The Outlook for Home Entertainment Helen Davis Jayalath, Head of Video Media-Tech Asia Macau, 15 March 2011 IHS Screen Diges t: w ho are we ? • Largest media-focused research firm in the world with ~50 analysts covering over 65 global territories • 40 years of experience tracking and forecasting media markets worldwide • Continuous online Intelligence research services • Constantly updated and comprehensive market data and ftforecasts • Flow of analytical reports • Strategic consultancy • Recently merged with iSuppli – and both companies acquired by IHS ($1bn leader in “critical information & insight”) Copyright © 2011 IHS Inc. All Rights Reserved. Combined 170 analysts: 1 + 1 = complete TMT coverage TECHNOLOGY MEDIA TELECOMMUNICATIONS . Raw materials . Operators . Broadband Media . Semiconductors . Wireless . Mobile Media . Photovoltaics . Wired . Gaming . Memory . Broadband . Video . Displays . Infrastructure . Cinema . Manufacturing . Computing . TV . Channels . Telematics . Advertising . Applications . Consumer Copyright © 2011 IHS Inc. All Rights Reserved. Agenda • Global entertainment spending • Trends in physical media • Focus on movies • The impact of Blu-ray Disc • Trends in diggyital delivery • The changing digital landscape • Focus on movies • Outlook to 2014 Copyright © 2011 IHS Inc. All Rights Reserved. Global entertainment spending is still rising despite a tough economic climate • Consumers spent $80bn on physical media in 2010 ($104bn in 2001) • But p hysi cal’ s sh are of spendi ng has fa llen from 50% to 24% in 10 years Global consumer spending on entertainment 2001-2010 350 300 250 Non- 200 physical nn media 150 $b 100 50 Physical media 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Physical rental VHS retail VCD retail DVD retail Blu-ray Disc retail Games Physical music Cinema Cable and Sat. Subs PPV and VoD Mobile games Mobile music Mobile video Online music Online video Online games Notes: Global = sum of all 37 territories covered by Screen Digest Video Intelligence where data is available. Online games data available for USA and Europe only. Copyright © 2011 IHS Inc. All Rights Reserved. TV subs generated most of the recent growth • Without them, physical still accounts for around half of entertainment spending • With mus ic accoun ting for the bigges t dec line Global consumer spending on entertainment 2001-2010 160 140 120 Non physical 100 media nn 80 $b 60 40 Physical media 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Physical rental VHS retail VCD retail DVD retail Blu-ray Disc retail Games Physical music Cinema PPV and VoD Mobile games Mobile music Mobile video Online music Online video Online games Notes: Global = sum of all 37 territories covered by Screen Digest Video Intelligence where data is available. Online games data available for USA and Europe only. Copyright © 2011 IHS Inc. All Rights Reserved. The video business is still dominated by physical media Home ent: $78.2bn • Worldwide, home entertainment was worth $80bn in 2010 • Two-thirds of this were generated by movies 52% • 90% of movie spending was generated by DVD and Blu-ray 4% • None of the non-physical forms of delivery had a significant impppgact on spending trends 85% Cumulative growth in global consumer Mov ies: $55. 5bn Physical video spending on home entertainment 2010 Pay TV VOD 0% Online video -13.1% -5.5% -4.6% -2% -4.7% -4.2% -3.2% 51% -5.8% -4% 2% -6% -8% -10% -12% -14% 90% DVD re ta il +BD+ BD re ta il +VCD+ VCD re ta il Notes: + online retail + physical rental + online rental Global = sum of all 37 territories covered by + TV VOD Screen Digest Video Intelligence Local currencies converted at fixed 2010 exchange rates Copyright © 2011 IHS Inc. All Rights Reserved. Even when theatrical is included, physical generated almost half of all movie spending • The prevalence of the retail business model means packaged media’s share of volume is even greater - 60% Global movie spending by platform Global movie transactions by 2005-2010 platform 2005-2010 60 10 50 8 40 6 30 ($bn) 4 20 (billions) 2 10 0 0 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 Physical Video Theatrical Pay TV VoD Online video Copyright © 2011 IHS Inc. All Rights Reserved. What’s happening to physical product in Asia? • Japan’s relatively strong video market means physical accounted for 76% of spending • Down from > 90% in 2008 • While the low prices prevalent in some markets means its share of volume was just 70% Asian movie spending by platform Asian movie transactions by 2005-2010 platform 2005-2010 12 2.5 10 202.0 8 1.5 6 (bn) ($bn) 101.0 4 0.5 2 0 0.0 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 Physical Video Theatrical Pay TV VoD Online video Copyright © 2011 IHS Inc. All Rights