1. 2 Conclusions: broadcasters can play an important role in Convergence 3.0 Supplying high quality content which users can easily access Help network.

1

2

Conclusions: broadcasters can play an important role in Convergence 3.0

• Supplying high quality content which users can easily access

• Help network operators secure investment in new broadband networks

• Contributing to standards and protection for children and other vulnerable groups

3

Broadcasters’ approach to the internet: three phases

Stage Broadcasters’ use of the internet

Phase 1: IncrementalA minor supplement to the things they were already doing

Phase 2: StrategicCreating initiatives to exploit the internet as a new medium in its own right

Phase 3: Transformative

Recognition of the new opportunities provided by high capacity broadband

We are now in the early stages of the ‘transformative’ phase

4

So far, broadcasters have had a positive effect on internet development, although the scale is hard to quantify

• Promotion

• Providing rich content and shared resources

• Raising awareness and encouraging digital literacy

5

Quality content still hugely important

• Consumers clearly value professionally produced quality content

Source: YouTube

No

. o

f vi

ews

up

to

Ju

ne

2007

(m

illi

on

s) 117

87

6045

31 24

CBS UniversalMusic

NBC RCA WarnerRecords

NBA

1 2 3 8 12 18

2059 3747 191 26 820 286

YouTube channel rank

No. of videos uploaded

6

Securing trust and confidence online: traditional broadcasters are well placed to help

Question asked: “Please indicate the top three media sources you depend on for information on these topics”

Source: Forrester, Q2 2006

News

TV Newspapers Magazines InternetRank of the

internet

91% 63% 10% 16% 3

Business News 40% 36% 8% 13% 3

Sports News 62% 42% 6% 11% 3

7

High-speed broadband infrastructure will require significant investment

Proposed broadband infrastructure investment by country

Source: Capgemini

28%

46% 50%62%

75% 80%95%

Target year

Target homes

(millions)

Investment planned

Technology

11

€3bn

FTTN

2

€300m

FTTN

16

€3.4bn

FTTN

20

€6.7bn-€8bn

FTTH

12

n/a

FTTH

1.8

€100m

FTTH

47

€37bn

FTTH

2007 2006 2007 2008 2010 2008 2010

DTGermany

SBCUSA

VerizonUSA

KTKorea

HKBNHong Kong

BelgacomBelgium

NTTJapan

8

Promoting consumer and citizen welfare

• Three broad suggestions in developing policies

- Encourage competitive markets (lowering entry barriers and ensuring that consumers are sufficiently well-informed to make effective choices)

- Define and safeguard the public interest in the new convergent world (self-and co-regulation)

- Encourage broadcasters, other content owners and network operators to find ways sharing risks and rewards

10

Aims of the report

• This an independent study which examines:

- The role that broadcasters have so far played in the development of the internet;

- The challenges and opportunities ahead, as convergence progresses;

- How broadcasters and the internet can work more closely in future; and

- The key policy issues for debate.

• This presentation contains the provisional findings

11

The traditional broadcasting model differs considerably from the online world

One-to-many

Broadcasting

Many-to-many

Online

Linear Non-linear

Built narrative content Interactive and participative

Geographically constrained Global

Regulated in public interest Broadly unregulated

Zero marginal cost per user and an established

distribution infrastructure

Zero marginal cost per user but likely to require significant investment in infrastructure

However, these differences are reducing as we move towards a more converged communications world

12

But the internet has already offered significant scope for an extension of broadcaster activity

• Scale and freedom from geographical limitations

• Digitising (and monetising) the content archive

• New opportunities to deliver more specialist content in a commercially viable manner

• Increasing the richness and depth of broadcast content

• Building a stronger, more participative and more loyal audience

• Reducing costs

13

Broadcasters’ use of the internet can be described in three phases

Stage Broadcasters’ use of the internet

Phase 1: IncrementalA minor supplement to the things they were already doing

Phase 2: StrategicCreating initiatives to exploit the internet as a new medium in its own right

Phase 3: Transformative

Recognition of the new opportunities provided by high capacity broadband

We are now in the early stages of the ‘transformative’ phase – many broadcasters are now using third party platforms, such as YouTube,

to distribute their audiovisual content

14

So far, broadcasters have had a positive effect on internet development, although the scale is hard to quantify

The importance of information and entertainment in driving internet take-up suggests broadcaster influence has not been

trivial

• Promotion- Television is still, by far, the most dominant

medium – time spent consuming television is 8 times higher than time spent online

• Providing rich content and shared resources - Funding, talent, production resources, etc.

