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Digital in a DownturnBroadcasting at a Crossroads

Human Capital ManagementTalent RetentionLeadership Consulting

Steve StineJune 2009

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The Future of TV?

”The growth of personal computers is happening so rapidly thatthe future open-architecture television is the PC, period…Inother words, there is no TV-set industry in the future. It isnothing ore or less than a computer industry; displays filledwith tons of memory and lots of processing power.”

- Nicholas Negroponte (Being Digital, 1995)

“By all measures, TV was a superb technology for its time.Indeed, its presence and properties defined the time. Butnow its time is over. The television age is giving way to themuch richer, interactive technologies of the computer age.”

- George Gilder (Life After Television, 1994)

Predicting the demise of TV is nothing new…

Yet, TV hangs on…and some would argue, even thrives in a climateloaded with new media and gadgetry…

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Television Perceptions Through Time

“Whoever controls the media, controls the mind.”

- Jim Morrison (musician)

“The media is too concentrated, too few people own too much. There's really fivecompanies that control 90 percent of what we read, see and hear. It's nothealthy.”

- Ted Turner (media mogul)

”Pictures are for entertainment, messages should be delivered by WesternUnion.”

- A. Samuel Goldwyn (American film producer)

“Television is more interesting than people. If it were not, we would have peoplestanding in the corners of our rooms.”

- Alan Corenk (comedian)

“Television is chewing gum for the eyes.”

- Frank Lloyd Wright (American architect and commentator)

“Television is an anesthetic for the pain of the modern world.”

- unknown

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Is the Sun Setting on Television?

The TV industry is still rife withcommercial and technical issues:

Broadcast & Cable operators stillcontrol the content levers

The advertising model is geared toencourage TV spend above and beyondall other mediums

Interactivity is technologically limitedand commercially discouraged

User interface (re: the remote control)is clumsy and obsolete

Operators are reluctant to aggressivelybundle add-ons such as consoles, slingboxes, or others, concerned thatconsumers will reduce standard viewing

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The Broadcast & Cable Providers’ Quandary

How do I grow myadvertising revenue

base?

What kind of newmedia strategy

could best reinforceregular viewership?

How do I driveservice & channel

loyalty?

How do I balancedistribution chargesagainst household

penetration?

How can I ensurethat consumer free

time is spentwatching TV?

How can I anticipatefickle viewer tastes

& preferences?

What can I do tocounter growing

consumer interest inWeb video &

programming?

What servicebundles are mostattractive to each

consumer segmentand why?

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The New Paradigm

1. Content – traditionally generated by asmall group of media elite is giving wayto an increasing amount of independentand user-generated product

2. Bandwidth – the lynchpin to Web video– is expanding at a record pace, drivinguser adoption of Web video

3. Community – Facebook, Linked-in,Twitter, and many other Internet sub-cultures are demonstrating the “powerof the collective” and challenging thestatus quo

BANDWIDTH COMMUNITY

CONTENT

Three interdependent phenomenon are aligning toproduce a new culture of entertainment wants & needs

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Content

Six primary applications are driving change:

1. YouTube is the single largest source for video viewing on the Web,representing 40+ percent of all Web video viewing

2. Video Conferencing will explode as the killer application in coming years.

3. Amateur Video from more than 500 million digital camera owners aroundthe world who take, store, and share digital photos and video on their PCs

4. Motion Pictures - Netflix, Blockbuster, Apple, Hulu, and many others arecreating new, inexpensive and alternative means of delivering HD-qualityfilms to TVs, PCs, and mobile phones

5. Online Gaming, underpinned by new graphic processing power, globalgamers represent a fast-growing and heavy-user segment

6. IPTV, backed by telcos who see the writing on the wall, less they investnow and diversify away from basic voice communication services.

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Bandwidth

“The U.S. Internet of 2015 will be at least 50 times larger than it was in 2006…These changes will entail a total new investment of some US$137 billion in theworldwide Internet infrastructure by 2010.”

- “Estimating the Exaflood” Discovery Institute, Jan 2008

“The number of servers in the U.S. nearly quintupled from 1997 to 2007.”- International Herald Tribune, June 15, 2009

“More than 200 million users have uploaded more than 15 billion photos, makingFacebook the world’s largest photo-sharing service.”

- International Herald Tribune, June 15, 2009

Apple sold nearly US$1.9 billion in movie and music content on iTunes in 2008- BusinessWeek, June 3, 2009

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Community

Online communities may be the greatest social force to be unleashed on thehuman race since the advent of modern transportation

The world is “flat,” but there are well- springs of interest groups, fan clubs,and social movements that are gaining influence and altering behaviors

Increasingly, social networks willform the backbone of contentdevelopment, distribution andprioritization

Human beings are “tribal” bynature, and will therefore beinclined toward and influencedby their digital communities asreal-time access and qualityof communication improves

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The Evolutionary Impact

An inevitable shift will occur toward “interactive” mediums as they become increasinglyuser-friendly and easily accessible

New content development models will emerge that are dynamic vs. static in nature

High Definition (HD) services will delay the shift to interactive mediums and devices, but itwill not be able to prevent it

News & entertainment choices will be made in line with community trends andrecommendations

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The Inevitability of Multi-Channel Digital Distribution

Telecom Service Providers are expandingbandwidth to the home and office

Technologists are innovating and improvinggraphic processing and social media technologies

Governments are promoting lower prices anduniversal access to broadband and 3G mobileservices

Private Equity firms are seeing new bandwidth-driven business opportunities and backinginfrastructure and service deployment

Neophytes are responding to new, easy-to-usetechnologies that offer simple access to digitalcontent

Content Providers say pirating and revenuecannibalization prevent them from makingchanges or deploying digital

Advertisers & Media Buyers prefer the high-margin, low-risk traditional media channel anddeplore the low-margin, high-risk digital mediums

Marketers - who hold the advertising pursestrings – remain conservative and risk averse

Consumers erroneously believe that all contentcan and should be made available free-of-charge

Device Manufacturers would rather “control”media access as opposed to promoting openstandards and open platforms

Infrastructure & Regulatory Advancesare driving change and growth…

Content providers & distributors aredefending against commercial change…

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Control

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Choice

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Asia Trends

Japanese broadband is the world’s fastest and cheapest

Korea has the highest broadband penetration in the world

Singapore is embarking on a state-of-the-art nationwide roll-out of high-speed networks

China is the fastest growing internet market in the world

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Asia Predictions

Asia will leverage its broadband roll-out in order to be among the world’s first indelivering new video-telecom, e-government, and energy-management services

A new breed of interactive programming that combines gaming with television-styledrama will dominate the Korean and Japanese entertainment landscape

China will struggle with these changes; intermittently clamping down then openingup, before the real revolution in digital media takes off

Indian software developers will unfurl new concepts in virtual (re: “cloud”)computing that lead to server and network optimization and higher levels ofoperational efficiency

Asian broadcast & cable operators will be vying for a place alongside thetelecommunications’ companies who start offering bundled voice, broadband andinteractive entertainment services

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Injecting New Talent into Old Business Models

Investors who understand the fast-moving dynamics of an internet world must lendtheir experience and expertise in infusing old media and telcos with capital and talent

Traditional media companies will need to recruit and incentivize businessdevelopment and strategy leaders to generate new multi-platform products andservices designed to delight customers on all fronts

Regional telcos will need to hire talent from new and old media companies in orderto infuse their traditional “service” and “infrastructure” businesses with people whooffer “new” ways of thinking and behaving

Asian corporate leaders must assume greater risk and experimentation in order totest a vast array of new digital media-related revenue opportunities

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Serving clients from 60 cities around the world