FUTURE OF TV - Digital Media Wire

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					     FUTURE OF TV?

2006 Future of Television Forum
 NYU Stern School of Business

          John Rose

      November 14th, 2006
                                         GUIDING BELIEFS


             Distribution will continue to expand and fragment and video will be
             watched on an ever increasing number of devices

             Consumer pay models will not replace advertising based models

             Appointment TV will gradually disappear

             Interactive / digital services will not “fill the gap”


             Small changes in viewer and ad patterns will destroy / create
             disproportionate amounts of value

             New competitors will emerge from historically unrelated business and
             win big


Future of TV Lunch v.1 TN.ppt                                                       -1 -
                                KEY QUESTIONS WE SHOULD BE ASKING (I)




           Wrong
          question                  How will the consumer watch video in the future?




           Right                    What different viewing patterns will different segments of the
          question                  population exhibit?




Future of TV Lunch v.1 TN.ppt                                                                   -2 -
                                KEY QUESTIONS WE SHOULD BE ASKING (II)




           Wrong
          question                   Is there a future for TV?




           Right
          question                   Who will create and distribute video experiences?




Future of TV Lunch v.1 TN.ppt                                                            -3 -
                                KEY QUESTIONS WE SHOULD BE ASKING (III)




           Wrong
          question                   How can I maintain / grow earnings?




           Right
          question                   How will money be made and how can I capture that value?




Future of TV Lunch v.1 TN.ppt                                                                   -4 -
                                                                                                                                                                            Distribution



                MUSIC INDUSTRY EXAMPLE: SALES AND CONSUMPTION


                                       CD sales decline...                                                             ...as music consumption soars


                                                       CD sales                                                                               Songs consumed (1)
  $ millions 15,000                                                                                          millions 400,000
                                              Real                           Forecasted                      of songs                    Real (2)                          Forecasted
                                                                                                                      350,000

                                                                                                                     300,000
                  10,000
                                                                                                                     250,000

                                                                                                                     200,000

                                        CAGR                              CAGR                                       150,000              CAGR
                    5,000                00-05                             05-10                                                           00-05
                                         -4.5%                            -10.3%                                     100,000               +47%
                                                                                                                                                                                  CAGR
                                                                                                                                                                                   05-09
                                                                                                                      50,000                                                        45%
                          0                                                                                                0
                                2000

                                       2001

                                              2002

                                                     2003

                                                            2004

                                                                   2005

                                                                          2006

                                                                                 2007

                                                                                        2008

                                                                                               2009

                                                                                                      2010




                                                                                                                                2000

                                                                                                                                       2001

                                                                                                                                               2002

                                                                                                                                                      2003

                                                                                                                                                             2004

                                                                                                                                                                    2005

                                                                                                                                                                           2006

                                                                                                                                                                                   2007

                                                                                                                                                                                           2008

                                                                                                                                                                                                  2009
(1)     Includes: Digital singles + digital albums + Recorded CDs + P2P files. Assuming 12 files per album, average number of P2P fil es shared per day= 30, growth in
        P2P similar to estimated growth in digital downloads
(2)     Data prior to 2004 does not include digital downloads. Data prior to 2003 does not include P2P file sharing.
Source: Veronis Suhler Stevenson, PQ Media, Recording Industry Association of America. The BigChampagne Group., Bay TSP report
Future of TV Lunch v.1 TN.ppt                                                                                                                                                                      -5 -
                                                                                              Distribution



            MUSIC INDUSTRY EXAMPLE: COLLAPSE OF EQUITY VALUE
                                                EMI Share price evolution (GBP)

                                         CAGR
                                         -23%




                                                      CAGR
                                                      -67%


                                                                                 CAGR
                                                                                 +21%

                                                                   CAGR
                                                                   +116%




                                Jan 00      Jan 02        Mar 03       Jan 04       Nov 06
Per share price (GBP)            6.1            3.6          0.9           1.6          2.8

Future of TV Lunch v.1 TN.ppt                                                                                -6 -
                                                                                    Distribution



                                 TV INDUSTRY STRUCTURE: YESTERDAY
                                 TV INDUSTRY STRUCTURE TODAY



                        Format             Access devices                  Replay



                  Broadcast

                       Cable                  Set top box

                    Satellite             Satellite set top box             TV

                        VCR                       VCR

                        DVD                       DVD

         Internet Streaming                      TIVO                       PC

          Mobile Streaming                     Sling box              Mobile Phone

   DRM enabled downloads                       Blue Ray           Portable Digital Players

