Cinema and VOD in Italy (and elsewhere)

Peter Kruger pwk.it

Estoril, 21 November 2008 EUROPA DISTRIBUTION 2nd ANNUAL CONFERENCE Talking about convergence?

The Italian convergence environment 2007

80 2 Bn € e-content Cinema? It is Video squeezed between very large forces undergoing 60 8 Bn € IT strong and widespread transformation

40 20 Bn € Investigating the future of the movie industry (and more broadly the TLC media industry) implies 20 understanding the future of the whole 44 Bn € convergence pile

pwk.it - VoD Italy 21 November2008 Major forces in action

The whole ecosystem of communications is undergoing a wide transformation with the user/consumer/individual as the main force driving such huge change

Business Globalization users

X-Y-Z… generations The future of Regulatory & Public Policy Customization Communication Media Aging YOU (me, he?) Technology Nomadic

Literally a Complex System: very hard to make any accurate forecast The media industry is just a subset still at odds with the transformation occurring pwk.it - VoD Italy 21 November2008 Video over IP • streaming •VOD • video download • catch-up Tv • progressive download •P2PTV • • Videoconferencing • peer-to-peer (P2P) • Destraeming • User generated content • Webisode (UGC) • • webcast • Vodcast • multicast • Swarming •simulcast • Broadcatching • webTv • Peercast •IPTV •

In the long run all video will go IP pwk.it - VoD Italy 21 November2008 Video over IP in Italy The Video over IP world is basically split in two very distinct environments. Technology enables to centralize many management processes buth such distinction should always be very carefully remembered

• On line video - Employing the open nature of the Web to break barriers • The web (and its affiliates) is already a huge entertainment arena with audiences comparables to traditional media. Still, as far as video is concerned, no clear successful model of monetization has so far emerged • The entertainment business is dominated primarily by large portals- aggregators offering marketing opportunities to rights holders and developing ad placement

• IPTV – Employing the flexibility of IP to bring “traditional” digital interactive tv to the consumer • It is enabling TLCs to enter the broadcast industry • The business comes from very well defined models: VoD, nVoD, PVR, nPVR, EPG • So far this is the only environment where VoD generates sound revenue

• Other. But let’s not forget about mobile and public display (not only d- cinema) pwk.it - VoD Italy 21 November2008 Broadband development

Broadband development in Italy lags behind most of Europe and is experiencing very strong slow done in 2008. • 10.7M HH by mid 2008 (2% growth) - 8.7M families (37%) •11M families with no PC •14M families with no BB •70% families say no interest (Beetween 2008)

ARPU non voice VAS (Y € / user) 15.415.4%% 105,6 22.822.8%% 91,5 Very good news from the 74,5 broadband mobile evolution with over 22M 3G users by ed 2007 and rapid growth of 3G VAS

2005 2006 2007 pwk.it - VoD Italy 21 November2008 IPTV VOD in Italy

• IPTV adoption is beating most expectations • 650K HH by mid 2008 (Between 2008) • Up ca. 100% in only 6 months • Four major offers: Fastweb, Telecom Italia, Tiscali, Wind • VoD/user grows fast

The bad news: • piracy of course! • P2P of course, but just not as bad as often portraied • regulatory dead lock (with repeated attempts to introduce rules against P2P) • the typical Italian issues: concentration in the media vs. weakness of independent players Æ no strength/incentives to move digital • VOD users watch movies but not as much as would be expected (prices plunge) Æ

pwk.it - VoD Italy 21 November2008 On line VOD in Italy

So far the only realistic model of 1001 monetization of video is on line ADV (though still to be proven) 801 The Italian on line environment is developing slower than in other major EU 601 countries

Jan-07 Jan-08 Y Growth 401

Active monthly 20,25 Mni 24,3 Mni + 21% users 201 Monthly 29 32 + 10% session/user

Monthly Time 18h 36m 21h 45 m + 18,7% spent /user 1 2005 2006 2007 2008E 2009E News Entertainment on line Bad news: Portali DTT e SAT Strong slow down of on line Mobile TV Classified ad growth (35% Æ 15% in Search Totale web 2008) Confindustria 2008

pwk.it - VoD Italy 21 November2008 The broadcast media picture

pwk.it - VoD Italy 21 November2008 Movies in the age of UCGs

• tends to become the only repository for all video content • While technology evolution tends to lower the entry cost for producers (even users…), the Internet tends to lower the physical costs of distribution • Cinema faces increasingly direct competition by other forms of video entertainment • The long tail promises more life and mobility to content (in space and in performance) thanks to the proactive role played by uesrs • But the long tail does not kill the Pareto Law (80-20), all it really implies is that the competition for audience increases and so does the relative cost of ensuring the success of a hit will (rule of marketing) • So what is really Cinema? Primary use in theater and strong capacity to build brands (actors, authors, themes, narrative cycles etc.) • Cinema thrives if it preserves its capacity to set trends and influence other forms of entertainment and discussion (personal, social etc.)

pwk.it - VoD Italy 21 November2008 The on line movie life cycle The current most promising opportunities for on line cinema are related to building/testing projects, brands, audiences and performance

On line (cross-media) marketing Community development

proj dev-funding- theatrical home video tv pre-production-post

utente On line retail finale

E-commerce

On line ADV

pwk.it - VoD Italy 21 November2008 From Packaged Goods to Conversational Media

Dictation Conversation – creator's dictation – audience is the principal of a highly produced vs. author, and the conversation is package of content the content Distribution Platform – economic differentiation – the architecture of the platform based on the control of is the key to differentiation and distribution vs. success Product vs. Service Perfection and Deliberation Iteration and Speed – shipping a highly produced – "perpetual beta" package of media vs. Consumption Engagement – "sit back media" vs. – "lean forward media"

pwk.it - VoD Italy As told by John Battelle 21 November2008 Digital content Homevideo Theatrical

cross-media mkt On-line ADV On-line retail

COMMUNITY BRANDING

conversational audience

Free-to-air

Pay-tv E-commerce pwk.it - VoD Italy 21 November2008 Scenarios for 2015 Last year IDATE carrieid out a scenario analysis of the communication ecosystem

Three scenarios for thee five major UE countries - IDATE, 2007

What’s your guess today?

pwk.it - VoD Italy 21 November2008 Q&A

Thx :-)

[email protected] http://pwk.it

pwk.it - VoD Italy 21 November2008