Transcript Chapter 15

Chapter 15: The Future of Media Usage
 Questions answered in this chapter:
• What is meant by the digital lifestyle?
• How will broadband technology impact Internet usage?
• What are the differences among the following Internetdelivery mechanisms: digital subscriber lines (DSL), cable
lines, and satellite?
• Which household device will serve as the gateway to the
Internet?
• How will increased wireless communications, video-ondemand, and personalized media content further fragment
media usage?
• How will the increased size of media companies allow them
to capture efficiencies of scale among diverse audiences?
September 2001
Chapter 15: The Future of Media Usage
1
Network and Media Convergence
 Digital Convergence
• Network infrastructure convergence is characterized by the ability to
share and transport information
•
•
•
•
Digital telephones
Digital radio
Digital television
Computers
• Media convergence is characterized by mergers among alternative
media companies
•
•
•
•
•
September 2001
Radio networks
Television networks
Magazine and newspaper publishers
Film producers
Online companies
Chapter 15: The Future of Media Usage
2
Exhibit 15-1: Convergence of Digital Economy
Print
(Newspapers/ Magazines)
Telephone
DSL
Cable Modem
Television
Digital
Digital
Convergence
Convergence
Radio
Satellite
Music
Wireless
Motion Pictures
1
September 2001
Chapter 15: The Future of Media Usage
3
Digital Lifestyle
 Bill Gates (Microsoft Corp.) believes that the personal computer,
the set-top box for interactive television, and the video-game
console will all be important household devices
 Craig Barrett (Intel Corp.) thinks about an “extended PC era”,
with consumers adopting PC accessories such as the digital
camera, personal digital assistants (PDAs), and digital sound
morphers
 Steve Jobs (Apple Computer, Inc.) envisions the PC as the
home’s Internet portal, the digital hub, where consumers could
edit their own movies or create customized CDs with easy-to-use
interfaces
 Nobuyuki Idei (Sony Corp.) believes that personal electronic
devices—such as the PlayStation 2 video-game console—will be
the future digital command centers for the home
September 2001
Chapter 15: The Future of Media Usage
4
Exhibit 15-2: The Digital Lifestyle - 2000 versus 2010
2010 — Media Services to The American Household
2000 — Media Services to The American Household
1. Access to cable television by
68%
2. Access to broadband by 5%
3. Daily newspapers read by 57%;
Sunday newspapers read by
67%
4. VCRs used by 91%
5. CD players by 55%; DVD
players by 22%
6. Video game consoles by 44%
7. Home computers by 53%; Online
services by 31%
8. PDA/Smart phones by 20%
9. Wireless internet by ?
1. Access to cable television by
80%
2. Access to broadband by 50%
3. Daily newspapers read by 50%;
Sunday newspapers read by
60%
4. Digital televisions by 100%
5. DVD and CD players by 95%
6. Video game consoles by 90%;
can also access the net
7. Home computers by 75%
8. PDA/Smart phones by 80%;
Ebooks by 40%
9. Wireless internet by ?
2
September 2001
Chapter 15: The Future of Media Usage
5
Analog and Digital Information
 Analog signal is a continuous variable
• Voice over telephone wires, broadcast radio,
broadcast television
• CODEC: analog signal can be digitized through an
analog-to-digital conversion process (coding) and
can be put back into analog through a digital-toanalog conversion process (decoding)
• Processing analog signal involves various signalfiltering techniques to reduce background noise
• Analog signal is difficult to compress
September 2001
Chapter 15: The Future of Media Usage
6
Analog and Digital Information (cont’d)
 Digital signal is a discrete variable represented
by “0” or “1”
• Computers, digital cell phones, digital cameras,
scanners, printers
• MODEM: digital signal can be converted to analog
(modulation) and can be put back into digital
(demodulation)
• Digital signal can be copied, processed, and
manipulated virtually without any loss in quality
• Digital signal is easy to compress
September 2001
Chapter 15: The Future of Media Usage
7
Applications of Broadband Technology
 Broadband technology is usually defined as having a
connectivity speed exceeding 128 kilobits per second,
significantly faster than the narrowband speeds of up to 53
kilobits per second achieved over regular telephone lines
 The increased use of broadband technology will allow for more
applications—such as video-on-demand, multiplayer games,
streaming of audio and video, and software distribution—to be
offered over the Internet
 At the beginning of 2000, Nielsen//NetRatings estimated that
only 5.1 million American households had access to broadband
technology
 By the end of 2005, the Yankee Group projects more than 30
million Americans will have access to broadband
September 2001
Chapter 15: The Future of Media Usage
8
Exhibit 15-3: Certain Applications More Dependent on Broadband
High
Video-onDemand
Streaming Video
Software
Distribution
Streaming Audio
Enhanced Graphics
Utility of
broadband
connection
Multiplayer
Games
Adult Content
Traditional Graphics
IP Telephony
Low
Free
High Price
Ability to charge for applications
Source: Jupiter Communications, “Broadband Applications: Emerging Business Models Enable ISP Service Bundles” (June 1999), written by Zia Daniell Wigder, Ken Allard,
and Joe Laszio.
