|Issue:||Asia-Pacific IV 2001|
|Topic:||Network Convergence Asia-Pacific Style|
A long chain of software, applications, appliances and carriers delivers content to the consumer. The chain is complex and today, since the advent of the Internet, can take advantage of an ever-increasing variety of delivery routes, systems and specialised hardware. This is a global phenomenon, but each region of the world, due to cultural differences, boasts a somewhat different version. This article summarises the key features of content conversion and how it is manifested in the Asian region.
Content convergence is a value chain that delivers content to the consumer. The components of this value chain are the content itself, the application and middleware software which facilitate content distribution, the media outlets which gather together content for the consumer, the carriage which provides the medium to deliver the content, and the appliances which present it to the user. The book, movie and Internet site (is the tee-shirt out yet?) ‘Harry Potter’ is probably the latest and hottest example of the powerful global forces of media convergence at work. Its owner AOL (www.aol.com) Time Warner has linked and cross-promoted every imaginable method of experiencing its ‘Wizard’ intellectual property, ‘Harry’. While Warner shows the movie, Time writes up the story as a magazine publication, and AOL features ‘Harry’ on its Home Page and even provides the DSL broadband connection to view the streaming video promotion. MSNBC.com and its affiliates provide a similar example of the striking impacts possible through leveraging media convergence. In Asia, it’s slightly different. The very same pressures creating convergence are at work, but the business entities and cultures are distinct in each Asia-Pacific country and create their own characteristic outcomes. Hong Kong is the last place on earth to persist with video on demand. Hong Kong and China have a thriving film industry (remember Crouching Tiger, Hidden Dragon and Bruce Lee kung fu action movies?). However, although the media convergence industry viewed in the English language and through Western behavioural norms seems limited, a Mandarin language and Chinese business ethic is rapidly assimilating lessons from the West in convergence. Sina.com (http://english.sina.com) and Alibaba (www.alibaba.com) are good working examples of rapidly emerging web-extended business models. As Disneyland Hong Kong is being built on reclaimed land on Lan Tau Island adjacent to Chep Lak Kok International airport we see Chinese culture embracing Western media and entertainment. In Singapore, the dominant carrier SingTel is heavily populated by government appointees in its board and its empathy with dominant local press such as the Straits Times is so strong that formal commercial links are not necessary nor perhaps welcome. Singapore’s second carrier Starhub (British Telecom, NTT (Japan) and the Singapore Electricity Utility) is busily integrating Singapore Cable Vision, the local pay-TV and cable modem Internet service provider, with its carrier operations. Japan has demonstrated some of the most complete management execution imaginable in market building and dominance in NTT’s mobile network operator DoCoMo. Its i-Mode business has grown to 28 million mobile internet subscribers in two years. Its mobile services are derived from access to the Internet and it counts upon 13 handset manufacturers, over 1,300 official content partners and over 30,000 casual content providers which easily register with merchants for billing transactions on DoCoMo’s Operations Support Service (OSS). The 30 million inhabitants of the Tokyo-Yokohama- Kawasaki strip are the first in the world to experience broadband wireless communications featuring streaming video over mobile phones. Finally, there is no more diverse range of languages and cultures in the world than those found in Asia. Understandably, legal issues in copyright, trademarks, domain name ownership, responsibility and liability issues are resolved in a variety of ways. Content Value Chain Traditionally, content has moved linearly from the developer through a media outlet to the consumer. Movies went to the movie theatre and then to the consumer. With the advent of television, programming went to the TV broadcaster and then to the consumer via the television set. The traditional model fitted the content to the media type and normally content had only one media distribution outlet. In the last half of the 20th century this one-for-one relationship began to change. Movies went from the theatres to cable operators, hotels, airlines and TV. However, the greatest change came with the dynamic growth of the Internet and its use of content. Content is now available through many appliances. Content With the advent of the Internet, content was transformed and became ‘king’. While the pundits were calling content on the Internet ‘king’, consumers were demonstrating that they would not pay for content, with the exception of pornography. Some of these content types have been around for centuries, whereas television and radio programming, film entertainment, and game software are products of the 20th century. Content convergence has impacted all types of content. The most impacted has been news and music. Largely because of CNN, news has gone from being a transmission of information to being 24-hour-a-day entertainment. In the case of music the Napster phenomenon nearly crippled a global multi-billion dollar industry. All content types will be impacted by content convergence; literature has been only slightly impacted by content convergence, while at the other end of the scale music has been significantly impacted (cf. Napster) and convergence is continually forcing the industry to evolve. The Content Convergence value chain will be impacted by the increasing digitalisation of content and the ever-increasing use of new media, carriage and appliances. The demand for the rapid dissemination of content is increasing. Middleware and Application Software This link of the value chain is influenced by a combination of proprietary and industry-standard software. In the short term, no one company or standard will win out as the software today is still very