Implementation of wide-screen and high definition television in the context of digital broadcasting

1. 1 Implementation of wide-screen and high definition television in the context of digital broadcasting Presentation of Eurostrategies’ Draft Final Report & Key Findings Brussels, December 17, 2004

2. December 17th, 2004 2 Agenda 10h00 - Introductory remarks (Peter Scott, EC) 10h15 - Presentation of the key findings and recommendations(Eurostrategies) 11h00 - Discussion 11h30 - Case Study 1 : “Wide-screen implementation in the UK” Guest speaker : Brendan Slamin (DTG) 12h15 - Case Study 2 : "Wide-screen and HDTV accross genres : sports as a key success driver“ Guest speaker : Francis Tellier (HBS) 13h15 – Concluding remarks (Peter Scott, EC)

3. December 17th, 2004 3 Agenda 10h00 - Introductory remarks (Peter Scott, EC) 10h15 - Presentation of the key findings and recommendations(Eurostrategies) 11h00 - Discussion 11h30 - Case Study 1 : “Wide-screen implementation in the UK” Guest speaker : Brendan Slamin (DTG) 12h15 - Case Study 2 : "Wide-screen and HDTV accross genres : sports as a key success driver“ Guest speaker : Francis Tellier (HBS) 13h15 – Concluding remarks (Peter Scott, EC)

4. December 17th, 2004 4 Presentation of the key findings and recommendations (by Eurostrategies) Eurostrategies : who we are Objectives and methodology Key findings and recommendations Wide-screen TV High-definition TV

5. December 17th, 2004 5 Eurostrategies : who we are A consortium of 3, mid-sized, independent consultancy companies : ERA (Belgium, Bob Taylor) ICC (UK, Richard Womersley) BIPE (France, Vincent Létang) Previous studies for DG Information Society : April 2002 - Study on "Digital Switchover in Broadcasting" March 2003 - Assessment of the Member States measures aimed at fulfilling certain general interest objectives linked to broadcasting, imposed on providers of electronic communications networks and services, in the context of the new regulatory framework

6. December 17th, 2004 6 Presentation of the key findings and recommendations (by Eurostrategies) Eurostrategies : who we are Objectives and methodology Key findings and recommendations Wide-screen TV High-definition TV

7. December 17th, 2004 7 MethodologyWhy address wide-screen and HDTV in the same study ? Both are innovations that can be more easily implemented in the context of digital television Both are « qualitative » ways of exploiting digital broadcasting capacities (vs. quantitative ways, i.e. more channels) With digital payTV adoption slowing down in a number of markets, broadcasters/operators must keep up with package media (DVD), differenciate from free analogue TV, from each other Consumer are more and more aware of technical quality HDTV issue encompasses wide-screen issue as 16:9 aspect ratio in ‘embedded’ in HDTV standards But 16:9 is already and still an issue now, in analogue or SD

8. December 17th, 2004 8 MethodologyObjectives

9. December 17th, 2004 9 MethodologyDetails

10. December 17th, 2004 10 MethodologyAbout 80 interviews in the value chain to detect obstacles to adoption

11. December 17th, 2004 11 Deliverables 3 volumes Executive summary Main report Annexes (country profiles) Link : http://europa.eu.int/information_society/topics/ecomm/shortcuts/digital_broadcasting/studies/index_en.htm

12. December 17th, 2004 12 Presentation of the key findings and recommendations (by Eurostrategies) Eurostrategies : who we are Objectives and methodology Key findings and recommendations Wide-screen TV High-definition TV

13. December 17th, 2004 13 Key findings on wide-screenScreens are here… 16:9 screens are already here. About 20% of European households have a wide-screen TV set. Penetration levels vary sharply from 5% (in poorest member states) to 35-45% (UK and the NL). 16:9 is becoming the default. With current sales, by 2008, the global penetration is expected to be close to 50% in EU25, and beyond 70% in the most advanced markets. Among the drivers pushing wide-screen sets : the complementarity with DVD and the aesthetic appeal of flat wide panel displays (WAF). Manufacturers and retailers played a leading role in promoting high-end wide-screen sets with higher margins

