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TRANSCRIPT
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We Accelerate Growth.
Digital Content
Jayesh EaswaramonyDirector, ICT – Asia Pacific
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www.frost.com
Agenda
What are the strategic options?3
1 What is changing?
What are the implications?2
3
www.frost.com
Frost and Sullivan brings an unique mix of research and consulting capabilities
Our Value Proposition
Global telecom and media Research
• 8 research areas in Asia Pac, Europe, USA
• Wireless• Digital media
• Fixed Networks • Managed Services
• Unified Communication
� Varying growth rates
� Key question: When /
at what level is the
market saturated?
� Where does the
money / purchasing
power come from?
Mobile data and services revenue development, 2000-2006 Comments
Source: EITO
0
10
20
30
40
50
60
70
in €
Period total values2000 2001 2002 2003 2004 2005 2006
Business services
Transaction
Entertainment
Messaging
Information and tracking
Data access and traffic
OptimisticOptimistic
Realistic?Realistic?
illustrative
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Growth and Market Opportunity Consulting
• Experience in analyzing new opportunities
• Experience in business plans
• New geographic expansion
• Go to market strategies
• Support from ideas to implementation
• Consumer proposition and marketing strategy
• Business modelling, financial plan and implementation plan
• Network and process readiness
End to End experience
Rationale ImplicationsKey Success
Factors
The People
� The typical private equity firm has an unstructured work environment - team capabilities and network especially those of the partners is the key driver to success
� The team needs to trust each other‘s ability to make good decisions. Hence it is ideal if the team has worked together and successfully previously
� Identify key roles and responsibilities; hire best fit partners preferably who have worked together. Build team around them
� Additionally create a credible Board of Advisors to supplement the network
Have a Fund Focus and Stick to
It!
� Important to have competence to understand current and forecast future industry trends to:
– Identify winners and loser (selection process)
– Create value in investee
– Estimate optimal timing and route for exit
� Focus will allow development of proprietary dealflow through credible industry positioning and network
� Identify fund focus (industries, stage and countries) and build expertise
� Focus deal-flow and investments in these sectors
� Cradle-to-Grave orientation of team. Allocate staff and structure incentives around individual investments/ sectors.
Investm
ent R
isk
Very small
Small
Neutral
Largel
Very large
Market Attractiveness
High Moderate Low
Attractiveoptions
Neutral options
Avoidt
Events and Ecosystem Support
• Research methodology used successfully in several Telecom, IT-Software & Hardware, Public Sector projects
• Constant interaction within the industry
Investment Model - Definition
Sector Focus
Region
Stage
Energy and power Public sector
Saudi Arabia Middle East ASEANOthers (US, Europe,etc.)
Early Expansion Late
Listed Public Private Both
Participation
Investment Type
Passive InvestorMonitoring at Board Level
Monitoring and Active Value
Creation
Infuse Management
Talent
Bring in New Management
Equity and Quasi-Equity Investment
Equity and Quasi-Equity Investment +
MBO
LBO with key management
CombinationEquity and Quasi-Equity Investment
Equity and Quasi-Equity Investment +
MBO
LBO with key management
Combination
Investment Hurdle Rate 20-25% 25-30% 30-35% 35-40% >40%
Stake
Average Size of Investment
(US$)
Holding Period
<10% 10-49% >50%
1-5M 5-10M 10-20M 20-50M >50M
< 2 years 2-5 years > 5 years
Material
Our Value Proposition
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www.frost.com
Convergence is a reality
Three forms of convergence are driving developments.
Convergence of Technologies and
Networks
Convergence of Content
Convergence of Devices
An IP-centric world: Fixed, Wireless, Internet
Digitization; same content recognizable across multiple
platforms
Every device has most features
Ubiquitous, Seamless
service with same look and feel
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Digital culture
Rapid advances in technology followed by changing consumption patterns is spawning a digital culture.
