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BARBARA COFFEY, an Analyst at Kaufman Bros., LP, joined the firm in April 2006.

MICHAEL PACHTER is an Analyst at Wedbush Morgan Securities, providing coverage of the entertainment software publishing and retail sector.

RALPH SCHACKART, CFA, joined William Blair & Company, LLC, in 2000. He is a Technology Analyst specializing in the digital entertainment/media sector.

COLIN SEBASTIAN is Vice President and Senior Analyst covering Internet and interactive entertainment at Lazard Capital Markets LLC.

EVAN WILSON, Senior Research Analyst, joined Pacific Crest Securities software team in 2002.

TWST: Barbara, how do you define the digital media space?

Ms. Coffey: I think each of us probably has a slightly different coverage list. I really look at where technology meets content. I range from digital audio, digital video, digital design, and go through the creation, storage and sale of digital content. I cover everything from the Adobes (ADBE) and Autodesks (ADSK) of the world, through DTS (DTSI), which was formerly Digital Theater, and Dolby (DLB), all the way to the RealNetworks (RNWK) and Napster (NAPS), which is the sale of digital content.

TWST: Ralph, what is your view of the space at this juncture?

Mr. Schackart: I have a bit of an eclectic list as well. I look at the way content is created, distributed and consumed. The way I look at digital media is really a transformation from the old print way that we consume media to more of a "content is everywhere, at anytime, on any device" approach. That is the way I structure how I approach companies.

TWST: Evan, how do you define the space?

Mr. Wilson: My coverage list is entertainment, so I look at content, like these folks do, except I look at it strictly from the point of view of content that entertains people. We also take a technology perspective, which means we really look at the space, how technology is changing, and how people spend their free time and money.

TWST: Michael, what is your view of digital media?

Mr. Pachter: I think about it as anything that can be delivered digitally. In our business, it also includes physical media, so it includes disks. I am not sure that digital delivery is really that important a distinction. It almost doesn't matter. It is the same concept that content that used to be delivered in analog form is now digital.

I don't think that anybody really thinks of me as a digital media analyst, because the video game companies produce entertainment now recorded on DVDs and soon they will be produced on Blu-ray high definition DVDs. The content itself is susceptible to being delivered over the Internet. I think that the bigger common thread among these companies is that they produce entertainment and all captured entertainment is migrating to digital form.

TWST: What is your concept of digital media, Colin?

Mr. Sebastian: In addition to what has already been said by the other panelists, I would extend the definition of digital media to include advertising models. Obviously, we are seeing the shift not only of content but also advertising moving online. I think that would be another leg of the stool, so to speak.

TWST: Colin, it sounds like the space is broadening out as more and more things are delivered digitally.

Mr. Sebastian: That is right. We are certainly seeing more dynamic business models and obviously in the realm of digitized content, advertising is an important piece of monetization.

TWST: Colin, as we look out over the next year or 18 months, are there any big changes coming along?

Mr. Sebastian: I think you need to look at a couple of driving factors from a consumption point of view. Obviously Internet penetration is essentially ubiquitous, at least in the developed markets. Broadband penetration has also reached critical mass. So what we are seeing at the user level is an increase in the rate of media consumption online. With music and print, we have already seen that transition. With other forms of content, video for example, there is already a fairly rapid migration online off of a small base, and that shift is also beginning to occur with video games. So I think the fundamental drivers are in place for us to see a continuation of these trends. The pipe needs to get bigger. I think it will be getting bigger. And changing consumer habits will continue to drive growth, as I mentioned, now that we have reached high levels of Internet and broadband penetration.