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E-Commerce: The Internet Leisure & Entertainment Market – Market Assessment 2006
Key Note Publications Ltd, June 2006
The Internet has had a profound impact on consumer behaviour in the UK, affecting work and education and opening up new channels of communication through e-mail and interactive websites. Spending time online has itself become an important leisure activity, but the days of pointless `surfing' have given way to much more directed, purposeful activities.
These new online activities are increasingly social, in contrast to the `solipsistic' surfing of the past. Research by Key Note shows that activities such as online auctions (led by eBay), interactive multi-player games and getting in touch with old friends, relatives or `dating' are all part of the new `virtual society' that has developed on the Internet.
However, in terms of generating revenues, the most lucrative e-commerce sector in leisure is still travel, estimated to account for nearly two-thirds of online spending on leisure. Consumers increasingly research their holidays online before booking them, even if they still use the telephone or a travel agent in the high street for the final booking. Examples of the impact of the Internet on travel include being able to check in at home for a flight (including self-printing the boarding pass) and the stimulus given to short-break holidays by the budget airlines (e.g. Ryanair), which sell almost all of their tickets online.
Despite the value and growth of e-commerce for leisure, worth around £6.5bn in 2005, this still represents a small fraction of total spending on leisure (a distribution share of less than 10% in most leisure markets). Some activities are suitable for a steady rise in the online share to take place, notably gambling and booking tickets for events. Interactive websites are eminently suitable for these activities, whereas other leisure activities obviously involve leaving the computer behind (e.g. taking part in sport or going to a public house or cinema).
The supply side of online leisure is increasingly dominated by a handful of major websites, despite the `democratic' nature of the Internet. The vast majority of consumers in the UK rely on systems using Microsoft (for basic software), and Dell has taken a clear lead in selling computers to UK households. There is a limited number of websites used as consumer portals into the Web, including Google, AOL and MSN (Microsoft Network). Leading leisure-related companies online include Amazon (for entertainment products), eBay (online auctions), iTunes (music downloads), Friends Reunited (a website now owned by ITV, for finding and contacting old friends) and Expedia (travel), but they face competition from the online divisions of established companies such as the BBC, Virgin and ITV. Overall, the supply is increasingly dominated by US companies such as IAC/InterActiveCorp, owner of 60 website brands including Expedia (travel), Ticketmaster (tickets for music, sports, arts and theatre events and other attractions), TripAdvisor (reviews and deals for hotels, resorts and holidays), Match.com (dating) and Ask.com (information searching).
Many experiments and trials are taking place in 2006 and 2007 that will shape the new Internet leisure market. Video-on-demand (VoD) will transform broadcasting, and the days of some `entertainment products' (e.g. CDs and DVDs [digital versatile discs]) are limited because of the potential for downloading them. However, books seem to be impervious to these changes and the traditional book market is still thriving. This is symptomatic of another trend in leisure: despite all the technological advances, most consumers are still simply finding ways to access `old culture', such as Hollywood movies, `greatest hits' records or live football matches. Many time-consuming activities online — such as finding old friends and relatives or buying second-hand goods — also contain an element of `cultural timelag'.
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