TECHNOLOGY

The Future of Convergence
New devices, services and growth opportunities By Gary Eastwood

Table of Contents

Gary Eastwood
Gary Eastwood is an experienced writer and editor in the field of business and technology. Over 10 years, he has contributed to some of the leading publications in the field, such as Computer Weekly, Computer Business Review and Mobile Enterprise. As well as holding senior positions on a number of technology trade magazines, Gary has worked with organisations such as the UK Department of Trade & Investment, The Confederation of British Industry, Microsoft, IBM, Oracle and Intel on various marketing communications projects.
Copyright 2006 Business Insights Ltd This Management Report is published by Business Insights Ltd. All rights reserved. Reproduction or redistribution of this Management Report in any form for any purpose is expressly prohibited without the prior consent of Business Insights Ltd. The views expressed in this Management Report are those of the publisher, not of Business Insights. Business Insights Ltd accepts no liability for the accuracy or completeness of the information, advice or comment contained in this Management Report nor for any actions taken in reliance thereon. While information, advice or comment is believed to be correct at the time of publication, no responsibility can be accepted by Business Insights Ltd for its completeness or accuracy.

Executive Summary

The digital revolution Converged mobile devices Portable content jukeboxes The Internet, TV and the PC Personal video recorders Conclusions

Chapter 1

Summary

The digital revolution

Introduction Converged devices Convergence of content providers Fixed Mobile Convergence Convergence challenges The content owner market today

Chapter 2

Converged mobile devices
Introduction Market context and sizing The PDA market Market analysis The smartphone market Market sizing Smartphone operating systems The mobile Internet
Mobile email Music on the move The mobile phone as iPod killer Brand building Sony Walkman-branded phones Apples response Challenges Camera phones and video Digital camcorder phones and multimedia computers Nokia leads the way Mobile TV Market sizing By handset By subscriber revenue Technical challenges WiFi and Voice-over-IP mobile phones Hard-drive mobile phones

Chapter 3

Portable content jukeboxes
Introduction The emergence of the mobile phone Consumer electronics market today Portable content jukeboxes What content? Competing devices Laptop The converged camera Mobile phone Nokia N-Gage Sony PSP Conclusions

Chapter 4

The Internet, TV and the PC
Introduction IPTV has the potential to change the broadcasting landscape Broadband penetration is essential for IPTVs success Increasing broadband penetration rates within Europe will speed up the development of IPTV services. IPTV vs. cable TV iv
The consumer the only winner? IPTV market sizing Europe North America Internet-based TV: the future? TV and the PC: targeting web-based on-demand content Conclusions Video streaming market development The alliance of content and distribution On-demand TV and the broadband home

Chapter 5

Summary Introduction Market drivers

Personal video recorders

Personal video recorders Market sizing Conclusions Only a pay-TV product? Likely to watch more TV programs Changes required in advertising models

Chapter 6

Conclusions
Convergent strategies for the future Why the mobile will rule the end-game The importance of the network operator Product control to limit the potential of the game-playing-mobile The opportunity for the content owners Required: scaleable content distribution platforms A centralized content database

List of Figures

Figure 2.1: Figure 2.2: Figure 2.3: Figure 2.4: Figure 2.5: Figure 2.6: Figure 2.7: Figure 2.8: Figure 2.9: Figure 2.10: Figure 2.11: Figure 2.12: Figure 3.13: Figure 3.14: Figure 3.15: Figure 3.16: Figure 3.17: Figure 4.18: Figure 4.19: Figure 4.20: Figure 4.21: Figure 4.22: Figure 5.23: Figure 5.24: Figure 6.25: Figure 6.26: Global handsets by device, 2004 vs. Examples of Business Handsets PalmOne Treo 650, RIM Blackberry 7230 & Nokia 9500 Communicator 29 Examples of Smartphone Devices: Orange SPV-C500, O2 xda IIs & RIM Blackberry 7100v 33 Examples of Nokias E-Series of Business Phones for Mobile Email Access 38 Sony Walkman-branded mp3 mobile phones, W850 and WMotorolas Rokr iTunes mobile phone 43 Nokias N93 digital camcorder mobile phone 46 Nokias N73 multimedia computer 46 Portable video devices 47 Global broadcast TV to mobile revenue ($m), 2004-Global broadcast TV to mobile revenue ($m) by region, 2004-Samsungs 8GB HDD mobile phone, SHG-iExamples of portable content jukeboxes 59 In usage terms the PCJ is a subset of the mp3 market 60 BenQ DC s40: the converged camera and mp3 player 63 The Nokia N-Gage 64 The Sony PSP 65 Consumer broadband access on the technology adoption curve 72 The relative demand for broadband and narrowband services 72 Household broadband penetration by country, 2004-Digital TV growth in Europe, 2004-Digital TV growth in the US, 2004-VoD and PVR installed base in Europe, 2000 - Personal video recorder forecast (millions), 2004-Impact of time on the price/value of different content 94 Simplified secured content distribution platform 95

