: : FUTURE OF MEDIA : REPORT : :
JULY 2008

: : FUTURE OF MEDIA : REPORT : : JULY 2008
WELCOME
We are entering the media economy. The
traditional boundaries of the media and
entertainment industry have become
meaningless. Today almost every
business and social activity is a form
of media. An increasing proportion of
our social interactions happen across
media channels. Every organization is
now a media entity, engaged in creating
and disseminating messages among its
staff, customers, and partners to achieve
business objectives. As the physical economy
becomes marginalized and economic value
becomes centered on the virtual, media
encompasses almost everything.
At the same time, many media organizations are experiencing
severe challenges, as content proliferates, audiences change
behaviors, advertising revenue erodes, and new competitors
emerge. Others are prospering as they tap swiftly growing
sectors, leverage amateur content creation, tap the power of
social networks, and scale production costs. Meanwhile adjacent
: : FUTURE OF MEDIA 2008 : PARTNERS : : industries such as telecom, financial services, mobile phones,
consumer electronics, professional services, and even automobile
Strategic Partners are becoming media participants.
Each year Future Exploration Network runs the Future of Media
Summit, linking Silicon Valley and Sydney with video and cross-
continental discussions, and launches an accompanying report.
The striking impact of the 2006 and 2007 Future of Media Reports
means this year’s report has a lot to live up to. We are confident
Partners
the new frameworks and ideas we are contributing will again
provide substantial value.
Over the last years we have helped many media organizations
develop and implement effective strategies. We thrive on helping
companies to create the future of media. However it is also
exciting to take these issues and conversations into a broader
sphere. Welcome to the conversation.
Ross Dawson
Chairman
Future Exploration Network
Page 2

MEDIA: A GROWTH MARKET
SIZE OF GLOBAL MEDIA AND
ENTERTAINMENT MARKET IN 2024:
$US 5.7 trillion (2008 dollars)
Source: Future Exploration Network
SIZE OF GLOBAL MEDIA AND
ENTERTAINMENT MARKET IN 2008:
$US 1.7 trillion
Source: PricewaterhouseCoopers
Media, entertainment, and related industries are positioned at the center of massive global
growth. The current positioning of some media companies in a rapidly changing market
means they are not experiencing this upside. Others are doing fabulously well in tapping
people’s almost insatiable desire for content and connection. In this report we explore the
growth and opportunities available to all participants in the vast landscape which is media.
Fastest growing advertising markets 2007 - 2010 Global advertising revenues
Source: Zenith Optimedia Source: Zenith Optimedia
US$ billion 600
0 2 4 6 8 10 12 14 16 18 20
USA 500
China
Russia 400
US$ bn
Brazil
UK 300
India
Japan 200
South Korea
100
South Africa
Philippines
0
0 10 20 30 40 50 60 70 80 90 100 2005 2006 2007 2008 2009 2010
%
Internet Outdoor Radio
Cinema Television Magazines
Newspapers
Page 3

Media Consumption
7 Driving Forces Shaping Media
Source: Carat
100 Behavioral Advertising
Source: eMarketer
90 4000
4
Internet
1
80 Digital TV 3500
70 Analogue TV Increasing Media Consumption Personalization 3000
Games
Hours per week
60 Increasing media consumption Humans are Media is becoming personalized. Ultimately this is 2500
Wireless intrinsically media animals. As we get greater access about user control, in enabling every possible choice in US$
50 2000
Outdoor Media to media and content, we are discovering that our what, when, and where people consume media, and its million
40 Digital Radio appetite for information and entertainment is virtually insatiable. formatting, filtering, and presentation. At the same time, real-time 1500
Analogue Radio It is commonplace for people of all ages to consume multiple information on viewers enables highly targeted advertising based on 1000
30
Cinema media at the same time, with television, internet, newspaper, behaviors, location, and other profile data. The fate of personalized
20 500
Print messaging, and other media frequently overlapping. advertising will depend on how societal attitudes to privacy evolve.
0
10
Implications: Implications: 2005 2006 2007 2008 2009 2010 2011
0
Average total media consumption will exceed waking Users’ expectations for control over their media will increase.
1900 1920 1940 1960 1980 2000 2020
hours. Most media will be consumed with partial attention. Abuse of personalized advertising will create a backlash. Some
Advertising impact will decrease. will opt-out, and others will opt-in if sufficient value is created.
2 5
Fragmentation
US Internet audience reach New revenue models
At the same time as we are consuming more Source: comScore, Media Metrix
media, every existing media channel is being US TV Fragmentation Within the current trend away from subscription
Platform-A
fragmented, and new ones are being added Source: Media Dynamics and Bear Sterns
Advertising.com and towards ad-supported business models, the
60 14
apace. In the example of television in this chart, we watch ever Yahoo! Network way that advertising is sold is dramatically changing.