14. December 17th, 2004 14 Key findings on wide-screen 16:9 sets penetration : estimates at end-2004

15. December 17th, 2004 15 Key findings on wide-screen16:9 sets are becoming the default in EU…

16. December 17th, 2004 16 Key findings on wide-screen 16:9 as an element of complementary innovations Chaque séance du club média sera composée de trois présentations. Deux présentations d’analyse de la conjoncture des industries éditoriales - La conjoncture économique générale, à chaque séance La conjoncture des industries de la communication : équipements, médias et biens éditoriaux, publicité Un présentation portant sur un sujet prospectif et stratégique le consommateur face aux médias et industries éditoriales Prospective technologique, réglementaire, etc.Chaque séance du club média sera composée de trois présentations. Deux présentations d’analyse de la conjoncture des industries éditoriales - La conjoncture économique générale, à chaque séance La conjoncture des industries de la communication : équipements, médias et biens éditoriaux, publicité Un présentation portant sur un sujet prospectif et stratégique le consommateur face aux médias et industries éditoriales Prospective technologique, réglementaire, etc.

17. December 17th, 2004 17 Key findings on wide-screenScreens are here… pictures not By contrast, wide-screen output (broadcasting) remains low in Europe. The level is significant in three countries only where broadcasters (PSB mainly) and regulators conducted a proactive policy: UK, Netherlands, Belgium. In the first one, wide-screen has come with digital TV. In the latter two, wide-screen comes, through PALplus as a transition way. Broadcasters show some letterbox programmes (films and advertising mainly) but very little true wide-screen broadcasts As a result, in many countries, broadcasters fail to address the most innovative viewers

18. December 17th, 2004 18 Key findings on wide-screenDon’t forget the broadcast driver Some empirical evidence that the supply of wide-screen broadcasts (and their active promotion) is also effective driver for consumer awareness and equipment. In the top three countries for 16:9 receivers penetration, we find the three countries where the output of wide-screen broadcasting is – by far – the more significant (UK, BE, NL) With similar DVD penetration, Belgium (16:9 broadcasts) has much higher 16:9 sets penetration than Sweden, and NL much more than Spain.

19. December 17th, 2004 19 Key findings on wide-screen Correlation between 16:9 sets and 16:9 broadcasts

20. December 17th, 2004 20 Key findings on wide-screen Correlation between 16:9 sets equipment and DVD equipment

21. December 17th, 2004 21 Key findings on wide-screenRemaining obstacles to a faster roll-out : conservative opinions and limited awareness Reluctance to “bring” viewers to 16:9 and to take any risk before the 50% or 75% “ceilings” for wide-screen set ownership have been reached Prevalence of the pre-conceived idea that viewers “won’t like” some genres in 16:9 (like sports) Scepticism about 16:9 transmission as a real competitive advantage either in free-to-air or pay-TV Lack of actual competition in payTV on some markets General and vague ideas about the “guaranteed” arrival of 16:9 in the mid term, as a free rider alongside HDTV, which would justify a wait-and-see approach in the short term

22. December 17th, 2004 22 Key findings on wide-screenRemaining obstacles to a faster roll-out Limited awareness of the fact that the technical chain (production, post-production, broadcasting) is already ready and capable of switching to full or at least partial wide-screen at marginal costs Still some transition costs : little new equipment needed but training needed for cameramen, (in sports production for example) Some technical problems on compatibility : in some cases, first-generation of digital set-top-boxes does not allow 4:3 sets owners to select a good, letterbox display mode when receiving a 16:9 feed ; this raises the problem with signalling systems.

23. December 17th, 2004 23 Key findings on wide-screenSeveral ways to introduce and implement 16:9 In some countries, players are migrating towards 16:9 before going to HD, while others intend to move to HD first while expecting it to drive 16:9 as « byproduct ». Both approaches, or hybrid ones, are sustainable. Broadcasters shouldn’t necessarily ‘wait’ for the future advent of HDTV, or even DTV, to start promoting the 16:9 format per se and encourage 16:9 production now. In some countries, players are migrating towards 16:9 before going to HD (e.g. German, Dutch and Belgian pubcasters), while others intend to move to HD first while expecting it to drive 16:9 (e.g. all French players). Both approaches, or hybrid ones, are sustainable. In some countries, players are migrating towards 16:9 before going to HD (e.g. German, Dutch and Belgian pubcasters), while others intend to move to HD first while expecting it to drive 16:9 (e.g. all French players). Both approaches, or hybrid ones, are sustainable.

