PREPARED FOR EMA DIGITAL MEDIA PIPELINE...

SO MANY CHOICES:DEVICES MOTIVATING CONTENT CONSUMPTIONSEPTEMBER 2013

P R E P A R E D F O R E M A D I G I T A L M E D I A P I P E L I N E C O N F E R E N C E

SETTING THE STAGE

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THE EVOLUTION OF CONTENT CONSUMPTION

• Several key themes

The intersection of content and technology innovation

The death of single-purpose devices

The growth of digital

Transition from products to services

• Tension point for device makers and content creators: unprecedented number of revenue opportunities, evenly matched by unprecedented fragmentation and consolidation

Copyright © 2013 International Development Group

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THE BIG PICTURE – MAIN THEMES

• Two transitions: 1) product cycle transitions, and more importantly, 2) broader business model transitions encompassing new markets

• Competitive battle lines are blurring, as business models and company profiles show increasing hybridization and cross-pollination

• Competitors are partnering with each other in interesting ways to address emerging opportunities

Viacom-Sony

Netflix-console manufacturers

GameStop-Steam


THE NEW NORMAL

5Copyright © 2013 International Development Group

Content/Delivery Operators gain access to the consumer by adding a layer of services to chosen devices

Access PointsOperating Systems Functionality

TV/Movies Music

Communication

Web Browsing

Games

Cable Operators Satellite Operators Streaming Movies/TV Providers DVR Providers

TV PC

Consoles

Smartphones/Tablets

In choosing a device, consumers make supplemental choices regarding the software utilized on each platform as well as its functional applications

THE DEVICE AS THE GATEWAY TO THE CONSUMER

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PLUGGING INTO SERVICES


22 million1 billion 10 million36 million 4 million114 million 36 million1.1 billion phones 90 million 26 million46 million575 million

Descending order of market size opportunityLegend:

Paid services

Hardware Access Points

Services

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CONSUMER PERSPECTIVE

• Unprecedented number of choices

Distribution channel: boxed product versus digital

Location: living room versus portable/on-the-go

Delivery mechanisms: disc, digital download, streaming

Business model options: retail purchase, subscription, download, free-to-play, rental, apps

Devices: TV, PC, Smartphone, Tablet, Console, Set Top Box, etc.

Entertainment/media verticals: TV shows, movies, music, games, web programming


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CONSUMER PERSPECTIVE (CONT’D)

• Competition for share of day

• Device loyalty Brand/content loyalty

• Desire for greater control over the content that they consume

• Consumers want to access their content at all times, regardless of location or device


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DEVICE MANUFACTURER PERSPECTIVE

• Single-purpose devices are dead

• Consumers want devices that can do multiple things well

• Devices must be a part of a broader entertainment ecosystem


THE IMPACT OF DIGITAL

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WHERE HAVE ALL THE RETAILERS GONE?

• Over the years, many retailers have exited the US video game business• Concentrated environment gives retailers more leverage


• Toy Store• Filed for bankruptcy in Jan ‘04

• Operated 650 stores in the US

• Toy Store• Filed for bankruptcy in Jan ‘04

• Operated 100 stores in the US in 1991

• Consumer electronics retailer

• Filed for bankruptcy in Nov ‘08

• 567 stores at time of liquidation

• Video game specialty stores

• Rebranded as GameStop stores

• Filed for bankruptcy in Sep ’10

• Subsidiary of Dish Network


• Video game specialty stores

• Merged with Babbage’s in 1994

• Consumer electronics retailer

• Stores liquidated starting n Feb ‘07


• Child World stores liquidated in mid 1992

• Once had 182 stores

• Filed for bankruptcy in Jan ’06

• Trans World Ent. purchased Musicland stores in Mar ‘06

Key Video Game Retailers *

Retailer Brands That Have Exited the Business or Been Consolidated*

* Figures for US market only

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THE NEW PUBLISHING LANDSCAPE


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DIGITAL IS THE GREAT DISRUPTOR AND ENABLER

• While retail will remain important in the value chain, digital is one of the most disruptive forces at the intersection of content and technology today

• Digital is the impetus for the expansion from products to services• Connected, multi-purpose devices are enabled by the presence of

digital


COMPETITIVE IMPLICATIONS

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IDG’S 4 PILLARS


Hardware Access Points

Software Operating

System

Cloud Storage Service

Online Store

Amazon‐customized Android 2.3

The 4 Pillars

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ECOSYSTEMS WILL TRUMP PLATFORMS

• In the new normal, building out an ecosystem will be the highest priority

• Although platforms will remain critical, many consumers are becoming more platform and device-agnostic

• While earlier consumers might be an iPod or Xbox loyalist, the newer generation of content consumers will show greater loyalty to content brands, across a variety of media verticals

• The ecosystem paradigm will be more important to generating maximum value and market share versus winning on a single platform


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