3
September 2001
Chapter 15: The Future of Media Usage
9
Exhibit 15-4 Broadband Usage, at Work and at Home, 2000 to 2005
(in millions)
35
30
25
20
15
10
5
0
'00
'01
'02
Satellite
'03
DSL
'04
'05
Cable
Projected number of U.S. households with
broadband service at the end of each year
Source: Projected Broadband Usage at Home,
Jupiter Communications
Source: Projected Broadband Usage at Work,
Jupiter Communications
4
September 2001
Chapter 15: The Future of Media Usage
10
Internet Service Providers (ISPs)
 National/international ISPs: America Online (AOL),
EarthLink, Microsoft Network (MSN)
 Regional ISPs: BellSouth, NYNEX, Pacific Bell
 Local ISPs: Access Internet Communications in
Cupertino, CA; Montana Communications Network in
Bozeman, MO
 By the middle of July1999, there were an estimated
6,000 ISPs in North America
 In December 2000, AOL was the largest ISP in the
United States with more than 29 million members,
followed by EarthLink, MSN, AT&T, and NetZero
September 2001
Chapter 15: The Future of Media Usage
11
Digital Subscriber Line (DSL)
 DSL allows for high-speed connections over existing copper
telephone wires
 DSL requires special “modems” on each end of the connection,
in the user’s home and at the telephone company’s central office
 DSL “modems” send and receive all data as digital data—no
translation to analog signal ever takes place—allowing for
faster data transmission
 DSL divides the phone lines into several channels which enables
to talk on the phone and use the Internet simultaneously—all
over a single phone line
 DLS “modems” must be within about 3 mile distance from each
other
 Data transmission speed over a DSL line is about 1.5 Mbps
September 2001
Chapter 15: The Future of Media Usage
12
Cable Modem
 With the use of special modem, the Internet can be
accessed over some cable TV systems through the
existing coaxial cable that carries TV signals
 By replacing the coaxial copper with fiber-optic lines,
cable operators could improve signal reliability and
reception quality, increase channel capacity, and
support the introduction of two-way interactive services
 Cable modems send and receive data at speeds of 2 to
3 megabits per second
September 2001
Chapter 15: The Future of Media Usage
13
Satellite Transmission
 Types of satellites used: geostationary (22,000
miles above the earth), medium earth orbit
(1,000 to 10,000 miles), low earth orbit (500 to
1,000 miles)
 Require sophisticated subscriber antennas
 Downstream access at speeds up to 1 Mbps
 Upstream access is available only by modem or
other landline connections through ISPs
September 2001
Chapter 15: The Future of Media Usage
14
Exhibit 15-5: Relative Speed of Various Types of Internet Connections
Cable
3 to 4 Megabits per second
DSL
ISDN
Telephone
1.5 Megabits per second
128 Kilobits per second
56 Kilobits per second
5
September 2001
Chapter 15: The Future of Media Usage
15
Gateway to the Internet
 Devices that are likely to serve as the household
command center include the personal computer, videogame console, and interactive TV set-top box
 Currently, the PC is the primary gateway for most
people to access the Internet
 At the end of 2000…
• Approximately 55 million U.S. households (53%) had
personal computers
• Approximately 35 million U.S. households (34%) had
Internet access
• There were approximately 62 million individual Internet
users in the U.S.
