectors worldwide
  • Exhibit 14 – Brief company profile – Social game developer – Zynga
  • Exhibit 15 – Anarchy Online by Funcom
  • Exhibit 16 – Australia – Be.interactive clients and partners
  • Exhibit 17 – Australia – Be.interactive mobile services
  • Exhibit 18 – Gemalto
  • Exhibit 19 – Key national and major smaller players in the PSMS market in Australia
  • Exhibit 20 – Revenue mix PSMS in Australia
  • Exhibit 21 – Open Mobile Video Coalition in USA
  • Exhibit 22 – Mobile TV/Video – emerging across the world
  • Exhibit 23 – First example of video media collaboration
  • Exhibit 24 – A plethora of mobile TV technologies worldwide

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Annual Publication Profile

Technologies

Broadband Fixed
Broadcasting
Companies (Major Players)
Digital Media

Number of pages 173

Status Archived

Last updated 13 Apr 2011
Update History

Analyst: Paul Budde

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