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Broadband Content Workshop: Which model to drive premium content offers in Europe? The view of a Pan-European independent telecom operator/ISP Renato Soru CEO Brussels, 15 July 2003. Broadband Penetration % (NNR, Nielsen Net Ratings 2003). Broadband Content: the state of art.

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Broadband Content Workshop:

Which model to drive premium content offers in Europe?

The view of a

Pan-European independent telecom operator/ISP

Renato Soru

CEO

Brussels, 15 July 2003


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Broadband Penetration % (NNR, Nielsen Net Ratings 2003)

Broadband Content: the state of art

  • Broadband access in Europe is starting to take off (although incumbents are strongly re-monopolizing the ADSL market)

  • NNR foresees Europe Broadband penetration in 2004 to overtake US; however, as far as content is concerned EU is still far behind:

    • Most European on line entertainment audience spends its time on free to air services and illegal file sharing (55% audience – NNR), with the only exception of adult content

    • Unlike the US, very few premium content services are available to the European entertainment audience


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US Premium Content

  • The US market is driven by high value and generalist offers directly built by major content owners or aggregators (very few ISPs being involved) ..

    • Generalist: Real One Super Pass, Yahoo! Platinum

    • Movies: Movie Link, Netflix, CinemaNow

    • Music: I-tunes, Pressplay, MusicNow

  • … and users are starting to pay for content

    • Real One: over a million paying subscribers

    • 10 per cent of US broadband users have rented a movie through an online service (Forrester, 2003)

    • I-tunes: 500.000 tracks sold every week


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Premium Content Barriers

  • Commercial

    • Illegal File Sharing (worldwide barrier)

    • Very few premium content available (EU specific)

    • Lack of wide spread methods of payment that are accepted by on line users (EU specific)

    • Small size language market (EU specific)

  • Infrastructure

    • Average bandwidth per broadband connection still relatively low (worldwide less Far East Asia)

    • The PC still hardly fits into the domestic entertainment environment (mainly the TV) (worldwide)


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EU content owners are holding back

  • The EU majors (mainly Broadcasters):

    • With a few remarkable exceptions (BBC), all major EU content owners and distributors are keeping very low investments in the development of audio-video offers for the on line world.

  • The EU small-size producers and distributors:

    • This characteristic EU media model is currently completely cut off from the on line world

  • A major lack in Strategy and Vision:

    • Unlike US content owners, there is very little awareness among EU players of how strategic broadband is to their future development and survival

    • EU content owners try to replicate models out of their traditional business (mainly the pay-tv model) without facing that the Internet is “a completely different story”

    • A general dominant and misleading opinion that broadband products are to be financed by ISPs, à la Pay-tv, while in the US ISPs play exclusively the role of final distributors (promote, deliver and charge)


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The Broadband Access Market

Not a favorable environment for content owners

  • Lack of wide spread global methods of payment that are accepted by on line users

    • Strong inhibition to the monetization of content

  • Incumbents’ Dominant Position (up to 90%)

    • Incumbents tend to market content as an exclusive service bundled into the broadband access offer (leveraging high access margin and thus cannibalizing the content value)

    • A single player’s game: Incumbents are in the position to fix the price

      Why should content owners jeopardize their traditional business for such a small market?


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A vicious circle

  • Content Owners

    Have poor opportunities of monetizing content

  • Incumbents

    Get poor content and don’t develop appealing offers

  • Consumers

    revert to file sharing which provides better content and service

  • Other ISPs

    Are cut out of competition

Content

Owner

Incumbent

ISP

other

ISPs

File Sharing

Drain


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The Broadband Content Model

Every player should mind his own business

  • Content Owners should focus on bringing their content to the web

    • Build broadband products: encode, license, publish

    • Gross-Distribute products on all available on line channels

  • ISPs should focus on providing a suitable environment for content to be served, promoted and sold (final distribution)

     provide open infrastructure for content delivery

     distribute broadband products to their customer base

     provide users with secure and acceptable payment methods to their customers (their own or third party)


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It’s old business as usual

Deliver

Product

Content

Owner

ISP

Promote

Charge

Revenue Share

  • Content Owners should keep doing what they have always done:

    • build good content (but now focusing also on the web)

  • ISPs should behave as supermarkets:

    • Provide shelves, i.e. infrastructure and promotion

    • Provide the cash machine, i.e. payment gateways and bills


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But not the usual Show

This model has nothing to do with TV:

  • Exclusivity by an ISP on a certain content implies cutting out all other ISPs’ users from accessing that content;

  • as a result of that, users will revert to other means in order to get hold of such content, that is to say:

    File Sharing!!

    Never forget: Internet is by its nature open

    And this market has more to do with HomeVideo than the usual TV show


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Actions

  • Content must hit the on line store

    • Content owners must get more involved

    • The EU should study incentives to favor the process

    • Remember: small producers and distributors risk to be completely cut out of the business!

  • ISPs need access to content

    • Exclusivity or preferential relationships - also de facto - between incumbents and content providers must be avoided in order to guarantee equal access to content by all ISPs

  • Payment gateways are badly needed

    • The EU should promote in each country the adoption of payment methods that are accessible to all users

    • No user should be discriminated by not having access to payment methods that are required to purchase content

  • The EU Commission must promote the integration of a transnational broadband access market

    • Moving beyond the current small size local markets is crucial in order to create the critical mass required to kick-start investments by EU content owners

  • Broadband access competition (also by way of appropriate regulation – see bitstream) must speed up

    • It will just never work so far incumbents have 90% access market share in their countries!


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