Future of Gear

1
Future of Gear
Communications Policy 197C Sept. 1, 2004
2
On Todays Episode..

• Where the media industries are going?
• How is technology changing content and business
  models?
• What will be the possible impact(s) of
  convergence?

3
Challenges Ahead

• Technology digital, PVRs, VOD, DVD recording,
  HDTV
• Increasing audience segmentation
• Repurposing
• Financing for those not vertically integrated
  (e.g. Sonys decision to shut down primetime
  network TV division)
• How much is too much for a conglomerate to own?

4
Digital Elimination of Space and Time

• Additional competitive elements copy at no
  cost ability to edit and use portions for other
  purposes
• Piracy
• Day and Date Releases
• Digital Production, Post-Production, and
  Distribution
• Shrinking windows
• Need for physical distribution infrastructure?
  need for economics of scale?

5
Two Questions for the Day

• What will media look like in 2010?
• What technologies and business models will work
  and what will fade away of all the different new
  media initiatives underway?

6
Gear Interacting With Ownership

• Rights of Editing Content
• Studios Edit for Airline and TV
• Rights of others to edit for audiences?
• ClearPlay Digital Cleaning
• Family Movie Act -- Rep. Lamar Smith exempts
  from legal liability any company that produces
  movie-filtering software so long as the product
  carries a disclaimer that it is cleaned up
•  
• Free Use Electronic Frontier Foundation (EFF)

7
Digital Distribution of Film

• Movielink -- 2001
• Partnership Viacom, Sony, NBC Universal, MGM,
  Warner Bros.
• 1.99-4.99/movie, short-term viewing
• Charter co-branding, also SBC, Bell South, AOL
• Only 75,000 pictures/month, 4.5 million/year
• CinemaNow 1999 -- Lions Gate, Microsoft,
  Blockbuster
• Movies.com Disney/Fox attempt
• Intertainer suing the major players for content
  failures
• MovieBeam new Disney alternative
• Starz!/Real Networks online movie service

8
Broadcasters Initiative (April 2004)

• Low-cost multi-channel viewing options 30 cable
  networks -- purchase a set-top box for a one-time
  cost of approximately 99 and pay roughly 25 a
  month in service -- a significant discount to
  current cable rates -- with access to local
  stations in high definition and at least 30
  top-rated cable stations
• Emmis, Barrington Broadcasting, Citadel
  Communications, Clear Channel, E.W. Scripps,
  Fisher Broadcasting, Media General, Meredith
  Corporation, Nexstar Broadcasting, Prime Cities
  Broadcasting, Raycom Media, and Sunbelt
  Communications Co

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Broadband Video
Australian Broadcasting Corporation
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Digital Production Enhancing Runaway Production

• Runaway Production large trend toward producing
  internationally
• Tax breaks
• Union breaks
• Currency breaks
• Now lower price of technology effects and digital
  production allow further production abroad

11
New DVD Format Wars

• High Definition DVDs next generation
• Blue Ray disc 25 gigabyte, blue laser has
  shorter wavelength (405 nanometer)
• Sony-driven also Dell, Hitachi, HP, LG,
  Mitsubishi, Panasonic, Pioneer, Philips, Samsung,
  Sharp, Sony, TDK and Thomson
• (Sony/Phillips CD patents)
• Would need all new plants
• Needs second built-in laser to be backwards
  compatible
• Sony to release all DVDs on BD by end of 05 or
  early 06
• HD DVD 15 gigabyte
• Can manufacture on current lines
• Backwards compatible

12
VOD Moving Up Windows?

• Studios earn about 12 for each DVD movie they
  sell and 1.50/rental from Blockbuster
• VOD movie with 60 split to studio gets studio
  2.40/buy
• Cannibalization of DVDs?
• Cannibalization of Cable Networks?
• Internet Bypass direct encoded digital
  distribution?
• Motivation for Comcast offer for Disney

