Creating Value in a Transforming Communication Creating Value in a - PowerPoint PPT Presentation

Creating Value in a Transforming Communication Creating Value in a Transforming Communication Environment Support For Discussion December 2010 1

Agenda 1 Our ideas of the future WebTV – A web 2.0 phenomenon fragmented, halfhearted and 2 under-exploited under exploited 2

1 SHAPING TRENDS Major shaping trends in entertainment and communication are transforming today's landscape TECHNOLOGICAL CUSTOMER NEEDS & TRENDS EARLY INDICATORS • Personalization – • Ubiquitous broadband access TiVo • Bandwidth in abundance B d idth i b d • Mobility – COMMUNI- iPod CATION AND • Vast intelligence and storage capacity on devices and in ENTER- • Accessibility – networks t k Blackberry TAINMENT 2020 • Full mobility / portability of • Availability – digital content iTunes • Convergence of networks (IPv6) • Simplicity – Google 3

1 SHAPING TRENDS As a result five core trends are shaping the communication market • Consumer spending on entertainment/media is growing CONSUMER 1 • Internet and video-based segment is developing rapidly BEHAVIOR • Leisure activities increasingly shifting online ONLINE 2 • Interactivity, personalization and user-generated content are key drivers • Traditional advertising markets are showing few growth prospects ADVERTISING 3 • Strongest growth segment is online • Free-TV broadcasters are forced to grow in areas other than advertising Free TV broadcasters are forced to grow in areas other than advertising • Free-TV broadcasters and major content brands are aiming for direct COMPETITION 4 customer relationships and pushing Pay-TV and on-demand services • Competition is emerging on the platform side, too, likewise driven by DSL • Competition is emerging on the platform side too likewise driven by DSL as the new TV infrastructure • DSL will continue to establish itself as a fully-fledged TV infrastructure; still, IPTV 5 the market for IPTV remains relatively small the market for IPTV remains relatively small • However, for access providers IPTV will quickly become a hygiene factor 4 4

1 SHAPING TRENDS Competition over share of wallet and time is increasing – Need to act now to stimulate growth SHARE OF WALLET SHARE OF TIME NEED TO ACT NOW Structures are breaking up: Structures are breaking up: Media offer is changing: Media offer is changing: • Traditional providers of infrastructure • Growing number of TV channels due (cable, DSL) offer own premium to digitalization packages • Increasing use of Internet for • Free-TV broadcasters launching pay F TV b d t l hi entertainment: t t i t channels – Online communities – User-generated content • Independent on-demand platforms are emerging – Online videos • New DSL TV infrastructure with N DSL TV i f t t ith growing IPTV offering Consequences: C • Actively secure core Consequences: • Media use patterns are changing business • Duopoly in TV (free, pay) is breaking • Increasing competition over • Capture new growth areas up customer media time • Increasing competition over content and customer budget 5 5

1 SHAPING TRENDS We are convinced that traditional media players will struggle when confronted with new entrants PREDATION STRATEGIES… … ARE A THREAT FOR > Predation consists of selling a product at a price below variable TRADITIONAL MODELS costs. The competitors are quickly driven out of the market. > Actors who are dealing with predation > When variable costs are very low or inexistant, predation strategies are easily implemented and do not leave a chance to strategies and networking effects are competitors competitors. doomed to disappear in the long run doomed to disappear in the long run. > Once the predator becomes the leader he can start making > Most traditional telecommunications profits. Entry barriers are so high that his monopole is actors adopt strategies that are the established. oposite of predation. They manage announcers' readers' and audience's announcers , readers and audience s rights and want their profit margins to remain steady. > Growth is limited. These actors depend …STRENGTHENED BY NETWORKING EFFECTS on announcers and on rights' holders on announcers and on rights holders. > Three virtuous circles are used in order to capture market share: > First virtuous circle: a customer follows other customers > Second virtuous circle : competition between "suppliers" > Third virtuous circle: development of platforms that make it possible to do business on one's own 6

