Convergence – A global media company’s perspective

Kevin Obi

Senior Vice President – Digital

Assets

NBC Universal International

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Introduction to NBC Universal

Media convergence trends in mature markets

Response from a global media company

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The Power of GE and NBC Universal

One of the world’s leading media and entertainment companies in the development, production and marketing of entertainment, news and information to a global audience (Circa 10% of GE’s revenues)

A division of one of the most respected global companies: • Revenue $173Bn• Net Income $22Bn• Market Cap. $317Bn• 300,000 employees

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NBC International Universal brands

TV Production & Distribution Film

International Channels

Diva TVDiva TV

Some content brands

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Views on Convergence

Media Telecoms

Revenue enhancement

Cost savings &

Cash-in

CustomerBenefits?

Chu

rn r

educ

tion

Technology

Industry view

•Fixed mobile convergence

• Device convergence

• Multi-services convergence

(bundling)

• Network convergence

• Media/telecoms/technology

industry convergence

Are we putting the customer first?

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Introduction to NBC Universal

Media convergence trends in mature markets

Response from a global media company

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Huge changes in media technology in recent years….

Streaming VideoDigital Cable

2000-2007

VOD

EPGs Broadband

Portable Devices

HDTV

1950’s 1960’s 1970’s

Internet

Digital Satellite

1990’s

DVD

PPV email

1980’s

IphoneSling box

HDDVD

Blu-ray disc

Satellite

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.. accompanied by changes in the media consumer

Now1950s

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…..have resulted in current media trends

1. Choice proliferation and fragmentation of audiences

2. More ‘time shifting’ of TV content through PVRs

3. Bigger TV screens, higher definition, PC monitors becoming TVs and vice versa

4. ‘Experimentation’ with windowing of theatrical releases

5. Rise of content on the internet – UGC, video, illegal ‘TV’ and Films (mostly for ‘free’)

6. Advertising money shifting from TV to the internet and advertiser move to greater ‘targetability’

6. Consumers are more technology savvy

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Convergence of video content and the Internet is the most pressing near term trend

• Internet and media convergence was a major theme CES Las Vegas in January 2008

• IPTV services being launched across the world− France is IPTV market leader− Japan and Hong Kong are Asian market

leaders, followed by places like South Korea

− Early days of IPTV services in India

• Mobile internet and video on mobile is still relatively immature, except in Japan and Korea

Examples from Europe & USA

•UK Internet traffic to online video websites increased by 178% between February 2007 and 2008.

• BBC iPlayer (catch-up TV) increased its market share of UK Internet visits by 423% between Feb & Dec ‘07

• MSN announced in April ’08 that video streaming in Europe is growing at over 60% every month

•SRG's study "Prime Time is Anytime" surveyed Americans aged 12 and over

− Internet TV viewers nearly doubled from 25% to 43% between 2006 and 2007

− 20% of the American online population watches TV on the internet every week

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Audience inertia and existing barriers prevent

mass shift to new media platforms – except for

short form content

1 - Status Quo

Internet enabled long form content ‘on-demand’ gains traction and a significant proportion of the linear TV audience, but sits alongside and complements linear TV

2 – ‘On demand’

TV

3 -’True’ Anywhere / Anytime

TV

Possible future scenarios

The norm becomes for consumers go around traditional broadcasters and search for content on the internet, obtain this directly from content ‘owners’ (or illegally) rather than watch linear TV

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… but barriers exist to true anytime/anywhere TV

Home Broadband

Connection Port

PC

TV

Internet

2. Connection from BB port to TV or “the last 10 feet”

3. Viewer inertia – low desire to watch TV on PC

1. Pipe thickness needs to be 6 Mbps+

“Only 6% of US viewers have ever connected a computer to

a TV to watch internet video” Harris Interactive

Entertainment, 2007 US survey

Diagram: LEK Consulting

Others barriers include: licensing,

windowing, business models

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Can we see the future in younger audiences?

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New competitors have also emerged – UK example

Examples Competitive Advantage

ChallengesCategory

Major broadcasters

Internet companies

Device driven players

Telcoms/IPTV

Emerging Web TV/Video companies

Others

NBC Universal, BBC, ITV, Chanel 4, BskyB

Amazon Unbox, Google Video, Yahoo, AOL, MSN

iTunes, Xbox live, Sony PSP, TV manufacturers

BT Vision, Orange, Tiscali

Joost, Babelgum

Vudu

Customer memory, making partnerships work, Licensing

Don’t own content, PC solution

Access to content, installed base, customer experience

Limited content, closed system,critical mass of customers

Premium content, brand, audience, PC solution, Technology

Another set-top box

Own content, customer facing brands, cross-promotion capability, audience shares, catch-up TV

Online audience share, deep pockets, internet experience

Installed base of devices (which drive adoption), partnerships with DTH/IPTV players, TV solution

Control broadband infrastructure, deep pockets, usability

Internet experience, involvement of some major content owners

TV solution, clever technology, content deals

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Introduction to NBC Universal

Media convergence trends in mature markets

Response from a global media company

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The major challenge for media companies

“How do we make the transition from our

businesses of today to the future businesses

of tomorrow, without destroying the

businesses of today?”

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Response from a ‘traditional’ media company

Content is ‘king’ - continue to make great content

Compete against increasing power of Internet distributors

- control distribution, branding and the user experience

Build stand-alone value in online destination sites

Take a few ‘bets’ on the digital media ‘stars’ of tomorrow

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• Joint Venture by NBC Universal and News Corp created to aggregate premium video content for the U.S. Market

• Founded in March 2007 with a $100 million investment from private equity firm Providence Equity Partners.

• Consumers: Aggregate Digital Content, With Great User Experience – Build the best consumer video experience online – Premium video content TV, film (both short and long-form),

Internet originals– Highest levels of content protection

• Scale: Distribute to give scale while monetizing content and branding Hulu – Distribution partners in US include: AOL, Comcast, MSN,

MySpace and Yahoo • Monetization: Attractive Business Model for Content

Owners– Primarily ad supported with commitments from major brand

advertisers• Advertisers: Premium video content

– Largest video advertising network ever assembled on the web

• International Expansion

Internet TV - hulu

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Convergence on mobile

Financial news and info on WAP, "live" channel streaming and on the Nokia catalogue in Europe & Asia

Licensing content applications (games, personalisation) based on our Film and TV IP; D2C platforms; pre-loaded films onto micro-SD

Made for mobile content production – stand-up comedy clips, animation, wallpapers, screensavers, voice tones

Simulcast of 3G Mobile TV services in Germany & Austria, seeking to do more across Europe

NBC2Go mobile TV channel on media flow; 2,200 hours of live, wireless coverage of the 2008 Olympics– the biggest wireless event to date in the US.

NBC Universal has made content available on mobile platforms, including

long-form and short-form content, WAP sites, text-based applications &

services

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Taking ‘bets’ - NBCU/GE Peacock Equity Fund

$250MM Fund launched 1Q’07

JV between GE’s Media, Communications

& Entertainment Group & NBC Universal

Investment Round: Series B or later

Sector Focuses: Digital Advertising,

Digital Content, ‘New Platforms,’

Mobile, Interactive Entertainment,

Media Technologies

Seeking to make further investments in

India

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Conclusion

• Convergence is now a reality

• Presents both a great opportunity and a major threat to media organisations

• Smart media companies will follow the audiences

• NBC Universal is well ahead of the curve!

Thank you!