Multimedia Markets; The Stakes and the Players

Dr. Teun J.B. Swanenburg

Philips Corporate Research Professor Holstlaan 4

5656 AA Eindhoven. The Netherlands

Abstract

In this paper the emerging markets related to multimedia, in- teractive television and the information superhighway are de- scribed on the basis of a value chain approach. The forces influencing and driving these markets will be analysed, and some consequences for electronic devices, components and modules will be highlighted.

Introduction

Over the past few years enormous attention has been devoted to a new cluster of buzzwords such as "multimedia", "informa- tion superhighway" and "interactive television" both in the popular and in the professional press. Various interest groups, from politicians to publishers and from electronic industries to newspapers are involved in the discussion. Alliances between billion dollar companies are announced or fall apart. tradi- tional markets are threatened, and totally new systems are announced. In this paper we will try to explain why this phenomenon oc- curs, and why it occurs now. The anticipated markets will be analysed on the basis of a value chain approach, in which the relations between various market segments are takcn into ac- count. The forces determining the future evolution of these markets will be discussed, and the consequences for tradi- tional and new players in providing and operating future multimedia systems and services will be indicated. In the subsequent sections several relevant aspects of niultinie- dia systems and their building blocks will be addressed. both from an economical and from a technical point of view. Finally the role of standards with respect to the timely intro- duction of multimedia systems will be discussed.

Why, and why nom?

The first question to be addressed in discussing the recent agitation about "multimedia" and "inforniation superhighway" is why this is happening, and why it is happening now. The basic capabilities for building multimedia systems and deliver- ing multimedia services esist already for inany years. and

there are no indications that completely new applications have been invented recently which require such systems. Apart from political motives to promote the "infobahn", there seem to be two drivers for the current interest, the first one of a social , the second of a technical nature. Several social indi- cators show that in the Western society there is an increasing demand for "individualisation", and this demand is reflected in the wish to have personalised information and entertain- ment, at individually chosen times. Being fed with the usual 36 television channels at times chosen by the program pro- vider is considered less and less acceptable. The second driver is related to technical evolution and break- through. The ongoing developments in microprocessors and memories allow for increasingly complex digital signal pro- cessing at prices which are affordable for average consumers. But even more important are the recent advances in compres- sion of digital video, which have led to the standardisation of compression schemes that enable full motion video trans- mission at 1.5 Mb/s with a "better than VCR" quality. This achievement brings communication, storage, editing and dis- play of voice, sound. image and video within the reach of large segments of the population.

Multimcdia markets. the stakes

In 1993 the size of the "media-related" market in the USA was about 420 B%. It is very useful, in particular for a technology oriented audience, to be aware of the structure of this market. Fig.1 depicts the flow of the "content" from the content crea- todprovider to the end customer, and gives an indication of the distribution of the money stream generated by the end customer.

Fig.1. Multiniedia value chain

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In the context of this discussion it is relevant to note that the section related to user site access (i.e. electronic equipment in the office and the home) represents only a minor fraction of the total market. Equally, the revenues generated in the dis- tribution segment are in the operation of the network, not in network equipment. For several reasons this market is expected to grow consider- ably in the years to come. In the first place a large variety of new services is expected to emerge, from videosn-demand to transactional services like home shopping and banking. A sec- ond reason for growth can be found in the introduction of new technologies, both in telecom and cable television networks and in digital equipment in the home. Basically, it is the digi- tisation of production, storage, distribution and processing of information which creates opportunities for new services.

