1. Entertainment: Music Trends March 2011

2. Contents

3. Market Environment

4. Annual digital music revenues to hit £12.3bn by 2015 Bolstered by the take-up of subscription services, annual digital music revenues are predicted to hit $20 billion (£12.3 billion) by 2015. Revenues from music subscription services will grow by over 60% between 2011 to 2015 at the expense of individual track downloads from outlets such as iTunes. The growth in individual tracks downloaded from digital music stores has slowed in the US - a trend likely to be emulated in Europe. Analysts said that the industry is failing to cope with the amount of music freely available online, not just the illegal kind but on-demand music services such as Spotify, which is masking the fact that the industry isn’t maximising revenue potential. A BPI report released during the last quarter suggested that digital music downloads account for over a fifth of legal music sales in the UK, but that over 76% of all music downloads were classified as illegal. Source: NMA.co.ukNMA.co.uk

5. Music: Did you know? Growth in sales of digital music halved last year in spite of increased action on behalf of governments to tackle digital piracy globally. Digital music revenues grew 6% to $4.6 billion in 2010, only half the 12% growth seen in 2009, and a fraction of the 25% growth in 2008 (Financial Times, Jan 2011)Financial Times Of all music singles sold, 98% are now purchased online, according to the latest figures from the Office of National Statistics. In 2007, digital and physical single sales totalled 87m, in 2009 digital and physical sales had reached 153m - an increase of over 75%.Office of National Statistics Digital album purchases grew by 160% in the two years between 2007 and 2009 as more and more consumers shifted to using mp3 devices. Physical album purchases fell by 14% over the same period. 25% of young people aged 11-14 purchase clothes online, 23% purchase video games, 21% purchase DVDs, 20% purchase CDs and 18% purchase music downloads (MediaTel, November 2010) In September Britain recently passed the 500-million mark for digital music downloads (Official Charts Company) Official digital music has grown at a phenomenal rate with over 98% of the singles bought now being downloads (MediaTel)MediaTel Source: Mintel Oxygen, Feb 2011Mintel

6. Source: Mintel Online Spending Habits, Feb 2011 Online Spending Habits: Market Size and Forecast Online spending in the UK exceeds that of any other European country, with IMRG data putting the figure at £58.6 billion in 2010. Online spending grew by 17.6% year-on-year in 2010. Average level of spend online by consumers has been responsible for driving growth. Ofcom estimates that average online consumer spend for the year reached £1,031. UK online spending trends and forecasts, 2005-15 Source: IMRG Capgemini Index/Mintel Note: 2005-10 figures are from IMRG, 2011-15 projections are Mintel’s own projections based on these figures

7. Media Multi-taskers With so much media entertainment available to the 16-24-year-old consumer, competition for time and attention is intense. Rather than simply extending reach through establishing a presence across all media, advertisers are now faced with the challenge of trying to reach the media multi-tasker, who is able to undertake several forms of communication and entertainment simultaneously and therefore shift attention towards whichever media are the more engaging. (Mintel, Oct 2010)Mintel “ “ Source: eMarketer, Feb 2011

8. Traffic and Demographic Trends

9. Music Search Traffic KPIs Traffic Searches for clothing generics increased by +37% between 2009 and 2010 Searches for clothing generic increased by +15% Oct to Dec 2010 v Oct to Dec 2009. Insights: Sales by DIY retailers in 2010 were £10.9 billion, down 2% on 2009 (Mintel) Over the last five years there has been a fall of 4 percentage points to about 56% of the adult population, that's 2 million fewer people undertaking DIY projects (Mintel) 1.Microsoft Advertising Intelligence Tool

10. Home & Garden Demographics and Daily Trends 1.Microsoft Advertising Intelligence Tool – December 2010 to Feb 2011 data

11. 11 Retail & Online Retailers Spend For the most part, Retail advertisers tend to spend the most on advertising in the Press and on TV On average the industry currently spends around 5% on Internet advertising (not including search). 2010 expenditure has increased +1% from that of 2009 Source: NNR adDynanix : Jan – Nov 2010

12. Display Advertisement Publisher Location: Reach and Frequency (Retail – Food) Microsoft sites delivered both the highest number of impressions and the highest number of unique visitors for Food Retailers in Dec. Source: ComScore adMetrix : December 2010

13. Display Advertisement Publisher Location: Reach and Frequency (Retail – Food) Microsoft sites also have the highest share of Food Retailers ad impressions, however average frequency is very competitive and far less than eBay, AOL and Glam Media. Source: ComScore adMetrix : December 2010

14. Source: ComScore AdMetrix – December 2010 Top Advertiser by Impression and UU by ComScore AdMetrix (Food Retailers)

15. Industry Insights

16. Music Online usage Base: 3,000 internet users aged 16+ Source: GMI/Mintel: Youth Media Consumption Habits, October 2010 Internet activity on PC/laptop in last 3 months all respondents, by demographics, August 2010 In October 2010 a Mintel report found that: 65% of 25-34 year olds listened to music online for free between Aug – Oct 2010 This rose to 77% of users aged 16-24 year olds!

17. Music Online usage Base: 3,000 internet users aged 16+ Source: GMI/Mintel: Youth Media Consumption Habits, October 2010 Media usage habits all respondents, by demographics, August 2010 The same Mintel study also found:

18. Users expect to be able to download music and films free of charge from the internet Source: nVision Research, 2010 Base: 1,000 online respondents aged 16+, GB % who agree or agree strongly, by gender, age and social grade

19. What Do People Buy Online? Goods/services bought online, December 2010 Source: Ipsos MORI/Mintel Base: 1,025 internet users aged 16+ “Which of the following, if any, have you bought/spent money on via the internet in the last 12 months?” Source: Mintel Online Spending Habits, Feb 2011 0102030405060708090100 None of these Motor vehicles Online dating membership Online subscription for music, video or magazine content Sports equipment Online gambling/casino gaming Furniture and furnishings Home appliances DIY or garden products Personal accessories Portable electronics Other housewares Gift vouchers Household cleaning products Music, video/film, software downloads,ebooks Home electronics Toys and games Entertainment tickets Holidays/leisure travel Insurance Food and drink Toiletries/cosmetics Clothing/footwear Books, CDs, DVDs, video games/software Any % of respondents

20. What entertainment would you miss most on a desert island? Source: British Music Rights/UK Music/University of Hertfordshire/nVision, 2009 Base: 1,808 respondents (1,158 in 2008) aged 14-24, UK By those aged 14-24

21. “I prefer music which is not mainstream but new and challenging” % who agree or agree strongly, by gender, age and social grade Source: nVision Research, 2010 Base: 1,000 online respondents aged 16+, GB

22. Modern pop music no longer addresses social issues and problems as it used to do Source: nVision Research, 2010 Base: 1,000 online respondents aged 16+, GB By gender, age and social grade

23. Frequency of listening to music Source: nVision Research, 2010 Base: 1,000 online respondents aged 16+, GB By gender, age and social grade “Which of these best describes how often you do each of the following activities? Listen to music”