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Recorded Entertainment - US - February 2009

The market for recorded entertainment has been on the decline since 2003, thanks largely to the advent of digital download technology and increasing broadband penetration. The landscape is constantly evolving, as brands try to reinvent themselves and extend into newly emerging market sectors such as digital movie downloads. In this report, Mintel assesses the current state of technology adoption and examines the positioning of major players.

Analysis and insights offered include:

  • How online distribution has changed the market forever
  • Which segments are growing because of the nation’s recession
  • Which companies are leading in the emerging digital movie rental space
  • How brands should be managed in a changing marketplace
  • How widespread digital piracy is today
  • Which demographics are most worth attracting
  • How does frequency of digital downloads compare to physical purchases
  • How much of an issue is digital rights management (DRM) for consumers
  • What are the barriers to greater adoption of new technologies

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Sales data
            • Consumer survey data
              • Abbreviations and terms
                • Abbreviations
                  • Terms
                  • Executive Summary

                    • Market for recorded media has suffered from online migration
                      • Music exploration sites a potential peril to music sales
                        • Piracy through P2P networks is still rampant
                          • DRM
                            • Other entertainment channels vie for share of leisure time
                              • Economic recession has several negative impacts
                                • DVD rental is a bright spot in dark economy
                                  • Leading players race to direct-to-TV movie download
                                    • PCs still the center of digital life but playback methods are diversifying
                                      • Consumers need to be convinced of value proposition of new technologies
                                        • Under 35s and Asians are key targets but harder to please
                                          • Teens are even more avid consumers of recorded media
                                          • Insights and Opportunities

                                            • Tech marketers should seek out Asian adopters
                                                • Figure 1: Population, by race and Hispanic origin, 2008-13
                                              • Established players lag behind Vudu in new brand equity
                                                • Brand differentiation opportunities in film download space
                                                  • Taking on piracy
                                                    • Anti-piracy education
                                                        • Figure 2: Legal consumption of entertainment content, pirates vs. non-pirates, October 2008
                                                    • Inspire Insights

                                                        • Consumers in control
                                                          • New ad-based business models
                                                            • Anywhere, anytime, and the role of social networking
                                                                • Figure 3: Interest in all-encompassing media service, November 2008
                                                                • Figure 4: Interest in all-encompassing media service, by gender, November 2008
                                                                • Figure 5: Interest in all-encompassing media service, by age, November 2008
                                                                • Figure 6: Interest in all-encompassing media service, by race/Hispanic origin, November 2008
                                                              • VOD and DVRs drive interest and expectations for immediate access
                                                                • Figure 7: DVR ownership, type, and plan to purchase, 2006-08
                                                                • Figure 8: Access to television content, June 2001-June 2008
                                                                • Figure 9: Pay television usage, 2002-08
                                                              • Set-top boxes be gone as IPTV takes over
                                                                • Figure 10: High-end television ownership, 2002-08
                                                              • Growing a long tail: Market fragmentation
                                                                • Content fragmentation
                                                                  • Playback fragmentation
                                                                  • Market Size and Forecast

                                                                    • Market for recorded entertainment continues to shrink
                                                                      • Figure 11: Total U.S. sales and forecast of recorded entertainment, 2003-12
                                                                      • Figure 12: Total U.S. sales and forecast of recorded entertainment, at inflation-adjusted prices, 2003-12
                                                                  • Competitive Context

                                                                    • Strong competition from the internet
                                                                      • Figure 13: Growth in indexed hours of filmed entertainment consumption per person per year, 2003-07
                                                                      • Figure 14: Indexed of change in hours of music consumption per person per year, radio vs. recorded music, 2003-07
                                                                    • Internet
                                                                      • Social networking sites based around consumer-generated content
                                                                        • Personalized internet radio sites
                                                                          • Network sites
                                                                            • Cable TV: The peril posed by free VOD
                                                                              • Box office
                                                                                • Video games
                                                                                • Segment Performance

                                                                                  • Video market holds ground as music industry shrinks
                                                                                    • Figure 15: U.S. sales and forecast of video and audio recorded entertainment, 2003-11
                                                                                  • Sales growth led by digital segments
                                                                                    • Figure 16: U.S. sales and forecast of recorded entertainment, by segment, 2003-08
                                                                                    • Figure 17: U.S. sales of recorded entertainment, by segment, 2005 and 2007
                                                                                • Segment Performance—Video