24. December 17th, 2004 24 Some of the reluctance against 16:9 broadcasting derives from 4:3 legacy and memory of compatibility problems that arose in the past, with first-generation STBs (mentionned in France and NL, e.g.).Some of the reluctance against 16:9 broadcasting derives from 4:3 legacy and memory of compatibility problems that arose in the past, with first-generation STBs (mentionned in France and NL, e.g.).

25. December 17th, 2004 25 For instance, a widescreen film is broadcast with letterbox on digital signal (as well as on analogue terrestrial signal) (A), but broadcast “fully 16:9” on this dedicated channel, enabling 16:9 homes to watch it full screen, without definition loss (D).This is non efficient. For instance, a widescreen film is broadcast with letterbox on digital signal (as well as on analogue terrestrial signal) (A), but broadcast “fully 16:9” on this dedicated channel, enabling 16:9 homes to watch it full screen, without definition loss (D).This is non efficient.

26. December 17th, 2004 26 On the other hand, when the consumer is equipped with an ‘intelligent’, 16:9-enabled STB with correct signalling implementation (like all recent STBs are), he is given a full range of options in cases B and C – British ‘best practice’ On the other hand, when the consumer is equipped with an ‘intelligent’, 16:9-enabled STB with correct signalling implementation (like all recent STBs are), he is given a full range of options in cases B and C – British ‘best practice’

27. December 17th, 2004 27 Key findings on wide-screenRecommendations Lack of feedback between broadcasters and audiences, a fair proportion of whom have purchased 16:9 receivers. Regulators and broadcaster should encourage market research into forward-looking consumer opinion (incl. migration). Efforts in communication remain necessary to raise awareness in different areas: awareness to equipment trends, to wide-screen broadcast appeal, awareness of the supply of 16:9 programmes and events (documentaries, football World Cup 2006). Common industry structures like the British « Wide-screen Forum » should be publicised as a model for coordinating players around such issues.

28. December 17th, 2004 28 Key findings on wide-screenRecommendations Simple and successful initiatives like the switch of ITV advertising to 16:9 must be emphasized. 14:9 aspect ratio has proved to be a good compromise in the transition period, to produce in 16:9, manage 4:3 legacy and still adress 16:9 set owners STB issue. Handling and signalling issues must be implemented at each stage of new platforms, standards, and generations of STB 14:9 aspect ratio has proved to be a good compromise in the transition period, to produce in 16:9, manage 4:3 legacy and still adress 16:9 set owners 14:9 allows optimising consumer satisfaction and/or reducing discontent, as long as a significant amount of viewers retain a 4:3 receiver. 14:9 aspect ratio has proved to be a good compromise in the transition period, to produce in 16:9, manage 4:3 legacy and still adress 16:9 set owners 14:9 allows optimising consumer satisfaction and/or reducing discontent, as long as a significant amount of viewers retain a 4:3 receiver.

29. December 17th, 2004 29 Presentation of the key findings and recommendations (by Eurostrategies) Eurostrategies : who we are Objectives and methodology Key findings and recommendations Wide-screen TV High-definition TV

