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A Detailed Look at the State of the Entertainment Industry

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A Detailed Look at the State of the Entertainment Industry A detailed look at the state of the entertainment industry. 2014 EDITION October 2014 Michael Masnick, Michael Ho Joyce Hung, Leigh Beadon A closer look at growth in the major entertainment industries MUSICMUSIC VIDEO GAME SALES VIDEO TOTAL CONSUMER SPEND, IN BILLIONS LIVE CONCERT REVENUES 18 IN BILLIONS BOOKSBOOKS $3.5 15 FILMS RELEASED IN THE US E-BOOK UNITS SOLD IN MILLIONS 12 650 $2.5 500 9 600 $1.5 375 550 2002 2012 250 500 1990 2010 MOBILE GAME REVENUES 125 IN BILLIONS, WITH PROJECTION 2002 2005 2008 2011 ROYALTY REVENUES 15 IN BILLIONS 2008 09 10 11 2012 TIME SPENT WATCHING TV $3 AVG. DAILY HOUSEHOULD HOURS E-READER OWNERS 10 9h AS % OF POPULATION $2 5 8h30m $1 4% 32% 8h 2008 2011 2014 2017 7h30m 1990 2010 CONSUMER SPEND ON GAMES 2010 2014 2012, BY CATEGORY 1999 00 2010 11 NUMBER OF TRACKS SELF-PUBLISHING OUTPUT INDEXED BY GRACENOTE MOVIE INVESTMENT BY TOTAL NUMBER OF ISBNs $14.8B IN BILLIONS eBooks Print Books TOTAL: $1.93B 24 40,000 $20.77B +1536% 180,000,000 $4.04B 30,000 18 11,000,000 2001 20,000 Content Hardware Accessories 12 2013 10,000 GAMING CONSOLE SALES 1990 2010 MUSIC APP REVENUES 2007 08 09 10 11 2012 LIFETIME UNITS SOLD, BY GENERATION GROWTH INDEX 300 ONLINE VIDEO TRAFFIC TOTAL BOOK MARKET AS % OF ALL TRAFFIC, PROJECTED IN BILLIONS 200 40% +77% 28 30% 27.5 100 2012 20% 2013 27 iOS App Store 1ST 3RD 5TH 7TH Google Play 10% 26.5 1972-77 1983-86 1993-97 2005-11 2ND 4TH 6TH 1978-82 1987-92 1998-2004 2010 11 12 13 14 2015 2008 09 10 11 2012 Sources: MPAA, Box Oce Mojo, Hollywood Reporter, BMO Capital Markets, Neilsen, Rachel Soloveichik (BEA), Gracenote, App Annie Index, e-Media Institute, BookStats, Pew Research, Bowker, NPD Group, PricewaterhouseCoopers, Economist, industry estimates OVERVIEW wo years ago, in our first Sky is Rising report, we highlighted how, despite all the reports of doom and gloom, we were living Tin a true renaissance period for content around the globe, in which more content than ever before was being created, more people had access to more content, more people were paying more money for content and the overall content industries were making more money than ever before. That did not mean that everything was perfect for everyone. Mixed within that data, we noted that there were both challenges and opportunities for many different parties. For content producers, while it had become cheaper and easier to produce and dis- tribute their works (and to connect with fans), it also meant that there was significantly more competition to deal with. Similarly, for traditional middlemen (especially those in gatekeeper roles), the shift was monumental. The changing nature of the creation, distribution and promotion of content often meant that business models that relied on being a gatekeeper were suddenly less powerful. In short: the creative output continued to grow and the money continued to flow — but often in very different ways that created both opportunities and challenges for all participants. Last year, we released the second report in the series, focusing on what was happening in six European countries. The reason behind this was to explore how accurately the global results were reflected in certain individual countries. What the data showed was that — for the most part — the global trends stayed true within individual countries, but with some key differences. Certain industries struggled more than others, giving us glimpses into different challenges and the ways different policies might impact the content industries. For example, there was a pretty clear correlation between the number of authorized digital music services and music revenue — suggesting that more convenient licensing policies likely resulted in more revenue. This report is the third in the series, and it focuses on what the data says about the US specifically. The US, of course, remains the leader in the production of music, movies, books and video games — and those works are exported all over the world. So fo- cusing on the US gives us a glimpse into what’s happening around the globe, but with the added benefit of more widely available and much more consistent measurements and data. CONTENTS 1 Music ............................................................................................................6 2 Video .........................................................................................................10 3 Books ........................................................................................................ 16 4 Video Games ...........................................................................................21 5 Conclusion .............................................................................................. 