Australia / Analyst Insights
Faster internet boosts online shopping, stifles traditional media

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by Brian Lo
May 25 2017

The ongoing rollout of the NBN has strongly enhanced Australian internet coverage and download speeds. According to the ABS, the number of internet subscribers in Australia increased by 4.7% over the twelve months through December 2016, with the number of high-speed fibre connections growing by 122.0% over the same period. The rising accessibility and quality of internet access in Australia has worked in favour of certain industries, but has been detrimental for other industries. The retail sector has fared particularly well. According to the NAB Online Retail Sales Index, total online sales accounted for 7.3% of traditional retail spending over the twelve months through March 2017.

Online sporting and physical recreation goods retailers are expected to benefit enormously from the changing landscape of retail shopping over the five years through 2016-17. Increasing broadband penetration and the growing acceptance of ecommerce as a safe and viable alternative to traditional bricks-and-mortar retailing have significantly expanded the overall size of this industry’s market over the period. Industry revenue is expected to increase at a compound annual rate of 11.7% over the five years through 2016-17, to reach $314.4 million. Revenue is anticipated to increase further during the current year, due to a rise in internet connections and more bricks-and-mortar retailers launching their own online sales channels.

However, the rising uptake of internet connectivity among Australian households has been detrimental for some more traditional businesses, such as video and DVD hire outlets. Demand for video and DVD hire has been in decline since the late 2000s, and the rising availability of content delivered through the internet has only exacerbated this trend. Higher internet speeds have greatly increased the popularity of internet-based content platforms, including online video sharing networks such as YouTube and subscription video on demand services such as Netflix and Stan. Demand for video and DVD hire services has been diminishing at a steady rate in recent years. Over the next five years, most of the revenue for this industry is projected to come from rental kiosks rather than physical outlets. Due to the growing threat of external competition, industry revenue is expected to decline by a compound annual rate of 22.2% over the five years through 2016-17, to $218.4 million, including a significant revenue decline during the current year. Subscription video on demand services are projected to take an even greater share of the domestic home entertainment market following the launch of Amazon Prime Video in December 2016.

Related industries:

Video and DVD Hire Outlets

Online Sporting and Physical Recreation Goods Sales