A study from business management firm KPMG has revealed that over the next two years venture capitalists will increase their investments in entertainment content with a focus on mobile applications.

Just over half (52%) of those surveyed told KPMG that their investments in digital content creation would increase over the next two years and a further quarter indicated that the increase will be more than 20%. Interestingly, 59% said that they would expect merger and acquisition activity in the digital content market to increase with nearly in five saying that they expect it to jump by more than 20%.

Overall, the mobile sector is seen as one of the hottest market sectors over the next two years by 31% of potential investors. Of what mobile applications will generate the most revenue, mobile video was surpassed only by gaming and social networks. Interestingly mobile video was seen as generating more revenue that both music downloads and user generated applications.

Nine in ten of the potential investors believed that mobile video would become a mass market in the next five years and 60% expected it to take off in the mainstream in the next three years.