List of Tables

Table 2.1: Table 2.2: Table 2.3: Table 2.4: Table 2.5: Table 2.6: Table 2.7: Table 5.8: Global handset shipments (millions), 2004-2009 Global smartphone shipments (in millions), 2003-2010 Advanced OS volume sales and market share, 2005 Global mobile TV handset shipments (in millions), 2004-2009 EMEA mobile TV handset shipments (in millions), 2004-2009 US mobile TV handset shipments (in millions), 2004-2009 Asia Pacific mobile TV handset shipments (in millions), 2004-2009 Personal video recorder forecast (millions), 2004-85

TECHNOLOGY

The Future of Digital Entertainment
The revolution of personal and home technologies in Europe and the US By Gary Eastwood

Table of Contents

Gary Eastwood
Gary Eastwood is an experienced writer and editor in business and technology, contributing to many leading publications and magazines in the IT and mobile sectors. As well as holding senior positions on a number of IT trade publications, he has worked as a copywriter for blue-chip companies, such Microsoft, IBM, Intel and the UK Department of Trade & Industry.
Copyright 2005 Business Insights Ltd This Management Report is published by Business Insights Ltd. All rights reserved. Reproduction or redistribution of this Management Report in any form for any purpose is expressly prohibited without the prior consent of Business Insights Ltd. The views expressed in this Management Report are those of the publisher, not of Business Insights. Business Insights Ltd accepts no liability for the accuracy or completeness of the information, advice or comment contained in this Management Report nor for any actions taken in reliance thereon. While information, advice or comment is believed to be correct at the time of publication, no responsibility can be accepted by Business Insights Ltd for its completeness or accuracy.

Executive Summary

Introduction to the digital home Broadband access Personal content jukebox or mobile phone? The future of European pay-TV Video-on-demand (VOD) The future of digital TV High-definition TV Internet Protocol TV

Chapter 1

Summary Overview
Introduction to the digital home
What is this report about? Who is the target reader? Introduction to the digital home Opportunities in home entertainment Broadband access Pay-TV Video-on-demand (VOD) Digital TV High-definition TV IP TV The broadcast value chain The advertising value chain

Chapter 2

Summary Introduction

Broadband access

Market context Defining broadband Broadband versus narrowband DSL (Digital Subscriber Line) Cable Fixed wireless Satellite Fiber-to-the-home Broadband-over-power line Market dynamics Factors influencing market conditions Regulation Pricing Consumer awareness Value-added applications and services Broadband network coverage Local loop unbundling Drivers and inhibitors Drivers Inhibitors Competitive dynamics Incumbent telcos Cable companies Independent service providers Alternative service providers Market forecast DSL Cable Other broadband technologies General trends Conclusions Penetration increases are not sustainable Differentiation is essential Develop a narrowband strategy Invest in security services Scale up in the call centers Refresh and upgrade the product portfolio Develop partnerships to build brands Service bundles Market winners will be decided shortly

Chapter 3

Summary
Personal content jukebox or mobile phone?
Overview Portable content jukeboxes The emergence of the mobile phone The return of converged devices Market dynamics Devices Content Competitive dynamics Devices Laptop Converged camera Mobile phone Sony PSP Content owners The future Why the mobile will rule the end-game The importance of the network operator What does this mean for the CE convergence products? Product control to limit the potential of the game-playing-mobile The opportunity for the content owners Required: scaleable content distribution platforms A centralized content database

Chapter 4

The future of European pay-TV
Market context Competition from FTA and basic DTV services Factors affecting uptake of Pay-TV Competitive dynamics ARPU maximization Subscriptions Pay-per-view Interactive services Personal video recorders Video-on-demand Future outlook Bundled services remain an important differentiator for cable Strategic focus on broadband Internet not digital TV?
Satellite operators will maintain focus on pay-TV European consumers will spend $39 bn on pay-TV in 2007 Conclusions

Chapter 5

Summary Overview What is VOD?