Google Ad Network
more television, but the proliferation of new channels means 12 Speci c Media
As illustrated, the vast majority of the online players with the
50
continually less viewer time per channel. Now that the Internet ValueClick Networks greatest reach are advertising networks, not stand-alone sites
and mobile are creating an explosion of new channels and 10 Yahoo! such as Google or Yahoo! Unbundling sales and content is
40 Tribal Fusion
content, audiences are being divided into smaller and smaller weekly Google allowing far greater scalability of content production costs.
8 set usage (hrs)
segments. 30
Casale Media Network The promise of micropayments for content may re-emerge
DRIVEpm within a decade.
6
Implications: adconion media group
time per Tra c Marketplace
20 Implications:
Current mass media markets are ephemeral. 4 channel (hrs) AOL Media Network
interCLICK
Revenues per channel will decrease. In all except 10 MSN-Windows Live
Advertising aggregation will be central to the media
2
a handful of cases, production costs will need Tremor Media
Advertising Networks
landscape. Media companies will segment and
to scaled down. 24/7 Real Media unbundle ad sales and content creation.
0 0 Web Property
ADSDAQ
1950 1960 1970 1980 1990 2000 2005 Burst Media
0 10 20 30 40 50 60 70 80 90 100
Year
% of US online population
Newspaper readership by age
3
User generated content
6
Source: Technorati, Flickr, Alexa, Comscore, www.internetworldstats.com Source: Journalism.org, Scarborough Research
350 Participation Generational change 80%
Early talk about consumer-generated media has become a The chart shows that each generation is fairly consistent 70%
300
stark reality over the last two years, with an explosion of media in its media consumption patterns, however that each
60%
250 participation across blogs, photos, videos, social networks, group behaves very differently. The average audience age
and more. The costs of quality content creation are plummeting. Already of traditional media such as television and radio continues to increase. 50%
200 a large proportion of content available is non-professional, and people’s Over the medium to long-term, generational change will result in
million
40%
media activities are increasingly focused on participatory channels such as dramatically different profiles for media consumption and participation.
150
social networks. 30%
Implications:
100 Implications: 20%
Media channels will be increasingly age-segmented. Advertisers
50 An infinite supply of content. Increased fragmentation of attention. will accelerate their shift to new media outlets. Sharemarket 10%
Pro-Am (professional-amateur) content models valuations will reflect age profiles of audiences.
0 0%
2005 2006 2007 2008 will emerge.
1999 2000 2001 2002 2003 2004 2005 2006
Global IP tra c
7
Flickr photos (x 0.1) Number of blogs
Source: Cisco 18 - 24 35 - 44 55 - 64
Facebook visitors YouTube visitors
50
45
Increasing bandwidth 25 - 34 45 - 54 65+
40 In developed countries the Internet has now shifted from dial-up to broadband in the home.
35 A rapid pace of increase in bandwidth will continue indefinitely. It will not be too long before the
30 majority of developed country homes receive over 100Mbps. At the same time mobile bandwidth is
Exabytes 25 soaring, with a variety of technologies contributing to pervasive high-speed access to content.
(1018 Bytes) 20
15 Implications:
Total IP bandwidth 10
Consumer 5
Video on demand anywhere, anytime. Personal clouds will allow music and video collections to be accessed anywhere without local
Consumer video 0 storage. The rationale for allocated media spectrum and infrastructure will fade.
2006 2007 2008 2009 2010 2011 2012
• Strategy
• Thought Leadership For additional Future of Media Resources
• Sponsored Content www.futureexploration.net

Future of the Media Lifecycle
HOME LIFE
MOBILE
STORAGE
PERSONAL CLOUD STREAMING
RECOMMENDATIONS VIDEO
WORDS PHOTOS
TIMESHIFTING PLACESHIFTING
VIDE MAG
A O A ZIN
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M
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SYS PC WA
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S IC O M
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HANDHELD PORTABLE
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MEDIA
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INTERFACES OF PARTICIPATION
DI CORDER
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CENTER
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GEST
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MUSIC SS REC VO NEW
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FLAT SCREENS
VID
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INTERFACES
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BO E LE TO
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ETHERNET KEYWIR
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TRAFFI INTE
UPnP C O
DE ERE BILL RAC
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HOME AP A
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INTELLIG
IV S
LIGHTI ENT
NETWORKS
M
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WE
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DIFFUSION
ATH
PIN
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OF MEMES LOCATION OUTDOOR
ALERTS
DIFFUSION
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PERSONA
LINK ILE
POWERLINE
TO
OF MEMES BASED MEDIA MEDIA
SH
MESSA LIZE
OB
LON
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OF
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DIREC TIME-BASE
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TV / VIDEO
CONVERSATION
GAMES
SEA OF CONTENT COMMENTARY
MUSIC NEWS
Creative Commons Attribution-Share Alike 3.0 License
Created for:
Strategy For diagram explanation, Summit registration
• Strategy
Thought Leadership
• Thought Leadership : : Future of Media : Summit 2008 : : For diagram explanation and additionalof Media Resources:
and other Future Future of Media resources:
• Sponsored Content Content
Sponsored Silicon Valley July 14 | linked by video | Sydney July 15 www.futureexploration.net/fom08
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Future of Media: Strategy Tools
Flow Economy Strategy Process - Summary
1. Define your space
Finite players play within boundaries, • What is the “total customer experience” you participate in creating?
