the outlook for physical video to 2016 outlook for physical video to 2016 mediatech hamburg 23 may...

The outlook for

physical video to

2016 MediaTech Hamburg 23 May 2012 Tony Gunnarsson, Video Analyst, IHS Screen Digest

Copyright © 2012 IHS Inc. All Rights Reserved.

Agenda

2

• Who are Screen Digest? IHS?

• The current state of physical video

• Today’s market is more than just physical

• What about Blu-ray?

• Outlook for physical to 2016

• Summary


Who are Screen Digest?

3

• Largest media-focused

research firm in the world with ~

80 analysts covering over 65

global territories

• 40 years of experience tracking

and forecasting media markets

worldwide

• Merged with iSuppli – and both

companies acquired by IHS

($1.5bn leader in “critical

information & insight”)


IHS - Advancing Decisions that Advance the World

Energy &

Power

Design &

Supply Chain EHS &

Sustainability

Defense, Risk

& Security Country &Industry

Forecasts Commodities,

Pricing & Cost

IHS employs 6,000 in 30+ countries, speaking

50+ different languages

• Aerospace &

Defense

• Agriculture

• Automotive

• Chemicals

• Construction

• Consumer & Retail

• Clean Energy

• Energy Oil & Gas

• Electronics

• Financial

• Government

• Healthcare &

Pharma

• Metals & Mining

• Military & Security

• Power & Utilities

• Shipping &

Transportation


Combined 170 analysts: 1 + 1 = complete

TMT coverage

Raw materials

Semiconductors

Photovoltaics

Memory

Displays

Manufacturing

Channels

Applications

Broadband Media

Mobile Media

Gaming

Video

Cinema

TV

Advertising

Operators

Wireless

Wired

Broadband

Infrastructure

Computing

Telematics

Consumer

TECHNOLOGY MEDIA TELECOMMUNICATIONS


IHS Screen Digest sample clients:

looking across the value-chain

http://online.vodafone.co.uk/dispatch/Portal/appmanager/vodafone/wrp?_nfpb=true&_pageLabel=templateBlank&pageID=VIRTUAL_HOME

Copyright © 2012 IHS Inc. All Rights Reserved. 7

The current state of physical video


Until 2004, worldwide video market was

experiencing continuous growth

8

• But consumer spending on physical video peaked at $55bn in 2004

• Spending on physical video has been in decline ever since

• Decline of physical market accelerated after 2007

0

10,000

20,000

30,000

40,000

50,000

60,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Sp

en

din

g in

$m

World: Spending on physical video

VHS retail VCD retail DVD retail BD retail Physical rental


The world’s largest market, the US, is driving

the market

9

• USA accounts for 40% of world spending on physical video (2011)

• Decline in consumer spending on DVD retail accelerated after 2008

• USA boosts both a strong retail and a strong rental market

0

5,000

10,000

15,000

20,000

25,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Sp

en

din

g in

$m

USA: Spending on physical video



European video broadly follows key world

trends

10

• European consumer habits are different than the US

• Decline in DVD retail slower than the US

• Blu-ray Disc (BD) is also lagging the US

• Compared to the US, rental is a much smaller sector of video

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Sp

en

din

g in

$m

Europe: Spending on physical video



Today’s market is more than just physical


Today’s video market is very different

compared to 5-10 years ago

12

• Video today means more than just physical discs

• Combined physical and digital video presents a fragmented market

• The overall picture remains that of a declining market

0

10,000

20,000

30,000

40,000

50,000

60,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Sp

en

din

g in

$m

World: Spending on total video

VHS retail VCD retail DVD retail BD retail Physical rental TV VOD Digital retail Digital rental Digital subscription


Digital video market is still at its developing

phase

13

• In terms of value, digital video is not yet competing with physical

• Digital is still a small part of overall video market (5%)

• So far, digital video is complementing disc market

• Digital is a good indicator of changing consumer behaviour

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Sp

en

din

g in

$m

World: Spending on digital video

Digital retail Digital rental Digital subscription


TV-based VOD is another area that indicates

changing consumer behaviour

14

• TV VOD has been around since early 2000s and is not in direct

competition with physical video

• But TV VOD has always been a competitor for ‘viewing time’

• Non-linear TV viewing trends indicates growth in ‘time-shifting’

• Return of competition in consumption of media between home-

recorded and pre-recorded

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Sp

en

din

g in

$m

World: Spending on total video

VHS retail VCD retail DVD retail BD retail Physical rental TV VOD Digital retail Digital rental Digital subscription


What about Blu-ray?


• BD transactions have grown very strongly since its launch

• BD is one of the fastest growing areas of film consumption

• A major factor why worldwide video consumption is currently at a

stable level

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2007 2008 2009 2010 2011 2012

Tra

nsacti

on

s in

m

World: Total video transactions

TV VoD DVD purchase DVD rental Digital BD purchase BD rental

Blu-ray has so far been measured against a

declining DVD market


“Has Blu-ray under-performed?”