                                             Mobile phone            Game consoles


Future of TV Lunch v.1 TN.ppt                                                                      -7 -
                                                                                                                                           Consumer pay
                                                                                                                                          model vs ad model

                                            AD SPEND VS. CONSUMER PAY



                           $B     300

                                                                                                       259
                                  250

                                                                           198
                                  200         181


                                  150
                                                                                                              123
                                                                                 112                                108
                                                     96
                                  100
                                                                                        74
                                                                                                                                       Media spend
                                   50                      41
                                                                                                                                       Consumer content(1)

                                                                                                                                       Access revenue(2)
                                     0
                                                    2000                         2005                        2010



(1)     Includes revenue from Home Video, Consumer Books, Pure Play Internet Services, Recorded Music, Newspapers, Consumer Magazines , Box Office and Videogames.
(2)     Includes revenue from Broadcast TV, Cable & Satellite TV, Pure-Play Mobile content, Broadcast and Satellite Radio
Source: Veronis Suhler Stevenson
Future of TV Lunch v.1 TN.ppt                                                                                                                                  -8 -
                                                                                                     Consumer pay
                                                                                                    model vs ad model

                                          CONSUMER DOWNLOAD MODEL VS.
                                           AD REVENUE FOR TV NETWORKS
                                              Comparison of Revenue of Top 10 TV Show
                                                 and Equivalent Download Revenue


                           Million   10       Advertising                    Download
                                                                                    8.9
                                      9
                                             8
                                      8                 7.5                7.5
                                      7
                                      6
                                      5
                                      4
                                      3                                                             Network TV Model
                                      2
                                                                                                    iTunes
                                      1                                                             Download model

                                      0
                                           Viewers      Ad.              Download    Required
                                                      Revenue (1)        Revenue    Downloads (2)
                                                      per Hour

(1) Assumes $26 CPM
    for 18-49 Demo
                                                      Equivalent revenue requires
(2) Net of 35% Distribution fee                      ~10-15% increase in audience
Source: TV Dimensions; BCG
Future of TV Lunch v.1 TN.ppt                                                                                     -9 -
                                                                                              Appointment TV



                                ALTERNATIVE MODELS FOR APPOINTMENT TV

      1             Consumer controlled: PVR/DVR                 2      Cable / MSO controlled: VOD




     3                 Virtual aggregator controlled             4     Network / MSO controlled: VOD




                                                   Which one do you want?
Future of TV Lunch v.1 TN.ppt                                                                             - 10 -
                                                                                        Appointment TV



                                             RECENT ACTIONS

         Company                   Date                               Action


                                Feb. 2006     CBS begin selling downloads of Survivor on CBS.com



                                Apr. 2006     TV networks sue Cablevision for Network DVR



                                              iTunes begins selling movies with Disney as its sole
                                Sept. 2006
                                              partner


                                              NBC dedicates 8 p.m. slot for reality, game shows;
                                Oct. 2006
                                              phasing out scripted shows in first hour of prime time


                                              Top ABC shows available for download; Disney nears
                                Nov. 2006
                                              half-million sales through iTunes

Future of TV Lunch v.1 TN.ppt                                                                        - 11 -
                                                                                                           Changes in
                                                                                                            audience

                                          EFFECTS OF CHANGES IN AUDIENCE
                                             Example: Newspaper Company



                                Readership                        Revenue                          Profit Margin
Index           130                                       130                             130
(2000                                                                  19%
= 100)
                120                                       120                             120


                110                                       110                             110
                                       (11%)                                                              (16%)

                100                                       100                             100


                  90                                       90                                 90


                  80                                       80                                 80
                                2000       2005                 2000     2005                      2000       2005




                                               Equity value declined 27% during this period
Future of TV Lunch v.1 TN.ppt                                                                                           - 12 -
                                                New competitors



                                MUSIC EXAMPLE




Future of TV Lunch v.1 TN.ppt                                - 13 -
                                WHAT DO YOU NEED TO DO ABOUT THIS



             Segment and micro segment the consumer audience


             Live the relevant consumer(s) view


             Meet the consumer’s needs first


             Experiment to find new value proposition(s)


             Let go of the past




Future of TV Lunch v.1 TN.ppt                                       - 14 -

				
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