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Deloitte analysis of top media trends for 2011

19 January 2011

  • DVRs proliferate: The 30-second spot doesn’t die!
  • Keeping the life in live: A&R diversifies
  • Television’s “super media” status strengthens
  • Push beats pull in the battle for the television viewer
  • Games go online and on sale: the audience grows, but at what price?
  • Social network advertising: how big can it get?
  • Pop goes pop-up: music retail goes seasonal and temporary -

The Technology, Media and Telecommunications (TMT) practice at Deloitte today announces its global predictions for the media sector in 2011, predicting that over half the households in the UK will own a digital video recorder by the end of 2011.

Jolyon Barker, global lead for Deloitte's Technology, Media and Telecommunications Industry, comments: “We predict that digital video recorder (DVR) penetration in the UK will exceed 50 percent of TV households by year end 2011; but TV advertising will be almost entirely unaffected. While DVRs provide the technological capacity to skip ads, the majority of DVR owners are likely to continue watching their television live. TV ad rates may go up or may go down for various reasons this year but DVR penetration probably won't be one of them.

“This year’s predictions report also highlights that record label investment in Artist & Repertoire (A&R) investment is set to decline this year. As a consequence, record companies will increasingly draw on a wider base of support from other entities in the music industry. Deloitte predicts that this will mean a change in the way the industry nurtures new talent with a shift towards the live music industry. Venue owners, concert promoters and ticket sales agencies are in a good position to pick up some of the slack.

“The need to foster new talent has rarely been more pressing as 40 per cent of the highest grossing live acts in the US over the past decade will be 60 or older.”

Ed Shedd, lead media partner of Deloitte said: “This year’s predictions show television’s continued strength, which continues to lead all media in total revenues, including advertising sales, subscriptions, pay-per-view, and license fees. In addition some 40 million new viewers will tune in for the first time and more than 140 billion more hours of content will be watched around the world.

“The television set is continually evolving and tens of millions will be sold in 2011 with a search function that allows viewers to “pull” content via simple search applications on the menu screen. However the inherently passive nature of watching television means the only pulling that most viewers may want to do is pulling up a chair.”

DVRs proliferate: The 30-second spot doesn’t die!

Over half the households in the UK will own a digital video recorder by the end of 2011 meaning that most television have the ability to fast forward through advertisements. So is the decade-old prediction of the death of the television commercial set to come true? Only if those television viewers record every single show they watch, including sport matches, reality show finals and news bulletins, so they can deliberately avoid commercials. Even then, viewers would need to keep their eyes shut when fast forwarding as studies suggest that even commercials viewed at 12 times the normal speed leave an impression on viewers, specifically the last advert before the show restarts.

Keeping the life in live: A&R diversifies

The record companies’ traditional A&R process was very effective, but also very resource intensive. In today’s environment where music fans seem to value a live experience more than a recording, the live music industry might be in a better position to identify top talent — specifically, the talent that can really deliver on stage. The various players in the live music industry must recognize their common need for an ongoing pipeline of new acts to replace the existing big draws — and they must take combined action. Over the next few years, label-sourced A&R is likely to decline by roughly $500 million per year globally. It seems reasonable to assume that the live music industry – or other source of funding – will need to step in to prevent the well from running dry.

Television’s “super media” status strengthens

Prophecies of the imminent obsolescence of television will again be proved wrong in 2011 and instead its status as a “super media” will be reinforced. Some 40 million new viewers will tune in for the first time and more than 140 billion more hours of content will be watched around the world. Pay-TV revenue will grow by 20 per cent and global advertising revenue is set to increase by $10 billion to $191 billion, its fifth consecutive year of growth, as its influence over forms media, such as books and music, continues to grow.

Push beats pull in the battle for the television viewer

Every year heralds a new innovation for the television set and tens of millions will be sold in 2011 that will feature a search function that allows viewers to “pull” content via simple search applications on the menu screen or, at its most sophisticated, by locating content from broadcast, streamed and stored content. However the inherently passive nature of watching television stands in the way of a mass market behavioural change amongst viewers that will take many years to arise. In 2011, the only pulling that most viewers may want to do is pulling up a chair.

Games go online and on sale: the audience grows, but at what price?

In 2011, the global computer and video games industry growth will come from diverse revenue streams, including monthly subscriptions, peripherals, fees for services, as well as in-game purchases and advertising in the free-to-play and “Freemium” markets. By the end of 2012, total revenue from these relatively new sources could be as high as $10 billion, or 16 percent of total games revenues. Over time, these sources could represent 50 percent of all revenues for the industry.

Social network advertising: how big can it get?

Social networks will deliver a breathtaking two trillion advertisements. Yet advertising revenue will remain at a modest $5 billion, a mere $4 per member, which represents less than one per cent of the global industry total. Nevertheless, thanks to a low cost base, social networks might still achieve impressive gross margins despite their relatively low revenues-per-user, particularly when compared to the traditional media companies they are competing against

When social networks attain the billion unique user milestone, nearly half of one global user base – computer-based Internet users - may be signed up by year-end 2011. This could put a ceiling on future growth if global Internet adoption continues to expand at the pace that consensus analysts expect: it might be increasingly difficult for social networks to sustain their impressive subscriber growth trajectories.

Pop goes pop-up: music retail goes seasonal and temporary

This year will prove to be the inflection point in the music industry when digital sales outstrip CD sales for the first time in at least one major market, probably the US, with the UK to follow close behind. However the shift will represent a sharp decline in CD sales rather than a significant spike in digital music subscriptions or downloads. The scale of the decline is put into perspective when considering that three quarters of the revenue made by record labels in the UK in 2009 was in CD form.

Notes to editors

For a full copy of the report with all of the Deloitte predictions please email: Karen Hogger or Melissa Armstrong or visit www.deloitte.com/tmtpredictions.

The 2011 series of Predictions has drawn on internal and external inputs from conversations with member firm clients, contributions from Deloitte member firms’ 7,000 partners and managers specialising in TMT, and discussions with industry analysts as well as interviews with leading executives from around the world.

About Deloitte

In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

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