infinite players play with boundaries. 3 Examples: Strategic repositioning • Which elements of the flow economy do you currently provide
in the Flow Economy within this?
1
James Carse
CONNECTIVITy INTERFACES • Who provides the other flow economy elements required?
Apple
• What is your current relationship with these providers?
Apple has proved very effective at
Flow Economy Framework repositioning itself across the flow
economy. Most prominently, it has used
The Flow Economy Framework encompasses all its strong positioning in Interfaces (e.g. iPod, Mac) 2. Redefine your space
activity based on the flow of information and ideas. to shift to Content (iTunes). It has also built direct • What is driving change in the flow of information and value in the space?
The diagram shows its six elements: Standards, Relationships with its iTunes customers whereas • How can you redefine the total customer experience?
Relationships, Connectivity, Interfaces, before distributors held all customer relationships. • What are competitive drivers within each of the flow elements required?
Content, and Services. All six elements are Apple’s adoption AAC as the default music encoding
Standard on iTunes provided some lock-in as it was a • How can you leverage your existing positioning into new sources of
required to deliver value to customers. revenue or value?
STANDARDS RELATIONShIPS
less common though still open standard. For iPhone
Each of these elements can be run as a stand- it has selected and generated revenue from selected
alone business. However the greatest value partners for Connectivity (AT&T in the US), and is
is unlocked in how they are combined. Only a now taking part of the Service revenue for iPhone 3. Reposition
handful of companies have the capacity to play in apps provided by a broader developer community. • Build internal capabilities.
2
all six elements of the flow economy, and even then they • Acquire existing businesses.
must rely heavily on alliances. The heart of strategy in the British Sky Broadcasting (BSkyB) • License content or technology.
flow economy is in leveraging existing strengths to move BSkyB began with part ownership of the satellites
into a higher-value strategic position. As the landscape • Build alliances with complementary firms.
providing the Connectivity for TV delivery,
develops, this repositioning is a continuous process. creating and buying Content, and using these • Outsource business activities.
to create customer Relationships. In the early 1990s it
3
CONTENT SERVICES sold its satellite ownership and since then has used the
Astra satellites to provide the necessary Connectivity. Its NTT DoCoMo
exclusive live TV Content rights for the FA Premier League The flow economy framework is especially relevant
More information since 1992 has been leveraged into strong subscriber growth to telecoms providers that need to reposition from
Full details on the Flow Economy and many new Relationships. In 2001 BSkyB introduced commoditized Connectivity into higher value
framework and strategy process can be In uncertain times, don’t try to predict the Sky+, a combination set-top box and digital video recorder, spaces. DoCoMo has distinguished itself by developing
found in Chapter 7 of Living Networks. future. Systematically explore possible futures. providing an Interface to generate greater revenue and Standards including W-CDMA and i-mode, providing it with
Ross Dawson build more entrenched Relationships. BSkyB is now shifting local market differentiation and access to international markets.
Free chapter download from: into new Services including broadband and phone. It is also Its alliances with phone manufacturers allow it to control the
www.livingnetworksbook.com distributing its Content over new channels including mobile Interfaces used by its customers, creating more embedded
Scenario Planning for Media using Sky Anytime. Relationships. i-mode’s staggering success after its 1999
launch was largely attributable to its model of allowing
Classic scenario planning is one of the most powerful tools for rigorous third-party Content and Services providers access to the
PLATFORMS long-term strategy development in the media industry. In the face of system, with just a low margin for DoCoMo. DoCoMo is now
multiple uncertainties, including technological development, consumer you have to learn the rules of the providing financial Services through its DCMX mobile
OPEN
behavior, standards battles, regulation, and many others, a well-designed game. And then you have to play credit cards, and, as other mobile companies, seeking
scenario planning process assists the development of robust business
better than anyone else. to leverage its existing customer Interfaces to
strategies. provide search functionality.