                                                                                  • Blu-ray fails to make up for digital cannibalization and faltering economy
                                                                                    • Figure 18: U.S. sales and forecast of video entertainment, 2003-12
                                                                                    • Figure 19: U.S. sales of physical video entertainment, 2003-08
                                                                                  • Economic downturn boosts video rental sales
                                                                                    • Figure 20: U.S. sales of video rentals and subscriptions, 2003-08
                                                                                • Segment Performance—Audio

                                                                                  • Weak economy makes problems worse for sales of CDs
                                                                                    • Figure 21: U.S. sales and forecast of audio entertainment, 2003-12
                                                                                    • Figure 22: U.S. sales and forecast of physical music entertainment, 2003-08
                                                                                  • Music downloads: Online sales explode but shrink music sales overall
                                                                                    • Figure 23: U.S. sales and of digital music downloads, 2004-08
                                                                                  • Music subscriptions showed promise but failed to pop
                                                                                    • Figure 24: U.S. sales of digital music subscriptions, 2005-08
                                                                                • Retail Channels—Music

                                                                                  • Online has grown to become leading music retail channel
                                                                                    • Figure 25: Where music is purchased, by type of store/channel, 2004 and 2008
                                                                                  • Online channel shows strongest skew with age
                                                                                    • Figure 26: Where music is purchased, by type of store/channel, by age, April 2007-June 2008
                                                                                  • Online and A/V stores skew with income
                                                                                    • Figure 27: Where music is purchased, by type of store/channel, by household income, April 2007-June 2008
                                                                                  • Blu-ray discs more commonly purchased online than DVDs
                                                                                    • Figure 28: Where physical discs are purchased, by type of disc, April 2007-June 2008
                                                                                • Retail Channels—Video

                                                                                  • Big box mass merchandisers attract a majority of DVD buyers
                                                                                    • Figure 29: Where DVDs are purchased, April 2007-June 2008
                                                                                  • Best Buy and Target positioned for higher earners
                                                                                    • Figure 30: Where DVDs are purchased, by household income, April 2007-June 2008
                                                                                  • High frequency DVD renters go online, while youngest respondents opt for bricks and mortar
                                                                                    • Figure 31: Where DVDs are rented, by age, April 2007-June 2008
                                                                                  • Online rentals and Blockbuster skew toward higher earners
                                                                                    • Figure 32: Where DVDs are rented, by household income, April 2007-June 2008
                                                                                • Leading Retailers

                                                                                  • Dramatic revenue growth in online distribution models
                                                                                    • Figure 33: U.S. sales of publicly traded recorded media distributors, 2005 and 2007
                                                                                • Brand Qualities

                                                                                  • Blockbuster’s brand expansion focuses on key values
                                                                                    • Netflix
                                                                                      • iTunes
                                                                                        • Amazon
                                                                                          • eMusic
                                                                                            • Wal-Mart
                                                                                              • Best Buy
                                                                                              • Innovation and Innovators

                                                                                                • The race to own movie downloading
                                                                                                  • Netflix and Amazon
                                                                                                    • Vudu
                                                                                                      • AppleTV
                                                                                                        • Blockbuster
                                                                                                          • HDTV with built-in internet
                                                                                                            • Any PC is a media PC
                                                                                                              • New sites facilitate exploration of new music
                                                                                                                • Pandora
                                                                                                                  • Last.fm
                                                                                                                    • Slacker
                                                                                                                      • Imeem.com
                                                                                                                      • Advertising and Promotion

                                                                                                                        • Overview
                                                                                                                          • Figure 34: Media spending by recorded media brands, 2006-07
                                                                                                                        • Television advertising
                                                                                                                          • Netflix
                                                                                                                            • Figure 35: Netflix—late fees, December 2008
                                                                                                                            • Figure 36: Netflix—family viewing, April 2008
                                                                                                                            • Figure 37: Netflix—customer interviews, December 2008
                                                                                                                          • Blockbuster
                                                                                                                            • Figure 38: Blockbuster Total Access, June 2008
                                                                                                                            • Figure 39: Blockbuster Imaging Service, December 2008
                                                                                                                        • Online Advertising

                                                                                                                          • Search engine advertising
                                                                                                                            • Search term: DVD RENTAL
                                                                                                                              • Search term: BUY DVD
                                                                                                                                • Search term: DARK KNIGHT DVD
                                                                                                                                • Market Drivers

