MP52284

MAPS : E-Commerce: Internet Leisure and Entertainment: July 2004

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EXECUTIVE SUMMARY

Despite strong growth in the online market for leisure and entertainment products, consumers making this type of purchase over the Internet remain in the minority. However, traders active in the market continue to hone business models and address consumer concerns, although they face increasing competition from rivals and growing downward pressure on prices.

The Internet is often viewed as simply another distribution channel, meaning that estimating the value or volume of business performed online is difficult. Published sources often do not differentiate between values of sales generated through the different channels, with the result that placing value sizes on the markets is not straightforward. Estimates — built from deciphering the overall trends, stand-alone figures and consumer take-up rates within the industry — are often the closest it is possible to get to hard data. Many of the tables in this report are estimated based on such evaluation.

The Internet has revolutionised the travel sector and the way in which products and services are retailed. Aside from the business-to-business (B2B) aspect of the marketplace (whereby, for instance, travel agents themselves utilise the Internet to search for deals), the convenient access to the Web now enjoyed by many companies and consumers has also transformed the way in which the travel industry interacts with its market.

In the music sector, technological advancements are driving new product developments (NPDs); there has been a real change in the way consumers access, purchase and listen to music. Downloading and streaming music over the Internet still represents a very small part of overall music industry sales, but is growing strongly, fuelled by the launch of new services and hardware. Books and DVD sales also continue to do well online as once niche brands, such as Amazon, carve out both a profit and a genuinely influential position in an increasingly global market.

Research in this report (see Chapter 7 — Consumer Dynamics) shows that the overall percentage of consumers actively making purchases online is small, but growing. Many still view the Internet as a place to do research prior to making purchases through more traditional routes; this experience is convincing traders that continuing integration of distribution channels is a core trend. Consumers in the ABC1 group are more likely to be active in the market than those in the C2DE group.

Across the market, there is strong incidence of acquisitions as some of the larger companies begin to consolidate their position as leaders within the sector. Where acquisition strategies are not sufficient or appropriate, companies are able to build competitive advantage through strategic partnerships and joint ventures, which provide extra dynamism to the sector and enhance consumer experience within it.

Future growth looks to be strong, particularly in the travel and music sectors, where developments in communications technology are likely to improve the way consumers are able to use the Internet.

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Last updated by Amanda Porteous November 2004