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Digital Entertainment in the Home: Technologies and Global Markets

  • January 2014
  • 204 pages
  • BCC Research
Report ID: 2009160

Summary

Table of Contents

STUDY GOALS AND OBJECTIVES

Home entertainment technology has been around for decades, but it is now starting to enter the mainstream. The reasons for home entertainment’s growing popularity include developments on the demand side as well as the supply side. On the demand side, rising incomes and standards of living have combined with technical advances to increase the attractiveness of technologies that promise to enhance the owner’s quality of life. In addition, many homebuyers are young, technologically savvy people with an affinity for the latest electronic devices, thus creating a favorable market environment for home entertainment systems.
On the supply side, the declining cost and complexity of new home entertainment products are helping to attract new buyers. Until a few years ago, the cost of quality home entertainment components was prohibitive for all but the enthusiast market, but now volumes are rising and prices are dropping. In fact, the cost of installation labor and the expense of educating electricians in this field are becoming the most inhibiting factors. Fortunately, other developments are helping to reduce the difficulty and cost of installation. These developments include the growing use of standards-based wireless technologies that allow home entertainment devices to integrate seamlessly and minimize the need for special wiring to connect them.
This report characterizes and quantifies the global market potential of residential entertainment and its different elements (digital TV, gaming, audio, and networking). The goal of this report is to provide an understanding of the market factors, state-of-the-art developments, and economic influences driving the home entertainment market. The study analyzes the different components of the industry, the influence of networking technology on home entertainment automation, and the impact of the different components in various world markets, such as Europe, North America, and Asia (including Australia).
The study contains information that is useful for planning production and the targeting of market efforts for the delivery of home entertainment systems as well as integration with other systems. Trends in the market are investigated, particularly the increasing emphasis on convergence. Increasingly, suppliers are bundling different home entertainment elements, so the traditional market sectors are becoming blurry. Projections are provided for the total home entertainment market through 2018, along with estimates of the market in terms of cost per device for each type of system, and the cumulative totals for the market overall.

REASONS FOR DOING THE STUDY

This study explores the major manufacturers of home entertainment equipment and the underlying technologies involved in delivery of those systems. Several forces are driving trends toward increasingly diverse and sophisticated levels of networked home entertainment systems. The development, proliferation and flexibility of microprocessor-based controls, interface devices, distributed actuators, standardized network protocols, computerized interfaces, and wireless communications have presented an opportunity for diverse, highly automated centralized entertainment systems.
The report addresses the global market for devices that are purchased by individual consumers for the downloading, creation, storage and playback of digital video, audio and multimedia entertainment content for their personal use in the home or any other venue except for motor vehicles. Motor vehicle entertainment systems often use many of the same technologies as home entertainments systems, but are considered a market in their own right.
Analog devices, such as VCRs and analog TVs are specifically excluded from the scope of the report. Also excluded are digital entertainment devices and technologies that are purchased by business, commercial and institutional (e.g., schools, hospitals) users, rather than private individuals and households. The report does not cover consumers’ purchases of commercially produced digital entertainment content such as CDs, DVDs, and downloaded MP3s. BCC decided to exclude these purchases on pragmatic grounds, because they represent a fundamentally different market that is best analyzed separately.
The report also excludes subscription fees (such as cable TV, Internet, or wireless service fees) that make it possible to receive digital entertainment content in the home. In purely physical terms, BCC defines the market for digital home entertainment as the four walls of the home, the surrounding yard, and the individual household members when they are away from the home. Thus, digital devices and technologies that are used commercially to produce digital content (recording and pre-recoded disk production equipment), for example, are excluded from the report.
The wiring for home entertainment systems is usually installed at the onset in new buildings, and these systems are becoming more complex. Integrated home theater systems are becoming fairly common in major renovations where new systems such as structured cabling and wireless are being put into place.
The strength of the world home entertainment infrastructure market relies on the health of local or regional construction markets. This, in turn, depends on world, regional, and national economies. Consequently, sales of these products have been largely seen in the world’s more advanced business epicenters: Europe, the U.S., China and Japan. This study analyzes the most prominent markets for these systems and breaks them down into four sections: Europe, North America, Asia (including Australia), and South America and Africa. The market’s economic potential is framed in the context of the construction market for each area examined and then consolidated to provide a complete picture of the market.
Extensive investigations have also been carried out to quantify the size of the market in four areas: digital TV, gaming, networking, and audio systems. This was done to aid marketers, manufacturers, system integrators, contractors, and other parties involved in the home entertainment industry to better direct their efforts at presenting their products and services to the most promising markets.

