Report: The Ongoing Battle for the Digital Home

1 Summary

Consumers spend money every month on a variety of priorities in the digital home. These range from communications services and PayTV bundles to consumer electronics and media. Over time, and as new technologies enable new forms of services and media experiences, consumer behavior shifts and the market changes. Some of these changes take years, and others happen more quickly: it took 40 years for cable television to overtake broadcast; a little more than a decade for the Internet to drive newspapers to the brink of bankruptcy.

The battle for supremacy in the digital home is an ongoing affair. There are three key businesses: services, devices and media. Within these digital home businesses, competition evolves in different ways:

  • Service providers use a variety of technologies to compete with each other for control of the biggest piece of consumers’ digital home budgets. “Triple- play” service bundles combine telephony, Internet access and PayTV services.
  • Device manufacturers are looking to sell you a piece of consumer electronics today. Whatever they sold last year is irrelevant, and they only profit from what they sell today, this month or this year. Media is often central to the purchase of music players and gaming consoles, but this is often a business designed to support the underlying consumer electronics sale.
  • Digital media companies rely on a combination of services, devices and paid content to support larger businesses that sell advertising. Even though consumers don’t buy advertising, they rely on it to support the media that’s everywhere.

The digital home is a slow-moving marketplace in which the battles for market dominance take years, if not decades, to evolve. There is more than $500 billion at stake in the U.S. every year. And the major players are household names such as AT&T, Verizon, Time Warner, Apple, Google, Microsoft and Sony.

Marketplace success depends on scale, scope and product diversity. Scale and scope are a necessity when it comes to reaching tens of millions of U.S. consumers. Product diversity is imperative for companies seeking to play in the marketplace over many years. The rewards are multi-billion dollar businesses.

So the result of new technology and shifting consumer behaviors is found in the ways in which incumbent players respond, develop new solutions and bring these to market as services, devices and media.