Tapping into the couch potato market

Tapping into the couch potato market - at Moneyweek.co.uk - the best of the week's international financial media.

The summer is often a miserable time for the stockmarket. The old city adage "Sell in May and go away" holds good more often than not. But this year, it won't just be stock brokers and investors who will need cheering up: with interest rates and taxes likely to rise and house prices and real wages likely to fall, the entire country is going to be in need of distraction as the summer progresses. And a lot of people might end up turning to computer games to relax, something that gives investors just one more reason to look at entertainment companies across the globe.

Home entertainment is a huge market, says The Guardian. In the UK there are more than 32 million people online at home; 16 million of them shop online and 12 million bank online. These are people who spend at least as much time online as they do listening to the radio and twice as much time online as they spend reading. This is not a fact that has escaped the news and entertainment businesses: companies such as The New York Times and Dow Jones are starting to acquire some sizeable online assets, aiming to move into the "sweet spot" of the traditional media online by providing both news and entertainment via broadband internet.

Broadband is not yet good enough that it can can truly deliver the quality or selection of programming available to those who have access via their televisions to Sky and Freeview, but those who have it already watch approximately two hours a week less television than they did. It doesn't take much to see broadband competing more aggressively with digital TV and taking a much bigger share of people's time and advertisers' money. The spectacular success of the likes of Sky+ and online DVD rental services points to increasingly sophisticated consumers who want media and entertainment to be made available to them as and when they like. Broadband allows just that.

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With this in mind, keep an eye on Video Networks, says Dominic White in The Daily Telegraph. This small loss-making company based in London - which rather improbably counts Walt Disney, Sony, and Microsoft co-founder Chris Larson among its shareholders - should by rights have gone bust a good three years ago, having spent a decade trying to pipe its video-on-demand service down phone lines in the UK. Instead, its Home Choice product is now vying to become a "serious competitor" to Sky, BT and cable: next month, it will offer 2.5 million Londoners the chance to get broadband, free phone calls to land lines, 80-channel TV and thousands of films on demand, for as little as £27.50 a month.

Still, the rise and rise of broadband doesn't mean that the traditional entertainment companies should be ignored. In Japan, hot products still fly off the shelves, says Michiyo Nakamoto in the FT. Portable audio players (such as iPods) are currently an enormously fast-growing sector of the market and the computer-gaming business is still seen as a good one to be in.

Take the case of games publisher Eidos (which has churned out hit games such as Hitman and Lara Croft). It began looking for a buyer a few months ago, after a period of disappointing trading, and has found no lack of interested buyers: the directors have just accepted a £97m offer from SCi Entertainment.