• Raising awareness and encouraging digital literacy- Particularly true for some specific demographic

groups

15

In many countries broadcasters are already leveraging their brands to build significant online presences

Source: EBU

The most popular European broadcaster internet sites ordered by country ranking

Internet property Country

Ranking among top

100 web properties

BBC Sites UK 5

DR.DK Denmark 7

Publieke Omroep Netherlands 7

MTV3.FI Finland 7

YLE.FI Finland 8

TV2 Danmark Denmark 8

V2 Sites Norway 9

ORF.AT Austria 10

VRT Sites Belgium 11

NRK.No Norway 13

Groupe TF1 France 16

SRG SSR idée Suisse Switzerland 19

Sveriges Television Sweden 19

% Reach (Jun '06)

% Reach (Jun '07)

Increase of reach (%)

55.3 59.6 4.3

36.8 33.2 -3.6

33.0 33.4 0.4

45.5 35.3 -10.2

30.9 30.9 0.0

32.0 31.4 0.6

n/a 33.6 n/a

22.2 22.0 -0.2

18.9 19.4 0.5

27.0 28.4 1.4

19.4 23.8 4.4

15.9 17.3 1.4

20.2 18.6 -1.6

16

And in many countries, broadcasters are developing increasingly sophisticated online offerings

Source: Broadcaster sites and Human Capital analysis

AdvertisingYes on ITV

LocalYesYesYesYes, minimal

On demand for 30 days after

airing

Yes throughout – although clips onlyITV

AdvertisingYesYes for most

sectionsYesYes

Yes, radio section & T4

4OD – variable availability

Yes throughout – although clips onlyChannel 4

AdvertisingYesYesYesYesNHKJapan

AdvertisingYesYesYesYesYesYesYesRede GloboBrazil

Free, licence fee

supportedYesYesYesYes

Yes, including full length episodesSVTSweden

Free, licence fee

supportedYesYesYesYesYes

NED 1(part of NPO)

Netherlands

AdvertisingYesYes, news and

other ‘web channels’

YesYesYesRAIItaly

AdvertisingYesYesYesYesYesYes, including full-

length episodesCBS

AdvertisingYesYesYesYesYesYesABC

AdvertisingYes, through

video uploadsYes

Yes, from MSNBC

YesYes, from MSNBC

Yes, including full-length episodesNBC

US

Free, licence fee

supportedYes

Yes for most sections

Yes throughout

Yes through-

out

Yes, large radio section

IPlayer – BBC programming only, 7 days after airing

Yes throughoutBBC

UK

Business Model

User-generated

content

Communities & forums

RSSMobilesPodcastsOn demand

video downloads

Video streamingBroadcasterCountry

17

Information and communication are the key drivers or internet take-up

The drivers for internet take-up

Source: Ofcom, 2006

18%11%

12%12%

13%16%

20%20%

26%22%

20%28%

43%46%

Recommended by friends or family

Shopping/ banking/ booking

Entertainment

For the Children

Keep up with technology

Communication

Information

Owners

Intend to get

18

Looking ahead, we are entering a new “transformative” phase

• High capacity broadband makes possible the delivery of high quality long-form audiovisual content

• Web 2.0- Changing user/content relationships- Increasing democratisation- The increasing importance of search and

content navigation

• New business models- Content provision- Paying for the infrastructure

19

The broadcasting value chain is being transformed

DistributorBundlerProducerTalent & Resources

Devices AudienceNavigationGatewayDistributorBundlerProducerTalent & Resources

Devices AudienceNavigationGatewayDistributorBundlerProducerTalent & Resources

Devices AudienceDistributorBundlerProducerTalent & Resources

Devices AudienceNavigationGatewayDistributorBundlerProducer The internet

• The content value chain, previously controlled by a small number of broadcasters, has been opened up to anyone with an internet connection and an idea

• In an online world, equipped with powerful search tools and user recommendations, bundling is arguably much less important

• Distribution, navigation and consumption are all made possible through the internet

Ideas

20

New online services have emerged, with richer content and greater functionality

Live and pre-recorded video broadcasting

User-created blogs, including text, pictures and hyperlinks

User-created ‘encyclopaedia’

Photo sharing

Social networking, allowing uploaded music, text and pictures

Video sharing

Live and pre-recorded video broadcasting allowing captioning and insertion of pre-recorded video packages

Live and pre-recorded video broadcasting

Site Functionalities

21

And whilst television remains hugely popular and important, there has been clear migration online

Source: Ofcom

216

170

36

6.9 3.70

50

100

150

200

250

television radio internet fixed mobile

min

ute

s p

er d

ay p

er p

erso

n

Time spent using communications services 2006

-3.6% -2.0% 158.0% -8.0% 58.0%change2002-2006

22

Both internet ‘reach’ and provision of content online continues to grow at considerable rates