30. December 17th, 2004 30 Key findings on HDTVEurope is late, and yet consumers are ready for quality HDTV broadcasting is already implemented outside Europe. HDTV is already implemented in European production. All broadcast equipment are available, at marginal cost increase. HDTV appears at European consumer equipment. HDTV-enabled TV sets (mid-to-large flat panel displays) are already being sold in Europe, even if consumers are often unaware of this capability HDTV broadcasting is already implemented outside Europe. Policy-driven implementation, bundled with digital terrestrial in the case of Japan, has been relayed by industry players. Broadcasters, payTV operators like Cablevision (Rainbow, Voom) or DirecTV now use HDTV as a competitive feature.   HD is becoming a reality in production. At NAB 2004, all production equipment was bi-standard SD-HD. For TV fiction, HD production is becoming cheaper than Super16 (and still coming down) at similar levels of quality. HD is also more and more used for cinema. In addition, European producers of documentaries have to produce HD if they want to reach extra-European markets. For live events, beyond experiments all over Europe (sports, talk shows, music), some events are produced HD for the American market. Finally, film and programme libraries are being upconverted to HD. HDTV broadcasting is already implemented outside Europe. Policy-driven implementation, bundled with digital terrestrial in the case of Japan, has been relayed by industry players. Broadcasters, payTV operators like Cablevision (Rainbow, Voom) or DirecTV now use HDTV as a competitive feature.   HD is becoming a reality in production. At NAB 2004, all production equipment was bi-standard SD-HD. For TV fiction, HD production is becoming cheaper than Super16 (and still coming down) at similar levels of quality. HD is also more and more used for cinema. In addition, European producers of documentaries have to produce HD if they want to reach extra-European markets. For live events, beyond experiments all over Europe (sports, talk shows, music), some events are produced HD for the American market. Finally, film and programme libraries are being upconverted to HD.

31. December 17th, 2004 31 Key findings on HDTVEurope is late, and yet consumers are ready for quality Market research evidence that consumers are more and more aware of and interested in quality. Consumer electronics manufacturers have preferred to push other features than HD (flat, 16:9 TVs) in recent years. Not anymore. Consumers are more and more interested in quality. DVD players, home cinema sound systems have set new standards of image and sound quality that digital pay-TV first, and free-to-air TV later, will have to match. High definition DVD will arrive within a couple of year. HD camcorders are also in sight of the consumer market. American pay-TV groups like Cablevision or Echostar are already offering HD channels as premium options, experimenting with a business model for transition. Consumers are more and more interested in quality. DVD players, home cinema sound systems have set new standards of image and sound quality that digital pay-TV first, and free-to-air TV later, will have to match. High definition DVD will arrive within a couple of year. HD camcorders are also in sight of the consumer market. American pay-TV groups like Cablevision or Echostar are already offering HD channels as premium options, experimenting with a business model for transition.

32. December 17th, 2004 32 Key findings on HDTV 2004 has been a turning point, with many announcements and initiatives Astra-supported Euro1080 (renamed HD1) launched early 2004. Several major European broadcasters (particularly pay-TV operators in France, the UK and Germany) have announced their intentions to launch HDTV services as early as 2005. The killer applications of HDTV will include sports. The FIFA/HBS decision to entirely shoot the 2006 football World Cup in HD is a milestone National and European industries are organising themselves, along the model of the successful British broadcasting “forums”: European HD Forum, French HD Forum…. Several major European broadcasters (particularly pay-TV operators in France, the UK and Germany) have announced their intentions to launch HDTV services as soon as 2005. Some governments have stated that Europe must compete on the worldwide HDTV scene. The killer application of HDTV will be sports. The HBS decision to entirely shoot the 2006 football World Cup in HD is important in this context. National and European industries are organising themselves, along the model of the successful British broadcasting “forums”: European HD Forum, French HD Forum…. Several major European broadcasters (particularly pay-TV operators in France, the UK and Germany) have announced their intentions to launch HDTV services as soon as 2005. Some governments have stated that Europe must compete on the worldwide HDTV scene. The killer application of HDTV will be sports. The HBS decision to entirely shoot the 2006 football World Cup in HD is important in this context. National and European industries are organising themselves, along the model of the successful British broadcasting “forums”: European HD Forum, French HD Forum….

33. December 17th, 2004 33 Key findings on HDTVThe chicken-and-egg situation with HDTV

34. December 17th, 2004 34 Key findings on HDTVExternal catalysts help breaking the chicken-and-egg situation : yet the broadcasting bottleneck remains

35. December 17th, 2004 35 Key findings on HDTV Some obstacles remain The psychological stigmata of the MAC failure in the 90s has been largerly overcome by now The main bottleneck remains bandwidth Especially so for bandwidth-scarce platforms (terrestrial) Therefore the HDTV issue is closely dependent on the compression codecs issue. Set-top-box bases installed by digital pay-TV operators will have to be renewed to be able to handle HD. A third problem lies in technical options : in which HDTV format should European players produce, remaster, broadcast ? Which requirements for HDTV labelling ? European players do not necessarily have to make a choice between the two existing, interoperable formats: 720p and 1080i. The main bottleneck remains bandwidth as HD requires four to five times more bandwidth than SD with a given codec. This is why the HD arrival is frequently associated with the arrival of new-generation compression codecs such as Mpeg-4. The main bottleneck remains bandwidth as HD requires four to five times more bandwidth than SD with a given codec. This is why the HD arrival is frequently associated with the arrival of new-generation compression codecs such as Mpeg-4.

