FUTURE OF TV? 2006 Future of Television Forum NYU Stern School of Business John Rose November 14 th,...

FUTURE OF TV?

2006 Future of Television ForumNYU Stern School of Business

John Rose

November 14th, 2006

Future of TV Lunch v.1 TN.ppt - 2 -

GUIDING BELIEFS

Distribution will continue to expand and fragment and video will be watched on an ever increasing number of devices

Consumer pay models will not replace advertising based models

Small changes in viewer and ad patterns will destroy / create disproportionate amounts of value

Interactive / digital services will not “fill the gap”

New competitors will emerge from historically unrelated business and win big

Appointment TV will gradually disappear


KEY QUESTIONS WE SHOULD BE ASKING (I)

How will the consumer watch video in the future?Wrong

question

What different viewing patterns will different segments of the population exhibit?

Right question


KEY QUESTIONS WE SHOULD BE ASKING (II)

Is there a future for TV?Wrong

question

Who will create and distribute video experiences?Right

question


KEY QUESTIONS WE SHOULD BE ASKING (III)

How can I maintain / grow earnings?Wrong

question

How will money be made and how can I capture that value?Right

question


CD sales decline... ...as music consumption soars

MUSIC INDUSTRY EXAMPLE: SALES AND CONSUMPTION

0

5,000

10,000

15,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

$ millions CD sales

millionsof songs

Songs consumed(1)

Real Forecasted

(1) Includes: Digital singles + digital albums + Recorded CDs + P2P files. Assuming 12 files per album, average number of P2P files shared per day= 30, growth in P2P similar to estimated growth in digital downloads

(2) Data prior to 2004 does not include digital downloads. Data prior to 2003 does not include P2P file sharing.Source: Veronis Suhler Stevenson, PQ Media, Recording Industry Association of America. The BigChampagne Group., Bay TSP report

Real(2) Forecasted

DistributionDistribution

CAGR 00-05-4.5%

CAGR 05-10

-10.3%

CAGR 00-05-4.5%

CAGR 00-05+47%

CAGR 05-0945%


MUSIC INDUSTRY EXAMPLE: COLLAPSE OF EQUITY VALUE

EMI Share price evolution (GBP)


Jan 00 Jan 02 Mar 03 Jan 04 Nov 06

CAGR-23%

CAGR-67%

CAGR+116%

CAGR+21%

Per share price (GBP) 6.1 3.6 0.9 1.6 2.8

Future of TV Lunch v.1 TN.ppt - 8 -- 8 -

TV INDUSTRY STRUCTURE: YESTERDAY

Broadcast

Satellite

DVD

Cable

VCR

Format ReplayAccess devices

Satellite set top box

DVD

Set top box

VCR

TV


TV INDUSTRY STRUCTURE TODAY

Broadcast

Satellite

DVD

Cable

VCR

Mobile Streaming

Internet Streaming

DRM enabled downloads

Satellite set top box

DVD

Set top box

VCR

Sling box

TIVO

Blue Ray

Mobile phone

PC

Portable Digital Players

TV

Mobile Phone

Game consoles


AD SPEND VS. CONSUMER PAY

(1) Includes revenue from Home Video, Consumer Books, Pure Play Internet Services, Recorded Music, Newspapers, Consumer Magazines, Box Office and Videogames. (2) Includes revenue from Broadcast TV, Cable & Satellite TV, Pure-Play Mobile content, Broadcast and Satellite Radio Source: Veronis Suhler Stevenson

181198

259

96112

123

41

74

108

0

50

100

150

200

250

300

2000 2005 2010

$B

Media spend

Consumer content(1)

Access revenue(2)

Consumer pay model vs ad model





CONSUMER DOWNLOAD MODEL VS. AD REVENUE FOR TV NETWORKS

87.5 7.5

8.9

0

1

2

3

4

5

6

7

8

9

10

Viewers Ad.Revenueper Hour

DownloadRevenue

RequiredDownloads

Million

Comparison of Revenue of Top 10 TV Show and Equivalent Download Revenue

iTunes Download model

Network TV Model

Equivalent revenue requires ~10-15% increase in audienceEquivalent revenue requires ~10-15% increase in audience

(1) Assumes $26 CPM for 18-49 Demo

(2) Net of 35% Distribution feeSource: TV Dimensions; BCG

(1) (2)

Advertising Download


ALTERNATIVE MODELS FOR APPOINTMENT TV

Virtual aggregator controlled3

Appointment TVAppointment TV

Consumer controlled: PVR/DVR1

Which one do you want?Which one do you want?

Cable / MSO controlled: VOD2

Network / MSO controlled: VOD4


RECENT ACTIONS

Company ActionDate

CBS begin selling downloads of Survivor on CBS.comFeb. 2006

TV networks sue Cablevision for Network DVRApr. 2006

iTunes begins selling movies with Disney as its sole partner

Sept. 2006

NBC dedicates 8 p.m. slot for reality, game shows; phasing out scripted shows in first hour of prime time

Oct. 2006

Top ABC shows available for download; Disney nears half-million sales through iTunes Nov. 2006

Appointment TVAppointment TV


Changes in audience

Changes in audience

EFFECTS OF CHANGES IN AUDIENCE Example: Newspaper Company

Equity value declined 27% during this periodEquity value declined 27% during this period

Index(2000 = 100)

80

90

100

110

120

130

2000 2005

Readership

(11%)

80

90

100

110

120

130

2000 2005

Profit Margin

(16%)

80

90

100

110

120

130

2000 2005

Revenue

19%


MUSIC EXAMPLE

New competitorsNew competitors


WHAT DO YOU NEED TO DO ABOUT THIS

Segment and micro segment the consumer audience

Live the relevant consumer(s) view

Let go of the past

Experiment to find new value proposition(s)

Meet the consumer’s needs first

FUTURE OF TV? 2006 Future of Television Forum NYU Stern School of Business John Rose November 14 th,...

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