17

• It is a premium product, not the

replacement for the DVD

• But BD will play a role both at

retail and rental

• BD is only 5 years old, but bear

in mind that the mass market

format DVD reached maturity

after a decade (BD 2016)

• But exciting things are

happening to Blu-ray format…

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Sp

en

din

g in

$m

World: Spending on BD

BD retail BD rental


Blu-ray format is still evolving…

18

• UltraViolet (UV) just launched in

the US and in some European

markets

• Guides consumers towards

digital video consumption

(alongside discs)

• UV is an value add for Blu-ray

• Allows premium price over

standard versions


Blu-ray will also benefit from being the

designated 3D home video format

19

• 3D is becoming a standard function on branded TVs and BD players

• Lack of 3D content on the BD3D format is no longer a barrier

• BD3D will remain a sub-sector that will strengthen overall BD market

• BD3D will punch harder at spending due to price premium

0

50

100

150

200

250

300

350

400

450

2010 2011 2012 2013 2014 2015 2016

Tra

nsacti

on

s in

m

World: BD transactions split 2D/3D

2D Blu-ray Disc BD3D

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2010 2011 2012 2013 2014 2015 2016

Sp

en

din

g in

$m

World: BD spending split 2D/3D

2D Blu-ray Disc BD3D


Despite positive developments for the BD

format, consumers will continue to buy DVDs

20

• Households around the world are increasingly becoming HD-ready

• Yet consumers are today overwhelmingly opting for standard-def

• In Europe, by 2016, only 30% of retail unit sales will be BD

• This trend is the same all over the world, meaning = DVD is still big

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Europe: Video retail unit sales (%)

DVD BD


The biggest threat to video, particularly BD, is

price drops

21

• DVD prices are at an all time low

• BD price has fallen significantly since launch

• Price declines across the market are compounding the reduction in

unit sales

0

5

10

15

20

25

30

35

40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Av

era

ge i

n $

Europe: Average retail price

DVD BD


Price drop strategies are clearly NOT driving

unit sales

22

• Alternative strategies must be used to retain industry value

• Value-add (like UV, BD3D) allows for premium pricing

• But industry should value physical product on its own

• Afterall consumers love video, many still want to own discs

0

5

10

15

20

25

30

35

40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Av

era

ge i

n $

Europe: Average retail price

DVD BD


Outlook for physical video to 2016


Just a reminder of where we are today…

24

• Continuous growth between 1981-2004

• Market peaked in 2004

• Declining market ever since…

0

10,000

20,000

30,000

40,000

50,000

60,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Sp

en

din

g in

$m

World: Spending on physical video



Outlook to 2016 is more decline in physical

video, but old habits are hard to shake!

25

• Overall, the decline in physical video will slow down

• Partly due to a growing BD market

• But mostly because consumers will continue to buy and rent DVDs

come 2016

0

10,000

20,000

30,000

40,000

50,000

60,000

2008 2009 2010 2011 2012 2013 2014 2015 2016

Sp

en

din

g in

$m

World: Forecast physical video



The world’s largest market, the US will

continue to be the key driver for video

26

• Consumer behaviour in the US is different than in Europe

• Faster decline for DVD, but also faster growth for BD

• US still boost strong retail and rental (53% rental in 2016)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2012 2013 2014 2015 2016

Sp

en

din

g in

$m

USA: Forecast video spending


DVD retail 15%

BD retail 32%

DVD rental 8%

BD rental 45%

USA: Spending on physical video in 2016


In Europe, the outlook is quite different to the

USA

27

• In Europe, DVD retail will continue to be key driver

• BD combined generate 33% of physical video (vs 77% in US!)

• Rental is a much smaller part of market than US (just 14% of mkt)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2012 2013 2014 2015 2016

Sp

en

din

g in

$m

Europe: Forecast spending


DVD retail 58%

BD retail 28%

DVD rental 9%

BD rental 5%

Europe: Spending on physical video in 2016


Summary: Physical media

28

• Outlook illustrated is based on current trends

• If existing conditions are allowed to continue unchecked

• Understandably there are concerns about a declining video market

• But the decline must be understood in its correct context

• Decline is likely to slow down as consumer habits ‘die hard’

• Digital video is still developing and it’ll be a long time before we can

contemplate a ‘solely digital’ market

• DVD and BD are a large part of market come 2016

• The shift in consumption from physical to digital platforms is one

that will take decades not years


Summary: Physical media

29

• The real threat to video market is that we’ll lose sight of revenue

generation

• Consumer prices are falling very fast and the effect (as we know) is

being felt right across value chain

• Therefore, the industry needs to maintain value in both physical and

digital sectors

• Consumers use the price of physical to benchmark the value of digital

product

• By 2016, 69 per cent of world consumer spending on video will still

be generated by physical formats, and 45 per cent of that by DVD.

• To lose sight of the importance of physical discs amid the buzz of

excitement that accompanies ‘alternative channels’ could be the

greatest danger for our industry


Questions?

[email protected]

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