1 SHAPING TRENDS The development of predation models will deeply alter market structure and rules Key stakes in media market 1 For actors who • Portfolio's size, value and exlusivity are essential in order to survive, to find a place in this new environement, to negociate and fight against predators, or even manage content: act as one. reach a critical size • Only actors whose size is big enough can survive 2 • Beyond content, value is also created in customer relationship management , For which is essential in order to reach to the client, to develop the relationship with him, telecommunications telecommunications to sell him a service and to successfully sell audience afterwards. to sell him a service and to successfully sell audience afterwards operators: find their • Traditional media actors are weak on this point because they did not evolve early enough and keep calling their customers an audience . natural place • Telecommunications and Internet actors are early adopters of this trend and are well ahead of their peers. ahead of their peers 3 • Dilemma between network providers and new media operators. Google is one of Find a way to the biggest questions finance future finance future • Network providers are moving backwards to finance future networks and do not networks need them yet. New media operators, especially Google, are in need of future networks and have started to finance them. Source: Roland Berger 7

1 SHAPING TRENDS Brands act as magnets for assigning the future business Brands provide Who provides consumers with crucial "brand" orientation and a USP • The broadcaster • The series, the film (also continuations, if applicable) • The genre • The program slot • The director, actors, the author, the producers Brands produce Genres, titles and actors come to the fore as a result of search & recommendation availability tools at EPG, hard disk recorders and VOD platforms Brands are aggregators gg g New portal brands such as maxdome and Joost, which simultaneously, establish a p , y, direct customer relationship are taking root Brands drive the • An anchor toward the customer – more so as a billing function, infrastructure business model business model platform etc platform, etc. • New brands are new players • However, the half lives of brands are becoming shorter and shorter Brands attract Brands attract Experience in advertising marketing can be transferred to new advertising platforms Experience in advertising marketing can be transferred to new advertising platforms advertisers 8 8

1 SHAPING TRENDS In the TV business, branding is characterized by a high level of "freedom of choice" and "reconsideration frequency" High Air travel VIDEO GAMES GAMES Fast food Fast food TV Fruit Internet Trains Coffee Sugar Soft drinks Soft drinks Gas stations Mobile phones Supermarkets Cigarettes Reconsideration frequency Mail order M il d Fixed net Credit cards Newspaper Healthcare "Throughput" Energy Cars Speed inflow/outflow of Insurance people through the brand user base Banks Porcelain Low Low Low Freedom of choice High 9 9

1 SHAPING TRENDS The Internet is growing in importance – Consumers believe that TV will grow less strongly "In ten years time, how important do you think each Comments of the following will be?" M More important [%] i t t [%] • Internet set to develop I t t t t d l Less important [%] most strongly – 96% of Slight drop in importance respondents think it will 1 96 Internet 17 79 Strong drop in importance grow in importance 1 87 Cell phones p 21 66 • Despite new competition – PC/video games 66 30 36 from VoD, Video/DVD will continue to gain ground 18 Video/DVD 47 4 14 32 15 according to just under 11 TV TV 44 9 9 23 23 21 21 2 2 50% 50% of respondents f d t 43 Teletext 18 16 27 12 6 • TV is the only traditional medium set to grow in 22 17 Radio 3 19 11 6 importance – other 34 34 13 13 6 6 28 28 Newspapers Newspapers 9 9 4 4 traditional media stand to lose out, especially books 35 Magazines 12 5 30 9 3 and movie theaters 51 Books 11 15 36 8 3 Slight gain in importance 49 49 Movie theaters 9 9 15 34 6 3 Strong gain in importance Basis: 1,002 respondents (aged 14-49 years) Remaining values (total 100): "no change", "don't know", question not answered 10 10

1 SHAPING TRENDS Consumer expectations: Lower prices, more content, new services Extra content, from feature films to niche content Content CUSTOMER • On-demand offers • Better prices via bundling • Program information (EPG) • Single bill • Search and recommendation • Single provider Single provider functionality functionality Price & P i & Services • Communication services convenience • etc. 11 11