2012 Australia - Digital Entertainment and Media Market

Will infrastructure constrain the digital entertainment market?

The digital media market is changing as it has been impacted upon many aspects of the media industry of old. These changes, combined with an economic downturn, led to much unrest in the media sector. Moving into digital entertainment there are several competing sectors. These sectors include – TV and radio broadcasting, newspaper publishers, the film and video industries – as well as the new internet-based companies.

The internet-based media companies are the clear leaders in the digital entertainment arena. However for the time being there are, to a certain extent, 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 arrival of smart TV will bring about a much closer alignment of these two developments, which most certainly will lead to further disruptive developments in the industry. In this publication we describe and analyse the effect that digital media and convergence is having on the media industry.

While the traditional media has been on notice about the changes it has so far failed to take decisive action, partly because it has been afraid of cannibalisation and partly because its business models do not cater for swift business action. To date the result has been a decline in revenues, but far more importantly the traditional media companies have failed to seize a share of the new market that is now dominated by relative newcomers such as Google, YouTube and Facebook.

In Australia the national broadband network (NBN) will be the next playing arena. Once 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role, such as looking at the trans-sector opportunities that the NBN has on offer – or they can simply copy their outdated models onto the NBN, perhaps by using the wholesale services of a telco.

Some initial indications are that they are looking at more of the same rather than moving towards media innovation. On the other hand, the traditional media companies do have strong brands and millions of (often unsigned) customers – but will they be able utilise this to their advantage?

In the past BuddeComm described triple play as being linked to the traditional business concept and the old telco way of thinking – that is, based on locking customers into their services rather than creating new customer benefits. In this publication we say we believe triple play should stand for the ability to deliver access to all forms of communication over the one connection. Telcos and ISPs need to make this possible, and of course media companies could join them in this. The services they can offer should be aligned with this open approach and should include security, storage, billing, and all kinds of extra enhancement, depending on the specific applications. The market is rapidly changing from one of broadcasting to one of narrowcasting.

In this publication BuddeComm also provides an analysis and market overview of the online video media and IPTV industry in Australia; and we give information on telcos around the world that have not been very successful in selling content. With devices such as smartphones, tablets and smart TVs the original triple play model will eventually disappear.

With the rollout of the NBN the telecommunications, entertainment, video and multimedia markets in Australia are undergoing sweeping changes. These are currently characterised by the increasing array of products and services that can be delivered to consumers over this infrastructure. The connected or smart TV will soon be a major entertainment hub of the digital home, with gigabit WiFi and WiFi repeaters bringing signals to laptops, tablets and smartphones around the house.

This will mean that subscription TV and cable TV operators, telecommunications firms, consumer electronics and IT companies will all be competing to provide various digital media services. These services require a large amount of bandwidth, and they are typically delivered over high-speed connections based on fibre optical or hybrid-fibre-coaxial (HFC) networks. In many markets access to fibre-to-the-home networks (FttH) have not been priced attractively enough to appeal to a large number of customers. However the NBN is changing this in Australia – it will attract large numbers of users, as well as new service and content providers. There will be a range of different offerings that will provide competitive access to a variety of services and, as such, triple play as an access solution is becoming a vanilla product rather than an upfront sales channel.

We also provide a brief overview of the major players in the industry, with some statistics and analysis along with results from recent industry surveys.

The telcos were the first cabs off the rank once they began to understand what they could do with the internet; however they then became entangled in their vertically-integrated business models. Some launched their own proprietary systems and tried to negotiate their own exclusive content deals with movie and sport providers.

This forced the new players to develop the market independently, with over-the-top (OTT) and apps solutions, thus bypassing the telcos as much as possible. The clear winner has been YouTube, but other specialised video entertainment companies, including the broadcasters, have also performed significantly better in the video entertainment market.

But as we move into 2012-2013 a new direction will begin to emerge for this market. With more widespread availability of ADSL2+ broadband, the prospect of new business models on the NBN and a new look at triple play models IPTV is back on the agenda. Some of the up-and-coming providers profiled in this publication, such as the Telstra T-box, FetchTV, Quickflix and the ABC’s iView, will lead the revival of this market.

The new digital market has also affected the newspaper publishers, some of which have been among those hardest hit by the massive changes that are taking place as a consequence of rapidly changing digital technologies. In this publication we also discuss the ‘dumbing-down’ of their newspapers as a survival strategy. We provide an overview and analysis of the digital developments in some of these companies’ operations, as they try to retain their dominant position in the digitally-connected world.

We also supply information on smartphones and tablets, with a global overview. We report on the use of tablets and smartphones and highlight the major mobile media providers and the services they offer in relation to mobile content in Australia. We discuss why the on-deck services market has diminished following developments that have taken place since the release of the iPhone, Android and other smartphones, now with the increasing uptake of tablets.

However, while mobile web browsing and data usage are still growing exponentially these mobile devices require more and more data bandwidth, as the applications that are being developed for the mobile market also allow mobile TV and video to be streamed. Unfortunately the mobile operators are having trouble keeping up with these mobile broadband demands. Mobile TV viewers are watching content off-net and this now also includes recording and viewing of FTA TV. The use of mobile social TV is further reducing the average-revenue-per-user returns of the operators and their portals.

By early 2012 the number of users of the social networking sites continues to grow, with over 15 million users of the major social networking sites in Australia. Increased use of mobile broadband through mobile devices is driving consumer uptake, with many businesses now investing in social media and also expecting a return.

The converged networks are seeing gaming, music, movies and gambling merging, integrating and moving online as well. And growing penetration of fixed and mobile broadband networks will promote further growth in online gaming. In 2012 the Interactive Gambling Act is still under review and in this publication we provide some information, analysis and an overview of digital media developments in online gaming and gambling, along with survey results containing statistical information.

Market highlights:

• The internet media companies are still maintaining leadership in this market;
• Usage in the mobile media and data market continues to expand through the use of smartphones and tablets;
• Revenue from the PSMS market is expected to drop in 2012 as other forms of use take precedence;
• Copyright and online piracy battles over content are continuing between those with vested interests;
• The NBN multicast service will enable RSPs to offer IPTV and other video content over the broadband network;
• Video and image-based content may constitute more than 90% of consumer traffic by 2013;
• Key trends for digital media companies;
• ABC’s iView has been far more successful in IPTV than others;
• Cloud-based music services allow streaming of millions of songs;
• The number of Australians interacting with brands via social networks has jumped by more than 60%.
• Online gaming and gambling is beginning to increase again, now that the initial effects of the GFC have passed in Australia.

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