Multimedia markets, the players

In a traditional, wellestablished market like television, the roles of the various players are clearly defined, and the inter- faces between the business segments are stable: studios create movies, which will be distributed via terrestrial or cable net- works to the home, where they will be received and displayed in a TV set. The new and most fascinating aspect of the multimedia market is that few of these roles and interfaces will remain the same. In the recent past it has been remarked that there will be a convergence of communication, computing and consumer electronics. This observation is mainly based on technical arguments: with the ever increasing computing power of microprocessors it will be feasible to build a television set in which the signal processing is done by a general purpose pro- cessor. If that is possible. then what is the difference between a TV set and a PC? A more important observation is that as a consequence of these technical achievements the characteristics of the busi- ness chain will change completely. If all information and en- tertainment is in digital format, the issue of copyright protection becomes very crucial. If videosn-demand becomes a viable service, is then the telephone network with its switch- ing and billing capabilities not a more appropriate delivery medium than cable? If a TV set is technically similar to a PC, then what will happen to the traditional consumer electronics industry? If today's broadcast and cable networks are replaced by a personalised, switched network, then what will be the ef- fect on advertising? From a technical viewpoint the most relevant changes will be that stand-alone electronic equipment and one-way networks will be replaced by sophisticated communicating systems. From a business point of view. the most important question is where the interfaces in the new systems will be, what they will look like, and who will be able to take control over them.

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The groups which will play a role in this game are the content owners and packagers, the distributors (telcos and CATV op- erators), consumer electronics and computer companies. Eventually the acceptance of multimedia by the public at large will be determined by the availability of reliable, flexible and easy-to-use system software.

Multimedia systems

Whatever the ultimate architecture of future multimedia sys- tems will be, it will in no way resemble the one-to-many broadcast-like systems of today. Quite probably, it will consist of a large variety of interconnected networks which allow the end user to address any kind of information stored on servers somewhere in the world, be it in text, audio, images or full motion video format. This relatively trivial statement immediately leads to the con- clusion that proper operation of such systems will require complex software which takes care of transport, switching, storage, authorisation. billing, formatting, etc. in an infra- structure that will be far from homogeneous. This aspect will be much more crucial to the success of multimedia than pro- viding the right hardware. The end user is not interested in complex access protocols, he wants to address information or entertainment in an intuitive, flesible and friendly way. In the next sections several aspects of the constituent parts of future multimedia systems will be discussed.

Network evolution

Table 1 gives an overview of the relevant parts of the total net- work, the players involved and the issues related to multime- dia communication. Predicting the evolution of multimedia delivery networks is extremely difficult, not only because there are many compet- ing technologies, but also because established players are try- ing to position themselves in such a way that there revenues from value added services will be maximised. Telcos will not be satisfied with providing a transparent "bitpipe" to the homes, and try to become involved in video programming. The use of the esisting telephone network for video services has become possible due to video compression and asymmetric digital subscriber line (ADSL) technology. At the same time, cable operators plan the introduction of return channels in their broadband networks to allow for interactive services. Several other technologies (satellite , mobile, "wireless cable") will play a role as well. Regulation will undoubtedly play a key role in network evol- ution. The present thrust for competition, and the plea for pro- viding universal service seem to be contradictory. The alternative of "open access" seems to require so many agree- ments on interface specifications that it is hardly realistic.

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Plnyrr

elco

rivate (MAhVLAN)

roadcast operator

atellite oprator

elco

Iobile operator

'ATV operator

KCh4Ol.k

B-ISDN core nctworh

MANiLAN core

network, ATM-based

Digital broadcast

Satellite to headend

Direct to horiie

Integrated access

network

Radio access network

C.4TV access nettvcirk

lssurs

SDfI standards worldwide

Upgradahle, flexible

Professional applications

Advanced tecluiology

Standards under way

No tilteractivity

Large coverage

No interactivity

Large coverage

Switcliing fiirictiotiality

Limited bandwidth

.ADSL, fiber-coax hyhrid

Large coverage

Band\\ idth liniited

Ititeractivity

Luge coverage

No stitching functioiiality

Bandwidth do\wistream

1 GI Iz, upstreaiu limited

It seems obvious that many of these new opportunities will not bccomc reality if network operators and owners \vi11 be forced to offer transparent transmission capacity uithout being al- lowed to be involved in the operation of thc senices pro\.idcd via these networks. Finally, there is the question of custoiner prciniscs nctivorks: as soon as various services are provided o \ w one integrated network, the need for smart. easy to usc in-house networks will be required to distribute these services to the appropriate terminal, be it the TV set. the PC. or the tclcphone.

