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The Changing Way We Capture, Record, and Store Digital Content - US - May 2009

Consumers live in a world where virtually all content is available in a digital form, from newspaper articles that can easily be read online, to affordable MP3 downloads that can be played on any PC or portable player; to user-generated videos as well as full-length TV episodes and movies that can be streamed or downloaded for free or on a rental or purchase basis from a variety of different sites.

Yet even as consumer interest in digital content has skyrocketed, the hardware and services used to access, consume, manage and share this content has not always kept up. For example, PCs remain the central hub for much digital content, even though these devices were initially designed for work rather than play, and have proven an awkward fit into living rooms. Meanwhile, few consumer electronics devices can match the PC’s versatility and seamless interaction with peripheral devices, forcing consumers to use multiple devices – for example, stacking a DVD player, DVR and gaming console by their TV, or carrying both an MP3 player and a cell phone while on the go.

As consumers increasingly seek simpler and better ways to interact with digital content, the consumer electronics and PC industries are facing a time of great change – as well as great opportunity.

From this report the reader will learn:

  • Potential usage models that could prevail in the future
  • Understanding of growth trends and opportunities within each sector
  • How trends such as the current economic recession and consumer interest in digital media will shape the sector
  • How marketing and advertising campaigns are playing an important role in educating consumers about new product offerings and capabilities
  • An understanding of how consumers are using digital media products and what they expect from these products

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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

                    • Rapid growth behind
                      • Challenges from portables and the cloud ahead
                        • PC role still being defined
                          • PC usage more common than stereo, PPV/VOD
                            • The direct to device threat
                              • Saturation
                                • Portability
                                  • Displays are where the money is
                                    • Building set-top box functionality into the television
                                      • Digital frame sales quadruple over two years
                                        • Video playback segment driven by DVRs
                                          • Off-site storage to decrease set-top box sales
                                            • Shiny disc player sales stalled
                                              • Convergence and redundancy
                                                • Spoils of battle to go to the best interface
                                                  • PCs and portables take audio
                                                    • Fragmentation
                                                      • Young pioneers
                                                      • Insights and Opportunities

                                                        • D2D
                                                          • Explore hardware/content partnerships
                                                            • Taking the tubes out of televisions
                                                              • Under-35s want to watch the web on their television…
                                                                • …but are dissatisfied with the quality of web videos on TV screens
                                                                  • Audio: “If you can’t beat ‘em, join ‘em”
                                                                    • Marketing UGM functionality
                                                                      • Taking the netbook into the living room
                                                                        • High-risk high-gain marketing opportunities
                                                                          • A shining knight for cable and satellite providers
                                                                          • Inspire Insights

                                                                            • Overview
                                                                              • Trend: You are in control
                                                                                • No More Mainstream
                                                                                  • Cool Consumer
                                                                                    • Smart phone + cloud = decline of hardware sales
                                                                                      • Implications
                                                                                        • The D2D dedicated display
                                                                                        • Market Size

                                                                                          • Changing media usage patterns
                                                                                            • How listening habits are changing
                                                                                              • Figure 1: Audio content consumption behavior within last week, November 2008
                                                                                            • The changing face of video consumption
                                                                                              • Figure 2: Video content consumption behavior within last week, November 2008
                                                                                            • A rich landscape of products
                                                                                              • Figure 3: Total U.S. supplier sales of digital media hardware, in current prices, 2004-12
                                                                                              • Figure 4: Total U.S. supplier sales of digital media hardware, at inflation adjusted prices, 2004-12
                                                                                          • Competitive Context

                                                                                            • Portable technology
                                                                                              • Figure 5: Cell phone features used within last month, February 2007-March 2008
                                                                                            • Disruption by the cloud
                                                                                              • Advanced gaming consoles take on set-top boxes
                                                                                              • Market Segmentation

                                                                                                • Overview
                                                                                                  • Access to content at the heart of segment competition
                                                                                                    • Set-top boxes expected to make the greatest gains
                                                                                                      • Figure 6: U.S. supplier sales of digital content hardware, by segment, 2004-12
                                                                                                      • Figure 7: U.S. supplier sales of digital content hardware, by segment, 2006 and 2008
                                                                                                  • Displays