Increasing Capacity and
Capability
Emerging Digital Culture
Continued improvement of Multi function devices
Increased sophistication of specialized devices
Higher bandwidth networks planned both fixed and mobile
Higher compression and miniaturization
Changing Consumption
Patterns
Personalize
Play
Search
More opportunity windows Greater control over experience
On the move
Multi-taskOn the pause
On the fly
Source Popularize
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www.frost.com
Video to drive internet traffic
Video has overtaken data as the primary driver of Internet traffic
Global Consumer Internet Traffic Mix
Internet video was 25% of traffic and if we assume 60% of
P2P is video, it accounts for 55% of traffic
Growth of Internet Video to PC is slowly arresting the growth
of P2P
Source: Cisco Visual Networking Index
Global Consumer Internet Traffic Forecast
390x
70x
30x
Global Internet Video is expected to grow 13 times in 5 years
8x
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www.frost.com
Consumption of traditional media is declining
High Broadband penetration Consumption of traditional media vs new media
Over 1 bn people are online through some kind
of internet connection, of these 300 mn are
through high speed broadband connections
33%
20%
28%
20%
24%
Denmark
Japan
Korea
UK
US
Broadband penetration per 100 inhabitants
Consumption of traditional media through online
means is increasing rapidly especially in the
younger generation
The younger generation is spending lesser time on traditional media
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www.frost.com
Traditional models are under pressure
New means of consuming traditional content
Time shifted and delayed viewing
Disaggregated consumption
Greater involvement in content creation
New forms of Participation and Interaction
User generated content
Wikipedia
Personalization and Effective sourcing of content
Search
Different models of content consumption are emerging
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www.frost.com
An online ecosystem or platforms
• Advertising – Google vs. Yahoo! vs. Microsoft vs. attackers (exchanges /
networks, performance-based vs. CPM, behavioral vs. contextual, ‘social
graph,’ tools - widgets…)
• Commerce – Amazon.com vs. eBay vs. Wal-Mart vs. attackers
• Payments – PayPal vs. Amazon.com vs. Google vs. mobile
• Social Networks – Facebook vs. MySpace vs. Yahoo! vs. Google / Orkut
vs. Skype vs. attackers
• ‘Traffic’ - As monetization tools improve, value of good traffic should rise
• ‘Services’ – Rugby scrum?
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www.frost.com
Agenda
What are the strategic options?3
1 What is changing?
What are the implications?2
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www.frost.com
Implications on the value chain
On the content side, the value chain is undergoing a complex transformation; presenting threats and opportunities for all players.
Over the top providers
Software Devices Distributors Aggregators Content
Producers
Going direct
Acquisition
Going direct
Turning aggregators
Going direct
Turning aggregators
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www.frost.com
Open architecture, more brand centric
The service provider landscape is changing from a service centric model to a brand centric model.
From service centric silos
Fixed Line Players Wireless Players
Cable TV Players DTH Players
Internet Portals Focused Web players
Others
To Brands
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www.frost.com
Multitude of devices
On the devices side, players are experimenting with a wide array of devices with different value propositions.
Set-top Box
Mobile Phones
Laptop Game Console
Key features:DisplayStorage
Connectivity
Devices competing in the converged world….
Niche Devices
Amazon Kindle
Most mid-range mobiles
Hybrids: Swiss Knife
Nokia NSeries
Hybrids: Lead
Experience
… and their value proposition
Commodity Devices
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www.frost.com
Implications on players
What's in it for the players?
New competitors, possibly with
stronger brands
Big investments, uncertain
returns
Enhanced customer loyalty;
Greater competitiveness
Greater share of consumer's
wallet; Higher ARPUs
Opportunity to roll out services
at low cost; one-stop lifestyle
enhancer
Unfamiliar business models
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Implications on consumers
What's in it for the consumers?
ConvenienceEnhanced
Lifestyle Discounts
Clunky
Unattractive
for specific
services
Do I really need these?
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www.frost.com
And this trend in favor of convergence is only expected to accelerate (e.g. USA)
Quadruple play – Bundling
ARPU for Bundled Services (US$)
Household Penetration for Bundled Services
Total revenues for Bundled Services (US$ Billion)
Source: Frost & Sullivan
0 60 120 180
2006
2009
2012
Double-Play Triple-Play Quad-Play
0%
15%
30%
45%
2006 2009 2012
2 Services 3 Services 4 Services
0
25
50
75
100
2006 2009 2012
Double-Play Triple-Play Quad-Play
Revenues through convergence to cross 100 Billion by 2012
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www.frost.com
PCCW :Quad play services
Source: PCCW
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www.frost.com
PCCW : Music Services
Source: PCCW
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www.frost.com
A mix of in-house rollouts and partnerships
As such, players are using different strategies to fill in the missing links.
