Piracy continues to scupper sales in home entertainment

A combination of piracy, free access to streaming services such as Spotify, Grooveshark, YouTube and the BBC iPlayer, and access to free apps and casual online games has reduced the value consumers attach to the ownership of home entertainment products. This trend has been exacerbated by consumers having less disposable income and lower confidence as a result of the economic downturn.

"'Society's views on piracy remain fairly relaxed and people will talk openly about downloading or streaming products without any worries of it being against the law," explains Carly Syme, retail analyst at Verdict Research. "Even with the prospect of Internet Service Providers being made liable for illegal downloads, piracy seems set to remain a major negative factor for the entertainment sector."

"Increasing internet usage, faster access speeds and a proliferation of P2P file sharing networks also means illegal downloading and streaming is relatively easy," adds Syme. "The weak economic climate has only added to the problem, making it more difficult to tempt people away from piracy towards legitimate services."

According to the latest data from Verdict Research's Global Home Entertainment* market report, the UK home entertainment market peaked in 2008 at £7.7 billion, largely because of an explosion in popularity of video games across 2007 and 2008. Since that year, the value of the market has fallen by £1.6 billion, with the market estimated to be worth £6.1 billion** in 2011.

UK market not looking as gloomy as the global market

"There is potential for the market value to recover to £6.6 billion by 2015 if new technology in video games can be effectively monetised and the digital market becomes more mainstream," says Syme. "It is expected that 21.4% of UK entertainment sales will occur digitally in 2011 as a result of growing broadband penetration, faster connection speeds, increased use of mobile internet and greater online connectivity of devices such as TVs, tablets and games consoles."

This percentage would be even higher if the measurement were based on consumption, rather than spending, with illegal online piracy and the popularity of free, subscription and rental services such as iPlayer, Spotify, Sky movies on demand bolstering the numbers of digital products being used.

Indeed, the UK market is not looking as gloomy as the global market which peaked at US$103.2 billion (£66.5 billion) in 2008 and where the forecast is for a continual decline to US$74.3 billion (£47.9 billion) by 2015. The only saving grace in the forecasted numbers is that falls will diminish to 0.5% by 2015.

"The global games market is unlikely to return to the high growth rates that it enjoyed in the years after the last batch of major consoles were released," says Patrick O'Brien, global analyst for Verdict. "The market for physical DVDs will continue to fall, increasingly moving towards video on demand and internet streaming and rental services. In addition, the music retail market will continue to fall at a rapid rate, as consumers continue to move away from physical music CDs."

Piracy is rife in both of those markets.

*Global Home Entertainment is published by Verdict Research.
**Exchange rate at time of posting: £1=R12.62

© Verdict Research 2011