Low ticket value means the entertainment category is avoiding the sharp slowdown in
spending being seen in many durables categories. However, the digitalisation of content has
exploded the number of methods of distribution and, in most media, traditional high-street
retailers are fighting hard to stand still.
The DVD/video category is no longer the saviour that it was. Hardware penetration has
reached a plateau and deflation in software prices has meant that value growth has stalled.
The games category enjoyed an exceptional 2007, as Nintendo, in particular, drove a big rise
in Europe’s installed base. Our forecast growth of 22% in 2008 augurs well for most players.
Books are enjoying steady growth, albeit mostly accruing to supermarkets and online
retailers. Reduction in capacity by Borders will likely bequeath some share to HMV. Supply
chain changes may threaten HMV’s earnings security short term. We are upgrading our rating
on HMV to Neutral (V) from Underweight and raising our price target to 138p from 114p.
Music, now the least important category, continues to face the greatest challenges. Mobile
downloads are just the most recent development to suck consumer spending away from
traditional high-street players. A booming live sector shows that inherent demand for music
remains high, but spending is, again, being diverted from the majors.
We are initiating coverage of Woolworths Group with an Overweight (V) rating and a target
price of 16p.

目录

The entertainment outlook 3
Entertainment in the context of household spending 3
The problem – in a nutshell 4
Channel evolution 5
The digital future 7
Canada 9
Money for nothing – or music for free 9
Music 10
Market evolution is not going the retailers’ way 10
Digital’s rising share of a soggy pie 12
Deflation 13
DVD 14
A flat market outlook at best 14
Rising influence of online 15
Outlook 16
Games 17
Introduction 17
A defensive sector? 17
Books 21
Overview 21
Channel evolution 22
The future 24
Less obvious, but very important, stuff… 25
Recent sales trends 26
Conclusions 27
Disclosure appendix 28
Disclaimer 30
Contents