                                                                                                                                  • Piracy through P2P networks is rampant
                                                                                                                                    • Economic recession hits shiny discs
                                                                                                                                      • Online distribution facilitates piracy and decreases price points
                                                                                                                                        • Internet penetration facilitates download purchases, piracy, free content
                                                                                                                                          • Figure 40: U.S. household penetration of PCs, DVDs, and broadband internet, 2003-07
                                                                                                                                        • Recession and confusion slow consumer investment in video technology
                                                                                                                                          • Consumer confusion
                                                                                                                                            • Growth of 12-34 year olds increases potential consumer base
                                                                                                                                              • Figure 41: Total U.S. population, by age, 2003-13
                                                                                                                                          • Incidence of Media Purchase

                                                                                                                                            • Migration from discs to downloads spreads to video
                                                                                                                                              • Figure 42: Incidence of media purchases in previous year and average number purchased, 2004, 2006 and 2008
                                                                                                                                            • Adoption of digital downloads skews strongly toward youth
                                                                                                                                              • Figure 43: Incidence of media purchases in previous year and average number purchased, by age, April 2007-June 2008
                                                                                                                                            • Lower-income segment may present opportunity for digital vendors
                                                                                                                                              • Figure 44: Incidence of media purchases in previous year and average number purchased, by household income, April 2007-June 2008
                                                                                                                                            • Single song downloads most popular by large margin
                                                                                                                                              • Figure 45: Incidence of media purchases in previous month and average number purchased, by age, October 2008
                                                                                                                                          • Incidence of Media Rental

                                                                                                                                            • DVD renters decline in number but increase in frequency
                                                                                                                                              • Figure 46: Incidence of DVD rental and average number rented, 2004, 2006 and 2008
                                                                                                                                            • 25-34s most important to DVD market
                                                                                                                                              • Figure 47: Incidence of DVD rental and average number rented, by age, April 2007-June 2008
                                                                                                                                            • DVD rentals more common among higher earners
                                                                                                                                              • Figure 48: Incidence of DVD rental and average number rented, by household income, April 2007-June 2008
                                                                                                                                            • Rental of digital downloads nearly as common as purchase
                                                                                                                                              • Figure 49: Incidence of movie rental and average number rented, by format/type, by age, October 2008
                                                                                                                                          • Use of Peer-to-Peer Networks

                                                                                                                                            • P2P download is widespread and devastates download revenues
                                                                                                                                              • Figure 50: Use of P2P networks and average items acquired, by media, October 2008
                                                                                                                                            • Piracy begins in the 18-24 age group
                                                                                                                                              • Figure 51: Use of P2P networks and average items acquired, by media, by age, October 2008
                                                                                                                                          • Playback of Physical Discs

                                                                                                                                            • Ways to playback media are diversifying
                                                                                                                                              • Figure 52: Playback medium for shiny discs, by type of disc, October 2008
                                                                                                                                            • Younger respondents find more ways to watch their DVDs
                                                                                                                                              • Figure 53: Medium used to playback DVDs, by age, October 2008
                                                                                                                                          • Digital Download Practices

                                                                                                                                            • PCs are still primary method of media download
                                                                                                                                              • Figure 54: Method of digital download, by type of download, October 2008
                                                                                                                                            • Disc burning performed by a third of respondents for both music and video
                                                                                                                                              • More than a fifth of respondents delete video downloads after viewing
                                                                                                                                                • Figure 55: Storage of digital downloads, by type of download, October 2008
                                                                                                                                            • Adoption of Technologies

                                                                                                                                              • Interest/ownership rate measures maturities of media technologies
                                                                                                                                                • Figure 56: Adoption of new technologies, ownership and interest in ownership, October 2008
                                                                                                                                              • Consumers need to be convinced of value proposition
                                                                                                                                                • Figure 57: Lack of interest or awareness in new technologies, October 2008
                                                                                                                                              • Younger and higher-earning respondent are earliest adopters
                                                                                                                                                • Figure 58: Ownership of new technologies, by age, October 2008
                                                                                                                                                • Figure 59: Ownership of new technologies, by household income, October 2008
                                                                                                                                            • Attitudes and Motivations

                                                                                                                                              • Preferences indicate different video distribution models are viable
                                                                                                                                                • Figure 60: Attitudes toward video entertainment, October 2008
                                                                                                                                              • Under-35s are more passionate but harder to please with movie downloads
                                                                                                                                                  • Figure 61: Attitudes toward video entertainment, by age, October 2008
                                                                                                                                                • DRM a barrier to audio growth
                                                                                                                                                  • Piracy still condoned
                                                                                                                                                    • Figure 62: Attitudes toward audio entertainment, October 2008
                                                                                                                                                  • Younger respondents critical of download quality
                                                                                                                                                    • Youngest respondents most likely to condone piracy
                                                                                                                                                      • Figure 63: Attitudes toward audio entertainment, by age, October 2008
                                                                                                                                                    • Higher earners more likely to buy and prefer MP3 format
                                                                                                                                                      • Figure 64: Attitudes toward audio entertainment, by household income, October 2008
                                                                                                                                                  • Race and Hispanic Origin

