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70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 1 COMMITTED TO IMPROVING THE STATE OF THE WORLD Digital Ecosystem Convergence between IT, Telecoms, Media and Entertainment: Scenarios to 2015 Executive Summary WORLD SCENARIO SERIES 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 2 The views expressed in this publication do not necessarily reflect the views of the World Economic Forum. World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 E-mail: [email protected] www.weforum.org © 2007 World Economic Forum All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system. 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 3 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 4 Digital Ecosystem: Scenarios to 2015 Introduction Introduction To understand how the Digital Ecosystem could music. These creations can be original or remixed plausibly evolve in the coming 10 years, we need to from existing content. South Korea and Japan, both look at the critical uncertainties and those factors considered more mature digital markets, show very shaping the ecosystem’s evolution. high levels of involvement and growth in user- Broadband adoption, technological advances generated content and community participation and decreased operating costs have pushed the IT, (figures 1 and 2). In time, the young and highly Telecommunications and Media and Entertainment active contributors to online content will grow older and industries into a period of great flux. As they their behaviour patterns will become the standard. converge, they are forming a space we could call Increasingly we note the fertilization of the the Digital Ecosystem. traditional media by the online world. For example, This emerging Digital Ecosystem is generating user-generated content is increasingly seen on many risks and challenges for government policies, traditional media channels, such as television as well as presenting new opportunities for creating programmes and newspapers. Services are arising social and economic value. Just as any healthy eco- to facilitate this – Scoopt, for example, brokers blog system enables its stakeholders to interact to the content to news editors and takes a commission. benefit of all, a healthy Digital Ecosystem will simulta- Figure 1 South Korean young internet users actively neously enable its commercial participants to create contribute to online content economic value and deliver well-being to society. Purpose of using the Internet – South Korea, 2006 The critical uncertainties we focus on are user Home page/Blog Community empowerment, market structure, market regulation, 80 74 Intellectual Property Rights, security and privacy. 70 Percentages 60 52 48 User empowerment 50 46 40 37 Digital users are taking control of when, where and 30 25 22 20 17 how they consume digital content. They are no 20 13 12 11 14 longer mere consumers: they increasingly participate 10 3 0 in the Digital Ecosystem in other ways – as contributors Internet 6-19 20s 30s 40s 50s 60s + Users Age group to online communities and as creators and distributors Source: 2006 Informatization White Paper, National Computerization Agency, Republic of Korea of digital content and services. Communities are also being created around infrastructure development, Figure 2 Japan experiences a rapid rise in users adopting user- generated content and social networking services such as when members of a community agree to share their wireless internet access. Number of registered users of blogs and social networking services, Japan Through communities, users interact and share March 2005 March 2006 10 digital content with like-minded people and get access 8.68 8 to specialist knowledge and advice. Communities 159% 7.16 Million persons also present opportunities for opinions to crystallize. 6 545% Most are not industry-led, but rather evolve organically. 4 3.35 Their power is growing as pressure from communities increasingly often influences business decisions. 2 1.11 Increasing numbers of digital users are creating 0 Blogs Social Networking Services 2 digital content in forms such as blogs, web pages, Source: U-Japan Policy, Ministry of Internal Affairs and Communications, Japan, October 2006 photos, videos, characters in games, animations or 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 5 Digital Ecosystem: Scenarios to 2015 Introduction DIGITAL LEXICON “The world was so recent that many things lacked names, and in order to indicate them it was necessary to point.” Gabriel Garcia Marquez, One Hundred Years of Solitude Digital Ecosystem “Digital” means any data that exist in binary form. GOVERNMENTS An “ecosystem” is an interdependent and dynamic network of living organisms and their physical USERS MEDIA & environment. The “Digital Ecosystem” is the space ENTERTAINMENT formed by the convergence of the media, telecoms and IT industries. It consists of users, companies, governments and civil society, as well as the infrastructure that enables digital interactions. COMMUNICATIONS INFORMATION TECHNOLOGY Digital user Any consumer, producer and/or distributor of digital content or services, personal or business, for purposes such as communication, information, entertainment, education or civic engagement. Digital community (or online community) A group of people who are connected online, for purposes that include communicating, sharing knowledge or exchanging content. Many communities are highly cooperative and establish their own unique culture. Contributors put in significant time for typically no monetary gain, at least at present. Digital content Any digital information, such as music, video, text, graphics or games that can be consumed. Digital services Any service that assists users in making the most of the digital infrastructure, such as aggregating or customizing digital content, enabling communication and supporting hardware or software products. 3 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 6 Digital Ecosystem: Scenarios to 2015 Introduction Some artists and bloggers have successfully parlayed Life can make money as they keep the intellectual their digital creativity into an income producing activity property rights over content they create. Contributors or a professional career. Also we find increasing to YouTube and MTV Flux, on the other hand, give coverage in the traditional media on events and up the right to commercialize their content. A middle celebrities born and bred online, such as the FIFA way, revenue sharing, is exemplified by Revver, which Interactive World Cup 2006 and Kamini, a French distributes user-generated videos along with advertising rapper who became famous on YouTube, was and pays the creator half of the advertising revenue. signed up by a major label and received in about It is still early days for user contribution and every television show. collaboration through communities. As communities Collaboration enabled by communities, for mature, who will take the leading role in defining example wikis, remains largely a leisure activity. But their operating processes and systems: industry there is a nascent trend towards commercial online players or, through an organic process, users user collaboration, as in open source software themselves? Will industry capture more of the community projects. Platforms for user-generated economic value arising from user creativity or will content are increasingly supported by venture grassroots communities increasingly incubate capital. In the last year, many leading platforms of commercial innovation as users pool their skills user-generated content have been acquired by and resources? media giants and internet portals: Google acquired YouTube and Jotspot; Viacom acquired iFilm, Atom Market structure Films, iVillage and Quizilla.com; Yahoo acquired Players in the Digital Ecosystem are moving beyond Jumpcut, and Newscorp acquired MySpace. their traditional boundaries. Aggregation and distribution There are various models for capturing economic of content are especially hotly contested, as shown value generated by user creativity. Users of Second in figure 3. Figure 3 Players move into adjacent activities and new players emerge Content Delivery platforms Connectivity / Consumer devices Generation Aggregation Transport Interface Content creators move into delivery expand into platforms Device and services manufacturers Network operators enter into content creation and delivery Cable & satellite providers enter the telephony services Portals develop content, expand into networks/WiFi/telephony Attackers deliver content via new networks Users Generated 4 Content Platform Providers Source: Based on McKinsey analysis 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 7 Digital Ecosystem: Scenarios to 2015 Introduction For example, content creators are implementing the US; in India under the recent government delivery platforms, and device manufacturers aggre- clampdown, companies will not be allowed to use gating digital content. Convergence services blur the unlicensed foreign VoIP providers such as Skype, lines between traditionally separate functions such Yahoo and Net2Phone. South Korea recently gave as in the case of Internet Protocol Television (IPTV) trial licenses for new IPTV network services to two bringing together network and broadcasting activities. consortia formed by key players from the telecom Convergence