Digital content drivers. (editor's note).(Industry Overview)

This month, in the third installment of our report on the present and future health of the digital content industry, we examine the market from the perspective of Wanda Meloni, principal of M2 Research, a digital content creation analysis firm. Here's a summary of findings from her latest series of reports.

Given the severe economic climate, the next two years will be telling for content creation toolmakers. From 1997 to 2000, the market experienced unprecedented growth in all segments, but that growth began showing signs of strain by the end of 2000. And as businesses continued struggling with difficult macroeconomic pressures, the entire market sustained substantial losses in 2002. Today, while the year ahead does not appear to be vastly different, there is hope that by the fourth quarter the market will show signs of recovery. Indeed, there are a number of key trends that are driving the entire digital media market, specifically in video, 3D, and 2D graphics.

* In the video market, the price of professional video tools--including video capture, video software, and turnkey systems--continues to drop as CPUs get faster, storage gets cheaper, and software becomes more accessible to more users. Consequently, as a number of lower cost systems have entered the fray, the high-end market has suffered. Nevertheless, several segments continue to have growth opportunity, mostly in the applications for broadcast and corporate use. For example, broadcasters are looking to update antiquated analog equipment with DV systems that provide real-time and HD functionality. And corporate users are electing to bring some of their previously outsourced video production work in-house.

* 3D graphics toolmakers, much like suppliers in the video market, ...