MDTV: Business, Economics and Regulation

1. MDTV: Business, Economics and Regulation MMF in association with AVF and SPI IBEC, Dublin, Ireland 09 February 2006 Dermot Nolan TBS

2. Available now…

3. The 30 second TV spot’s future

4. The 30 second TV spot’s future • ‘ We are facing a cliff edge moment within five to ten years’ • ‘ We will have to deal with the mobile phone as one of the devices to communicate with customers and it will probably be the largest biggest medium in the world’ Maurice Levy, Publicis, November 2005

5. Ireland: Outlook for MDTV services • Many commercial, political and regulatory delays to launch consumer DTT/DAB • No clear timescale, apart from DVB-T field trials (system which already works!!!) • Irish DTT service may be marginalised by UK Freesat service • However, second mover advantages BECAUSE: • Spectrum IS available for DTT, MDTV and DAB as services NOT allocated (cf UK) • Follow path set by France, Finland and Spain : allocate UHF MDTV spectrum? • Requires radical rethink vs current assumptions re services, regulation and viability

6. Ireland: Outlook for MDTV services • ComReg consultation interesting BUT: scale economies, market size, technology divertissements and licence terms are ALL problematic • Who pays for the new MDTV networks: broadcasters, mobile operators or a consortium? • External factors complicate the rollout: UK overspill of xG services and DTT/future MDTV services, Freesat makes Irish DTT look very shaky, market preemption etc… • Reappraise current priorities for wireless systems to support broadcasting, mobile and MDTV services • A new business model, Government policy and regulatory framework is needed.

7. Agenda • Technology transition tippingpoints • Introduction • Mobile vs Broadcast industries: current situation • A very clear MDTV proposition • Economic issues • In-band / hybrid MDTV systems • Platform wars • The Trials Game • UK national network indicative costs • Business models

8. More Agenda • Distinctive content proposition • Service pricing • Rightsholders relish rollout • Ownership structures • Regulatory risk reduction • Spectrum and environmental issues • TV Viewing implications • TV advertising implications • Ireland: outlook for MDTV services • MDTV Takeup predictions • Outlook

9. Technology transition tippingpoints

10. Introduction • Satellite MDTV in South Korea May 2005(c 350k subs) • xG based MDTV many countries (US, EU, Asia) • Global technical trials of hybrid MDTV services • Standards wars inevitable (EU & US) • Multiple business, consumer and regulatory issues • Emerging revenue models: subscription / advertising

11. Mobile vs broadcast industries: current situation

12. A very clear MDTV proposition • ‘Its live TV on your phone, stupid!’ • Simple selling proposition, BUT…... • Problems: logistic, execution, regulation • Numerous regional variations likely • End-to-end value chain scrutiny (who gets what?)

13. Economic issues • Substantial infrastructure investment costs • Onerous coverage requirements • Handset pricing & subsidy strategies • Content acquisition & rights costs • Service pricing & business models • Regulatory costs

14. In-band vs hybrid MDTV systems • In-band MDTV broadcast via xG (=2.5G or 3G) networks • Hybrid MDTV = xOFDM / xG networks integrated in handset • xOFDM transmission = DVB-H, ISDB-T, T-DMB, MediaFLO • Distinct regulatory environments • Separate deployment timescales

15. In-band MDTV systems • NOW (MobiTV, Orange TV, SkyMobileTV, etc) • Vertically integrated with cellular operator • Test bed: consumer behaviour, demand, pricing • -’s: Picture quality, mass-market scalability, usage caps • Dominant for next three years…..

16. Hybrid MDTV systems • US / APAC (2006), Europe (2006/7) • Separate mobile TV / cellular networks • +’s: Picture quality, mass-market scalability, services • -’s: Ownership, regulation, spectrum, access • Competing standards create consumerconfusion

17. Platform wars • Korea & Japan: self-contained standards/markets • Europe: DVB-H vs T-DMB • US: DVB -H vs MediaFLO • Asia: DVB-H vs T-DMB Cellular carriers & vendors will pick winners!!!

