Deloitte Digital Index: tracking the pace of digitisation in the UK for the first time

Wednesday, June 4th, 2008
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Online video consumption to grow to 50% in 5 years’ time; Mobile TV penetration to remain at less than 1%, held back by cut backs in discretionary spending

Deloitte, the business advisory firm, is today launching the Deloitte Digital Index, measuring, tracking and anticipating changes in the consumer take-up of digital products and services.

Jolyon Barker, head of technology, media & telecoms at Deloitte, comments: “The Deloitte Digital Index looks at the key metrics for tracking the consumer take up of digital products and services and analyses the disruptive impact this will have on the TMT sector. This provides an opportunity to benchmark how fast an organisation’s ‘journey’ to digital is happening and the drivers and barriers determining changes in consumer attitudes and activities.

“While digitisation has already enabled mass market change, from the adoption of e-mails and mobile phones to the growth of e-commerce, digitisation’s full impact has yet to be felt. Companies using digital products and services as a channel to market should understand how and why their addressable market is growing. Entering a market too early could be as costly as entering too late.”

Francesco Caio, who is leading the UK government’s review into the delivery of next generation broadband networks and spoke at the launch of the Digital Index today said: “Deloitte’s Digital Index offers a unique insight into the UK’s developing digital landscape. Their analysis of broadband penetration reveals its growing impact on household behaviour; from how individuals shop to where they work, to their forms of entertainment.”

Billions of downloads: online video

Currently 19% of households consume online video on a regular basis, up 8% from August 2007. In 5 years’ time, Deloitte expects that this figure could realistically grow to more than 50%, consolidating the Internet’s integral role in home entertainment in the UK.

The rise of mainstream internet video services – such as the iPlayer – is broadening the traditional online video user base. The offer of access to well-known and breaking shows and series in a way that complements traditional TV scheduling is encouraging a growing number of UK households to try out online video. This trend – coupled with the increased sophistication of each successive generation – will support a significant acceleration in online video usage over the next few years.

With improvements to the network for the delivery of online video, accessing on-demand video content through a PC or television will become common place. As a result, online video will redefine the way content is distributed and consumed.

The television business model is likely to be affected by the growth of online video and this will have a major impact on the advertising industry. This may herald the end of the dominance of the traditional 30 second TV advert and broadcasters will lose a valuable time specific advertising slot.

Small screen, minuscule demand: mobile TV

Deloitte estimates that less than 1% of the UK population currently consumes mobile television and expects this to remain much the same for the rest of the year.

With the current economic climate expected to lead to consumers cutting back on discretionary spending, 2008 is unlikely to be the year mobile TV takes off. Consumers looking to save money and cut costs may upgrade their phones less frequently. As a result, phones with the latest functionality and capable of receiving mobile TV, are unlikely to enter wide circulation quickly. Consumers that already have the necessary handsets are also likely to be more reluctant than ever to make use of mobile TV services where there are direct incremental costs.

In the longer term, Deloitte continues to take the view that a concerted industry-wide effort is a prerequisite to a significant uptake in demand for mobile TV. But with the growing success of online video providing an alternative opportunity for catching up with missed viewing (one of the potential USPs of Mobile TV) that window of opportunity is closing.

However while traditional television on a mobile may not become a mass market pastime, the capture and exchange of videos via mobile phones is likely to become increasingly popular.

The Digital Index provides detailed commentary on 12 key metrics, including mobile TV, MP3 players, online video, digital video recorders, DVD players, DAB recorder, digital TV, broadband, VoIP and mobile Internet.

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