This year, we have chosen to confine DigiWorld markets to digital service businesses. The hardware and devices that are used to run them are not factored in as such. They are nevertheless vital components of the solutions delivered by service providers. They are intermediate goods, so automatically part of the value-added. This is true of telcos’ network equipment, IT companies’ servers and TV industry players’ production and broadcasting equipment.
Value still concentrated in IT and telecom services
Of the four main sectors that we have analysed, two account for more than two thirds of overall value, and were almost equal in weight in 2017: IT services and software on the one side (34.5%) and telecom services on the other (34.7%). Thanks to a much steadier growth momentum, IT services and software have taken the lead in 2018. Meanwhile, the other two segments, i.e. digital content and Internet services share the remaining 31%, with a still slightly stronger advantage for digital content (16.8%). But Internet services (14.1% of total revenue) are enjoying rapid growth and thus gaining ground.
Performance is driven chiefly by factors proper to each sector
The disparate trends we find in each segment cannot be summed up merely by shifts in value. While it is true that a portion of telecom services revenue evaporated when OTT services arrived, another, no doubt greater, portion was destroyed by the competition that telcos have been waging among themselves through price wars and unlimited plans.
On the flipside, the content services economy has been transformed with distribution going digital, physical media on the wane and time-shifted viewing, while production and distribution revenue has continued to rise at a steady pace. If ad revenue has been moving over to online platforms, it continues to rise and, for TV at least, networks’ ad revenue also continues to increase, and pay-TV is still a growing market.
Lastly, IT services are moving to the cloud and XaaS solutions are enabling client companies to achieve their digital transformation, which is extending little by little to every part of their business.