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US and UK consumers still attached to physical media

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As smartphone penetration passes 60 percent in China and nears 40 percent in Brazil, the countries are becoming digital trendsetters. Meanwhile US and European consumers are being left behind in terms of embracing the true potential of mobile connected devices because they are still attached to physical media. 

Without, for the most part, large existing CD, film or video game collections, consumers in Brazil and the Asia Pacific region -- where smartphones and tablets are exploding in popularity -- are driving digital media sales, whether it be music and video downloads or paid content subscriptions. And although the most recent in-depth research and analysis from Ofcom (the UK's media regulator) on global digital trends shows that UK consumers lead the world in terms of online shopping, mobile internet use and online TV, a new study, published Monday by KPMG shows that although digital media is growing in popularity in mature markets, UK and US consumers are still more attached to physical media and are much slower to commit to new channels of content delivery.

"The move to digital has had a dramatic impact on how we consume music, publishing and newspapers. But we are still early in the process of a transition to digital anytime-anywhere availability across all media sectors," said Paul Wissmann, Head of Media & Telecommunications, KPMG in the US of the survey of 9000 consumers across the US, UK, Germany, Spain, China, Brazil, Australia and Singapore. "Until online services can provide content -- especially film and video -- on all devices, including home televisions, and be as seamless and easy to use as their offline counterparts, 'old' and digital media will continue to co-exist."

In the US, according to the Digital Entertainment Group, consumers spent $18 billion on home entertainment (not including music or videogames) in 2012 and one of the biggest areas of growth contributing to that total was Blu-ray disc sales -- 51 percent of US homes are estimated to have a Blu-ray player and that number is rising.

Likewise, the latest industry figures in the UK, published by the Entertainment Retailers Association on January 2, also show the continuing hold of physical media on the British consumer. Digital downloads hit £1 billion in sales for the first time in history, but physical formats still accounted for the vast majority of home entertainment sales in the music (62%), video (93.9%) and videogames (75.5%) categories.

Of the figures, ERA Director General Kim Bayley explains: "Despite digital's seemingly inexorable growth, the CD, the DVD and the physical games disc show incredible resilience. It is nearly nine years since iTunes launched in the UK yet over 60% of music sales are still accounted for by physical formats. It is clearly way too soon to write off the CD and in video, digital barely gets a look in. Physical formats still account for three quarters of the entertainment market."

However, recent moves by Amazon and by UltraViolet, as well as the growing reach of services such as NetFlix may start to make inroads into this area and help consumers in mature markets to let go of their physical attachment to media.

UltaViolet, a US-based service that recently rolled out in the UK (and plans to launch in Europe and Australia in 2013) automatically converts physical DVD and Blu-ray purchases into digital files so that owners can stream this content on tablets, computers, connected TVs and smartphones, saw subscriptions grow in 2012. The service now has 9 million US users, up from 1 million at the start of 2012 and only 3 million as recently as June. "The most important thing for all of us is focusing on driving adoption of the digital ecosystem," said Warner Bros. home video President Ron Sanders of the motivation for UltraViolet.

Likewise, on January 10, Amazon launched a feature called AutoRip, that gives users a free digital copy of any physical CD they buy in the future and a free digital copy of any qualifying album that they have bought in the past. Currently only available in the US, the service is also expected to roll out in Europe as the digital rights are agreed. And while one of the driving forces behind the service is to move consumers away from iTunes, the other motivation is to provide a transitional service for those who are still focused on buying physical media.

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