GfK’s National Conference indicates sales are up but prices down

By Martin Vedris

SYDNEY: GfK Australia, which provides essential market data to over 200 organisations in Australia and New Zealand, held their National Conference on digital-entertainment at Darling Harbour’s Dockside Conference Centre in Sydney on Friday.

Called The A to Zee of Digital Entertainment, it was attended by key representatives from companies in the digital entertainment (DE) industry.

In his opening presentation, GfK managing director Gary Lamb gave a snapshot of sales within the DE category as well as a look ahead at what the future may bring. The summary is that the staggering sales growth over the past five or six years may be showing signs of slowing.

Lamb explained that 26.5 million DE devices were purchased through the retail channel in Australia last year, which is 22 million more products than were purchased in 2000.

“Cumulatively, Australian consumers have acquired 110 million digital devices since 2000—that’s an average of 15 per household,” Lamb revealed. “However, the rate of growth has begun to slow.

“Consumer spending on durable goods is continuing to increase, but the continued growth in the digital markets is now having a significant negative impact on the absolute value of the non-digital categories.”

According to the GfK research, the main contributor to this decline in non-digital is CRT TVs. In 2003 that market was still worth $1.2 billion, by MAT April 07 the CRT TV market has declined to $315 million.

“The strongest growth by a considerable margin is the vision category which includes games consoles — which is essentially PC and console games, and DVDs — is also contributing significantly to the growth, as is telecoms, but audio, which includes MP3 players and imaging, largely because of the decline in printers, memory cards, and compact digital still cameras, are both digital categories currently in decline.”

Taking the year to April 2007 versus the year to April 2006, vision products are driving sales up almost 40% to a market value of $3 billion.

“High definition devices, including HD TVs, set top boxes, laptops, DVD hardware and software, camcorders and games hardware and software, are really driving growth up almost 130% to a value of over $1.8 billion from MAT April 2007 to MAT April 2006. And the biggest growth rates are coming from new generation video games hardware and software.

“However over $1.5 billion of those sales are coming from full HD TVs which are the real fuel behind the growth in this category.”

Interestingly, LCD TVs, with an increase of $650 million, have grown by almost as much as all of the other digital categories combined. Add that to the growth in the plasma market and it means that LCD and plasma together now have a market value of over $2 billion.

Also of interest is that sales of pre-recorded DVDs are up more than $150 million to $1.3 billion year on year and that sales of music CDs were a 50 million unit market, which is an eight per cent increase on the previous years.

“Consumers are clearly still happy to be acquiring their entertainment content in a tangible form, as the growth of standard definition DVDs testifies,” Lamb concluded.

With only a few exceptions, average prices in the digital categories have declined between 10 and 20 per cent in the last year.

When comparing average prices between the year to April 2006 and the year to April 2007, plasma TV’s have declined 20%, DVD recorders have declined10%, LCD TV’s have declined 8% whereas PC software, PC games and console hardware average prices increased over the same period respectively seven, 10 and 11 per cent.

Looking ahead Lamb said that for the market to look radically different in three, five or 10 years time from the way it looks today, there will need to be some significant changes in consumer behaviour.

“One thing, to me a least, is fairly certain, and that is that technology is currently changing faster than behaviour. That’s why I believe, the fastest-growing DE categories at the moment are those that are essentially digital replacements for previously analogue products — the types of products that bring the relatively straightforward benefits of quality, simplicity, functionality or portability. We are not yet witnessing a stampede towards fully-convergent entertainment solutions.

“This belief is reinforced by the evidence of behavioural inertia that is apparent from, for example, the length of time it took for the internet shopping to grow significantly; or from the fact that although music downloading is growing strongly, 50 million CDs were sold in Australia last year. Downloading is being driven by younger consumers who aren’t so much changing their behaviour as practicing probably the only behaviour they’ve ever known. The more mature owners of MP3 devices seem to be side-loading much of their content, so their MP3 player becomes, essentially, just another portable audio product, where the content would have started its life on a CD.”

GfK research also shows signs of shifts in consumer PC usage trends.

“In the space of less than a year, we have witnessed a significant move in the primary use of a PC,” Lamb explained.

In quarter two 2006, the consumers surveyed revealed that 60% primarily used their PC for internet and email and 10% used it as an entertainment hub. In quarter one 2007, the responses had already shifted to 45% using it for internet and email and 16% using it as an entertainment hub.

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