Reserved. BD’s premium price helps packaged media to ppgunch above its weight Global units sold (m) • Hardware take-up has been slower than initially expected but 147 it i s now i ncreasi ng • BD’s share of retail sales rose from 4% in 2009 to almost 8% 81 • BD premium over DVD averages 100% globally 2009 • In less developed markets it can cost 5x to 10x as much • BD generated 14% of global retail video spending last year 1,972 2010 1,821 Average consumer price of DVD and BD in 2010 Global retail sppgending (()$bn) ($) 80 DVD 3.9 BD 60 2.3 40 2009 20 26.8 2010 0 23.8 Notes: International = sum of all 34 territories outside North America DVD BD covered by Screen Digest Video Intelligence Local currencies converted at fixed 2009 exchange rates Copyright © 2011 IHS Inc. All Rights Reserved. But the industry must not get complacent – BD hom es will contin ue t o buy DVDs Europe: Hardware penetration (%) Asia: Hardware penetration (%) 100 25 80 20 DVD 15 60 VCD 40 BD 10 DVD 20 (inc PS3) 5 0 0 2006 2008 2010 2012 2014 1996 1998 2000 2002 2004 2006 2008 2010 Europe: Volume sales to consumers by format Asia: Volume sales to consumers by format 100% 100% 80% 80% 60% 60% DVD VCD 40% 40% BD DVD 20% 20% 0% 0% 2006 2008 2010 2012 2014 1996 1998 2000 2002 2004 2006 2008 2010 Europe: Average consumer price ($) Asia: Average consumer price ($) 50 30 40 25 20 30 DVD 15 VCD 20 BD 10 DVD 10 5 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 1996 1998 2000 2002 2004 2006 2008 2010 Copyright © 2011 IHS Inc. All Rights Reserved. What’s the bottom line for physical media? • BD will continue to coexist with ‘good enough’ DVD, including in BD HHs • Recession may have slowed BD hardware adoption but it has not stalled it • BD will account for one third of global consumer spending on physical video by 2014 Global home entertainment spending 2010-2014 50 45 40 35 30 25 ($bn) 20 15 10 5 0 2010 2011 2012 2013 2014 Rental VCD purchase DVD purchase BD purchase Notes: Local currencies converted at fixed 2010 exchange rates Physical data covers all mainstream genres; Digital includes content delivered over the open internet: retail (movies, TV & sport), rental (movies & TV) and subscription (movies & TV); TV VoD/nVoD covers TV content and movies delivered through walled garden systems Copyright © 2011 IHS Inc. All Rights Reserved. But surely the whole world’s going digital? • Broadband is becoming ubiquitous: 680m connections globally by 2014 • Penetration rivals DVD take-uppg in some regions and is ahead of Pay TV VOD availabilit y Worldwide broadband connections (m) 800 600 400 200 0 2004 2006 2008 2010 2012 2014 W. Europe C. & E. Europe North America Asia Pacific Latin America Copyright © 2011 IHS Inc. All Rights Reserved. The landscape of connected devices is changgging fast: will be very different by 2014 • Broadband coupled with connected devices is causing a seismic shift in how consumers use content, and what they expect from entertainment suppliers US & Western Europe: Addressable US and Western Europe annual connectdliited living room (m ) tablet sa les (m ) 300 60 250 50 200 40 150 30 100 20 50 10 0 2010 2014 2010 2014 2010 2014 2010 2014 2010 2014 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 TVs Consoles Blu-ray Pay TV Standalone STBs STB other tablet iPad Connectable Connected Copyright © 2011 IHS Inc. All Rights Reserved. Multiple devices can lead to fragmented consumer experience… …What the consumer wants is anytime, anywhere, Copyright © 2011 IHS Inc. All Rights Reserved. any device (and they have many devices) New release movies and TV series are now available illeggyally more than ever before • Perfect movie rips usually appear several weeks ahead of physical disc street date • As of mid-2010, there were 400+ US TV series freely available online illegally • Often available within one hour of premiere broadcast • Most audiences understand the internet as 'free' and need a compelling reason to spend, because they can already get the same content free from the pirates Illegal online availability of sample movies US Theatrical Date of Cam/TeleSync US Home video Date of DVD/BD-rip Title of Film Release Date upload Release Date upload The Wolfman February 12 February 16 (Cam) June 1 May 21 (BD Rip) Shutter Island February 19 February 21 (Cam) June 8 May 19 (BD Rip) Alice in Wonderland April 5 April 5 (Cam) June 1 May 13 (DVD Rip) Date Night April 9 April 17 (Telesync) August 10 June 5 (DVD Rip) Kick Ass April 16 April 17 (Cam) August 3 June 5 (DVD Rip) Prince of Persia May 28 May 29 (Telesync) September 14 August 15 (DVD Rip) The Twilight Saga: Eclipse July 2 July 02 (Cam) December 4 August 18 (DVD Rip) The Expendables Aug 13 Aug 16 (Cam) December Aug 29 (DVD Rip) Copyright © 2011 IHS Inc.