Consumer spending on digital entertainment to rise

Gartner predicts market will be worth $2.8 trillion by 2015, currently worth $2 trillion

Tags: ConsolidationConsumer electronicsGartner Incorporation
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Consumer spending on digital entertainment to rise Consumer spending in digital information and entertainment products and services will increase from $2 trillion in 2010 to $2.8 trillion by 2015.
By  Georgina Enzer Published  June 28, 2011

Gartner has predicted that consumer spending in digital information and entertainment products and services will increase from $2 trillion in 2010 to $2.8 trillion by 2015.

Consumer spending in this sector is expected to reach $2.1 trillion by the end of 2011.

The increase in the number of vendors offering a diversified range of products means they can gather a larger share of consumer wallet spending.

"There are two basic strategies that vendors have used to capture consumer spending that will enable their interconnected consumer experience," said Mikako Kitagawa, principal research analyst at Gartner. "The first is to concentrate in one consumer spending segment, and the second is to diversify into other consumer spending segments."

Gartner defines consumer wallet spending as the money spent by consumers for digital technology devices and services which are for accessing, consuming and creating content. Gartner divides the wallet into three basic spending types - content, devices and services.

"While a vendor can be a leader in specialising within just one segment of the consumer wallet, there are a mounting number of examples that suggest diversification may be the optimal path forward in the consumer electronics industry," said Amanda Sabia, principal research analyst at Gartner. "Vendors that diversify their offerings across multiple consumer spending segments earn revenue across the full ecosystem and take legacy services to transform to newer products and services."

Consumers in 2010 spent 62% of the total $2 trillion spent globally in 2010 on digital information and entertainment products and services, on communications subscription-based access and usage services.

This $1.2 trillion included mobile and wired devices; mobile data services such as SMS, broadband, fixed broadband, video services such as subscriptions to pay TV; and online gaming.

Twenty-eight percent of the consumer spend or $600bn was for consumer electronic devices, such as mobile devices, PCs and related devices, stationary entertainment equipment, such as television sets and game consoles.

The smallest spending segment at 10%, was for content and software at a total of $200bn. This includes video content that has been purchased, rented, streamed or downloaded, as well as premium channel or pay per view (PPV), video on demand (VOD), and pay TV subscriptions allocated to licensing fees made up half of this segment.

The other half was made up of PC and gaming software, digital music and books, and purchases from mobile apps stores.

"The challenge to vendors choosing to be hyper-focused on one wallet spending segment is the relentless pursuit of innovation required to maintain segment sales leadership in this one specific segment," Kitagawa said. "There are two ways to achieve leadership in this instance: by diversifying the portfolio suite of offerings and by expanding the target audience or usage model of the products and services."

According to Gartner, vendors who choose to diversify into other consumer segments can benefit from customers using alternative services that move their spending from one segment to another, such as fixed voice to mobile voice; fixed broadband to mobile broadband; physical content, such as CDs, DVDs and books to online/digital versions; and linear broadcast TV to over the top (OTT) video.

"The three key technology areas that will offer the best opportunity for vendors during the next three years are: wireless broadband, which will enable constant connectivity; location-based services [LBS], which will personalise and take advantage of the constant connected state; and operating systems, which are the foundation for integration applications that can bring it all together," said Kitagawa.

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