2011 Global Digital Media - Online Sector Entertains the World

Online entertainment a key driver to internet use

Online entertainment has become a hugely popular area and every day, internet users around the globe log in for purely entertainment purposes. From updating social networks, watching online videos and participating in games and gambling; the online platform now offers an enormous range of services.

Online video in particular has become recognised as a powerful format for both communicating online and providing an enhanced online experience. Online video is being used by many different industries for advertising, marketing, entertainment, demonstration and communication purposes. The success of Google’s YouTube service, based on user-generated videos, has been well documented and in 2011 YouTube continues to dominate in terms of viewers and streaming. YouTube is also seeking to expand its services beyond only user-generated videos by forming partnerships with online movie content providers.

Other business models have emerged and are proving successful, particularly for online movies and TV shows. Hulu is a prime example of this and Netflix, operating in North America, is also gaining prominence. In 2011 we also saw social networks begin to offer online Video-On-Demand (VoD) services via a partnership between Facebook and Warner Bros. Whole new distribution channels for on-demand videos are opening up and the success of these partnerships will be closely watched by the industry.

As indicated above, Facebook, which began as a social communication tool, is fast expanding its offerings and has become a true competitive threat to Google. Social media is becoming integrated with many service offerings such as e-commerce, unified messaging and online gaming. Facebook is well positioned in the social gaming area too, offering popular games such as Zynga’s Farmville via both online and mobile channels.

Advertising is still the key source of revenue for online entertainment providers and around 15% of overall worldwide advertising spending will be directed towards digital media channels. While the economic downturn initially impacted upon the growth of overall advertising spending; in 2011 there are signs of recovery with online advertising continuing to grow and the ever popular TV advertising rebounding.

The rise of digital media channels has placed much pressure upon the traditional media and entertainment outlets in recent years. This, combined with an economic downturn, has led to much unrest in the media sector. The digital media companies are the clear leaders however, 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 telecoms infrastructure.

The success of Digital Media companies can be partly attributed to their willingness to compete in many different markets and implement new innovations. Companies like Google, Microsoft, Amazon, Facebook, Apple, Twitter, and so on are continually looking for other opportunities from developments in mobility, e-commerce, home media centres, social media, online VoD and infrastructure. As online entertainment is based on a virtual environment, it is expected that cloud computing technology will become a useful infrastructure tool for the future.

Examples of key insights:

• Online video media is a growth area and in 2011 Hulu has over 300 advertisers using its service.
• There is a growing movement to combat music piracy and illegal online downloading services.
• Nearly 30% of music sales globally are now sold through digital channels.
• Facebook continues to expand upon its service offerings and has become a true competitor to Google.
• In 2011 social networking is the most popular online activity worldwide followed by online gaming.
• In the Middle East, a rapidly growing broadband user base offers a digital media market ripe for development. Recent events in the region highlight the role and impact potential of social digital media in the region.

• Ranked 22nd worldwide, Egypt has Africa's largest Facebook community, growing at over 100% per year.
• Latin America is a growing market for video game development. Argentina is home to the Latin Interactive Network (LIN), a leading online games publisher, and to the Three Melons, a game studio that develops online and iPhone games.

Note: all $ are US$ unless stated otherwise.

BuddeComm’s new report, Global Digital Media – Online Sector Entertains the World, gives the latest insights into the online entertainment sector. It explores key issues and opportunities and provides analyses, statistics, forecasts and trends. The report includes broad statistical information and insights into internet media trend. It explores the digital media leaders such as Google and Facebook as well as social networking and gaming trends; online video media and digital advertising. It provides insight into the impact on traditional media and emerging trends like cloud computing. The report also includes a unique perspective into how the online entertainment sector is unfolding differently around the world by incorporating regional overviews written by BuddeComm’s senior analysts.

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