                                                                                                                                                    • Asians show greater adoption of online distribution and technology
                                                                                                                                                      • Figure 65: Where music is purchased, by race/Hispanic origin, April 2007-June 2008
                                                                                                                                                      • Figure 66: Where DVDs are rented, by race/Hispanic origin, April 2007-June 2008
                                                                                                                                                      • Figure 67: Where DVDs are purchased, by race/Hispanic origin, April 2007-June 2008
                                                                                                                                                      • Figure 68: Incidence of media purchases in previous year and average number purchased, by race/Hispanic origin, April 2007-June 2008
                                                                                                                                                      • Figure 69: Ownership of new technologies, by race/Hispanic origin, October 2008
                                                                                                                                                      • Figure 70: Attitudes toward video entertainment, by race/Hispanic origin, October 2008
                                                                                                                                                      • Figure 71: Attitudes toward audio entertainment, by race/Hispanic origin, October 2008
                                                                                                                                                  • Cluster Analysis

                                                                                                                                                      • Fanatics
                                                                                                                                                        • Who they are
                                                                                                                                                          • Opportunity
                                                                                                                                                            • Enthusiasts
                                                                                                                                                              • Who they are
                                                                                                                                                                • Opportunity
                                                                                                                                                                  • Traditionalists
                                                                                                                                                                    • Who they are
                                                                                                                                                                      • Opportunity
                                                                                                                                                                        • Cluster characteristics
                                                                                                                                                                          • Figure 72: Recorded entertainment clusters, October 2008
                                                                                                                                                                          • Figure 73: Penetration for buying, renting and peer sharing recorded entertainment in past month, by clusters, October 2008
                                                                                                                                                                          • Figure 74: Ownership/subscription to entertainment services and products, by clusters, October 2008
                                                                                                                                                                          • Figure 75: Interest in acquiring entertainment subscriptions/hardware, by clusters, October 2008
                                                                                                                                                                          • Figure 76: Attitudes toward recorded entertainment, by clusters, October 2008
                                                                                                                                                                          • Figure 77: Consumption of purchased, rented, and peer shared recorded entertainment in past month, by clusters, October 2008
                                                                                                                                                                        • Cluster demographics
                                                                                                                                                                          • Figure 78: Recorded entertainment clusters by gender, October 2008
                                                                                                                                                                          • Figure 79: Recorded entertainment clusters by age group, October 2008
                                                                                                                                                                          • Figure 80: Recorded entertainment clusters by household income group, October 2008
                                                                                                                                                                          • Figure 81: Recorded entertainment clusters by race/Hispanic origin, October 2008
                                                                                                                                                                        • Cluster methodology
                                                                                                                                                                        • Custom Consumer Groups

                                                                                                                                                                          • Teenagers most avid consumers of all
                                                                                                                                                                              • Figure 82: Incidence of media purchases in previous year and average number purchased, by teens, April 2007-June 2008
                                                                                                                                                                              • Figure 83: Incidence of DVD rental and average number rented by teens, April 2007-June 2008
                                                                                                                                                                              • Figure 84: Where music is purchased by teens, April 2007-June 2008
                                                                                                                                                                            • Minority youths
                                                                                                                                                                                • Figure 85: Incidence of media purchases, by age and race/Hispanic origin, April 2007-June 2008
                                                                                                                                                                                • Figure 86: Use of P2P networks, by age and race/Hispanic origin, October 2008
                                                                                                                                                                              • Race/ethnicity and household income
                                                                                                                                                                                • Figure 87: Attitudes toward audio entertainment, by race/Hispanic origin and household income, October 2008
                                                                                                                                                                            • Appendix: Other Useful Consumer Tables

                                                                                                                                                                              • Retail channels
                                                                                                                                                                                • Figure 88: Where music is purchased, by gender, April 2007-June 2008
                                                                                                                                                                                • Figure 89: Where DVDs are purchased, by gender, April 2007-June 2008
                                                                                                                                                                                • Figure 90: Where DVDs are purchased, by age, April 2007-June 2008
                                                                                                                                                                              • Incidence of media purchase
                                                                                                                                                                                • Figure 91: Incidence of media purchases, by gender, April 2007-June 2008
                                                                                                                                                                              • Incidence of media rental
                                                                                                                                                                                • Figure 92: Incidence of DVD rental, by gender, April 2007-June 2008
                                                                                                                                                                                • Figure 93: Incidence of DVD rental, by race/Hispanic origin, April 2007-June 2008
                                                                                                                                                                              • Attitudes and motivations
                                                                                                                                                                                • Figure 94: Attitudes toward video entertainment, by gender, October 2008
                                                                                                                                                                                • Figure 95: Attitudes toward video entertainment, by household income, October 2008
                                                                                                                                                                                • Figure 96: Attitudes toward audio entertainment, by gender, October 2008
                                                                                                                                                                            • Appendix: Trade Associations