SCOPE OF REPORT

The shifts described above create new opportunities for vendors and service providers serving the home entertainment market. The goal of this report is to identify the main business opportunities, while providing information on the conditions and challenges that must be met in order to take advantage of these opportunities profitably.

Specific objectives of the report include:
• Identifying the digital home entertainment devices and technologies with the greatest commercial potential in the near to mid-term (2013-2018).
• Analyzing recent sales trends and quantifying current sales of each device and technology.
• Identifying and evaluating the impact of economic, business, demographic technological, legal/regulatory and other factors that will drive the future market for each device and technology.
• Forecasting future sales of each device and technology in value and, where possible, in unit terms through 2018.

Digital home entertainment systems feature a suite of components that include (in alphabetical order):
• Audio Systems.
• Digital TV.
• Gaming.
• Networking.

This report examines technologies, markets, and factors influencing the markets for integrated entertainment systems, one that integrate the controls of various subsystems. Markets are forecast on the basis of historic activity and current opportunities, government initiatives and policies, and the status of the construction and renovation industries in specific nations.
The forecasts presented are for the total available markets. Some discussion is provided that compares actual revenues with market potential on various continents. Markets are broken down on a geographic basis and discussed within the context of the trends in construction activity, regulatory initiatives, and the revenue potential associated with home entertainment systems.
The revenue comes from North American, European, and Asian markets. A detailed analysis of the home entertainment market potential in these geopolitical economic regions is used as a basis for estimating world markets for these products. Thorough analyses are carried out on construction industry practices in the target regions. Trends toward the uptake of home entertainment products and costs are examined, along with associated laws, regulations, and common practices.
Geographic and environmental factors influencing requirements for the systems are examined, as are national and international responses to global environmental challenges.

INTENDED AUDIENCE

This report was prepared for individuals who are interested in the residential home entertainment infrastructure market. Those individuals could include vendors involved in the research, development, manufacturing, or marketing of these products. The report will help these individuals evaluate market trends and respond to market changes so that they can perform more effectively in their organizations. Lastly, financial analysts can benefit from the report. They will be able to determine the market potential for various products and evaluate the performance of various vendors in this space.