In-house Roll Out
Partnerships/ Alliances
Mergers/ Acquisitions
� Multi-billion dollar investments to upgrade network: AT&T, Verizon, BT
� Google's plans to develop city-wide wi-fi networks and bid for wireless spectrum
� Vodafone partnering with BT Wholesale to offer DSL
� Comcast, Time-Warner Cable, Cox JV with Sprint for wireless
� Fujitsu-Cisco alliance focusing on routers and switches for advanced IP networks
� Nokia - Cisco alliance: mobile handsets that can operate as extension off Cisco's IP PBX and messaging infrastructure
� Softbank - Vodafone Japan
� BSkyB - Easynet
� Cisco - Scientific Atlanta, WebEx, P-Cube, dynamicsoft, Orative
� Microsoft - Danger
� eBay - Skype
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www.frost.com
Agenda
What are the strategic options?3
1 What is changing?
What are the implications?2
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www.frost.com
Telcos should strategize as ‘Experience orchestrators’ and not as service
providers
Broadband ++
Full triple play
Mega bundle
Experience Orchestrator
Characterized by
limited TV channels and mostly VOD
Video may be
through
partnerships or DTT
Bandwidth
constraints
Full fledged video
equal to or better
than pay TV
Some kind of
exclusivity
Largely 4-5 Mbps
Higher bandwidth
services like HDTV,
multiple picture in
picture
Digital home offerings
like security
monitoring
Multiple concurrent
streams
About 10-20 Mbps
Converged customer experience
Mix of internet based
and traditional video
Multi device multi
network integration
Contextual advertising
Ecosystem
partnerships
Strategic Intent
Services
Network
“Start something”
“Get the video equation right”
“Sweat the network”
“Build an integrated experience”
Think experience, not services
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www.frost.com
As IPTV transforms itself into an experience platform, new issues would need
to get addressed
PC to TV integration If it is on the internet it is on
your TV
Issues for IPTVPossibilities Description
Pricing based on Bandwidth, content or
caching ?
Multi-device Multi network
Download once, play it wherever
Who monetizes at source?
Multiple experience elements
What do you control and what do you
outsource?
I want the coolness of an ipod, the content diversity of the web, the
flexibility of my mobile at a price of X
New challenges
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www.frost.com
The next generation service portfolio will be a mix of core, differentiated and enhanced services
Next Gen Service portfolio
Core
Bundle
Platform
Differentiators
Experience
Enhancers
Key sales driversTriple play service bundleBlockbuster content
Leverages the technologyGames, Music On-demand/PVRInteractivity
Stickiness buildersQuad playContextual servicesCommunity/sharing
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Ability to mix and match experience dimensions with content types can create n-play
Experience Elements and n-play
Content Presence
Preference
Sharing & Co-creation
Context
High probability of consumption due to natural flow of activities
Greater need for content at certain times/niche times e.g. weather forecast while travelling
Greater monetization due to greater capacity to pay
Content whose value enhances if shared or gets more popular
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Succeeding in new media and converged services necessitates a paradigm
shift
Economics
Traditional media New media
Critical success factors
Scale and scope Speed and innovation
Advertising Big bets based on share of audience
Small bets based on share of attention
High barriers to entry due to limited distribution capacity
Low barriers to entry due to abundant distribution capacity
Driven by service and content providers
Driven by End-user/Prosumers and network effects
Value creation
Paradigm Shift
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Conclusion
Eventually, all players in the ecosystem will have to adapt to the needs of their target consumer segments likely to emerge in a converged world.
Consumer Business
Value Seekers
Convergence means bundling and discounts
Consumer Business
Sophistication Seekers
Convergence means
Integrated yet Optimized
Premium application/ content
Implications for devices players?
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Knowing the customers
Tying-up the back end
Adapting the organization
� Management capability to adapt to business environments for telco and media
� Changing mindset to adapt to the high risks/ uncertainty and required flexibility characteristic of the converged business landscape
Conclusion
� Ability to provide relevance and strong value proposition
− Service/ Product design and content/ apps. offering
− Pricing
− Marketing and distribution
� Optimizing network and solution capability
� Provisioning of the right end-user devices
� Availability of the right content/ application
Key Considerations
Everything to Everyone vs
Right mixes at Right Prices
Organic
Partnerships/ Alliances
M&A
Silos
Matrix
Hybrid
Critical Success Factors for players across the ecosystem in a converged world:
