Cinema and VOD in Italy and elsewhere Peter

Cinema and VOD in Italy (and elsewhere) Peter Kruger pwk. it Estoril, 21 November 2008 EUROPA DISTRIBUTION 2 nd ANNUAL CONFERENCE

Talking about convergence? The Italian convergence environment 2007 2 Bn € 80 e-content Cinema? It is Video 60 IT 40 8 Bn € 20 Bn € TLC 20 44 Bn € pwk. it - Vo. D Italy squeezed between very large forces undergoing strong and widespread transformation Investigating the future of the movie industry (and more broadly the media industry) implies understanding the future of the whole convergence pile 21 November 2008

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 users Globalization X-Y-Z… generations The future of Communication Customization Regulatory & Public Policy ? 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 - Vo. D Italy 21 November 2008

Video over IP • streaming • VOD • video download • catch-up Tv • progressive download • P 2 PTV • file sharing • Videoconferencing • peer-to-peer (P 2 P) • Destraeming • User generated content (UGC) • Webisode • webcast • multicast • simulcast • web. Tv • IPTV • Screencast • Vodcast • Swarming • Broadcatching • Peercast • Vlog In the long run all video will go IP pwk. it - Vo. D Italy 21 November 2008

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 portalsaggregators 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: Vo. D, n. Vo. D, PVR, n. PVR, EPG • So far this is the only environment where Vo. D generates sound revenue Other. But let’s not forget about mobile and public display (not only dcinema) • pwk. it - Vo. D Italy 21 November 2008

Broadband development in Italy lags behind most of Europe and is experiencing very strong slow done in 2008. • 10. 7 M HH by mid 2008 (2% growth) - 8. 7 M families (37%) • 11 M families with no PC • 14 M families with no BB • 70% families say no interest (Beetween 2008) ARPU non voice VAS (Y € / user) 15. 4% 22. 8% Very good news from the broadband mobile evolution with over 22 M 3 G users by ed 2007 and rapid growth of 3 G VAS pwk. it - Vo. D Italy 21 November 2008

IPTV VOD in Italy • IPTV adoption is beating most expectations • 650 K HH by mid 2008 (Between 2008) • Up ca. 100% in only 6 months • Four major offers: Fastweb, Telecom Italia, Tiscali, Wind • Vo. D/user grows fast The bad news: • piracy of course! • P 2 P of course, but just not as bad as often portraied • regulatory dead lock (with repeated attempts to introduce rules against P 2 P) • the typical Italian issues: concentration in the media vs. weakness of independent players no strength/incentives to move digital • VOD users watch movies but not as much as would be expected (prices plunge) pwk. it - Vo. D Italy 21 November 2008

On line VOD in Italy So far the only realistic model of monetization of video is on line ADV (though still to be proven) The Italian on line environment is developing slower than in other major EU countries Jan-07 Jan-08 Active monthly users 20, 25 Mni 24, 3 Mni + 21% Monthly session/user 29 32 + 10% Monthly Time spent /user 18 h 36 m 21 h 45 m + 18, 7% Bad news: Strong slow down of on line ad growth (35% 15% in 2008) pwk. it - Vo. D Italy Y Growth Confindustria 2008 21 November 2008

The broadcast media picture pwk. it - Vo. D Italy 21 November 2008

Movies in the age of UCGs • Internet 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 - Vo. D Italy 21 November 2008

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-fundingpre-production-post On line retail theatrical home video tv utente finale E-commerce On line ADV pwk. it - Vo. D Italy 21 November 2008

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

Digital content Homevideo Theatrical On-line ADV cross-media mkt On-line retail COMMUNITY BRANDING conversational audience Free-to-air Pay-tv E-commerce pwk. it - Vo. D Italy 21 November 2008

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 - Vo. D Italy 21 November 2008

Q&A Thx : -) pkruger@gmail. com http: //pwk. it - Vo. D Italy 21 November 2008