36. December 17th, 2004 36 Key findings on HDTV Some obstacles remain In many smaller or less advanced countries, HDTV broadcasting is seen more as a long term objective, as regulators and PSBs are struggling for more basic developments. In some advanced TV markets, some sceptical consider that : "In Europe, the quality leap to HD from digital SD is less than in the US, making the business case more difficult to find“ “achieving a complete digital switchover is number one priority and HDTV could interfere in the process” Therefore they play down the HD broadcasting issue in Europe, preferring to focus in the short term on other improvements like 5.1 sound. 2 reasons for HDTV-sceptical : a) HD creates no big quality leap from digital SD, the business model will be more difficult to find in Europe than in the US. Consumer perception tests led by e.g. the BBC show that HD quality gap is hardly visible on small to mid screens. b) Policy dilemma : On one hand HDTV (possible only in DTV) can boost DTV adoption (as well as the introduction of high-speed internet access has accelerated internet adoption and PC equipment). On the other hand “le mieux est l’ennemi du bien”. HDTV creates transition costs in the system : if operators try to go directly to HDTV (without the DTV phase) it could delay the whole process, esp. in free-to-air TV (e.g. more expensive STBs Besides, in many smaller European countries, HDTV broadcasting is seen more as a long term objective, as regulators and PSBs are struggling to set up TV regulation, secure public service broadcasting financing, and initiate the migration to digital TV. These markets will follow Western trends. 2 reasons for HDTV-sceptical : a) HD creates no big quality leap from digital SD, the business model will be more difficult to find in Europe than in the US. Consumer perception tests led by e.g. the BBC show that HD quality gap is hardly visible on small to mid screens. b) Policy dilemma : On one hand HDTV (possible only in DTV) can boost DTV adoption (as well as the introduction of high-speed internet access has accelerated internet adoption and PC equipment). On the other hand “le mieux est l’ennemi du bien”. HDTV creates transition costs in the system : if operators try to go directly to HDTV (without the DTV phase) it could delay the whole process, esp. in free-to-air TV (e.g. more expensive STBs Besides, in many smaller European countries, HDTV broadcasting is seen more as a long term objective, as regulators and PSBs are struggling to set up TV regulation, secure public service broadcasting financing, and initiate the migration to digital TV. These markets will follow Western trends.

37. December 17th, 2004 37 Key findings on HDTV The « short cut » dilemma 2 reasons for HDTV-sceptical : a) HD creates no big quality leap from digital SD, the business model will be more difficult to find in Europe than in the US. Consumer perception tests led by e.g. the BBC show that HD quality gap is hardly visible on small to mid screens. b) Policy dilemma : On one hand HDTV (possible only in DTV) can boost DTV adoption (as well as the introduction of high-speed internet access has accelerated internet adoption and PC equipment). On the other hand “le mieux est l’ennemi du bien”. HDTV creates transition costs in the system : if operators try to go directly to HDTV (without the DTV phase) it could delay the whole process, esp. in free-to-air TV (e.g. more expensive STBs Besides, in many smaller European countries, HDTV broadcasting is seen more as a long term objective, as regulators and PSBs are struggling to set up TV regulation, secure public service broadcasting financing, and initiate the migration to digital TV. These markets will follow Western trends. 2 reasons for HDTV-sceptical : a) HD creates no big quality leap from digital SD, the business model will be more difficult to find in Europe than in the US. Consumer perception tests led by e.g. the BBC show that HD quality gap is hardly visible on small to mid screens. b) Policy dilemma : On one hand HDTV (possible only in DTV) can boost DTV adoption (as well as the introduction of high-speed internet access has accelerated internet adoption and PC equipment). On the other hand “le mieux est l’ennemi du bien”. HDTV creates transition costs in the system : if operators try to go directly to HDTV (without the DTV phase) it could delay the whole process, esp. in free-to-air TV (e.g. more expensive STBs Besides, in many smaller European countries, HDTV broadcasting is seen more as a long term objective, as regulators and PSBs are struggling to set up TV regulation, secure public service broadcasting financing, and initiate the migration to digital TV. These markets will follow Western trends.

