Entertainment expenses in the digital home to peak in 2008

June 14, 2007 - Expenditure on entertainment services in the digital home is to peak in 2008, level off by 2011 and start declining from 2012, according to a new report by US research company The Diffusion Group.

The report, entitled “Digital Home Control Points and Revenue Distribution thru 2016”, adds that while entertainment-related service revenue will increase due to rapid growth in the number of digital homes, per-home expenses will experience negative pricing pressure due to fierce competition and commoditisation. 

Dr. Predrag Filipovic, author of the report and Director of TDG’s Digital Home Solutions group, commented: “The majority of digital home entertainment service revenue will continue to be controlled by ‘clustered’ service providers such as Comcast and Verizon.  Although consumers will have more choice in terms of the providers they use for specific entertainment services, only a small share of revenue and profit pool will shift to alternative or non-facility-based providers.”

Filipovic believes that as a result of the proliferation of Internet-based services, a shift will take place towards a distributed digital home architecture that is less controlled by incumbent providers, forcing the incumbents to offer a broader range of digital home entertainment services.  This is expected to result in lower costs for the end-user, which according to Filipovic is already beginning to happen with triple-play service offerings that cut prices and decrease churn.

‘New media’ providers are expected to claim a share of digital home entertainment service revenue between 2008 and 2011, resulting in a net increase in total digital home service revenue but at the expense of established video purchase and rental players such as Blockbuster.