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2 Conclusions: broadcasters can play an important role in Convergence 3.0 Supplying high quality content which users can easily access Help network operators secure investment in new broadband networks Contributing to standards and protection for children and other vulnerable groups

3 Broadcasters approach to the internet: three phases StageBroadcasters use of the internet Phase 1: Incremental A minor supplement to the things they were already doing Phase 2: Strategic Creating initiatives to exploit the internet as a new medium in its own right Phase 3: Transformative Recognition of the new opportunities provided by high capacity broadband We are now in the early stages of the transformative phase

4 So far, broadcasters have had a positive effect on internet development, although the scale is hard to quantify Promotion Providing rich content and shared resources Raising awareness and encouraging digital literacy

5 Quality content still hugely important Consumers clearly value professionally produced quality content Source: YouTube No. of views up to June 2007 (millions) CBSUniversal Music NBCRCAWarner Records NBA YouTube channel rank No. of videos uploaded

6 Securing trust and confidence online: traditional broadcasters are well placed to help Question asked: Please indicate the top three media sources you depend on for information on these topics Source: Forrester, Q News TVNewspapersMagazinesInternet Rank of the internet 91%63%10%16%3 Business News40%36%8%13%3 Sports News62%42%6%11%3

7 High-speed broadband infrastructure will require significant investment Proposed broadband infrastructure investment by country Source: Capgemini 28% 46% 50% 62% 75% 80% 95% Target year Target homes (millions) Investment planned Technology 11 3bn FTTN 2 300m FTTN bn FTTN bn- 8bn FTTH 12 n/a FTTH m FTTH 47 37bn FTTH DT Germany SBC USA Verizon USA KT Korea HKBN Hong Kong Belgacom Belgium NTT Japan

8 Promoting consumer and citizen welfare Three broad suggestions in developing policies -Encourage competitive markets (lowering entry barriers and ensuring that consumers are sufficiently well- informed to make effective choices) -Define and safeguard the public interest in the new convergent world (self-and co-regulation) -Encourage broadcasters, other content owners and network operators to find ways sharing risks and rewards

10 Aims of the report This an independent study which examines: -The role that broadcasters have so far played in the development of the internet; -The challenges and opportunities ahead, as convergence progresses; -How broadcasters and the internet can work more closely in future; and -The key policy issues for debate. This presentation contains the provisional findings

11 The traditional broadcasting model differs considerably from the online world One-to-many Broadcasting Many-to-many Online LinearNon-linear Built narrative contentInteractive and participative Geographically constrainedGlobal Regulated in public interestBroadly unregulated Zero marginal cost per user and an established distribution infrastructure Zero marginal cost per user but likely to require significant investment in infrastructure However, these differences are reducing as we move towards a more converged communications world

12 But the internet has already offered significant scope for an extension of broadcaster activity Scale and freedom from geographical limitations Digitising (and monetising) the content archive New opportunities to deliver more specialist content in a commercially viable manner Increasing the richness and depth of broadcast content Building a stronger, more participative and more loyal audience Reducing costs

13 Broadcasters use of the internet can be described in three phases StageBroadcasters use of the internet Phase 1: Incremental A minor supplement to the things they were already doing Phase 2: Strategic Creating initiatives to exploit the internet as a new medium in its own right Phase 3: Transformative Recognition of the new opportunities provided by high capacity broadband We are now in the early stages of the transformative phase – many broadcasters are now using third party platforms, such as YouTube, to distribute their audiovisual content

14 So far, broadcasters have had a positive effect on internet development, although the scale is hard to quantify The importance of information and entertainment in driving internet take-up suggests broadcaster influence has not been trivial Promotion -Television is still, by far, the most dominant medium – time spent consuming television is 8 times higher than time spent online Providing rich content and shared resources -Funding, talent, production resources, etc. Raising awareness and encouraging digital literacy -Particularly true for some specific demographic groups

15 In many countries broadcasters are already leveraging their brands to build significant online presences Source: EBU The most popular European broadcaster internet sites ordered by country ranking Internet propertyCountry Ranking among top 100 web properties BBC SitesUK 5 DR.DKDenmark 7 Publieke OmroepNetherlands 7 MTV3.FIFinland 7 YLE.FIFinland 8 TV2 DanmarkDenmark 8 V2 SitesNorway 9 ORF.ATAustria 10 VRT SitesBelgium 11 NRK.NoNorway 13 Groupe TF1France 16 SRG SSR idée SuisseSwitzerland 19 Sveriges TelevisionSweden 19 % Reach (Jun '06) % Reach (Jun '07) Increase of reach (%) n/a33.6n/a

16 And in many countries, broadcasters are developing increasingly sophisticated online offerings Source: Broadcaster sites and Human Capital analysis Advertising Yes on ITV Local Yes Yes, minimal On demand for 30 days after airing Yes throughout – although clips only ITV AdvertisingYes Yes for most sections Yes Yes, radio section & T4 4OD – variable availability Yes throughout – although clips only Channel 4 AdvertisingYes NHKJapan AdvertisingYes Rede GloboBrazil Free, licence fee supported Yes Yes, including full length episodes SVTSweden Free, licence fee supported Yes NED 1 (part of NPO) Netherlands AdvertisingYes Yes, news and other web channels Yes RAIItaly AdvertisingYes Yes, including full- length episodes CBS AdvertisingYes ABC Advertising Yes, through video uploads Yes Yes, from MSNBC Yes Yes, from MSNBC Yes, including full- length episodes NBC US Free, licence fee supported Yes Yes for most sections Yes throughout Yes through- out Yes, large radio section IPlayer – BBC programming only, 7 days after airing Yes throughout BBC UK Business Model User- generated content Communities & forums RSSMobilesPodcasts On demand video downloads Video streamingBroadcasterCountry