METHODOLOGY AND INFORMATION SOURCES

Both primary and secondary research methodologies were used in preparing this report. Information was obtained from a wide variety of sources, including interviews with manufacturer executives, inventors, engineers, and marketers; construction industry representatives; purchasing officers; and real estate development company representatives. Much of the market research numbers came from company financial reports and interviews with suppliers who outlined various market trends and company initiatives. Extensive use was made of the Internet, industry trade publications, print media, and online information sources, such as Wikipedia. Digital and printed statistics were gathered to quantify and help verify trends in the level of activity within the various market sectors.
The approach taken to quantify the world markets for home entertainment infrastructure systems involved several steps. Primary among these was delineating the technologies involved in home entertainment and the companies that produce them. The focus is on systems that have been tied together in some way rather than stand-alone solutions. Because the market is evolving, clear boundaries among various categories can be difficult to discern. Autonomous product categories have been shifting, as suppliers have been trying to deliver a more cohesive and integrated approach to home entertainment. In addition, vendors have been broadening their product lines, such that many offer products in numerous categories. In some cases, vendors bundle systems together to entice potential consumers; therefore, categorizing the revenue from different types of products can be difficult. Consultations with various companies and industry experts helped to break those categories down as finely as possible.
Another step involved developing a quantitative understanding of the characteristics of residential construction industries in different regions of the world. In addition, assessments were made of regulatory policies governing each region with respect to requirements for home entertainment systems. This was done with varying degrees of granularity, keeping in mind that special codes are enforced in different nations.
A summary understanding of the markets was developed for component systems of various home entertainment systems. With this information in hand, trade publications and Internet searches were performed, along with interviews with industry representatives, regulators, and legislators to discern trends in the extent of implementation of fully-integrated home entertainment systems.
Attention was also paid to activity in the markets for systems that integrate disparate component systems. In this regard, networking and data transfer capabilities of the product lines of various component system vendors were taken as an indication of manufacturers’ thrust toward integrated systems.
Revenue from the various products comes from two sources. New construction is one source. Analysts estimate that home entertainment elements account for 1.0% to 1.5% of the total construction project value for new homes. In addition, owners decide to renovate their residences to make them more attractive and more fulfilling.
The world economy has become increasing complex, volatile, and difficult to forecast. The financial projections in this report came from projections from various economic monitoring groups, including the International Monetary Fund (IMF), the World Bank, and the CIA World Fact Book. Input from these various sectors was used to complete the five-year market projections. All revenues are expressed in U.S. dollars.
The International Monetary Fund projects that worldwide revenue will increase from about $71.7 trillion in 2013 to $86.6 trillion in 2018, representing a growth rate of 3.85%. However, the numbers will be distributed quite unevenly. The Asian, South American, and African markets will demonstrate the highest growth rates. At 5.5% China’s growth is reshaping the world economy; however, that growth is not directly translating into home entertainment market. To date, it has been a limited market lagging the significant pick up seen in the rest of Asia, the U.S. and Europe. The lack of underlying intelligent network infrastructure as well as the lack of an established high end, middle class has meant that growth in the home entertainment has been smaller and more limited in China. Currently, the digital entertainment market is more established in Japan and South Korea than it is China. Those limitations will eventually be addressed and the potential for dramatic growth is expected in China as the decade closes.
The long-term projections are extremely tenuous. The world economy has become much more interconnected and much more volatile than it was in the past. Problems, such as the solvency issue in Greece and Spain, ripple throughout other countries’ economies. Many possible problems loom on the horizon. In addition, there is concern because China’s high-flying market has slowed and forced suppliers to take erasers to their business plans. Terrorism also remains a worldwide concern. Any future attack will probably have an adverse impact on the world’s gross national product (GNP). Therefore, while the forecast is for a growth of 3.1%, that number could possibly be lower, depending on how world events unfold.

ANALYST CREDENTIALS

With more than two decades of experience, Paul Korzeniowski is a market research analyst and home entertainment infrastructure consultant. His work has centered on determining major market trends in areas of interest such as the development of new networking standards, integration of various home entertainment systems, and the emergence of new technologies, such as wireless communications. He has authored reports on markets for home entertainment systems for a wide variety of publications, including Investor’s Business Daily, Business 2.0, and EnergyBiz.

REPORT HIGHLIGHTS

The global digital home entertainment systems market reached nearly $147.4 billion in 2012. This market is expected to grow to $150.9 billion in 2013 and $176.3 billion in 2018, a compound annual growth rate (CAGR) of 3.2% over the five-year period, 2013 to 2018.

This report provides:
• An in-depth analysis and forecast of the home digital entertainment market
• Analyses of global market trends, with data from 2012, estimates for 2013, and projections of compound annual growth rates (CAGRs) through 2018
• Coverage of market trends, drivers, and inhibitors
• Examination of the size and growth of identified entertainment technology categories
• Comprehensive company profiles of key players in the market.

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