Deloitte makes predictions for the TMT sector in 2011


19-01-2011

More than half the households in the UK will own a digital video recorder (DVR) by the end of 2011, but TV advertising will be almost entirely unaffected, according to Deloitte’s predictions for the media sector in 2011.

While DVRs provide the technology for viewers to fast forward adverts, the majority of DVR owners will continue to watch live television, putting paid to the decade-old prediction of the death of TV advertising.

David Halstead, Technology, Media and Telecommunications (TMT) practice partner at Deloitte in Cambridge, said: “TV ad rates may go up or down for various reasons this year but DVR penetration probably won’t be one of them.”

According to the business advisory firm’s annual global predictions for TMT sector, the television’s status as a “super media” will be reinforced in 2011, with some 40 million new viewers tuning in for the first time and more than 140 billion more hours being consumed around the world. Pay TV revenue will grow by 20 per cent and global advertising revenue is set to increase by $10 billion (£6.243 billion) to $191 billion (£119.241 billion).

Mr Halstead said: “Rather than the usual prophecies of the imminent obsolescence of television, this year’s predictions show television’s continued strength, which continues to lead all media in total revenues, including advertising sales, subscriptions, pay-per-view and license fees.”

In the online market, social networks will deliver two trillion adverts, yet advertising revenue will remain at a modest $5 billion (£3.121 billion), which represents less than one per cent of the global industry total. However, due to a low cost base, social networks could still achieve impressive gross margins despite their relatively low revenues-per-user, particularly when compared to the traditional media companies they are competing against.

In the telecommunications sector, Deloitte predicts that video calling will become cheaper, more widely available and of a much improved quality in 2011, but the long-awaited boom in demand will not happen.
The vast majority of calls will continue to be voice-based, meaning video will exceed the needs of most businesses.

Other telecoms sector predictions include increased demand on wi-fi hotspots and the introduction of Long Term Evolution (LTE) networks, which will usher in the era of 4G services.

Mr Halstead said: “Although the public’s appetite for smartphones shows no sign of slowing down, demand for data passing through wi-fi hotspots is set to outstrip the amount of traffic carried over mobile networks by between 25 and 50 per cent next year, with the number of public hotspots set to rise by 20 per cent in 2011.

“What’s more, Wi-fi is set to become the default network for video applications, with just one hour of video streaming over a 3G network eating up an entire month’s data allowance on most contracts.

“Long Term Evolution, or LTE, networks which will usher in the era of 4G services will fall short of expectations next year as the roll-out of new infrastructure proves slower than forecast due to a continuing dependence on 3G. The current generation of 4G, which is being tested by 130 operators around the world, does not yet provide the quantum leap in speeds and features compared to 3G and it would perhaps be more precise to describe them as ‘4G ready’.”

Additional TMT Predictions 2011:
Push beats pull in the battle for the television viewer
Every year heralds a new innovation for the television set and 2011 is no different. This year ten of millions will be sold that will feature a search function that allows viewers to pull content via simple search applications on the menu screen or by locating content from broadcast, streamed and stored channels.

Keeping the life in live: A&R diversifies
The record companies’ traditional A&R process was very effective, but also very resource intensive. Over the next few years, label-sourced A&R is likely to decline by roughly $500 million per year globally. It seems reasonable to assume that the live music industry – or other source of funding – will need to step in to prevent the well from running dry.

Games go online and on sale: the audience grows, but at what price?
In 2011, the global computer and video games industry growth will come from diverse revenue streams, including monthly subscriptions, peripherals, fees for services, as well as in-game purchases and advertising in the free-to-play and “Freemium” markets. By the end of 2012, total revenue from these relatively new sources could be as high as $10 billion, or 16 percent of total games revenues. Over time, these sources could represent 50 percent of all revenues for the industry.

Pop goes pop-up: music retail goes seasonal and temporary
Next year will prove to be the inflection point in the music industry when digital sales outstrip CD sales for the first time in at least one major market, probably the US, with the UK to follow close behind. However the shift will represent a sharp decline in CD sales rather than a significant spike in digital music subscriptions or downloads. The scale of the decline is put into perspective when considering that three quarters of the revenue made by record labels in the UK in 2009 was in CD form.
 

 

The Deloitte Cambridge office comprises 8 Partners and over 250 staff who deliver a full range of professional services to the East Anglian region. As well as focussing on the life sciences and technology sectors for which the region has become so renowned, the office has long standing specialisms in other sectors including the professions, consumer business, food and agribusiness.

Deloitte LLP