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“Indoor/Outdoor” Omnipresent Broadcast, Digital and Analog Integration Translated from Huaguang Digital Media by Yuan Haibo February 16, 2009

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“Indoor/Outdoor” Omnipresent Broadcast, Digital and Analog Integration Translated from Huaguang Digital Media by Yuan Haibo February 16, 2009 “Indoor/Outdoor” Omnipresent Broadcast, Digital and Analog Integration Translated from Huaguang Digital Media By Yuan Haibo February 16, 2009 1. From indoor to outdoor, from fixed broadcast to mobile broadcast, digital television is everywhere in our lives. On January 1st, 2008, Beijing began to adopt terrestrial digital television, which is mainly used for broadcasting CCTV’s high-definition channels and six standard-definition channels from CCTV and BTV. That Beijing has begun to broadcast both analog and digital signals simultaneously represents China’s formal entry into the world of terrestrial digital wireless television broadcasting. Marshall McLuhan once said the medium is the message; the medium is an extension of ourselves. When urban commuters spend several hours in public buses a day, mobile television channels naturally become a target pursued by commercial interests. Experts who drafted the technical standard for China’s terrestrial digital television could not have known that their “national standard” would end up being used mostly to broadcast television to public buses. According to Chinese Mobile Television Market Development Report, China’s mobile television industry (mobile television on public buses) has been growing at a rapid pace, generating revenues of close to CYN 1.3 billion. In 2008, the mobile television industry brought in CNY 1.293 billion in advertising revenues, a 105% increase from the previous year. According to a public report issued by VisionChina Media, the company, one of China’s largest public bus television operators, raked in a net third-quarter income of USD 18.1 million, clearly demonstrating the company’s strong growth. Terrestrial digital television’s accommodation of two types of receivers, one fixed (primarily for family users) and one mobile, has become a promising trend. The number of viewers who watched the Olympic Games on TVs on Beijing’s public buses is second only to those who viewed the Games on indoor televisions. Mobile digital television has become a mainstream medium that captures much of the public’s attention. Watching mobile television when one is away from home and watching cable television when one is at home has made the concept of omnipresent television a reality. Yet GuideLine Research’s cable television user satisfaction survey found a falling trend in digital television user satisfaction. When increases in subscription prices are not backed by improved content, service, functions and promotional offers, a poorly supported digital television operation will quickly suffer adverse effects from economies of scale. Such an operation risks losing repeat customers, user satisfaction, and subscriptions. While indoor television is losing users to other media, the amount of time that people spend watching outdoor television is actually increasing. From indoor to outdoor, from fixed broadcast to mobile broadcast, television as a medium is expanding. How can a cable television operator for whom indoor television remains the main source of income adapt to new challenges and take advantage of new opportunities? 2. Whether for analog or digital television, research on user demand is the key to product development. Technical progress or business model, which is more important? After many years’ experience, the communications industry has reached its own conclusions. For newly established broadcasting operations, however, the question still needs to be further explored. When it comes to brand building or adapting to a new operational model imposed by a new product, the broadcasting industry still has much to learn. From operators, content providers, pay-per-view channels, to users, every business element has a different set of requirements and issues. How can a business juggling with value gaps in its production chain sustain rapid growth if it cannot consider the issues facing all relevant business operations? Increasing user value requires more than slogans. Businesses need to pay more attention to establishing a corporate culture. In such areas as user behavioral analysis, surveying, research, planning, design, testing, and marketing, the communications industry has set many useful precedents. Abiding by such universal values as openness, equality, and freedom, the Internet is able to attract potent social resources, which in turn help build a healthy production chain. Mobilizing positive social resources to build a healthy digital television corporate culture is no doubt more efficient than learning the ropes all by oneself. Closed systems are the most stable systems, but they are also less efficient. Businesses today will require open formats to take their operations to the next level. From “horizontal transfer” to “total transition,” the digitalization of the broadcast industry has entered the “post transition” era. Horizontal transfer follows and reproduces a simple thought process. The transition to digital television, however, entails a fundamental change in business model. Television in China is transitioning from a government operation to a multifunctional and commercially run operation. Earlier, the advertised benefit of adopting set-top boxes (STBs) was that they would bring sharper images to digital television. Then, the message shifted to the greater number of channels available on digital television. In the past year or two, commercial television operators have widely begun to push for the transition from “watching television” to “using and playing with television.” Family applications of digital television have become the new business model. All over China, cable television operators have begun to grasp digital television’s ability increase user value. The digital television production chain consists of an open group of businesses in which upstream and downstream producers must focus on different priorities. Flat screen terminals have begun to develop in the direction of multi-compatibility and multi-screen functions. Many now popular LCD or plasma screens come equipped with multi-channel AV, HDMI, and VGA connectors. Some have USB network adaptors or even DMB-TH (digital terrestrial media broadcast) receivers. In some regions, television sets that already come equipped with HD cable STB have become available. As digital television hardware and functionalities become ever more diversified, users have also begun to demand more from their cable television service. Whether looking at analog or digital television, research on user demand is the starting point of any product development effort. After many years of exploration, the cable television industry is close to optimizing its value chain (See Chart 2). Channel service Value-added service Direct broadcast channel Information browsing Replay broadcast (news review) Entertainment Mobile channel (mobile phone television, car Education television, outdoor television) Interactive advertising (tie-in service such as Lifestyle program subscription prize for ad viewers) Digital TV shopping, with ad insertion Digital TV shopping mall PUSH or USB memory storage for on- Online service matchmaking, professional demand television set-top box configuration Mobile phone USB storage for on demand Digital television family billing plan television Digital photo album, E-zine Digital media content building, uploading, distribution, and subscription Product development direction: 1. Allowing wider user participation and interaction, 2. Freedom to choose when and where to watch television, 3. More interactive service, content, and multimedia audiovisual formats, 4. Customized channels and broadcasts targeting specific audience, 5. Fulfilling entertainment, education, lifestyle, and work needs, 6. Never having to leave home to access services, 7. Economy of scale, 8. Cross-industry service. Since there exists no business model for family terrestrial receiver systems yet, government broadcast represents the mainstay of family systems. The most marked characteristic of this arrangement is its effectiveness in broadcasting emergency information. In the immediate aftermath of the 2008 Sichuan earthquake, terrestrial digital television broadcasts were able to produce a beneficial effect. When users judge a product’s value, they seldom care about the product’s technical specifications. Whether a product is digital or analog, the product that can bring about a new user experience will be considered the better, more popular technology. From “Digital TV Comes of Age,” “Digital TV New Trend,” “Digital TV New Life,” to “Digital TV New Opportunity,” CCTV’s Focus Interview has made a systematic introduction of such digital television topics as industry policy, product functions, services, and user experience. The program has shed new light on ways in which digital television can bring fashion, convenience, entertainment, and utilitarian value to viewers. Yet the push for digitalization still faces a circular argument: without decent programs and services, users will not subscribe to digital television; without users, however, operators will not have the means to guarantee the quality of programs and services. How to encourage users to accept new technologies and services is the greatest challenge facing any multi-service operator. Since users needs to order an STB in order to turn a television unit into a digital terminal, the lag in service, organization, and contents that comes as a result of any rapid deployment of new technology has caused confusion among some users, so much so that some users have even become opposed the adoption
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