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What Asia can tell us about the future of TV and Video
Benjamin Joffe, CEO | Plus Eight Star | December 2008
www.plus8star.com
Cross-Market Consulting
Mobile & Internet Innovation
    China | Japan | South Korea
Agenda

1.   Why looking at China, Japan & Korea?

2.   Is advertising the only valid business model?

3.   Some services ...
1. Why China, Japan & Korea?
In Japan & Korea, broadband is
among the fastest and cheapest
on Earth (100Mbps for <30 USD)
3G penetration in Japan and
    Korea is over 70%
100%


           80%

                                           USA
           60%
3G users




           40%

        ...
1. Why China, Japan and Korea?
 China is the world‟s largest market

 Japan is the most “mobile literate”

 Korea is the m...
2. Is advertising the only valid
       business model?
Can advertising revenues
scale for video services?
US$23.8
 billion
            Movie


                          Paper
           TV                      6% of total
      ...
What if…?
                                                    Hockey Stick of
                                            ...
Facts and Assumptions
#1 | YouTube is still not profitable
#2 | Ad revenues grow “linearly” (?)
#3 | Content grows much fa...
Winter is at the door.
 Who will survive?
Where are the people? Do
   people reduce travelling
budget due to economic crisis?

       -- at Ad: Tech, Nov 25, Shangh...
Poor ad market share



                       TV/video
3 main categories




Remaining issues for UGC
         IPR
    Content Control
Faster growth brings more players
          to new media
    e.g. CCTV online, Phoenix TV online
Looking back

#1 Internet winter had 2 types of survivors

             (1) Game companies
              (2) WVAS provider...
Stocks
                                 NetEase: online
                                    gaming



              Tencen...
Easier to sell to end-users
  than to companies?
Promising revenue models

#1 | Pay per view
#2 | Monthly subscription
#3 | Premium services
#4 | Rev. share w/ producers &...
2. Is advertising the only valid
       business model?
Ad-only models seem to have problems
 Now, online video is already...
3. Some services giving hope
Profitable Video Sharing Site
Founded: October, 2004
Revenue: 10 million EUR
   80~90% from ads
 Breakeven in Q1 2008
3 million subscribers
       10 million UVs/month
2% CTR = 20x Naver! (leading portal)
      P2P saves 40% expenses
Pandora TV vs. YouTube Korea
                                     (Page Views)

                                Number of ...
Pandora TV | Business Models
   Companies                                         Content Creators
  (advertisers)
  Provi...
Video + E-commerce
    Nico Nico Douga

    ”smiling videos”
   quot;Japan's YouTubequot;
Paying members:
7 million members in
                             200,000
  total by Jun 08         (started July 2007)


...
Breakdown by gender          Breakdown by age


                                      30s
                                ...
Main features
• Registration only

• On-video comments
  – Over 1.2 billion comments on 1.1 million videos
  – Average: 1,...
The text on the videos is based on a
 timeline, which allows a new form of
   asynchronous communication.
   In fact, we s...
Revenue sources
Premium members
                             47%
200,000 (June 2008)
  5 USD / month

    Affiliate links
...
Affiliate links
  related to
mouse and pet
   product
Video + e-Commerce
                  =
Social Commerce or TV Shopping 2.0?
Online/Offline mass media?
Afreeca TV (March, 2006)
   Monthly unique visitor: 5 million
  Time Period of Staying : 45 minutes
YouTube+ Live broadcas...
BJ = Broadcasting Jockey
      “Broadizen”
    (Broadcast + Netizen)
1.5 million Private Channels run by BJ

“BJ Managers” for content monitoring
Encouraging Creation: Open Studio
Afreeca TV | Business Model
1. Premium options                     3. Create / Upload / Share
2. Use of Afreeca TV‟s
   cy...
Don’t forget to turn off your webcam…
4. Where are the barriers?
Are users willing to pay?
Drawing inspiration from digital music
iTunes
        =
5 billion songs
More music is sold “online” than
 “offline” in China and Korea
Ringback tones were created in
        Korea in 2001

They reached 30% penetration in
        less than 2 years
Digital music revenues in Japan




                     Source: Infinity Venture Partners, 2008
90% of digital music
sold in Japan is mobile
Chinese users too!


