2007 Global Digital Media Volume 1 - Industry Convergence Continues

The convergence between telecoms, media and IT saw the arrival of Digital Media, and in 2007 we are beginning to see a clearer future for its direction. Led by high-speed access to the Internet, new ranges and applications for Digital Media are developing. This in turn is stimulating other industry sectors to change their business models, including the traditional media and telecommunications companies.

Some convergence will continue to take place now, but other forms will wait until open networks based on Next Generation Networks (NGN) and fibre become available over the next 10 years. In the meantime, supplementary as well as converged services will continue to be introduced.

For more information, see chapter 1, page 1 and see chapter 2, page 12.

It is the Internet companies such as Google, Yahoo!, eBay, AOL, Microsoft, News Ltd and Amazon, which by evolving their services and capabilities are forcing the industry to change. They are breaking down the old business models which were mainly built around monopolistic market structures.

Traditional media companies have realised they can longer treat the Internet simply as a fad; the reality is that these developments are well and truly eating into their businesses. The industry has had no choice but to finally moving in more innovative directions. The telcos will also need to work hard to keep up, as they too have lost the lead they had in the market for the last five years.

The focus is moving towards content and applications, and this requires a change in marketing strategies. The market is now moving from supply driven (telco) to demand driven (Internet), and those with the best marketing and customer service capabilities will win; technologies are rapidly becoming commodities. Convergence will inevitably lead to a structural separation between infrastructure and media players.

Triple play is the first telecoms derived business model designed to deliver some the newly integrated products. However triple play models themselves have so far not lived up to expectations. While there have been some positive developments in countries such as France, Italy and Hong Kong; by and large it has not been the success story that was anticipated. It is the Internet media companies that are now setting the trend and the business models emerging from their stables will become far more important in the future.

For more information, see chapter 3, page 21.

A key to success in the new era of digital media revolves around advertising. New advertising business models are now emerging, giving the industry the confidence to begin changing their more traditional models. The phenomenal growth in online advertising revenues is also a driving this trend.

For more information, see chapter 6, page 63.

More and more businesses are also increasing their e-activities. This includes e-trading, website marketing, transactions, email and other forms of related communications. Digital Media, such as videoconferencing, is now playing a vital role in many companies’ day-to-day operations, and new developments such as telepresence are also beginning to infiltrate.

For more information, see chapter 7, page 80.

Key Highlights:

• In order to maintain their positions and compete in the new market, leading Hollywood players have digitalised their collections, and in some cases set up online content distribution services. Others have established partnerships with existing content distributors and packagers, and the content is promoted and sold over the Internet or even mobile.
• Current broadband developments will finally lead to the much-vaunted phrase ‘Interactive Multimedia’, and this in turn will bring one-to-marketing opportunities based on video communications and interactive digital TV networks.
• It is expected that by 2015, 65% of all New Media revenues will be based on permission based marketing.
  For more information, see chapter 6.2, page 75.
• Search services are central to almost everything that users do online, and this places leading search companies such as Google and Yahoo! at an advantage in the new market. Google is the industry leader, dominating the worldwide search market with around a 60% market share.
• The value of search services also became evident with Microsoft launching its own search engine ‘Live Search’, and Amazon its ‘A9’ search engine. Traditionally known as a web encyclopaedia, Wikipedia is also attempting to move into the market, with the proposed launch of a search engine in 2007.
  For more information, see chapter 4, page 45.
• User Generated Content (UGC) will see the largest growth this year; video-based consultancy, monitoring and communication services will also see significant growth.
• The USA continues to play a leading role in the development of new digital media markets, being home to many of the global digital media giants such as Microsoft, Google and Yahoo!.
• In 2010 over $2 billion will be spent on social network advertising in the US.
• Cable TV is set to play a pivotal role in China’s converged media environment, as triple play services - which include the provision of television, telephony and broadband Internet access over a single network - begin to be delivered over cable TV infrastructure. China has the largest cable TV network in the world.
  For more regional information, see chapter 8, page 88.