The Connected Consumer

1. The Connected Consumer Scott L. Brown SVP Strategic Relationships, Marketing & Technology

2. THE FOLLOWING SHORT FILM HAS BEEN APPROVED FOR Most of You … Perhaps Not All BY THE MOTION PICTURE ASSOCIATION OF AMERICA THE FILM HAS NOT BEEN RATED

4. Agenda • Assessing the connected consumer • Emerging consumer trends • Factors driving new technology development • Which devices are key and why • Today and tomorrow • Looking forward • Likely outcomes

5. Past Present Future The Connected Consumer Home

6. Connected Consumer Home • 1967 – the average home owned 1.3 CE devices • 2007 – the average home has 26 CE devices and will spend an average of $1,500 on gear • “High speed” in the 60s conveyed one thing; today it means 55 million homes connected tothe Web 001010100001110

7. Connected Consumer Trends • The kind of content delivered to the electronics gear • Underlying partnerships and services that are unfolding • Ease with which the technology works • Stoking consumer excitement • Transporting, storing, and consuming digital media

8. HDTV picture size & quality The utility of broadband access Wants timeshifting and material everywhere in the home Expects mobile and wireless capability Demands of Connected Consumer

9. 1) Picture Size and Quality • The rage - heavy sales tied to “true” new 1080P HDTV format • Emergence of 2nd tierlow cost players • Olevia • Visco • Akai • Tatung … and others

10. Trend Toward Flat Panels • New price war unfolding • Worldwide sales – 42 million LCD units vs. 8 million plasma units sold in 2006 • Plasma shipping weight is key • Middle income homes finding large flat panel HDTV within reach

11. Price Forcing More Feature Growth • Commoditization forcing a tide that lifts all features (DVR, DVD, Home network, etc.) HD-Capable Set at Home By Annual Income Source: LRG

12. True ceiling $800-900 Psychological ceiling - $700 Sweet Spot - $500 HDTV Acquisition 42” HDTV “You’re a damn fool!” “I should have listened to my mother about you” “For once, you’re smarter than you appear”

13. Web Connectivity • Smart TVs – broadband/PC capable • RGB, Ethernet, iLink 1394 • Sony marketing Smart-TV adaptor/streaming • Soon, little difference between surfing the Web on TV and watching TV on PC • Consumer expectations drive CE to Web integration - convergence or

14. Picture Size & Quality Summary • Web connectivity is now key for new advanced HDTV sets • HDTV set penetration is now driving demand for HD content • Amount of HDTV content within the program bundle is a differentiator

15. 2) Broadband • Broadband is the “cardiac” component of all bundling strategies • Triple/Quad play reduces churn by 40% • OCAP boxes and IPTV boxes usher in new generation of consumer interaction • Broadband is the vehicle for digital video content, interactivity and Web access

16. Broadband Video Content Instatt

17. Broadband Creative Expansion • New Microsoft Vista O/S available • Enables point/click Web publishing user generated content • Inexpensive Web original/short stories • Unparalleled growth - millions of inexpensive video assets to the Web • New broadband devices are stoking consumer expectations

18. Blossoming Broadband Connectivity Mobile High Social Networks P2P Garden Clubs Video RSS Opportunity Consumer Involvement With Content User Gen Content Interactivity Web Original Bandwidth & Functionality Edge Content Traditional Content Low Web Activity High

19. Broadband – Service Provider Goals • Enable consumer involvement with entertainment • Feature branded home page and EPG • Provider walled gardens and control of access to the consumer • Transactional business • You think churn is a big deal now?

20. Selling a CE device Unicast Interactivity HD Usage: Assume 8 hours of HD use 8Mbs for HD x 60sec x 60min x 8 hours = over 200 gigabits/per day/per home Broadband Summary Yikes!

21. 3) Timeshifting – Can’t Live Without It • How it is made available • Standalone, In-home network, Networked, Game Console, In-Set or Home Media Server • HD DVR becoming new standard • Interactivity & DVR storage combined • Studios worry that DVRs will produce a “digital leak.” Digital Rights Management embedded in all HD content

22. HD DVR/DVD Burner • HD DVD/DVR burner from Toshiba with a one-terabyte hard drive • Can record and store up to 130 hours of high-definition broadcasts and burn HD DVD discs • Ethernet enabled, multi-tuner • 33lbs and $3,470

23. TV/DVR Around The Home • Motorola Follow Me TV with new advanced DCT6400 set-tops, plus integrated networking support • DVR, music, photo on all TVs including HDTV interface • Uses existing in-home coax Family Room Bedroom Coax

24. DVR Proliferation to PC & Handheld • Yahoo acquired Meedio. Turns PCs into DVRs and digital media organizers linked them with television sets • Sansa View - 8GB of storage on a 4-inch screen • SDHC for 8, 16, 32GB, etc. • Drive-free, efficient

25. Timeshifting Summary • DVR proliferation to every platform • DVR, interactive services, content staging and profiling • DVR a future content upload device • Networked DVR (Cablevision & Start Over) will expand to complement in-home DVR

26. 4) Wireless and Mobile • WiFi 802.11g for in home or hotspot use • New 802.11n standard permits wireless HDTV signals within the home • Super 3G and WiMAX are “mobile internet” with speeds of up to 100 Mbs

27. WiMax Going Mainstream • Motorola announced that Chicago will be one of the first major cities installed with Sprint Nextel • Motorola will help build the high speed infrastructure for launch in early 2008 • Intel planning market trials of WiMax late this year and forecasts availability to 100 million users by the end of 2008

28. Wireless • Wireless service providers destined to expand and offer choice • Price for web access will come down • Wired vs. wireless • Net Neutrality could also cause disruption with two tiers of pricing • Premium based on data volume • Standard but slower flat plan

29. Wireless Handheld • V Cast Mobile TV for live full-length television programming to selected phones via Qualcomm's MediaFLO technology • Service launches end of March with eight channels - CBS, NBC, MTV, Fox and ESPN • $15 per month for V Cast streaming video

30. Broadcast TV On Cells • Free wireless will be available (A-VSB) • New Samsung chipset enables a mobile phone to pick up standard terrestrial TV • Broadcasters must transmit a separate signal over existing TV and radio towers • No mobile TV package required • Digital Multimedia Broadcasting, DVB-H Modeo and Hiwire

31. Wireless and Mobile Summary • 802.11 wireless is an expanding local commerce vehicle • More handheld interfaces – iPhone • WiMax is a huge gamble, and if it is cost sustainable, could pull market share from traditional service providers

32. Today & Tomorrow Technology Enabling

33. More Cool Is Coming?

34. Vision is strong … but the reality isn’t quite there Are we missing what the consumer really desires? Digital is about communication! So Is The Consumer Connected?

35. Interaction Will Be Key • Consumer involvement with content is destined to grow and new devices enable it • Rise of social networking confirms it • Service providers trying to deliver a personal video stream to each individual subscriber • Bandwidth is the constraint … also analog support

36. Some of the Rules Are Changing • Television transitioning to embrace direct marketing to complement mass marketing • “Over The Top” - TV programming will be delivered over the Internet, bypassing today's traditional cable and satellite providers

37. Preference engines for locating content within vast storage universe Choicestream, Google, Yahoo, MSN Your HDTV becomes a communications platformin the home And it will learn about you! Personalization/Targeting Will Grow

38. Now This Is Personalization If I was Oprah you all would be taking one home!

39. THE FOLLOWING FOOTAGE HAS BEEN APPROVED FOR Imaginative & Interactive Purposes BY THE MOTION PICTURE ASSOCIATION OF AMERICA THE FILM HAS NOT BEEN RATED Do You Believe?