      ~1.2 billion
         EUR




                     Source: China Mobile, 2008
Affordable content

Mega TV (IPTV) in Korea
0.5 USD per TV episode
   1 USD for a movie
4. Where are the barriers?
Ecosystem different from traditional TV

Users pay for the right user experience

  Need for 1-...
5. How about mobile?
Mobile TV penetration in Japan
   and Korea is over 30%
37 million mobile TV phones were
   sold by June 2008 in Japan




     Mobile TV started in May 2006
In Japan over 70% of new handsets
      are mobile TV-enabled
2008 Trends
Mobile Service Trends: Japan




                            Mobile TV service “One Seg”
    Twist screen
                ...
Mobile Service Trends: Korea
   Mobile TV       Mobile web browsing service




Video phone call         Mobile widget
Is it a success?
Remaining Questions
What business models for mobile TV?
      (data back-channel? M-commerce?)

  Who pays for the infrast...
5. How about mobile?
Is it too late for broadcast mobile TV?

       Affordable alternatives

     Ecosystem hard to create
About +8*
There are more ideas
outside your country
          than inside
                   Tom Kelley
                    CEO, IDE...
“Innovation Arbitrage”
• About us
   – +8* | Plus Eight Star is the leading cross-market and cross-cultural consultancy in...
Selected References
•   Adidas | E-commerce strategy for China, Japan & Korea

•   Bouygues Telecom | Cases studies of lea...
Social Work
• Mobile Monday
   – Founder of the Mobile Monday forum in Beijing since 2006 (3,000+
     members, 23 events,...
Contact Us

www.plus8star.com

benjamin@plus8star.com

benjamin0123                           +81 | Japan

               ...
Future of TV and Video from Asia
Future of TV and Video from Asia
Future of TV and Video from Asia
Future of TV and Video from Asia
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Future of TV and Video from Asia

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Presentation for \"New Era, New TV\" Seminar @ OrangeLabs in Beijing in December 2008. Details on services from Korea and Japan (Pandora.tv, Afreeca.tv, Nico Nico Video) and ideas on why pure ad model might be a bad idea, and why mobile is still unproven.

