This month, in the third installment of our report on the present and future health of the digital content industry, we examine the market from the perspective of Wanda Meloni, principal of M2 Research, a digital content creation analysis firm. Here’s a summary of findings from her latest series of reports.
Given the severe economic climate, the next two years will be telling for content creation toolmakers. From 1997 to 2000, the market experienced unprecedented growth in all segments, but that growth began showing signs of strain by the end of 2000. And as businesses continued struggling with difficult macroeconomic pressures, the entire market sustained substantial losses in 2002. Today, while the year ahead does not appear to be vastly different, there is hope that by the fourth quarter the market will show signs of recovery. Indeed, there are a number of key trends that are driving the entire digital media market, specifically in video, 3D, and 2D graphics.
- In the video market, the price of professional video tools—including video capture, video software, and turnkey systems—continues to drop as CPUs get faster, storage gets cheaper, and software becomes more accessible to more users. Consequently, as a number of lower cost systems have entered the fray, the high-end market has suffered. Nevertheless, several segments continue to have growth opportunity, mostly in the applications for broadcast and corporate use. For example, broadcasters are looking to update antiquated analog equipment with DV systems that provide real-time and HD functionality. And corporate users are electing to bring some of their previously outsourced video production work in-house.
- 3D graphics toolmakers, much like suppliers in the video market, have found it increasingly difficult to compete. Sales of systems into the more traditional markets have slowed. Film production companies saw an 18 percent decrease in annual sales since 2000. The broadcast business decreased by 32 percent over the same period. And for all their efforts, 3D Web vendors are still trying to move beyond an emerging market. On the bright side, sales of 3D software in the game market have increased, as have revenues from 3D middleware and development tools. And in terms of opportunities, the Web 3D market is looking for lower priced products with integrated features that can work with the more traditional design systems.
- The 2D graphics market, of all segments, is the most mature. Over the years, extensive consolidation has left only a few large players. The distribution channels are well established, and prices are stable. Even so, there are new opportunities. For example, in the corporate arena, which now accounts for 38 percent of all 2D software sales, there is a growing need for networked enterprise systems that can output to multiple formats for print, Web, or video.
What does all this research mean? For vendors, it means that competition will escalate—in terms of offering lower prices, more customer support, and more complete solutions—but in the midst of the current economic downturn there will still be opportunities for the most savvy, if they know where to look. For users, it means that the industry has become customer-driven, where digital content producers will have more choice for less money. And, finally, for viewing audiences at large, it means that the level and complexity of digital imagery will increase as content creators find new and innovative ways to express their messages and visions.