                                                                                                    • Overview
                                                                                                      • Digital transition, new technologies drive sales revenue
                                                                                                        • Figure 8: Total U.S. supplier sales of displays, in current prices, 2004-12
                                                                                                        • Figure 9: Total U.S. supplier sales of displays, at inflation adjusted prices*, 2004-12
                                                                                                      • Feature convergence, touch screens, and 3D on the horizon
                                                                                                        • TVs: a new window on the web?
                                                                                                          • Figure 10: Samsung Series 7 LED TV
                                                                                                          • Figure 11: U.S. sales of digital displays, by segment, 2006 and 2008
                                                                                                        • Digital display ownership
                                                                                                          • Figure 12: Digital photo display ownership, by age, November 2008
                                                                                                          • Figure 13: Digital photo display ownership, by household income, November 2008
                                                                                                          • Figure 14: Digital photo display ownership, by ethnicity/Hispanic origin, November 2008
                                                                                                      • TV Ownership Trends

                                                                                                        • Multiple TV ownership the norm
                                                                                                          • Figure 15: Number of TVs owned, October 2007-December 2008
                                                                                                        • Substantial upgrade opportunities remain in replacing tube televisions
                                                                                                          • Flat-panel ownership relatively consistent across age groups
                                                                                                            • Figure 16: Type of TV owned, by age, October 2007-December 2008
                                                                                                          • Flat-panel ownership driven by household income
                                                                                                            • Figure 17: Type of TV owned, by household income, October 2007-December 2008
                                                                                                          • Large screen TVs remain a potential growth arena
                                                                                                            • Figure 18: Size of TV owned, by age, October 2007-December 2008
                                                                                                          • Kitchen displays for higher-income groups
                                                                                                            • Figure 19: Size of TV owned, by household income, October 2007-December 2008
                                                                                                        • Attitudes toward New Uses for TVs

                                                                                                          • Will television displays remain relevant?
                                                                                                            • Figure 20: Online video as a replacement for television, by age, November 2008
                                                                                                            • Figure 21: Online video as a replacement for television, by household income, November 2008
                                                                                                            • Figure 22: Online video as a replacement for television, by ethnicity/Hispanic origin, November 2008
                                                                                                          • What’s new on TV: The web
                                                                                                              • Figure 23: Interest in web access on home television, by gender, February 2009
                                                                                                            • Young respondents want web action on the TV
                                                                                                              • Figure 24: Interest in web access on home television, by age, February 2009
                                                                                                          • PCs as Media Hubs

                                                                                                            • Overview
                                                                                                              • PC commoditization takes hold
                                                                                                                • Figure 25: Total U.S. supplier sales of PCs, in current prices, 2004-12
                                                                                                                • Figure 26: Total U.S. supplier sales of PCs, at inflation adjusted prices*, 2004-12
                                                                                                              • The netbook revolution
                                                                                                                • Figure 27: HP Mini 1000 R (Vivienne Tam limited edition)
                                                                                                                • Figure 28: U.S. sales of PCs, by segment, 2006 and 2008
                                                                                                            • PC Entertainment Usage

                                                                                                              • Seven hours a week spent on the home PC
                                                                                                                • Figure 29: Average hours of weekly PC usage, by gender, age, household income, and race/Hispanic origin, October 2007-December 2008
                                                                                                              • PC video usage: 12 inches or 12 feet?
                                                                                                                  • Figure 30: Sony LV All-in-one PC
                                                                                                                  • Figure 31: Attitudes on viewing content on television, PCs, and cell phones, by age, July 2008
                                                                                                                • The PC is the primary music player for one in four online
                                                                                                                  • Figure 32: PCs as audio equipment, by age, February 2009
                                                                                                                • The future of PC video looks cloudy
                                                                                                                  • Figure 33: PCs as video playback hardware, by gender, February 2009
                                                                                                                • Follow the leaders: how 18-34s use video on PCs
                                                                                                                  • Figure 34: PCs as video playback hardware, by age, February 2009
                                                                                                                • The PC as DVR
                                                                                                                  • Figure 35: Interest in DVD/DVR functions on PCs, September 2008
                                                                                                                • User-generated media usage
                                                                                                                  • Figure 36: Usage of user-generated media, by age, February 2009
                                                                                                              • Digital Video

                                                                                                                • Overview
                                                                                                                  • Expanding array of features
                                                                                                                    • Figure 37: Vudu set-top box
                                                                                                                  • Blu-ray unable to lift shiny disc player sales
                                                                                                                    • Figure 38: U.S. supplier sales and forecast of digital video hardware, in current prices, 2004-12
                                                                                                                    • Figure 39: Total U.S. sales and forecast of digital video products, at inflation adjusted prices, 2004-12
                                                                                                                    • Figure 40: U.S. sales of digital video products, by segment, 2006 and 2008
                                                                                                                • On-demand: DVR, PPV, and VOD