Video-on-demand (VOD)

120 121
Market context DVD/video sales and rental Personal video recorders (PVRs) P2P threat Competitive dynamics The US Comcast EchoStar Akimbo Systems Disney The UK Sky ntl and Telewest BT via Freeview BBC France Noos Wanadoo Telecom Italia Spain Telefnica Japan OnDemandTV J-COM Taiwan ChungHwa Telecom Conclusions

Chapter 6

Summary Overview Market dynamics Digital cable
The future of European digital TV 124

126 126

Europe The US Digital satellite Competitive dynamics Digital terrestrial Competitive dynamics Factors influencing DTV uptake Freeview IPTV Market sizing Europe vs US Conclusions

140 141

Chapter 7
Summary Overview Market context Drivers and inhibitors Market dynamics Japan The US Australia Europe Market sizing Market opportunities Subscriber growth Vendor/integrators Satellite Hardware equipment Conclusions

High-definition TV

159 159

Chapter 8

Summary Overview What is IPTV? Market dynamics Drivers Inhibitors Market dynamics Europe

Internet protocol TV

170 170
Asia Pacific The US Market sizing Conclusions Glossary/Definitions Index

176 177

List of Figures
Figure 2.1: Figure 2.2: Figure 2.3: Figure 2.4: Figure 2.5: Figure 3.6: Figure 3.7: Figure 3.8: Figure 3.9: Figure 3.10: Figure 3.11: Figure 4.12: Figure 4.13: Figure 4.14: Figure 4.15: Figure 4.16: Figure 4.17: Figure 6.18: Figure 6.19: Figure 6.20: Figure 7.21: Figure 7.22: Figure 8.23: Figure 8.24: Figure 8.25: Figure 8.26: Figure 8.27: The relative demand for broadband and narrowband services 30 Consumer broadband access on the technology adoption curve 35 DSL household penetration by country, 2004 to Cable broadband household penetration by country, 2004-Household penetration of other broadband technologies by country, 2004 to A comparison of the most prominent jukeboxes in the UK 59 In usage terms the PCJ is a subset of the mp3 market 60 BenQ DC s40: the converged camera and mp3 player 63 The Sony PSP 65 Impact of time on the price/value of different content 73 Simplified secured content distribution platform 74 European digital TV installed base by platform, 2002-ARPU maximization, up-sell and reducing costs are key factors 85 Conceptual segmentation of digital pay-TV ARPU 87 iTV games & gambling revenues in Western Europe, 2002-European integrated PVR shipments by platform, 2002-European pay-TV revenues, 2003-European digital TV uptake to European market development comparison to Digital TV uptake comparison: Europe vs US 141 Forecast of European HDTV household penetration 154 HDTV market development comparison 155 Offering video services can substantially boost ARPU for telcos 168 Incremental costs per IPTV subscriber ($) 169 Global IPTV households to IPTV households by region to IPTV revenues by region to 2007 174

List of Tables

Table 2.1: Table 2.2: Table 2.3: Table 4.4: Table 4.5: Table 4.6: Table 4.7: Table 6.8: Table 6.9: Table 6.10: Table 6.11: Table 6.12: Table 7.13: Table 7.14: Table 8.15: Table 8.16: Table 8.17: DSL household penetration by country, 2004 to Cable broadband household penetration by country, 2004-Household penetration of other broadband technologies by country, 2004 to European digital TV installed base by platform, 2004-European digital TV installed base by platform, 2004-European integrated PVR shipments by platform, 2004-European pay-TV revenues, 2004-European digital TV uptake, 2004 to Digital cable overview 128 Digital satellite overview 130 Digital terrestrial overview 132 Market development comparison to Forecast of European HDTV household penetration 154 HDTV market development comparison 156 Global IPTV households to IPTV households by region to IPTV revenues by region to 2007 175