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  1. 1. What Asia can tell us about the future of TV and Video Benjamin Joffe, CEO | Plus Eight Star | December 2008
  2. 2. www.plus8star.com
  3. 3. Cross-Market Consulting Mobile & Internet Innovation China | Japan | South Korea
  4. 4. Agenda 1. Why looking at China, Japan & Korea? 2. Is advertising the only valid business model? 3. Some services giving hope 4. What are the barriers? 5. How about mobile?
  5. 5. 1. Why China, Japan & Korea?
  6. 6. In Japan & Korea, broadband is among the fastest and cheapest on Earth (100Mbps for <30 USD)
  7. 7. 3G penetration in Japan and Korea is over 70%
  8. 8. 100% 80% USA 60% 3G users 40% Japa Chin 20% n a 0% 0% 20% 40% 60% 80% % of Internet connections measured above 5Mbps (Source: Akamai, 1H2008)
  9. 9. 1. Why China, Japan and Korea? China is the world‟s largest market Japan is the most “mobile literate” Korea is the most “Internet literate”
  10. 10. 2. Is advertising the only valid business model?
  11. 11. Can advertising revenues scale for video services?
  12. 12. US$23.8 billion Movie Paper TV 6% of total ad market New media Outdoor TV/video
  13. 13. What if…? Hockey Stick of Broken Illusions “The model is flawed” Content / $ Content / Costs Curve of Unclear Hope Revenues “We‟re profitable!” Everyone Here today Costs start before Time revenues Source: Plus Eight Star
  14. 14. Facts and Assumptions #1 | YouTube is still not profitable #2 | Ad revenues grow “linearly” (?) #3 | Content grows much faster #4 | Costs follow content #5 | Ad$/Content goes down #6 | …囧
  15. 15. Winter is at the door. Who will survive?
  16. 16. Where are the people? Do people reduce travelling budget due to economic crisis? -- at Ad: Tech, Nov 25, Shanghai Hans Geng Nielsen-Net Ratings China, CEO
  17. 17. Poor ad market share TV/video
  18. 18. 3 main categories Remaining issues for UGC IPR Content Control
  19. 19. Faster growth brings more players to new media e.g. CCTV online, Phoenix TV online
  20. 20. Looking back #1 Internet winter had 2 types of survivors (1) Game companies (2) WVAS providers Tencent Sina Sohu Shanda
  21. 21. Stocks NetEase: online gaming Tencent: virtual Sina: ad goods, gaming, WVAS Baidu: ad Are B2C models safer than B2B?
  22. 22. Easier to sell to end-users than to companies?
  23. 23. Promising revenue models #1 | Pay per view #2 | Monthly subscription #3 | Premium services #4 | Rev. share w/ producers & “sharers” #5 | Connection with e-commerce
  24. 24. 2. Is advertising the only valid business model? Ad-only models seem to have problems Now, online video is already a media So there must be some solutions…
  25. 25. 3. Some services giving hope
  26. 26. Profitable Video Sharing Site
  27. 27. Founded: October, 2004 Revenue: 10 million EUR 80~90% from ads Breakeven in Q1 2008
  28. 28. 3 million subscribers 10 million UVs/month 2% CTR = 20x Naver! (leading portal) P2P saves 40% expenses
  29. 29. Pandora TV vs. YouTube Korea (Page Views) Number of Page Views for Pandora TV and YouTube Korea 500 Page Views (million) 400 Pandora TV 300 200 Over 3 times! 100 YouTube Korea Jul.08 Aug.07 Sources: Daum directory
  30. 30. Pandora TV | Business Models Companies Content Creators (advertisers) Provide advertising contents with payment Creating/posting and >80% of total Sharing UCC contents revenue ‘CUPI’ convertible • Share ad revenue with virtual currency content creators & sharers • Charge users premium content/option
  31. 31. Video + E-commerce Nico Nico Douga ”smiling videos” quot;Japan's YouTubequot;
  32. 32. Paying members: 7 million members in 200,000 total by Jun 08 (started July 2007) Mobile members: 1.7 million (started Aug 2007)
  33. 33. Breakdown by gender Breakdown by age 30s 18% Female: 29% >30 20s 8% 47% Male: 71% <20 27%
  34. 34. Main features • Registration only • On-video comments – Over 1.2 billion comments on 1.1 million videos – Average: 1,000 comments per video! • Most of the content focus on local pop culture – Anime, video-games, J-pop music videos, etc.
  35. 35. The text on the videos is based on a timeline, which allows a new form of asynchronous communication. In fact, we see ourselves as a communication service using videos -- at “Infinity Ventures Summit”, Nov. 2008, Sapporo Seiji Sugimoto CEO, Niwango
  36. 36. Revenue sources Premium members 47% 200,000 (June 2008) 5 USD / month Affiliate links 39% 820,000 USD / month Online ad 14% 300,000 USD / month Monthly revenues 2.1 million USD
  37. 37. Affiliate links related to mouse and pet product
  38. 38. Video + e-Commerce = Social Commerce or TV Shopping 2.0?
  39. 39. Online/Offline mass media?
  40. 40. Afreeca TV (March, 2006) Monthly unique visitor: 5 million Time Period of Staying : 45 minutes YouTube+ Live broadcasts + Game Portal
  41. 41. BJ = Broadcasting Jockey “Broadizen” (Broadcast + Netizen)
  42. 42. 1.5 million Private Channels run by BJ “BJ Managers” for content monitoring