                                                                                                                  • PPV and VOD usage as pillars of content access
                                                                                                                    • Figure 41: PPV and VOD usage, by age, household inocme, and race/Hispanic origin, October 2007-December 2008
                                                                                                                  • Women more keen DVR usage
                                                                                                                    • Figure 42: Attitudes toward DVRs, by gender, February 2009
                                                                                                                  • DVR usage: 25-34 year olds the DVR generation
                                                                                                                    • Figure 43: Attitudes toward DVRs, by age, February 2009
                                                                                                                • Digital Audio

                                                                                                                  • Overview
                                                                                                                    • Sales hampered by rise of PC and portables
                                                                                                                      • Figure 44: U.S. sales and forecast of home audio hardware, in current prices, 2004-12
                                                                                                                      • Figure 45: Total U.S. sales and forecast of home audio hardware, at inflation adjusted prices, 2004-12
                                                                                                                    • Strong potential for docks, home theater
                                                                                                                      • Figure 46: Klipsch iGroove
                                                                                                                      • Figure 47: U.S. sales of home audio hardware, by segment, 2006 and 2008
                                                                                                                    • Trended audio ownership
                                                                                                                      • Figure 48: Home audio ownership, 2002-08
                                                                                                                  • Audio Usage Behavior

                                                                                                                    • PCs taking steam out of dedicated audio
                                                                                                                      • Figure 49: Home music listening behavior, by gender, February 2009
                                                                                                                    • Younger listeners go digital
                                                                                                                      • Figure 50: Home music listening behavior, by age, February 2009
                                                                                                                    • Opportunity to market multifunction devices to low-income users
                                                                                                                      • Figure 51: Home music listening behavior, by household income, February 2009
                                                                                                                  • Market Drivers

                                                                                                                    • Content anytime, anywhere
                                                                                                                      • Figure 52: Desire for universal, comprehensive content, by age, race/hispanic origin, November 2008
                                                                                                                    • Slashed spending on discretionary items
                                                                                                                      • Figure 53: U.S. unemployment rate, October 2008-April 2009
                                                                                                                      • Figure 54: U.S. personal income and consumption, October 2008-February 2009
                                                                                                                    • Online video: The new digital revolution
                                                                                                                      • Figure 55: Use of free online video, June 2008
                                                                                                                    • UGM
                                                                                                                      • Figure 56: Use of user-generated media, by age, February 2009
                                                                                                                    • Declining storage costs
                                                                                                                    • Advertising and Promotion

                                                                                                                      • Targeting the dual-income household
                                                                                                                        • Figure 57: Role in purchasing, by gender, age, household income, and race/Hispanic origin, February 2009
                                                                                                                      • The advertising landscape
                                                                                                                        • Figure 58: Adspend by leading brands, 2006 and 2007
                                                                                                                      • Online advertising
                                                                                                                        • Television advertising
                                                                                                                          • HP chases women
                                                                                                                            • Figure 59: Hewlett-Packard ad, 2008
                                                                                                                          • Microsoft gets playful
                                                                                                                            • Figure 60: Microsoft ad, 2009
                                                                                                                          • TiVo takes on cable
                                                                                                                            • Figure 61: TiVo ad, 2009
                                                                                                                          • Verizon demystifies FIOS
                                                                                                                            • Figure 62: Verizon ad, 2008
                                                                                                                        • Product Ownership

                                                                                                                          • PCs, home audio, MP3 players, camcorders, and home networks
                                                                                                                            • Ownership rates consistent among under-65s
                                                                                                                              • Figure 63: Hardware ownership, by age, October 2007-December 2008
                                                                                                                            • Making PCs optional for low-income users
                                                                                                                              • Figure 64: Content device ownership, by household income, October 2007-December 2008
                                                                                                                            • Penetration for broadband, pay TV, smart phones, and media centers
                                                                                                                              • Figure 65: Advanced digital content device ownership, February 2009
                                                                                                                            • Cord-cutting among younger respondents
                                                                                                                              • Figure 66: Advanced digital content device ownership, by age, February 2009
                                                                                                                              • Figure 67: Advanced digital content hardware and subscription ownership, by gender and income, February 2009
                                                                                                                          • Race/Hispanic Origin