content-and appliance-dependent. Video Streaming Video streaming will be primarily a vehicle for short video clips, eg, movie trailers, interviews, news clips, advertisements. The International Standards Organization (ISO) developed the MPEG-4 standard. Earlier ISO standards, MPEG-1 and 2, were successful but MPEG-4 will have to compete with an already installed base of RealNetworks and Microsoft software. Consequently MPEG-4 has not received the overall backing of the content developers. iTV Middleware Interactive television (iTV) is a merger of different technological capabilities combining entertainment and the Internet. Wireless data applications protocols allow users to access information. They have a limited range of Internet functionality, and are linked to it by handheld digital wireless devices, such as mobile phones, pagers, PDAs, etc. Wireless Application Protocol (WAP) is practically ubiquitous in Europe, while in the US the Handheld Device Markup Language (HDML) holds a similar position. In Asia-Pacific WAP has the largest market share, followed by iMode, which was developed by Japan’s NTT DoCoMo, and Microsoft Mobile Explore (MME) and Japan Telecom’s Mobile Markup Language (MML), which have equivalent market share. Wireless data, for the time being at least, is growing despite being shackled by a multiplicity of standards. Media The media assembles and packages content for the consumer. In Understanding Media (1964) Marshall McLuhan stated that ‘the medium is the message’. The form, or media, content comes in transfigures the message. Media has seen both a convergence in corporate ownership and an explosion in the number of media outlets. Television, which had a handful of channels in the past, now has hundreds, magazine titles have done similarly. This has fragmented audiences, both a boon and bust for advertisers and marketers. The Internet was the ultimate fragmentation of audience, effectively developing audiences of one. Carriage Until the Internet, carriage was simply a minor element of the content convergence value chain. There was only cable, over-the-air broadcasts, and a sampling of satellite. The cable companies addressed the Internet’s high-speed requirement first and have maintained this market leader position. Telecommunications carriers had the xDSL technology available, but were reticent to come to market for fear of cannibalising existing revenues. The cable companies originally entered the market with entertainment/television, and the telecommunications carriers watched. Again, with the advent of the Internet the cable operators entered the market first and the carriers, other than addressing the dial-up market and possibly selling some second lines, just watched. In the last couple of years the carriers have realised that broadband is effectively becoming the next dial tone and have reacted. Recently more technologies have been added to the carriage link of the value chain. Effectively, today’s content convergence’s carriage battle is between three technologies-cable, xDSL, and satellite. In the US cable has a seemingly insurmountable lead considering its natural bias toward entertainment and its existing subscriber base. Appliances One of the paradoxes of content convergence is that, although there is convergence in the industry, there is an ever-increasing supply of specialised devices. Within the appliances value chain link there are three primary categories: computers (PC / Internet); entertainment (MP3 players, etc.); and communications (information and entertainment delivered over numerous appliances). Content Carriage Effectively, content convergence’s carriage battle today is between three technologies-cable, xDSL, and satellite. Dial-up is too slow for content convergence applications and fixed wireless is a too late entrant. Wireless, even with 3G, will be a complimentary carriage method for content convergence applications. Although there is significant competition within content convergence, within the carriage link there are few competitive technologies and players will tend to consolidate. With the introduction of video-on-demand and iTV, cable has better positioning than xDSL. Cable’s entry into the telephony market via VoIP will put significant pressure on the telecom carriers. Although there is significant competition within content convergence, within the carriage link there are few competitive technologies and players will tend to consolidate. This type of merger could effectively create a ‘bottleneck’ in the content convergence value chain and propel carriage players into a content convergence leadership role. Enterprises There are several types of enterprises involved in content convergence. They must all learn to deal with a new reality. Cable Operators To the cable operators, content convergence represents an opportunity. Marketing success is finding out what you do right and doing it again. Cable operators’ expertise is in entertainment and they should emphasise it in their plans-video-on-demand, interactive television, and then voice. They will need to learn how to deal with interactive customers, after decades of dealing with a passive consumer. Telecommunications Carriers To the telecommunications carriers, content convergence is a potential turning point. Carriers will either address entertainment as a market or decide to continue to address the consumer in a ‘harvest mode’ and plan for declining market shares, declining gross margins, and a secondary position in the home. Conclusion For media companies, the financial challenge of content convergence may be may be more difficult to deal with than the challenges presented by content and other elements of the content convergence value chain. This will force media companies to continue to pursue vertical integration through acquisition. The music industry’s reaction to the Internet and content convergence provides a good lesson to other content providers with respect to content convergence: don’t under-estimate it, don’t assume it will be a while in coming, don’t take a defensive ‘it’ll pass’ stance, but do react with a full-speed strategy. Country by country, cultural, regulatory and carriage dissimilarities will force the media companies to pursue separate regional strategies.