  43. 43. Encouraging Creation: Open Studio
  44. 44. Afreeca TV | Business Model 1. Premium options 3. Create / Upload / Share 2. Use of Afreeca TV‟s cybercash „Star Balloon‟ Broadizen (Broadcast + Netizen) Organizations/ Communities Advertising Companies Providing ad platform for advertisements Setting-up of broadcasting system
  45. 45. Don’t forget to turn off your webcam…
  46. 46. 4. Where are the barriers?
  47. 47. Are users willing to pay? Drawing inspiration from digital music
  48. 48. iTunes = 5 billion songs
  49. 49. More music is sold “online” than “offline” in China and Korea
  50. 50. Ringback tones were created in Korea in 2001 They reached 30% penetration in less than 2 years
  51. 51. Digital music revenues in Japan Source: Infinity Venture Partners, 2008
  52. 52. 90% of digital music sold in Japan is mobile
  53. 53. Chinese users too! ~1.2 billion EUR Source: China Mobile, 2008
  54. 54. Affordable content Mega TV (IPTV) in Korea 0.5 USD per TV episode 1 USD for a movie
  55. 55. 4. Where are the barriers? Ecosystem different from traditional TV Users pay for the right user experience Need for 1-click payment systems
  56. 56. 5. How about mobile?
  57. 57. Mobile TV penetration in Japan and Korea is over 30%
  58. 58. 37 million mobile TV phones were sold by June 2008 in Japan Mobile TV started in May 2006
  59. 59. In Japan over 70% of new handsets are mobile TV-enabled
  60. 60. 2008 Trends
  61. 61. Mobile Service Trends: Japan Mobile TV service “One Seg” Twist screen with data menu overlay Decorated and animated mobile Internet browsing (left) messaging
  62. 62. Mobile Service Trends: Korea Mobile TV Mobile web browsing service Video phone call Mobile widget
  63. 63. Is it a success?
  64. 64. Remaining Questions What business models for mobile TV? (data back-channel? M-commerce?) Who pays for the infrastructure? How to attract advertisers? How to get the right content? How to charge users for content?
  65. 65. 5. How about mobile? Is it too late for broadcast mobile TV? Affordable alternatives Ecosystem hard to create
  66. 66. About +8*
  67. 67. There are more ideas outside your country than inside Tom Kelley CEO, IDEO The 10 faces of Innovation
  68. 68. “Innovation Arbitrage” • About us – +8* | Plus Eight Star is the leading cross-market and cross-cultural consultancy in Asia. – We provide local expertise & global perspective on mobile and Internet innovation from China, Japan and South Korea to add value to and accelerate the development of our clients’ businesses. • Our services – Analysis of proven best practices and business models from Asia – Other services: executive study trips, market entry strategy, M&A advisory, partners identification, negotiation support. • Founder & CEO: Benjamin Joffe – 9 years experience with mobile & Internet in Asia – Selected among “China’s Top 100 mobile industry influencers” in 2007 – Regular speaker at events on mobile and Internet in Asia – Fluent in English, Japanese, French with working knowledge of Mandarin, Korean and Spanish
  69. 69. Selected References • Adidas | E-commerce strategy for China, Japan & Korea • Bouygues Telecom | Cases studies of leading Asian Web 2.0 services and virtual worlds • Deutsche Telekom / T-Online | Benchmark of Korean mobile & Internet convergence strategies • Hemisphere | Analysis of mobile marketing best practices in Japan and South Korea (Hemisphere is a leading digital advertising agency), analysis of leading social platforms (SNS, virtual worlds, online games). • Microsoft | Analysis of Japan’s key players and market catalysts for mobile commerce market positioning in China • DeNA | Case studies of the best practices of leading social networks in China and South Korea (DeNA operates Mobile Game Town, Japan’s leading mobile SNS service) • China Mobile | Benchmark of Korean leading online communities • Sands Capital Management | Evaluation of China’s investment opportunities in social networks in China
  70. 70. Social Work • Mobile Monday – Founder of the Mobile Monday forum in Beijing since 2006 (3,000+ members, 23 events, over 80 presentations). • Media – Monthly column on Asian innovation for Asian Business Leaders (one of the leading Chinese business magazines), numerous interviews in international media. • Events – Regular keynote speaker and moderator at Internet, Telecom, Media and Investment events e.g. ITU Asia, Asia Venture Capital Forum, China Mobility International Summit, O’Reilly’s Graphing Social Patterns, Red Herring Asia, Media 08 Conference, Wireless Developer Forum, Open Web Asia, XMediaLab, Mobile Monday Global Summit, etc.)
  71. 71. Contact Us www.plus8star.com benjamin@plus8star.com benjamin0123 +81 | Japan +82 | Korea http://twitter.com/plus8star +86 | China Telecom & Internet www.linkedin.com/in/benjaminjoffe + Added Value * High quality www.slideshare.net/plus8star
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