                                                                                                                            • Tech-savvy Asians lead PC, advanced TV ownership
                                                                                                                              • Figure 68: Content hardware ownership, by race/Hispanic origin, October 2007-December 2008
                                                                                                                            • Web cell phones a key platform for blacks and Hispanics
                                                                                                                              • Figure 69: Advanced digital content device ownership, by race/Hispanic origin, February 2009
                                                                                                                            • Hispanics enjoy experimenting with digital music
                                                                                                                              • Figure 70: PCs as audio equipment, by race/Hispanic origin, February 2009
                                                                                                                            • Short videos lead for black respondents
                                                                                                                              • Figure 71: PCs as video equipment, by race/Hispanic origin, February 2009
                                                                                                                            • Interest in watching UGM, not posting
                                                                                                                              • Figure 72: Usage of user-generated media, by race/Hispanic origin, February 2009
                                                                                                                            • Low DVR engagement amongst Hispanics
                                                                                                                              • Figure 73: Attitudes toward DVRs, by race/Hispanic origin, February 2009
                                                                                                                            • Strong interest in viewing web content on TVs
                                                                                                                              • Figure 74: Attitudes on TV/web usage, by race/Hispanic origin, February 2009
                                                                                                                          • Cluster Analysis

                                                                                                                              • Traditionalists
                                                                                                                                • Opportunity
                                                                                                                                  • Mainstreamers
                                                                                                                                    • Opportunity
                                                                                                                                      • Media Monsters
                                                                                                                                        • Opportunity
                                                                                                                                          • Cluster responses to survey instrument
                                                                                                                                            • Figure 75: PC, DVR, and TV owner clusters, February 2009
                                                                                                                                            • Figure 76: Service and product ownership, by clusters, February 2009
                                                                                                                                            • Figure 77: Audio listening behavior, by clusters, February 2009
                                                                                                                                            • Figure 78: PC as audio hardware, by clusters, February 2009
                                                                                                                                            • Figure 79: PC as video playback hardware, by clusters, February 2009
                                                                                                                                            • Figure 80: Attitudes toward DVRs, by clusters, February 2009
                                                                                                                                            • Figure 81: Television usage for non-traditional viewing, by clusters, February 2009
                                                                                                                                            • Figure 82: Use of UGM, by clusters, February 2009
                                                                                                                                            • Figure 83: Decision-making faculty for household, by clusters, February 2009
                                                                                                                                          • Cluster demographics
                                                                                                                                            • Figure 84: Clusters, by gender, February 2009
                                                                                                                                            • Figure 85: Clusters, by age group, February 2009
                                                                                                                                            • Figure 86: Clusters, by household income group, February 2009
                                                                                                                                            • Figure 87: Clusters, by race/Hispanic origin, February 2009
                                                                                                                                          • Methodology
                                                                                                                                          • Custom Consumer Groups

                                                                                                                                            • Young males like tech, not TV
                                                                                                                                                • Figure 88: Advanced digital content hardware ownership, by gender/age, February 2009
                                                                                                                                              • Income key determinant for tech savvy, not ethnicity/race
                                                                                                                                                  • Figure 89: Advanced digital content hardware ownership, by race/Hispanic origin and household income, February 2009
                                                                                                                                                • Male respondents lead in digital music
                                                                                                                                                    • Figure 90: Home music listening behavior, by gender/age, February 2009
                                                                                                                                                  • Different models for young black and Hispanic music fans
                                                                                                                                                    • Figure 91: Home music listening behavior, by age/race/Hispanic origin, February 2009
                                                                                                                                                  • Young males rely on PCs for music
                                                                                                                                                    • Figure 92: Use of PCs as audio equipment, by age/gender, February 2009
                                                                                                                                                  • PC video usage prevails for young males
                                                                                                                                                      • Figure 93: PCs as video equipment, by gender/age, February 2009
                                                                                                                                                    • Young women are DVR leaders
                                                                                                                                                        • Figure 94: Attitudes toward DVRs, by age/gender, February 2009
                                                                                                                                                    • Appendix: Other Useful Consumer Tables

