Digital Media

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  • May 22, 2003

    Digital Music Downloading

    It was just like the old days. Apple started an online music service, which was immediately well received. Steve Jobs proclaimed loudly that the world would never be the same. Investment banks rushed to assert that digital downloading would save the music companies. Truly gargantuan estimates were made of the potential revenue streams. This note looks at the i-Tunes phenomenon.

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    March 18, 2003

    Piracy

    The troubles of the global music industry are usually assumed to derive from the growth of piracy. This report argues that physical piracy is probably no more of a problem than it has been in the recent past. Digital piracy is indeed becoming more important, but still is by no means the only explanation of declining music sales.

  • The Internet of All Things - Towards the Hyper-connected World
    The Internet of All Things - Towards the Hyper-connected World
    November 4, 2002

    UK Internet Trends Q3 2002

    This note shows the mixed evidence on household penetration. Most surveys report a distinct plateau in subscribing household numbers in the UK, particularly compared to France and Germany, where numbers are still growing. Other surveys show a continuing rise in individual users. On balance, we think the data does point to a clear deceleration in the growth in subscribing households. Current penetration is just over 10m homes, or 40% of the UK total.

  • July 17, 2002

    European Online Advertising

    This report addresses four principal questions:

  • June 27, 2002

    The High Cost of Going Digital – The experience of BSkyB

    In The Digital Bomb II (2002-21), we asserted that the worldwide switch to digital TV would take place more slowly than most commentators expect. We base this view on our assessment that there is no financial incentive for the operator to make the switch from analogue to digital TV. 1. The evidence of a rapid slowing of the growth in multichannel homes is increasingly clear. We predict that Sky will miss its target of 7 million subscribers by the end of 2003 by 300,000 homes, if current trends continue. 2. TV viewing levels appear to have returned to 2001 levels, after a fall in the first months of this year. The evidence for a secular decline in overall viewing is weak. But ITV1 continues to plummet.

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    June 11, 2002

    The Digital Terrestrial Licence Applications

    Digital terrestrial television in the UK and elsewhere faces three enormous problems: (1) the paucity of attractive programming available for free distribution; (2) the uncertainty of the coverage and picture quality; and (3) the low channel capacity compared to satellite and cable. The four bids for the UK DTT licences try to address these problems, but with limited success. In the next two weeks the Independent Television Commission will try to choose the least worst proposal. The rationale behind the deal appears to be that management needed to demonstrate their continued commitment to building a successful US business, an ambition that all EMI managers have had for the last twenty years. Robbie Williams has never sold well in the US, and we regard EMI's public commitment to make him in a star in America as an extremely testing challenge. Robbie's brand of cheery mainstream pop is not as attractive to US record buyers as, say, Radiohead's gloomy rock. And the market for European music in the US has rarely been weaker.

  • May 1, 2002

    The Digital Bomb II – The Digital TV World Market

    This report explains why we are pessimistic about the short and medium term prospects of the global digital TV supply chain. While some recently published forecasts of digital TV penetration remain unremittingly optimistic, our own estimates suggest the number of digital homes may reach only 160 million by 2005. Not only are we bearish on demand but we find an industry that is concentrating on consolidation rather than unsustainable subscriber growth. Although some operators such as BSkyB are well on their way to profitability others face huge uncertainty over subscriber numbers and margins. But operator consolidation will not entirely solve the core issue facing the industry: that the current cost of an STB cannot be recouped by increased ARPU. To become profitable operators will require lower costs of content rights and STBs - and lower churn. These are all negative trends for the supply chain and will lead we believe to a 17% decline in global STB shipments during 2002 - a shortfall of 6m units over 2001. Furthermore due to declining average selling prices, we expect the STB market will not recover to 2001 value (approximately $7bn) until 2004. lack of a price advantage over GPRS or 3G tariffs a small base of prospective users

  • The Internet of All Things - Towards the Hyper-connected World
    The Internet of All Things - Towards the Hyper-connected World
    December 21, 2001

    UK Internet Trends

    15 million UK adults regularly (at least once a month) accessed the Internet from home in Q3 2001, the same as in Q2 2001. This stagnation is due to mainly seasonal factors and we expect growth of the home Internet population to be renewed in the autumn and winter. Our lower forecasts are derived from an analysis of the numbers of households and small businesses that are apparently prepared to buy ADSL at current price levels, but also driven by concerns about this particular product. Users will have to acquire new email addresses and pay for a new email service. We do not think the product will work in networked multi-PC homes or offer ISDN users a real alternative. We see tremendous confusion in the marketplace from two competing BT Broadband offerings from BT Retail and BTopenworld.

  • December 14, 2001

    Microsoft Windows XP

    Microsoft XP has wider significance than most analysts appreciate. While the operating system is, in itself, not a huge advance on existing products - particularly Windows 2000 - its true significance lies in its value as a Trojan Horse for Microsoft .NET. As we indicated in the spring of this year, we think .NET moves Microsoft into direct competition with businesses as diverse as ISPs, mobile network operators and home electronics companies. Widespread adoption of XP makes the eventual success of .NET more secure

  • November 21, 2001

    UK Digital TV Trends

    This report provides an update on the major trends in the UK digital TV market. We use a variety of consumer market research data, which all offer a consistent picture of trends in the business. Sky is doing well. But the evidence of the last quarter's results suggests that it is not out of the wood yet.

  • October 23, 2001

    UK Internet Trends

    This note provides an update on UK Internet trends covering the post-Christmas period. It covers usage, shopping and other online activities of the 17.7 million connected adults. The note highlights the feminisation of the UK online population and its impact on shopping behaviour. Broadband cable suffers from several technical performance problems, including installation, actual performance and the costs of providing content, in particular to gamers. In Germany, less than 5% of cable homes have been upgraded to digital, suggesting that Deutsche Telekom's DSL push has irresistible momentum.

  • October 1, 2001

    European Online Advertising

    This report provides our forecasts for online advertising revenues in 2001 and 2002 in the UK, Germany and France. Our central forecasts are for a decline of 3% in online advertising in 2001 over 2000 (€610 million versus €615 million), and for a maximum increase of 8% in calendar year 2002 (€660 million). For Europe as a whole, online advertising will be flat: increases in Italy and Spain are offset by decline in more mature markets.

  • The Internet of All Things - Towards the Hyper-connected World
    The Internet of All Things - Towards the Hyper-connected World
    July 17, 2001

    Internet Access in the UK

    This report updates our thinking on the market segmentation of Internet access in the UK, one year after we buried the European portal model (Portal Strategies, May 2000). It analyses the connectivity needs of large businesses, medium-sized and small enterprises, and residential customers.

  • May 8, 2001

    Digital TV Update

    We have published extensively on digital TV in the past 18 months, consistently casting doubt on the potential of TV-centric interactive platforms to (a) generate enough income for operators to repay hardware subsidies and (b) compete with the PC for home shopping activity (t-commerce). We see a clear distinction between the relative success of Sky and the continued slow growth of ITVdigital and the real difficulties being experienced by cable operators. Sky is gaining business while the other operators are struggling to retain their share. This is the first of two notes. In the first (attached), Chris Goodall examines the financial prospects of Sky in advance of its results next week. Chris looks at what would be good or bad numbers for Sky's results in all the main categories, and suggests reasons for short-term optimism. In our next note, which will be sent out on Monday, I analyse ITVdigital and question whether anything can be done to improve its prospects. The launch of ITVsport does not help, with its huge programming budget and limited opportunities.