Digital piracy is inhibiting the growth in the legitimate digital market in SA.
This is according to PricewaterhouseCoopers (PWC), which says Internet service providers in a number of countries have managed to slow digital piracy and, in some cases, graduated response measures have been introduced to warn consumers of suspected infringements.
According to the consulting firm, the licensed digital market has developed relatively slowly in SA due to limited Internet access.
“Low broadband penetration limits Internet distribution because it is not easy to download from a home computer. Mobile phone downloads continue to dominate the market due to the fact that nearly every adult in SA owns a cellphone,” it adds.
PWC also points out that, while the digital market is still very young, growth is expected to continue over the same forecast period.
“Digital has been increasing and spending will more than triple from R130 million in 2009 to R425 million in 2014, with an average compound annual growth of 26.7%,” PWC says.
In addition, the firm says physical piracy - or audio/visual 'ripping' - remains a major problem for the actual distribution market but efforts to contain this setback have yielded positive results. A substantial quantity of illegal products to the value of R6 billion was confiscated in Johannesburg in October 2009 and industry losses are now estimated to have decreased from R500 million to R350 million annually.
Due to these kinds of piracy, recorded music market in the country, has experienced a decline over the last two years losing 17.3% in 2009. “The recorded music market is made up of consumer spending on physical formats and digital distribution, which consists of music, distributed to mobile phones and licensed Internet music downloads,” it says.
PWC's first edition of its report, 'South African Entertainment and Media Outlook: 2010 to 2014' states that the physical format market will continue to decline at double-digit annual rates till 2012 and will moderate to single-digit decreases during 2013 to 2014.
PWC says spending on digital is not expected to surpass spending on physical formats over the next five years. However, by 2014, digital spending will be more than half of physical spending.
Vicki Myburgh, director of Entertainment and Media for PWC Southern Africa says: “Spending on physical formats is expected to decrease to R810 million in 2014 from R1.4 billion in 2009, a 10.4% compound annual decline.
“Prices for digital formats are significantly lower than that for physical formats and this will result in a shift in the consumption between the two.”
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