                                                                                                                                                      • Attitudes toward non-traditional usage of televisions, by household income
                                                                                                                                                          • Figure 95: Interest in web content on TVs, by household income, February 2009
                                                                                                                                                        • Ownership and usage trends
                                                                                                                                                          • Use of video and audio by race/Hispanic origin
                                                                                                                                                            • Figure 96: Video consumption behavior within last week, by race/Hispanic origin, November 2008
                                                                                                                                                            • Figure 97: Home music listening behavior, by race/Hispanic origin, February 2009
                                                                                                                                                          • Cable vs. set-top box by gender
                                                                                                                                                            • Figure 98: Advanced digital content device ownership, by gender, February 2009
                                                                                                                                                          • Audio and video usage by household income
                                                                                                                                                            • Figure 99: Usage of music on PCs, by household income, February 2009
                                                                                                                                                            • Figure 100: PCs as video equipment, by household income, February 2009
                                                                                                                                                            • Figure 101: Usage of user-generated media, by household income, February 2009
                                                                                                                                                          • Wireless networks the rule, carrying eight of 10 networks
                                                                                                                                                              • Figure 102: Computer network type, by age, household income, and race/Hispanic origin, October 2007-December 2008
                                                                                                                                                            • WebTV penetration and interest
                                                                                                                                                                • Figure 103: Web TV ownership/purchase interest, by age, household income and race/Hispanic origin, October 2007-December 2008
                                                                                                                                                            • Appendix: DVD Player Ownership and DVD Purchasing

                                                                                                                                                                • Figure 104: Household DVD player ownership, 2002-08
                                                                                                                                                                • Figure 105: Household DVD player ownership, 2003-08
                                                                                                                                                                • Figure 106: Recent purchase of DVDs, 2003-08
                                                                                                                                                                • Figure 107: DVDs purchased in the last year, 2003-08
                                                                                                                                                            • Appendix: Trade Associations

                                                                                                                                                              Companies Covered

                                                                                                                                                              • Acer Inc.
                                                                                                                                                              • Amazon North America
                                                                                                                                                              • American Electronics Association
                                                                                                                                                              • Apple, Inc
                                                                                                                                                              • Best Buy stores (USA)
                                                                                                                                                              • Blockbuster USA
                                                                                                                                                              • Bose Corporation
                                                                                                                                                              • Bureau of Economic Analysis
                                                                                                                                                              • Cablevision Systems Corporation
                                                                                                                                                              • Circuit City (US)
                                                                                                                                                              • Cisco Systems, Inc.
                                                                                                                                                              • Consumer Electronics Association
                                                                                                                                                              • Crispin Porter + Bogusky
                                                                                                                                                              • Dell Inc.
                                                                                                                                                              • Digital Media Association (DiMA)
                                                                                                                                                              • Facebook, Inc.
                                                                                                                                                              • Federal Reserve System
                                                                                                                                                              • Flickr
                                                                                                                                                              • Google, Inc.
                                                                                                                                                              • Greenfield Online
                                                                                                                                                              • Harmon Kardon
                                                                                                                                                              • Hewlett-Packard Company
                                                                                                                                                              • Home Box Office, Inc.
                                                                                                                                                              • Lenovo Group Limited
                                                                                                                                                              • LG Electronics Inc (USA)
                                                                                                                                                              • MasterCard Incorporated
                                                                                                                                                              • Microsoft USA
                                                                                                                                                              • Motion Picture Association of America
                                                                                                                                                              • MSN (USA)
                                                                                                                                                              • MySpace.com
                                                                                                                                                              • National Broadcasting Company, Inc. (NBC)
                                                                                                                                                              • Netflix, Inc.
                                                                                                                                                              • Nintendo of America Inc.
                                                                                                                                                              • Nokia Corporation (US)
                                                                                                                                                              • Panasonic Corporation of North America
                                                                                                                                                              • Philips Consumer Electronics North America
                                                                                                                                                              • Recording Industry Association of America [RIAA]
                                                                                                                                                              • Samsung Electronics (USA)
                                                                                                                                                              • Software & Information Industry Association (SIIA)
                                                                                                                                                              • Sony Corporation of America
                                                                                                                                                              • T-Mobile USA
                                                                                                                                                              • Time Warner Inc.
                                                                                                                                                              • TiVo Inc
                                                                                                                                                              • Toshiba Corporation (USA)
                                                                                                                                                              • U.S. Bureau of Labor Statistics
                                                                                                                                                              • US Department of Labor
                                                                                                                                                              • Verizon Wireless (Cellco)
                                                                                                                                                              • Vizio, Inc.
                                                                                                                                                              • YouTube, Inc.

                                                                                                                                                              The Changing Way We Capture, Record, and Store Digital Content - US - May 2009

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