38. December 17th, 2004 38 Key findings on HDTV HDTV accross platforms and business models For payTV players HDTV could be first proposed as premium version of existing channels Before a global transition to HD ? Business model for standalone HDTV-specific channels with no specific line-up ? Platforms : satellite and cable, with much larger bandwidth capacities, might b first, and terrestrial probably AFTER analogue switch-off For free-to-air television All broadcasters have to maintain a good-enough quality facing the competition of package media (DVD and then HD DVD to come) on bigger, better displays Pubcasters have to keep in the race (or even to pioneer) technical innovations

39. December 17th, 2004 39 Key findings on HDTV Recommendations : What could help a faster implementation ? Several players point out that market forces don’t need subsidies nor obligations, but incentives, “regulatory carrots”, such as the allocation of free digital frequencies if you go HD (US-style). Because of bandwidth costs, HDTV business model closely depend upon advanced compression codecs Therefore these must come to market quickly and with good accessibility Regulatory issue : new codecs must be encouraged and accepted « Showcase » or experimental HD feeds are valuable, to trigger consumer and retailer interest. They should develop. To avoid any consumer confusion, industry players should agree, at least at national level and reception levels, what should be labelled « High definition »

40. December 17th, 2004 40 Agenda 10h00 - Introductory remarks (Peter Scott, EC) 10h15 - Presentation of the key findings and recommendations(Eurostrategies) 11h00 - Discussion 11h30 - Case Study 1 : “Wide-screen implementation in the UK” Guest speaker : Brendan Slamin (DTG) 12h15 - Case Study 2 : "Wide-screen and HDTV accross genres : sports as a key success driver“ 13h15 – Concluding remarks (Peter Scott, EC)

41. December 17th, 2004 41 5 Case studies in the report 16:9 : Widescreen Forum in the UK 16:9 and HDTV : HBS and the 2006 milestones in sports HDTV : HDTV and DTTV in France, the TF1/Thomson scenario HDTV : HD-1, the first European HD channel HDTV : « Navarro » a switch to HD production

42. December 17th, 2004 42 Case Study n°1The UK « best practice »

43. December 17th, 2004 43 Brendan Slamin slides

44. December 17th, 2004 44 Agenda 10h00 - Introductory remarks (Peter Scott, EC) 10h15 - Presentation of the key findings and recommendations(Eurostrategies) 11h00 - Discussion 11h30 - Case Study 1 : “Wide-screen implementation in the UK” 12h15 - Case Study 2 : "Wide-screen and HDTV accross genres : sports as a key success driver“ Guest speaker : Francis Tellier (HBS) 13h15 – Concluding remarks (Peter Scott, EC)

45. December 17th, 2004 45 Case study 2Sports production could drive 16:9 and HDTV Major sports events have always been predominantly SD 4:3. Elite Football league are produced 4:3 (except UK and export) International events have only experimented HD and 16:9 The football World Cup 2006 in Germany will be the first major event ever whose international feed will be produced in single shooting : native HD 16:9. Host Broadcaster Service (HBS) decided to make this quantum leap in late 2003, based on shrinking costs and growing international demand for HDTV and 16:9.

46. December 17th, 2004 46 Francis Tellier Slides

47. December 17th, 2004 47 Agenda 10h00 - Introductory remarks (Peter Scott, EC) 10h15 - Presentation of the key findings and recommendations(Eurostrategies) 11h00 - Discussion 11h30 - Case Study 1 : “Wide-screen implementation in the UK” 12h15 - Case Study 2 : "Wide-screen and HDTV accross genres : sports as a key success driver“ 13h15 – Concluding remarks (Peter Scott, EC)