26 The Sky Is Rising 2014 Floor64 3 At the same time, the US is also beginning what is likely was, with some massively successful books now coming out to be a long process of exploring copyright reform — and we from self-published authors. hope that an analysis of what the data actually says about Meanwhile, the television market (increasingly difficult to the US market for content will help aid the debate and dis- define, given changing technology), has continued to expand, cussion as that process moves forward. and many people now recognize that some of the most cre- As for the data: the basic story certainly remains the same. ative content production has moved from “movies” to epi- Within the US there has been an explosion in creative out- sodic television — though some of that “television” is now put over the past couple of decades. While the nature of the only available online. Related to this is the ongoing struggle various industries may have changed, the simple, undeniable of how those shows will be offered, with some still locked to fact is that there is a cornucopia traditional pay TV options (cable of amazing new content being and satellite) and others avail- produced, consumed, shared and able via online only platforms, monetized in the United States. like Netflix and Amazon. Connect- The amount of new music being ed to all this are the “cord cutters” produced and released is abso- The US is beginning and (increasingly) the “cord nev- lutely staggering, with Graceno- ers” who are driving the various te’s database of commercially what is likely to be a paths on a collision course. The available songs jumping from long process of exploring markets are still somewhat frag- 100 million tracks in 2011 to 180 mented, but everything is moving million tracks in 2013. Despite copyright reform — and online, and the amount of new constant predictions of it falling and wonderful content continues off, the live music business con- we hope that an analysis to multiply. tinues to grow as well. While the The book market is one that business models are still unclear, of what the data actually many people have been predict- the rise of streaming services as ing doom and gloom for quite the dominant form of access in says about the US some time — often for different both music and video are a clear reasons than the music and vid- and overwhelming trend. There market for content will eo markets. However, again, the is significant evidence that the technology industry appears to long-predicted shift from “own- help aid the debate be creating a wonderful payoff ing” content to “accessing” con- for those in the publishing in- tent is in full swing. dustry who embrace it — show- A similarly undeniable trend ing tremendous growth in ebook is the shift in music, movies and publishing, thanks to increasingly books away from total domina- widespread adoption of dedicat- tion by “the majors.” While major labels, major studios and ed ebook readers and general purpose tablets and smart- major publishers still produce much of the top content, in- phones. dependent artists, authors and movies are no longer on the The video game market has been changing quite a bit fringe, with many taking up the slack where the majors have in recent years as well. After seeing incredible growth for backed off on production. Independent movie production, years, the industry did have a bit of a stumble, but mostly for example, has been revolutionizing the movie industry, that appears to be due to the switching generation of con- with some of the most successful (and critically acclaimed) soles, leading many gamers to hold off on purchases until movies in recent years coming from independent origins. the new platforms were available, and not fully attributable Self-publishing is no longer stigmatized in the way it once to the 2008 economic downturn. That said, the rise of new 4 Floor64 The Sky Is Rising 2014 gaming opportunities in mobile and social have begun to tounding abundance. Not only do they have significantly change what people think of as “gamers” and the potential more content to explore than ever before, but a greater op- gaming market. portunity to really dig in and explore new areas and commu- Put it all together, and we discover, again, an incredibly nities. They’re better able to learn about influences, to join vibrant world of creativity on multiple fronts. Amazing new communities and even to interact with the artists and cre- works are being created in every different form of media — ators, as well as other fans, directly. with the boundaries and lines between them starting to blur. Legacy players may be facing more challenges in adapt- Much of what is happening is directly related to technologi- ing to this new world, but we’re seeing that as they em- cal progress and innovation, as new platforms, tools and ser- brace new systems and platforms, many are learning how vices are enabling cheaper, eas- to thrive as well. The increasing ier and better ways to create, to success of licensed platforms for distribute, to promote, to connect distribution are opening up new and to make money. channels, and those who take a The challenges still remain: more holistic view of the oppor- with easier creation, promotion The two industries tunities are seeing success.
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