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New Media, New Business Models & New New Media, New Business Models & New OpportunitiesOpportunities

Campbell CowieCampbell CowieDirector, Public PolicyDirector, Public Policy

Time Warner EuropeTime Warner Europe

OECD London 2OECD London 2ndnd June 2005June 2005

DISCLAIMER: The views expressed in this presentation are solely DISCLAIMER: The views expressed in this presentation are solely those of the author.those of the author.

Traditional case for intervention in content & Traditional case for intervention in content & conduit markets linked to market powerconduit markets linked to market power

•• Competition policy issues: crossCompetition policy issues: cross--media ownership, media ownership, integrationintegration

•• Political issue: media pluralityPolitical issue: media plurality

•• Market power: network, intermediary services and contentMarket power: network, intermediary services and content

•• Consumer preference is (as always) keyConsumer preference is (as always) key

Market definition issuesMarket definition issues

Technology evolves quickly in the media industryTechnology evolves quickly in the media industry

New markets are still in their infancyNew markets are still in their infancy

These are innovative markets where products are differentiated These are innovative markets where products are differentiated and success is still highly unpredictableand success is still highly unpredictable

Convergence and fastConvergence and fast--changing technology make market changing technology make market definition, assessment of demand substitutability and of market definition, assessment of demand substitutability and of market power challengingpower challenging

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Market power at the network levelMarket power at the network level

Need to assess each market structure in its own specific contextNeed to assess each market structure in its own specific context::Distribution via traditional platforms and new media (mobile, ISDistribution via traditional platforms and new media (mobile, ISPs, Ps, telecoms)telecoms)Emerging new services for consumersEmerging new services for consumers

Market power requires a case specific assessmentMarket power requires a case specific assessmentPay TV: competition Pay TV: competition vsvs monopolymonopolyDSL: effective wholesale competition is rare DSL: effective wholesale competition is rare

Key question is to what extent (Key question is to what extent (if at allif at all) new media content deals ) new media content deals impact on:impact on:

InterInter--platform competitionplatform competitionIntraIntra--platform competitionplatform competition

Differentiated product problem: consumer choice and new Differentiated product problem: consumer choice and new technology hold the keytechnology hold the key

What do we expect of DRM technologies?What do we expect of DRM technologies?

Welfare enhancing pricing models & market expansionProvides a bright line between legitimate and illegitimate consumer actions

Watch OnceHave for a WeekAdd to LibraryLoad on Portable PlayerBurn DVDBuy extra material

Select one: Your Technology D-TicketYour Technology D-Ticket

DRM transforms intermediary economicsDRM transforms intermediary economics

Intermediation central to content business modelIntermediation central to content business modelAggregationAggregationTrustTrustMarket makingMarket makingMatchingMatching

Platform operators fulfil intermediary functions Platform operators fulfil intermediary functions –– source of source of market powermarket power

DRM (and broadband) may lower entry barriers in intermediary DRM (and broadband) may lower entry barriers in intermediary marketsmarkets

Conditional Access, search and billingConditional Access, search and billingA charge towards disintermediation?A charge towards disintermediation?

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Considerable uncertainty exists around Considerable uncertainty exists around content business modelscontent business models

Drivers behind transition from generalist freeDrivers behind transition from generalist free--toto--air to thematic air to thematic pay TV likely to be different from those driving the transition pay TV likely to be different from those driving the transition to to the next generationthe next generationTechnology supports access to a wider range of attractive contenTechnology supports access to a wider range of attractive content t for new media platformsfor new media platformsA significant number of content providers, with lower entry A significant number of content providers, with lower entry barriers and lower switching costsbarriers and lower switching costsThe content markets are very competitive at every stageThe content markets are very competitive at every stage

Evidence suggests a more varied content diet Evidence suggests a more varied content diet in the new media environmentin the new media environment

0

5

10

15

20

25

Software

downlo

ads

Digital

photo

servi

ce

Music

downlo

ads

Media

playe

r soft

ware

Intern

et rad

io

Movie/

film do

wnload

s

Music

video

s

Movie

traile

rs/pre

views

Live m

usic

conc

erts a

nd fe

stiva

ls

News h

eadli

ne cl

ips fro

m TV

Video c

hat

Live c

once

rt cov

erage

Online

trave

l guid

e vide

os

Live s

ports

cove

rage

Intera

ctive

educ

ation

al pro

grammes

Weathe

r clip

s from

tv

Intera

ctive

onlin

e gam

ing

Digital

conte

nt sto

rage s

oftware

Sports

high

lights

Tv high

lights

Hobby

show

s (eg

. Anti

ques

)

Cartoo

ns

Garden

ing sh

ows

Cooke

ry sh

ows

Avatar

chat

rooms

Interv

iews w

ith ce

lebriti

es

Source: CCS Study 2004.; Base: Home Internet users :

28.7 million. Sample: 2936 Fieldwork: June 2004

Movies

Live sport

Warner Bros. New Content Deals in EuropeWarner Bros. New Content Deals in Europe

VoD VoD –– Telecom Italia Telecom Italia (Italy)(Italy)

VoD VoD –– SF Anytime SF Anytime (Denmark, Finland, Norway, Sweden)(Denmark, Finland, Norway, Sweden)

VoD VoD –– LyseLyse (Norway)(Norway)

SVoDSVoD –– VNL/Home Choice VNL/Home Choice (U.K.)(U.K.)

PayPay--perper--view to PVR view to PVR –– BSkyB BSkyB (U.K.)(U.K.)

PayPay--perper--view view –– Premiere Premiere (Germany)(Germany)

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Some ConclusionsSome Conclusions

Ultimate Goal: Greater consumer choice, more diversity and Ultimate Goal: Greater consumer choice, more diversity and improved visual and audio qualityimproved visual and audio quality..Market delineations are a moving target.Market delineations are a moving target.New business models are emerging and are currently under New business models are emerging and are currently under review.review.It is important to recognise the need to protect valuable It is important to recognise the need to protect valuable IPRsIPRs so so as not to reduce incentives to invest and innovate.as not to reduce incentives to invest and innovate.It really is simply a matter of time!It really is simply a matter of time!Who will ultimately drive development of new media markets in Who will ultimately drive development of new media markets in a convergent world? Consumer demand!a convergent world? Consumer demand!