Digital Media Growth Slows to 0.9% in Q1 2009

A new study is confirming the deteriorating economic conditions in the first quarter of this year, showing that digital media revenue growth has declined since the same period last year. The Digital Media Strategies Service report from research firm Strategy Analytics found that growth in the digital media sector dropped worldwide to only 0.9 percent.

The firm's Digital Media Index dropped from 6.6 percent in the first quarter of 2008 to 3.4 percent in the fourth quarter of the same year, and to a dismal 0.9 percent in the first quarter of 2009. Digital media revenues grew 3.6 percent in Q1 2009, on a year-over-year basis, a sharp drop from the 29.2 percent growth in Q1 2008.

“As the US digital media market’s major players suffer from revenue decline, the international market—in particular the European and Asian markets – is still weathering the economic downturn,” Martin Olausson, director of Digital Media Strategies (DMS) at Strategy Analytics, said. “This indicates that international expansion could be one of the solutions for digital media companies struggling with US market growth.”

The report looked at a variety of digital media companies in advertising, video, music, games, social media and content delivery networks. It found that companies not relying on advertising as their main source of income, for example having a consumer-paid business model, fared much better than the ones with a large ad revenue stream.

“Although many digital media companies will still choose the advertising revenue model given the relative ease of gaining user traffic, Strategy Analytics believes that the consumer-paid model is more resilient in the recession as it maximizes the value of content.” Jia Wu, analyst at Strategy Analytics Digital Media Practice and author of the DMI, commented.