17 Information and communication are the key drivers or internet take-up The drivers for internet take-up Source: Ofcom, % 11% 12% 13% 16% 20% 26% 22% 20% 28% 43% 46% Recommended by friends or family Shopping/ banking/ booking Entertainment For the Children Keep up with technology Communication Information Owners Intend to get

18 Looking ahead, we are entering a new transformative phase High capacity broadband makes possible the delivery of high quality long-form audiovisual content Web 2.0 -Changing user/content relationships -Increasing democratisation -The increasing importance of search and content navigation New business models -Content provision -Paying for the infrastructure

19 The broadcasting value chain is being transformed DistributorBundlerProducerTalent & Resources DevicesAudienceNavigationGatewayDistributorBundlerProducerTalent & Resources DevicesAudienceNavigationGatewayDistributorBundlerProducerTalent & Resources DevicesAudienceDistributorBundlerProducer Talent & Resources DevicesAudienceNavigationGatewayDistributorBundlerProducer The internet The content value chain, previously controlled by a small number of broadcasters, has been opened up to anyone with an internet connection and an idea In an online world, equipped with powerful search tools and user recommendations, bundling is arguably much less important Distribution, navigation and consumption are all made possible through the internet Ideas

20 New online services have emerged, with richer content and greater functionality Live and pre-recorded video broadcasting User-created blogs, including text, pictures and hyperlinks User-created encyclopaedia Photo sharing Social networking, allowing uploaded music, text and pictures Video sharing Live and pre-recorded video broadcasting allowing captioning and insertion of pre- recorded video packages Live and pre-recorded video broadcasting SiteFunctionalities

21 And whilst television remains hugely popular and important, there has been clear migration online Source: Ofcom televisionradiointernetfixedmobile minutes per day per person Time spent using communications services %-2.0%158.0%-8.0%58.0% change

22 Both internet reach and provision of content online continues to grow at considerable rates Broadband subscriptions and growth amongst top countries Source: Netcraft.com Netherlands 0% 20% 40% 60% 80% 100% USA China Japan Germany France South UK Italy Canada Spain Brazil Australia Mexico TurkeyRussia Poland Belgium Sweden India Millions of subscribers Annual growth (Q to 2007) Source: Point Topic Growth in the volume of hostnames and active websites Active Hostnames

23 In this third phase, broadcasters could, if they meet the challenge, have a greater role to play Broadcasters can help drive further internet development by: Supplying high quality content which users can easily access -Creating clear expectations for users about the nature and reliability of available content; -Providing the vital roles of aggregator and navigator; -Helping later adopters to make sense of the internet. Helping the internet to adjust to a world in which it will have to pay more attention to citizens concerns about standards and protection for children and other vulnerable groups. Help network operators secure investment in new broadband networks

24 Quality content is still hugely important, both for consumers and in setting standards Consumers clearly value professionally produced quality content Source: YouTube No. of views up to June 2007 (millions) CBSUniversal Music NBCRCAWarner Records NBA YouTube channel rank No. of videos uploaded The economics of programme production still suggest that a high production value programme needs mass audience exposure on a broadcast channel to ensure a return on its upfront investment Although it is possible to create content specifically for the internet, the promotional and marketing costs will be prohibitive in most cases

25 Securing trust and confidence online is also crucial, and traditional broadcasters are well placed to help Question asked: Please indicate the top three media sources you depend on for information on these topics Source: Forrester, Q A GlobeScan survey revealed that the most trusted global news brands tested include the BBC (with 48% across the 10 countries saying they have a lot or some trust) and CNN (44%) Consumers, particularly for news and factual content, clearly place most reliance on traditional broadcaster sources News TVNewspapersMagazinesInternet Rank of the internet 91%63%10%16%3 Business News40%36%8%13%3 Sports News62%42%6%11%3

26 High-speed broadband infrastructure will require significant investment Proposed broadband infrastructure investment by country Source: Capgemini 28% 46% 50% 62% 75% 80% 95% Target year Target homes (millions) Investment planned Technology 11 3bn FTTN 2 300m FTTN bn FTTN bn- 8bn FTTH 12 n/a FTTH m FTTH 47 37bn FTTH DT Germany SBC USA Verizon USA KT Korea HKBN Hong Kong Belgacom Belgium NTT Japan

27 Broadcasters may work with network operators to help secure this major infrastructure investment Enders Analysis estimate that the total cost of deploying fibre to the home (FTTH) to 90% of UK households would be 14bn Network operators may have to shoulder the burden of investment, but are not certain of the returns Broadcasters may be able to help by agreeing innovative deals with networks, to share risk and rewards

28 There will also be important roles for policymakers in promoting consumer and citizen welfare Over regulation will stifle growth and innovation; under regulation risks a wild-west-style free for all We assert three broad suggestions in developing policies -Encourage competitive markets by lowering entry barriers and ensuring that consumers are sufficiently well-informed to make effective choices -Define and safeguard the public interest in the new convergent world drawing on aspects of self-and co- regulation, rather than transferring old style broadcasting regulation to the broadband world -Encourage broadcasters, other content owners and network operators to find ways sharing risks and rewards

29 As a result, we argue that there clear consumer and citizen benefits from a symbiotic broadcaster/internet relationship There have already been some impressive success stories as broadcasters begin to recognise the opportunities of the internet As we move into a more converged media and communications world, the future development of broadcasting and the internet will be increasingly closely linked Broadcasters and leading internet players depend on, and will benefit from, working closely with each other