September 2001
Chapter 15: The Future of Media Usage
16
Video-Game Consoles
 PlayStation 2 is a video-game console with the potential to
access a wide range of broadband services on the Internet
 In addition to being a video-game player, PlayStation 2 could
function as a SC and DVD player
 With their Play Stations, users should be able to bank, shop, and
e-mail through a television set, as well as download, store, and
replay digital music and video from the Web
 In addition to a hard drive, the PlayStation 2 has built-in
“firewall” ports, which will allow it to transfer data from
camcorders, digital cameras, and other PC peripheral devices in
the future
September 2001
Chapter 15: The Future of Media Usage
17
Interactive Television
 Currently, AOL and Microsoft offer basic interactive TV services
that allow users to access e-mail, chat, and surf the Internet with
a set-top box and dial-up modem while watching TV
 Forrester Research projects that by 2005, 40 million households
will have access to digital set-top boxes, almost an eightfold
increase from the 4.9 million households that had access to settop boxes at the end of 1999
 In addition to interactivity, video-on-demand will become more
widely available, whereby consumers can choose to watch any
movie or television show at any time and can even pause in the
middle of it
September 2001
Chapter 15: The Future of Media Usage
18
Media Usage Fragmentation
 Forecasters see mobile wireless technology as one of the fastestgrowing alternatives to PCs for accessing the Web, especially
when it is used as an “electronic wallet” or to check on stock
quotes, which requires relatively low bandwidth
 Palm-size computers as well as cell phones are now enabled to
receive wireless data through the Internet
 Wireless Web technology will be less likely to take off in the
United States, where 55 percent of the population accessed the
Internet through desktop computers, compared to 25 percent in
Japan
 Only 32 percent of all Americans have cell phones, compared to
45 percent in Japan, and 65 percent in Finland
September 2001
Chapter 15: The Future of Media Usage
19
Media Content of the Future

With the continued fragmentation of media usage, mergers of content-based
media companies will continue as a way to reach different segments of
consumers
• The merger of AOL and Time Warner will allow the company to reach an
estimated 60 percent of all American households through its magazines, cable
television, movies, books, or online service
• AOL Time Warner reaches 29 million households through its online service and
14 million through its cable systems, owns 40 magazines through Time Inc., has
37 million subscribers to its HBO channel, and reaches 12 percent of all
moviegoers through Warner Bros Studios

The companies that create the network infrastructure will also dominate the
media infrastructure
• Sony acquired CBS records and Columbia Studios in the late 1980s
• Microsoft developed the MSN Network and has a stake in MSNBC News
Channel
September 2001
Chapter 15: The Future of Media Usage
20
Exhibit 15-6: AOL-Time Warner Synergies
V
The AOL-Time Warner Empire
Broadband
Digital Music
X
Cross-Promotion
E-Books
Wireless
America Online, Inc. — 29 Million subscribers, AOL is the leading online service in the United States.
The company is now migrating AOL service beyond personal computers to pagers, cell phones and
other mobile devices
Time Warner Cable — The second largest U.S. cable operator, AOL-TW is pushing digital services
and broadband access to its customers. Plan to offer interactive shopping and entertainment
Time Inc.— Publisher of 40 magazine, including four with the largest circulation: Time, Sports
Illustrated, People and Fortune. With the merger it is promoting magazine subscriptions heavily
Estimated
2001
Revenues
$10.3
Billion
$6.9 Billion
Synergies
V
X
V
X
$5 Billion
X
Home Box Office — Largest premium cable network with 37 million subscribers
$2.4 Billion
X
Turner Broadcasting System Inc. — Includes some of cable television’s top networks including CNN,
TBS, and TNT. CNN is already promoted on the Netscape website and AOL
$5.1 Billion
WB Television Network — The ‘Fifth’ network after the big three and FOX. Targets young viewers with
hits such as Felicity and Buffy, The Vampire Slayer
X
$495
Billion
X
Warner Brothers— Third largest movie studio with 12% market share. Ultimately, movies will be
delivered on demand through cable television and over the web
$7.1 Billion
V
NewLIne Cinema — Ninth largest movie studio
1.6 Billion
V
Warner Music Group — With artists such as Faith Hill, AOL deal will allow digital distribution of music
over the web
$4.4 Billion
X
$300
Billion
X
Warner Trade Publishing — Parent company of Warner Books and Little Brown, company has
launched ibooks, an online publisher dedicated to e-books
Source: Business Week, January 15, 2001, Internal analysis
6
September 2001
Chapter 15: The Future of Media Usage
21
Exhibit 15-7 Microsoft Strategy: Today and Tomorrow
MICROS OFT- S TRATEGY
TODAY
Ope ra ting S ys te m s
MICROS OFT- S TRATEGY
FUTURE
Ope ra ting S ys te m s
Applica tions
Applica tions
MS NBC J oint Ve nture
MS NBC J oint Ve nture
MS N Ne twork
MS N Ne twork
We b TV
We b TV
S e rve rs
S e rve rs
Windows CE for pa lm tops
Windows CE for pa lm tops
Windows Me dia P la ye r
Windows Me dia P la ye r
Micros oft Re a de r- e Books
7
September 2001
Chapter 15: The Future of Media Usage
22