Broadband subscriptions and growth amongst top countries

Source: Netcraft.com

Net

he

rlan

ds 0%

20%

40%

60%

80%

100%

US

AC

hin

aJa

pan

Ger

ma

ny

Fra

nce

So

uth UK

Ital

yC

ana

da

Sp

ain

Bra

zil

Au

stra

lia

Mex

ico

Tu

rkey

Ru

ssia

Po

lan

dB

elg

ium

Sw

ed

enIn

dia

0

10

20

30

40

50

60

70Millions of subscribers

Annual growth (Q1 2006 to 2007)

Source: Point Topic

Growth in the volume of hostnames and active websites

199

5

199

7

199

9

200

1

200

3

200

5

200

7

12.525.037.550.062.575.087.5

100.0112.5125.0137.5

0

Active

Hostnames

23

In this third phase, broadcasters could, if they meet the challenge, have a greater role to play

Broadcasters can help drive further internet development by:

• Supplying high quality content which users can easily access

- Creating clear expectations for users about the nature and reliability of available content;

- Providing the vital roles of aggregator and navigator;

- Helping later adopters to make sense of the internet.

• Helping the internet to adjust to a world in which it will have to pay more attention to citizens’ concerns about standards and protection for children and other vulnerable groups.

• Help network operators secure investment in new broadband networks

24

Quality content is still hugely important, both for consumers and in setting standards

• Consumers clearly value professionally produced quality content

Source: YouTube

No

. o

f vi

ews

up

to

Ju

ne

2007

(m

illi

on

s) 117

87

6045

31 24

CBS UniversalMusic

NBC RCA WarnerRecords

NBA

1 2 3 8 12 18

2059 3747 191 26 820 286

YouTube channel rank

No. of videos uploaded

• The economics of programme production still suggest that a high production value programme needs mass audience exposure on a broadcast channel to ensure a return on its upfront investment

• Although it is possible to create content specifically for the internet, the promotional and marketing costs will be prohibitive in most cases

25

Securing trust and confidence online is also crucial, and traditional broadcasters are well placed to help

Question asked: “Please indicate the top three media sources you depend on for information on these topics”

Source: Forrester, Q2 2006

• A GlobeScan survey revealed that the most trusted global news brands tested include the BBC (with 48% across the 10 countries saying they have a lot or some trust) and CNN (44%)

• Consumers, particularly for news and factual content, clearly place most reliance on traditional broadcaster sources

News

TV Newspapers Magazines InternetRank of the

internet

91% 63% 10% 16% 3

Business News 40% 36% 8% 13% 3

Sports News 62% 42% 6% 11% 3

26

High-speed broadband infrastructure will require significant investment

Proposed broadband infrastructure investment by country

Source: Capgemini

28%

46% 50%62%

75% 80%95%

Target year

Target homes

(millions)

Investment planned

Technology

11

€3bn

FTTN

2

€300m

FTTN

16

€3.4bn

FTTN

20

€6.7bn-€8bn

FTTH

12

n/a

FTTH

1.8

€100m

FTTH

47

€37bn

FTTH

2007 2006 2007 2008 2010 2008 2010

DTGermany

SBCUSA

VerizonUSA

KTKorea

HKBNHong Kong

BelgacomBelgium

NTTJapan

27

Broadcasters may work with network operators to help secure this major infrastructure investment

• Enders Analysis estimate that the total cost of

deploying fibre to the home (FTTH) to 90% of UK

households would be €14bn

• Network operators may have to shoulder the burden of

investment, but are not certain of the returns

• Broadcasters may be able to help by agreeing

innovative deals with networks, to share risk and

rewards

28

There will also be important roles for policymakers in promoting consumer and citizen welfare

• Over regulation will stifle growth and innovation; under regulation risks a wild-west-style ‘free for all’

• We assert three broad suggestions in developing policies

- Encourage competitive markets by lowering entry barriers and ensuring that consumers are sufficiently well-informed to make effective choices

- Define and safeguard the public interest in the new convergent world drawing on aspects of self-and co-regulation, rather than transferring old style broadcasting regulation to the broadband world

- Encourage broadcasters, other content owners and network operators to find ways sharing risks and rewards

29

As a result, we argue that there clear consumer and citizen benefits from a symbiotic broadcaster/internet relationship

• There have already been some impressive success stories as broadcasters begin to recognise the opportunities of the internet

• As we move into a more converged media and communications world, the future development of broadcasting and the internet will be increasingly closely linked

• Broadcasters and leading internet players depend on, and will benefit from, working closely with each other