TV Ecosystem Strategies for Innovation and Growth in German Television. Niko Steinkrauß Principal, Media Europe Booz & Company

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1 München, 28. Oktober 2009 TV Ecosystem Strategies for Innovation and Growth in German Television Niko Steinkrauß Principal, Media Europe

2 Starting Point: No Growth In Sight In German Television? Slump in Ad Markets? Competition Infrastructure vs. Content? Tragedy around New Services?? Unknown New User? 28. Oktober 2009 Medientage München Keynote "TV Ecosystem 2010+", Niko Steinkrauß 1

3 No Triggers From Classic Ad Market New Platforms And Services Still With Low Penetration TV Ad Markets (Net) in bn % Penetration Rates (% of all TV Households, 2008) 1) Digital TV 53% 71% IPTV 1% 5% -14% Mobile TV, Video Connections 4% 8% ) Digital TV = Mindestens digitales Basispaket; Mobile TV/ Video Connections = Video Services per Streaming oder Download für Mobiltelefone; Europa = EU 27 + Norwegen und Schweiz Quelle: PWC, Wilkofsky Gruen Associates, Screen Digest, Ovum, 2

4 Evolution In TV User Behaviour -- But Internet Dominates Usage Already In 2015 On The One Hand: No Revolution TV Usage Stable (Min./Day) Internet On The Other: Internet Usage Profile On The Horizon Szenarios 2015 more linear Pay TV? 74% no TV %+ regular VoD? 81% yes TV Internet Quelle: Bitkom/Mediarise, TV Dominates Lean Back 30 Info Info "spontaneous" Daily Entertainment 20%+ EPG Nutzer? App-Store in Devices? 76% yes 72% yes HH Penetration IP-enabled Devices: 60% Time Shift: 53% Archive: 32% Interest / Usage today: EPG: 26% Ad Skip: 43% 3

5 Sender vs. Platforms -- Shifting Towards Platforms Revenues TV / Broadband Ecosystem Germany, bn % 4.6 License Fees TV Advertising Pay TV Internet Access TV Cable % -1% +20% +9% +40% +16% +2% Quelle: PWC, ZAW, Group M, ZenithOptimedia, Screendigest, GEZ, EITO; Direct Response Internet Advertising 4

6 Video Advertising And Release Windowing Today And Tomorrow -- Symbiosis Of TV And Internet New Ad Models Video Game Service Portfolio Ad Measurement KPIs (Medien Companies USA) New Release Windows Model Calculation The Office Episode Reach 94% Initial Airing DVD $3,5m $2,2m Online Video Supermarket Engagement Aktivity 62% 57% Syndication Internet Download Internet Streaming $0,7m $0,2m $0,1m Mobile TV RoI 54% Internet Syndication $0,1m Quelle: Forrester, 5

7 The Music Industry Digital Turnaround -- A Blueprint for Television? Worldwide Sales Recorded Music e ( bn) Digital/ Online Traditional Portion of Digital Sales (2008): Music: 15% Print: 7% TV/Film: 3% 2008+: Recorded Music growing again Business Model Variety: 1998: 5-8 Formats, 1 Model 2008: 100+ Formats, x Models Quelle: IFPI, e 12e But: Pie is distributed differently (Hardware, Mobile Operators, ) 6

8 International Examples: Growth With Cooperation, Acquisition And New Capabilities Challenge Solution Example Establish standards for interactive advertising on TV Platform Cooperations across different industry players 1 Exploit new revenue streams and build new capabilities Size first, then Diversification through acquisition and cooperation 2 Develop new ad models (TV and other media platforms) Integration of traditional value creaction across different sectors 3 Quelle: 7

9 1 Project Canoe: Breakthrough For Interactive TV advertising On Cable As An Industry Challenge Cooperation Cable Operators Elements Of Cooperation Objective: Increasing Ad Sales Standardisation of technology 113 MM $ 68 bn 100% Joint sales of ad inventory and joint airing Ziel Investment $ 150 MM Interactive / targeted advertising for all Pay TV cable customers 56% 39% Cable Quelle: TV Housholds TV Advertising (Revenue) 8

10 2 Comcast: Size, New Revenues And Capabilities With Acquisitions And Partnerships Big Bangs Cooperations & Small Steps 2003 #5 #1 TV Everywhere 2004 Online Content 2009? Software Quelle: 9

11 3 Future Of Advertising: Re-Definition Of Value Creation -- Still In The Test Lab Cooperation Models Future Of Advertising Advertisers + Media Companies Advertisers + Agency (1:1) Advertiser Media Agencies Integrated Media Companies / Agencies Media Companies + Agencies Quelle: 10

12 Growth In TV Ecosystem 2010+: To Dos For All Players Broadcaster Platform Operator Agency / Advertiser Regulator New Self Understanding: From Push To Pull Understand usage behaviour across platforms Become content navigator Shorten innovation cycles - Launch & Learn based on user preferences New Ecosystem: Diversity & Cooperations Differentiate business models (Advertising + Subscription + Transaction) Re-define relevant markets, seek scale effects Forge new cooperations, think beyond current function / value creation Define strategy vs new players (international, devices, technology) Quelle: 11