                                                                                                                                                                              Companies Covered

                                                                                                                                                                              • AB Volvo
                                                                                                                                                                              • ABC, Inc.
                                                                                                                                                                              • Amazon North America
                                                                                                                                                                              • Apple, Inc
                                                                                                                                                                              • Best Buy stores (USA)
                                                                                                                                                                              • BJ's Wholesale Club, Inc
                                                                                                                                                                              • Blockbuster USA
                                                                                                                                                                              • BMW of North America, LLC
                                                                                                                                                                              • Borders Group
                                                                                                                                                                              • CBS Corporation
                                                                                                                                                                              • CinemaNow, Inc
                                                                                                                                                                              • Circuit City (US)
                                                                                                                                                                              • Columbia House Company
                                                                                                                                                                              • Comcast Corporation
                                                                                                                                                                              • Consumer Electronics Association
                                                                                                                                                                              • Costco Wholesale Corporation
                                                                                                                                                                              • EMI Group plc
                                                                                                                                                                              • Entertainment Merchants Association
                                                                                                                                                                              • Facebook, Inc.
                                                                                                                                                                              • Future of Music Coalition (FMC)
                                                                                                                                                                              • Google, Inc.
                                                                                                                                                                              • Greenfield Online
                                                                                                                                                                              • Hollywood Entertainment Corporation
                                                                                                                                                                              • imeem, Inc.
                                                                                                                                                                              • Independent Film & Television Alliance
                                                                                                                                                                              • Interactive Entertainment Merchants Association
                                                                                                                                                                              • International Federation of the Phonographic Industry
                                                                                                                                                                              • LG Electronics Inc (USA)
                                                                                                                                                                              • Live Nation
                                                                                                                                                                              • LOVEFiLM International Ltd
                                                                                                                                                                              • MasterCard Incorporated
                                                                                                                                                                              • Mercedes-Benz USA
                                                                                                                                                                              • Metro-Goldwyn-Mayer Inc.
                                                                                                                                                                              • Microsoft USA
                                                                                                                                                                              • Motion Picture Association of America
                                                                                                                                                                              • Movie Gallery, Inc
                                                                                                                                                                              • Movielink, LLC
                                                                                                                                                                              • MySpace.com
                                                                                                                                                                              • Napster Inc.
                                                                                                                                                                              • National Association of Recording Merchandisers
                                                                                                                                                                              • National Association of Theater Owners (NATO)
                                                                                                                                                                              • National Broadcasting Company, Inc. (NBC)
                                                                                                                                                                              • Netflix, Inc.
                                                                                                                                                                              • Nintendo of America Inc.
                                                                                                                                                                              • On Demand Distribution PLC (OD2)
                                                                                                                                                                              • Panasonic Corporation of North America
                                                                                                                                                                              • RealNetworks, Inc.
                                                                                                                                                                              • Recording Industry Association of America [RIAA]
                                                                                                                                                                              • Redbox Automated Retail, LLC
                                                                                                                                                                              • Sam Goody Ltd
                                                                                                                                                                              • SAM's Club
                                                                                                                                                                              • SanDisk Corporation
                                                                                                                                                                              • Sonic Corp.
                                                                                                                                                                              • Sony Corporation of America
                                                                                                                                                                              • Sony Pictures Entertainment
                                                                                                                                                                              • Target Corporation
                                                                                                                                                                              • Ticketmaster
                                                                                                                                                                              • Time Warner Inc.
                                                                                                                                                                              • TiVo Inc
                                                                                                                                                                              • Toshiba Corporation (USA)
                                                                                                                                                                              • U.S. Bureau of Labor Statistics
                                                                                                                                                                              • U.S. Bureau of the Census
                                                                                                                                                                              • USA Today
                                                                                                                                                                              • Video Software Dealers Association
                                                                                                                                                                              • Walmart Stores (USA)
                                                                                                                                                                              • YouTube, Inc.

                                                                                                                                                                              Recorded Entertainment - US - February 2009

                                                                                                                                                                              £3,199.84 (Excl.Tax)