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Spending on digital platforms to touch $1.1 trillion by 2011

Indiantelevision.com Team

(24 November 2007 10:00 pm)

NEW DELHI: Global spending across various digital platforms is expected to touch $1.1 trillion by 2011, up from $690 million in 2006.

The spending will be at a CAGR of 9.1 per cent, according to FICCI-PricewaterhouseCoopers (PwC) study on Entertainment & Media: India Going Digital. Asia Pacific will be the fastest-growing region, with a projected 13.5 per cent CAGR.

In 2006, the spending on digital platforms has contributed 48 per cent to the total entertainment and media spending including internet access spending.

Spending on these platforms have expanded by double-digit and high-single-digit rates during the five past years. The report also says that two additional years of double-digit growth are expected, with high-single-digit gains anticipated during 2009–11.

India is currently witnessing a trend of increased digital infrastructure penetration of broadband and mobile networks which now make it possible to broadcast, stream and download digitised content from diverse platforms to a variety of devices. The new technological environment is thus creating great opportunities for content providers in India to monetise their valuable content across various digital media and devices.

However, the migration to digital formats has an adverse impact on competing revenue streams. The FICCI-PwC study points out that digital/mobile spending streams compete with physical home video sell-through and rental, physical recorded music sales, physical book sales and purchases of magazines and newspapers. Additionally, traditional TV, radio, magazine, and newspaper advertising continues to compete with Internet advertising.

Consumer migration to digital formats is leading to change on the part of content providers, including increased interest in consolidation. With content now being distributed on multiple platforms, content producers/providers, distributors, and technology companies are looking to expand their presence among the proliferating channels, resulting in an increase in merger and acquisition (M&A) activity.

Companies are also forming alliances and joint ventures to better take advantage of and serve the needs of the changing environment.

Broadcasters are creating strategic alliances with digital networking companies and teaming up with Internet companies and wireless providers to stream programming both over the Internet and to mobile devices. Publishers and search engine companies are working together to share content and sell advertising in both print and digital formats. Technology companies are creating alliances to support the expansion of digital and mobile distribution of content.

The study suggests that an efficient Digital Rights Management System that will allow management and protection of digital content in a digital environment is mandatory to boost the fast-growing Indian digital entertainment and media industry.

The System should be technology-agnostic, forward-looking and robust regulatory policies balanced with self-regulation and cross-industry agreements, according to the study.

Howevr, the study also notes that the advent of digital media has thrown up several new issues like copyright and technology development. Copyright issues are at the foremost which impact exploitation of digital content across ‘new media’. Digital piracy, ‘though at a nascent stage’, will also be a challenge for Indian stakeholders with proliferation of digital media.

It says that content, distribution, and technology companies are thus expected to continue to pursue new relationships during the next five years to accommodate the growing role that digital distribution will play in the entertainment and media market.

Content providers and distributors have to see the degree to which they utilize DRM software to control distribution. DRM restricts the ability of consumers to copy and distribute products. The benefit to content providers is that DRM limits unauthorized distribution. But restrictions on usage, which include the inability of content downloaded on one device to play on another, can discourage some consumers from buying product through legitimate channels.

Because of increasing pressure on the industry itself, music companies are considering releasing music over the Internet without copy protection, which would fuel Internet distribution and revenue growth by allowing music downloaded to be played on virtually any device. With physical distribution falling rapidly, labels are becoming more receptive to strategies that enhance digital distribution even as it reduces impediments to unauthorized distribution.

Companies are experimenting with different approaches to intellectual property management. It is expected that technologies, methodologies, and business models will continue to evolve during the next several years.

The FICCI-PwC study points out that customer focus may very well be the key differentiator in the months and years to come. More and more entertainment and media companies are pushing forward with their triple- and quadruple-play strategies. Enabled by the growth in broadband and mobile, new players are intensifying competition and the fight for revenues as the market moves toward lower prices.

The study says the consumer now increasingly has the power to influence others, the organisation, and the marketplace. There is an unprecedented explosion of choices and new services. They can access content anywhere, anytime, on any device. They can entertain themselves and others and communicate with each other and with content and service providers in new ways, can customize anything, from their music playlists to their television line-ups. They can use Weblogs, create their own content, and share that content on a growing number of social networks.

For the organisations that provide the content and distribution services, the growing complexity of their businesses is driven by new revenue opportunities, cost pressures, and a need to be much more transparent while developing offerings to meet consumer demand. Capturing the potential within the complexity requires a new marketing approach and a new mind-set, both reflecting the new expectations of consumers.