Sources Sanford Bernstein, Daily Variety
13
TimeShift TV

• Internet to deliver programming
• New Internet box with subscription service
• Parent Broadband Networks
• Languages Spanish, Hindi, Chinese, French,
  Italian, Japanese, Polish and Korean
• 199-599/box
• Aims to take market share from? 2.5 billion
  foreign-language video market

14
In the Sky VOD?

• Digeplayer, the first in-flight VOD system, now
  on Alaska Air
• Content Warner, Fox, Buena Vista
• Free in first class, 10 on coach

15
Digital Dailies

• Media.net partnership with BT Broadcast
  Services in Europe
• Previous tries by JCI Corp. (1997), GeoVideo
  (2000), Picture Pipeline (2001/02)up to a total
  of 30 dead competitors

16
Netflix and its Copycats

• Personalized information
• Pushes library
• Competition from new WalMart service --
  15.54/month

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Blockbuster Make or Break Models in U.S.

• Blockbuster Moviepass subscription in U.S. May
  2004 _at_ 24.99/month (2 movies) 29.99/month (3
  movies)
• Tried Freedom Pass in 25 of its U.S. stores
  being replaced found 15 of subscribers had no
  rental activity the year before and could be
  rekindled
• Fading business?
• Being spun off by Viacom 3Q04

18
UK Ahead of U.S. in Subscription Retail Rental
Model

• Blockbuster -- Model in U.K. since Sept. 2002
• Expanded Internet-based service in Europe
  14-21/month or 3.50-4.50/5 night single movie
• Netflix moving into UK (2mm U.S. subscribers)
• Video Island, 17,000 online DVD titles,
  partnerships with Tesco, Comet, MSN, Toys R Us,
  6MM online shoppers, or 38 of UK internet
  shoppers (course Comscore) _at_ 13-26/month

19
Blockbuster in Video Game Rentals

• June 2004 -- BLOCKBUSTER Flip Card for just 49
  plus tax, they get unlimited game rentals, one
  out at a time, for three consecutive months --
  less than the price of the hottest new release
  games

20
Digital Cinema Uses

• Regal Theaters
• Conferences
• Prince Concert
• Advertisements
• Special Events

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Is Broadcast Radio Safe?
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Satellite Radio

• XM Satellite 2 million customers
• 68 Commercial-Free Music Channels, 33 Channels of
  News, Sports, Talk Entertainment, 21 dedicated
  Channels of XM Instant Traffic Weather
• 9.99 a month
• Sirius 400,000 customers
• 120 channels of satellite radio 65 devoted to
  commercial-free music, in almost every genre
  imaginable, and over 50 channels dedicated to
  sports, news and entertainment.
• 12.95/month
• New EchoStar deal for 1/3 of their 9.7MM
  customers (May 2004)

23
New Form Factors

• Wireless Media Soap Operas
• 'Jong Zuid' ('Young South) -- over 30,000 Dutch
  subscribers since its launch in October 2003
  creator Media Republic is now negotiating with
  MSN, its partner for Jong Zuid, and leading
  mobile operators to launch in other countries,
  starting with UK and Germany
• 2 episodes a day, each 6 pictures with text
• Also access through MSN Netherlands and MSN
  Messenger
• Relationship marketing with mobile devices
• GPS-based media
• Merging of mobile phone, game device, and/or PDA
• Mforma raised 44MM in VC financing licensing
  with Paramount, Universal, CBS Sportline
  content from The Italian Job, Top Gun,
  Dracula, The Mummy

24
Videogames in War

• Pandemics deal with US Army
• History Channel using UK-based Creative Arts
  technology from Rome Total War to make Time
  Commanders to create on-screen simulations

25
Media 2010

• How fragmented?
• How much piracy?
• How much band to the home? Who controls it?
• How much will the consumer be willing to spend
  each month?
• How do advertisers get their impressions to the
  home?
• How much band OUTSIDE the home?
• How portable does media become?
• How personalized?