Digital Media Content Drives Consumer Electronics
By Mark Kirstein, iSuppli -- 10/20/2006
The delivery of digital media content, including video and music, has emerged as a primary driver of the global consumer electronics industry and its associated semiconductor market, iSuppli Corp. believes.
A look at all the hot products and services across the electronics value chain—from MP3 and portable media players (PMP), to Internet Protocol televisions (IPTV), to digital video recorders, to mobile TV and mobile music—reveals one thing in common: Their value is derived from the delivery of digital media content, and their growth is driven by achieving alignment among content, operator and platforms.
Media companies and telecom operators are among the most impacted by the trend toward digital distribution of media. With a growing number of digital distribution networks, and consumer electronics platforms that can link up with such networks, media and telecom companies are seeking a path to support multi-channel distribution and multi- platform interoperability.
A key goal for these companies is supporting digital media content on the “three screens” employed by consumers, i.e. computers, televisions and mobile phones. To accomplish this, a host of underlying technologies are needed.
Multiple media formats drive a more programmable consumer electronics platform with higher demands on video, graphics and audio capabilities in TVs and mobile phones. All devices with access to premium digital media need to support multiple digital rights management (DRM) technologies. Furthermore, because media requires copious memory and storage options, platforms will need additional memory.
IP Aware
The media home network is among the centerpieces of this new multi-channel, multi-platform model. Current broadband media distribution primarily targets PCs as the consumption platform. However, the bulk of traditional media consumption is in the home entertainment center: televisions for video and home stereos for music.
Until digital and broadband media can reach the home-entertainment center, market growth for digital media content will be constrained. Fortunately, there are a variety of trends that indicate consumer electronics products are becoming IP-aware.
Leading the charge for integrating an IP connection in consumer-electronics devices are video-game consoles. All major next-generation video-game consoles feature an IP connections, providing a rapidly growing installed based of media-home networked devices. Equally as important, millions of consumers actually use the video-game IP connection for online gaming. Plus, consumers are becoming increasingly aware of the capability of the video-game consoles to also act as a bridge to PC-based and Internet-based media content.
Telecom operators around the world are deploying IPTV, contributing to a growing number of installed IP-aware set- top boxes. These boxes are using the IP connection for a variety of applications, from no-new-wires installations, to multi-room digital video recording (DVR), to interconnecting with PC-based content and Internet-based content.
Similarly, modern cable set-top boxes are integrating both advanced Data Over Cable Service Interface Specification (DOCSIS) specifications and the home networking technology to become more IP-capable themselves. It’s little wonder cable providers are doing this, given they face determined new competition from telecom operators.
Satellite operators are integrating the IP connection, as well. This is nearly mandatory for satellite set-top boxes, as the IP connection enables a richer set of video-on-demand options that are otherwise unavailable via broadcast satellite. Again, on a competitive basis, there’s little choice but for the satellite operators to do so. Television consumption will be enormously impacted by the interactivity and richer content options enabled by the IP connection.
Apple’s Impact
A broader set of consumer-electronics devices are implementing IP connections, too, as television and DVD manufacturers adopt them. However, Apple Computer Inc.’s entry into this market with its Internet Television (iTV) initiative and the addition of full-length feature movies to its iTunes online music store represent a potentially pivotal transition point in the market. Apple carries the credibility, marketing and clout to make a major impact.
This impact will be felt both at the consumer level, where ease-of-use and design prowess are likely to dramatically improve, but also within the media and technology industries. Media companies and consumer-electronics firms are likely to join in the aggressive push to IP-enabled consumer electronic devices to avoid missing another huge opportunity.
The significance of the impact of IP on the home entertainment center can’t be underestimated. iSuppli believes that the addition of IP connections in consumer electronics devices will have as transformational an impact on digital media and home entertainment devices as adding the IP connection to PCs did years ago. Consumer electronics devices will become more programmable and more flexible in managing multiple media types and multiple formats. New business models will emerge for media-centric, consumer-electronics-based application software and broadband value-added services delivery to TVs. Moreover, the IP-enabled consumer electronics trend is among the pivotal convergence points that will enable “any content, any device, anywhere,” media consumption.
The impact of IP-enabled consumer electronics goes beyond just the consumer electronics market. IP-enabled consumer electronics devices are the gateway for a growing market for broadband video on demand, IPTV, broadband music, and online gaming. iSuppli expects the broadband VoD market for media to reach nearly 4.5 billion units by 2010. We project IPTV subscribers will grow beyond 63 million subscribers and generate more than $25 billion in annual services revenue in the same year. Broadband music will continue to flourish via PMPs, but also will benefit from in- home distribution to home stereos. Overall, iSuppli expects broadband music will grow to nearly $5 billion by 2010, or about 25 percent of the size of the physical recorded music market in the same year. Growth across these diverse markets will rely on the expanding base of IP-enabled devices.
Digital media is critical to the future of the technology and media industries. As we’ve already seen with video-game consoles and Apple’s iPods, the growth of both electronics products and digital media is becoming more interdependent. This tight interdependence is expanding to more product categories, as the digital media markets grow.
Because of this, competitors throughout the supply chain can no longer look just at their own customers and products, but must understand the complete multimedia ecosystem and value chain to formulate winning strategies.
Mark Kirstein is the VP of multimedia content and services at the market research firm iSuppli Corp. For more information about digital media and IP consumer electronics devices, see Kirstein’s new research releases from iSuppli’s Home Entertainment Multimedia service.
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