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If we look at the digital home market in Australia, what is the GFK estimate on current value?

GL: The value of the categories we measure is about $6.5 billion in retail sales but of course there are some elements missing from that. If you want a true value of everything associated with digital technology in household applications you would certainly have to include mobile phones in that but also things like the value of cable and satellite hardware, Foxtel subscriptions, music downloads and mobile phone bills. To my mind, these are all household expenditures on digital technologies and applications. By the time you add all that into the mix, goodness knows what it would be but it is certainly way above $10 billion.

And does the market still have good growth potential? Are you seeing rapid expansion of that spending?

GL: Yes. Almost all digital devices - and there are probably two or three exceptions out of the categories that we measure - are still showing anything from reasonable to astronomical growth.

So what are those exceptions?

GL: There's a decline in expenditure on home theatre systems - the number being bought continues to rise but the average price erosion is bringing the overall value of the market down; desktop PCs are falling as we move to notebooks; and printers, where there's been a decline of 15-20 per cent in value although pretty strong growth in multifunction devices partially offsets that. The multifunction device category is now worth about $163 million. It's just a change in the format of printing devices.

What are the higheset value categories?

GL: The biggest is flat panel screens. They obviously receive analogue signals too but I think it's legitimate to include them for the purpose of this discussion. Plasma and LCD together have a retail sales value of about $1.1 billion in Australia. Very close to that, which will be surprising to a lot of people, are sales of DVD software including movies, box-set TV shows and music at about $1 billion. Next are digital still cameras and interactive gaming if you include consoles and software. Both of these categories are worth something approaching $800 million. Notebooks are about $700 million.

Some people believe we are going rapidly towards the concept of a digital home because consumers are spending more and more on these products. Others argue that having a few devices here and there doesn't constitute living the digital lifestyle that is being espoused by the vendors. Which camp do you fall into?

GL: Even within GFK we have members of staff whose personal views fall on one side or the other. We held a conference in June last year - The Digital Lifestyle: Do We Buy It? My personal view is that Australian households are rapidly becoming digital in that everybody is replacing analogue products with digital equivalents but to my mind that doesn't mean they are buying into the concept yet. There are some signs that early adopters are but that's as far as it goes as far as I'm concerned. There are lots of elements in our figures that demonstrate that. I mentioned earlier that one of the biggest categories is DVD software - nobody is buying pre-recorded films because they are building a digital hub infrastructure at home. It's because a DVD player, another digital product, is the nearest thing to plug and play we have ever seen. You plug it into a television, open a draw, put the disc in and play it. Not surprisingly, DVD players and software are huge markets but that's not digital lifestyle - it is all about functionality and ease of use. All you have to do is compare the size of the pre-recorded DVD software market with the maximum size that the pre-recorded VHS market ever reached. There's no comparison because the DVD player and software is far simpler to attach to your television and learn to use.