18. PAY-TV past lessons in Platform wars

19. Numerous MDTV field trials • Worldwide trials by cellular carriers / broadcasters • ‘Showcase’ technical trials • Economic conclusions: focus group / tame triallists • All trials of hybrid MDTV systems • AND parallel xG TV rollouts by carriers…. • To hone the MDTV service proposition…

20. Latest trial results: O2/Arqiva, January 2006(Oxford, UK, DVB-H trial) • 375 O2 triallists of DVB-H, 18-44, mixed demographics • 16 channel MDTV service (terrestrials, basic tier pay services) • 83% satisfaction levels, 76% would subscribe • Usage profile:36% (home), 23%(work), 21% (bus) • Channel choice drives usage • Key to secure major broadcasting brands • Results all in public domain

21. UK National Network indicative costs

22. Business models • Free-to-air / advertising: Korean T-DMB • Subscription / advertising: S-DMB, SkyMobileTV • Mixed FTA / subscription: regulatory requirement? • Wholesale to carriers : BT, CrownCastle, Qualcomm

23. Distinctive content proposition • Location, personal, time, screen specific • Mass-market channels & live premium sports • Viable genres: news, business, comedy, childrens • MDTV exclusive, ’Mobisodes’, localised services • Adult services key drivers (via xG TVservices) • Graphics, display, picture quality CRITICAL

24. Service pricing • Mixed advertising / subscription models • Hybrid trials / in-band MDTV services: Flat rate fee • Price elasticity not quantified: take-up key • Churn mismatch between two segments: • cellular 25% • pay-TV 10% • Hybrid MDTV break-even: pricing, takeup, network cost

25. Rightsholders relish rollout • New distribution platform for rightsholders... • Potential global reach • High growth pay-TV platform? - fixed platforms peaking • Rights clearance: complex & problematic (see UK…) • Non-exclusive short-term licensing • Conditional Access for high value rightsholders • Content owners positioned to leverage value

26. Ownership structures • Large upfront investment costs • Various equity ownership structures • Advantages / disadvantages • Competition policy issues: SMP in Europe • Environment considerations impact industry

27. Regulatory risk reduction • Licence(s) • Coverage, service, technologies • Spectrum availability, authorisation, access • Licence allocation mechanism • Licence term • Competition policy requirements

28. Spectrum and environmental issues • Hybrid MDTV requires spectrum allocation • Potential bands: VHF vs UHF vs L band • Issues: antenna size, interference, radios, costs to deploy • Critically dependent on national DTV transition strategies • Low UHF (E21- E49) is preferable, but.. • HDTV vs MDTV, auctions etc post-analogue • Higher frequencies = greater environmental impact

29. TV viewing implications • Location independence mirrors cell phone success • Fundamentally alters peak-time viewing definitions (O2 confirmed this shift) • ‘Bite-sized’ viewing patterns favoured • Short attention span formats flourish • Superior audience research / interactive possibilities

30. TV advertising implications • Potentially GLOBAL mass market medium • From THIRTY second to FIVE second spot!!! • Highly targetted advertising NOW possible • Simulcast existing terrestrial channels ( Italy etc ) • Dream demographics: 16-35 year olds

31. Ireland: Outlook for MDTV services • Many commercial, political and regulatory delays to launch consumer DTT/DAB • No clear timescale, apart from DVB-T field trials (system which already works!!!) • Irish DTT service may be marginalised by UK Freesat service • However, second mover advantages BECAUSE: • Spectrum IS available for DTT, MDTV and DAB as services NOT allocated (cf UK) • Follow path set by France, Finland and Spain : allocate UHF MDTV spectrum? • Requires radical rethink vs current assumptions re services, regulation and viability

32. Ireland: Outlook for MDTV services • ComReg consultation interesting BUT: scale economies, market size, technology divertissements and licence terms are ALL problematic • Who pays for the new MDTV networks: broadcasters, mobile operators or a consortium? • External factors complicate the rollout: UK overspill of xG services and DTT/future MDTV services, Freesat makes Irish DTT look very shaky, market preemption etc… • Reappraise current priorities for wireless systems to support broadcasting, mobile and MDTV services • A new business model, Government policy and regulatory framework is needed.

33. Forecast MDTV handset shipments 2012(m)Source: Screen Digest September 2005MDTV The Coming Handheld Revolution

34. Outlook • xG MDTV reigns supreme for next three years • Fragmented growth prospects for Hybrid MDTV • Regulatory / ownership hurdles • Very profitable franchises? • Simple business models highly effective? • (MD)TV advertising has to be completely reinvented • MDTV everywhere within a decade ?

35. Contact us • MDTV: The coming handheld revolution, Screen Digest • Ordering Details: www.screendigest.com • Contacting TBS: +44 (0)20 7286 5570 , skype: dmenolan, email: dermot@nolan0705.freeserve.co.uk