1. Digital Media Trends to Watch Changes in Content Consumption Joe Bates Director of Research Consumer Electronics Association 4 th Annual Digital Media Conference June 22, 2007

2. Agenda About CEA Trend #1: Disruptive Distribution Trend #2: Greater Consumer Control / Choice Trend #3: Greater Realism Trend #4: Greater Connectivity Trend #5: Greater Portability Presentation URL / Contact Info NOTE: All 2006 figures are estimates, all 2007 and beyond are projected

3. More than 2,100 members Top 20 Trade Association Represents entire range of consumer technologies More than $140 billion in annual U.S. sales by members CEA Market Research 300 consumer research studies Sales data and forecasting program Research Library Economic Insights About CEA

4. Disruptive Distribution

5. Physical Media Music? Digital Media Video? Physical Media Music? Digital Media Video? Purchasing Usage The Shifting Media Continuum

6. OVERALL Late Mass Early Mass Early Adopters Late Adopters Base: All Online US Households Video Download vs. Physical DVD

7. Fewer restrictions with physical media Afraid something may happen to the digital file Physical copy easier to share with friends/family Want to immediately play without any hassle Like in-person shopping experience Like to display collection of DVDs or CDs Reasons for Preferring Physical Media

8. Greater Consumer Choices & Control

9. Digital Recording Options

10. FREE Streaming Network Shows Amazon Video iTunes Video Vongo CinemaNow MovieLink Xbox Live Google/You Tube Bebo Emerging Home Services

11. Desired Activities Using Home TV

12. Satellite Radio Satellite Video (vehicle) HD Radio Mobile TV (over the air) Courtesy XM Satellite Radio Emerging On The Go Services

13. Greater Realism

14. High Definition Standard Definition The Shift to HDTV

15. Combined HW/SW Revenues of $13 Billion in 2006 PS2, XBOX, Game Cube Launch Xbox 360, PS3, Wii Launch The Era of HD Gaming

16. *Includes only component based HD-DVD and Blu-Ray players Packaged HD Movies

17. Greater Connectivity

18. Wide area connections (WiMax, WiFi/Hotspots, Cell, Broadband, SlingMedia) Local area connections (Ethernet, WiFi, HDMI) Personal networks (RF, Bluetooth, OE integration) Connecting services (VOIP, vlogs, blogs, social networks) Growth of Networks

19. The Need for Speed

20. Present Future Desktop PC Laptop PC Television DVR Media Server Appliances Security System Products Connected to Internet

21. Greater Portability

22. 14% 38% 46% 58% 74% 80% Millions of Unit Shipments w/ Percent Video Playback 0.5 0.7 1.7 3.0 7.1 24.8 33.0 38.3 39.0 33.8 29.8 20002001200220032004200520062007200820092010 14% 38% 46% 58% 74% 80% Portable MP3 Growth

23. Desktop PC Laptops/Notebooks Portable Computing

24. Base: Online adults who own a portable entertainment device (+15) (+8) (+5) (-18) (+20) (+1) (+11) (+1) (+35) (+13) Future Portable Entertainment Uses

25. Thank You! jbates@CE.org