OwNERShIP
Albert Einstein
PEOPLE PLATFORM Generic scenarios are of limited use. Scenarios need to be developed
POwER PLAyS around specific business issues and key decisions. A typical scenario
planning process would include:
Game Theory: Strategies for Openness STRATEGy STRATEGy STRATEGy STRATEGy
• Define objectives and key strategic decisions MAP 1 2 3
FRAGMENTED CONCENTRATED
• Identify driving forces and critical uncertainties The inexorable shift to openness dominates the media strategic landscape today. All
successful platforms provide rich programming interfaces, open standards are swiftly
• Select key dimensions being adopted, data portability is gaining momentum, most content is available on RSS COMPETITOR
A
wAITING FOR TITANS • Create scenario framework feeds, and controls on intellectual property are being loosened.
ThE FUTURE CLASh • Develop distinct, plausible, complementary scenarios The extraordinary pace of these trends means that media strategy is becoming more
challenging. New business models are required, competitive responses must be swift, and COMPETITOR
PROPRIETARY
• Test existing strategies across scenarios strategic choices need to be made and implemented in real-time. B
• Generate new strategic options In this environment game theory is extremely relevant and a valuable strategic tool.
• Define a core strategy and contingent responses Game theory studies how multi-player situations may evolve as participants respond to COMPETITOR
C
each others’ actions. This can be done using mathematical modelling, or more simply as a
• Build strategic responsiveness across the organization framework for thinking through strategic options, their impact on the industry landscape,
and optimal short and long-term strategies.
• Strategy
• Thought Leadership For additional Future of Media Resources
• Sponsored Content www.futureexploration.net

: : FUTURE OF MEDIA : REPORT : : JULY 2008
SNIPPETS
MEDIA SNIPPETS
More than 57% of
online video viewers Roughly one-fifth
share links to the videos of all U.S. households are
they find with others disconnected from the
Pew Six in ten (59%) are Internet and have never
not comfortable used e-mail.
when websites use Parks Associates
behavioural information
to tailor advertisements
or content.
US newspaper
Harris
circulation is the same
as in 1978, when there
were 100 million fewer France has the
people in America largest number of IPTV
Newspaper Association subscribers in the world, with
of America
three of the world’s four largest
IPTV service providers (Free,
In 2007 YouTube Orange France Telecom and Neuf
consumed as much Cegetel). The remaining service
bandwidth as the provider out of the top four is
There are 1.4 entire Internet PCCW in Hong Kong.
million new in 2000. dailyIPTV
broadband users Daily Telegraph
in China every
month.
China Mobile
Almost 70% of
Thirty seven percent journalists read blogs
of consumers say regularly, while 20% say
they would rather pay they spend over one hour
The median age of for online content per day reading blogs
a US live television than be exposed to
Marketwatch
viewer is 50, compared advertisements
to 38 for the entire Deloitte
population.
Magna Global
Page 10

ABOUT FUTURE EXPLORATION NETWORK
Future Exploration Network assists major organizations globally SERVICES
to gain insights into the future and develop strategies that create Strategy consulting
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Future Exploration Network applies a range of tools and
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approaches to assist its clients to develop clear, actionable
best-of-breed experts.
strategies in highly uncertain environments. We have deep
Clients of Future Exploration Network’s key executives include expertise in applying scenario planning to build robust strategies.
ABN Amro, Capgemini, CNET, Ernst & Young, IBM, KPMG, Lend
Lease, Macquarie Bank, Microsoft, Morgan Stanley, News Research
Corporation, and SAP. Deep research into technological, social, and business
trends supports clients’ strategic thinking, decisions, and
implementation. Technology landscapes help organizations
LEADERSHIP
to plan long-term positioning, product development, and
Ross Dawson technology strategies.
Chairman
Thought leadership content
Ross Dawson is a globally recognized
We create content for leading organizations that will reach
business strategist and authority on
and engage attention-poor senior executives and support key
the future of technology and business,
messages on technology and business trends. These can be
the best-selling author of Living
delivered in a wide variety of content formats, including print,
Networks and Developing Knowledge-
presentations, documents, audio, video, and flash, and delivered
Based Client Relationships, and a frequent
so they reach target audiences.
international keynote speaker. His work is regularly featured in
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Bloomberg TV, Washington Post, Reuters, SkyNews, ABC TV, and Keynote speeches and executive workshops can be delivered
Channel News Asia. Ross also writes the highly influential Trends by key Future Exploration Network executives Ross Dawson,
in the Living Networks blog Richard Watson, or other world-class presenters from our network
to stimulate, provoke, entertain, and provide input into specific
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