S t 0 Ti1 ge

Another critical aspect of multimedia networks will be stor- age. both in thc head end and i n the homc. On the network side large senws storing digital nioties, images, test and sound will constitute the "information warehouse". Here the most important issue is not the hardware technology, but the propcr system architecture to handle billing. security, privacy. local insertion of commercials, etc. On the side of the customer. storage may acquire a position which is very different from what i t is today. Storage will be in digital format, either magnetic or optical. and will allow the user to edit the material acquired or generated in novel ways.

Already today the number of "amateur producers" of various kinds of content on Internet is increasing dramatically. Edit- ing, storing and printing of digital information for personal use will acquire new dimensions, provided the relevant system interfaces will be adequately standardised. It seems that €or read-only purposes a preference for optical disc is devcloping, and this trend will certainly continue when higher densities become available. Digital magnetic tape will remain to play a role in mass storage applications, maybe in combination with other devices like hard discs.

Processing

Probably the most important building block of future multime- dia systems will be the various digital signal processing el- ements and the related memories. As stated before. the continuous increase of processing power at constant price level will enable the complete small signal processing of a television signal by a general purpose micro- processor in a few years from now. This statement does not necessarily lead to the conclusion that there will be no differ- ence between a TV set and a PC: the application of the two species will remain different. and so will the actual imple- mentation. Convergence will occur however with respect to the architecture of both systems, and the TV set will be equipped gradually with peripherals like floppy disc drives, communication interfaces, CD-ROM and CD-I drives, printers etc. Issues such as scalability and flexibility will become of prime importance in allowing the design of a range of equip- ment in a cost effective way. Another aspect of digital video (and audio) processing is that a full general purpose solution may not be the most viable prop- osition. Depending on the required functionality of the equip- ment dedicated processors may turn out to be a better solution. Stringent requirements will have to be put to the operating systems that control the microprocessor. For the anticipated growth of interactive applications and services true multitask- ing will be a prerequisite for obtaining adequate response times. The expected heterogeneity of networks and customer premises equipment will stimulate the demand for hardware independent operating systems. Obviously for the companies involved in this area critical choices will haw to be made in the very near future, and these choices will determine their future growth opportunities to a large extent.

Today there exists an enormous difference between the bright TV display tube which has a relatively low resolution, and the high resolution monitor display. Evidently this difference is the consequence of the dissimilar applications: TV watching usually takes place at a distance of 2-3 meters, while monitors

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are optimised for a distance of less than 50 cm. For true multimedia applications a high resolution display is a pre- requisite. Easily readable test and high quality graphics can- not be achieved without that. With the present construction it seems difficult to combine the properties of brightness and resolution, but more innovative use of control electronics may lead to interesting results. A real breakthrough however will be achieved if large size flat displays become available. The combination of a large screen with escellent sound reproduction is extremely immersing.

t

It seems inevitable that future multimedia systems will be based on heterogeneous networks, and that a variety of plat- forms will be in esistence for entertainment and information provided by very diverse service providers. Such systems can only be economically attractive if appropriate open interfaces are defined. For equipment manufacturers standards are equally important. They will never reach the point where there products will be economically attractive if these products have to be specially designed for each individual application.

The role of standards Conclusions

Standards have always been of crucial importance in com- munication networks. In the past, intricate negotiations led to compromises which were acceptable for all parties before large scale deployment was initiated. The speed with which the PC and multimedia related markets are developing have led to a different approach by many com- panies involved: they no longer wait for an ostial standard. but try to team up with partners to establish a de-facto stan- dard as quickly as possible. Also consumer electronics com- panies have followed this track, e.g. in creating the CD and digital VCR standards. Such an approach is advantageous if the momentum created is sufficiently large to establish a world-wide standard, and if only stand-alone equipment is addressed. If however the 'stan- dard' has implications for the total network, then many more players will be influenced, and will have to accept.

In this paper an attempt has been made to describe the present turmoil about multimedia on the basis of a value chain ap- proach. The roles and interests of the various players have been analysed, and the technical issues related to possible fu- ture developments were described. The emerging multimedia market will provide interesting op- portunities for a large variety of enterprises. Exploitation of these opportunities will require a clear understanding of the technical architecture of multimedia systems, of the structure of the market, and speed and flexibility in addressing the cus- tomer needs.

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