Hype Cycle for Consumer Technologies, 2007

Transcription

1 Industry Research Publication Date: 3 July 2007 ID Number: G Hype Cycle for Consumer Technologies, 2007 Van L. Baker, Andrew Frank, Mike McGuire, Adam Daum, Jon Erensen, Leslie Fiering, Stephen Kleynhans, Thilo Koslowski, Carolina Milanesi, Paul O'Donovan, Amanda Sabia, Patti A. Reali, Elroy Jopling, Neil MacDonald, Katja Ruud The consumer electronics industry has begun to deliver the digital home promise, centering on connectivity and delivery of media to devices. Copyright holders are broadening their distribution, but consumer usability and configurability problems continue to impede the delivery of the digital future. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

2 TABLE OF CONTENTS Analysis... 4 What You Need to Know... 4 The Hype Cycle... 4 The Priority Matrix... 7 Off The Hype Cycle... 8 On the Rise... 8 Media Distribution via Game Consoles... 8 Widgets... 9 Microprojectors... 9 OLED TVs Terrestrial Digital Radio (HD Radio) At the Peak Network DVR Portable Personality Ultramobile Devices Fixed-Mobile Converged Voice Service Legal File Sharing/Legitimate P2P Digital Video Broadcasting (Handheld) Mobile TV Broadcasting HD Optical Disc Players Sliding Into the Trough PC-Based Media Center IPTV Mobile TV Streaming Online Game Consoles Wireline Home Networking (Coaxial and Power Line) Broadband Video on Demand Next-Generation Satellite Video Chat Over IP Climbing the Slope Interactive TV Digital Video Recorders HDTV Displays Mobile Video on Demand Consumer Telematics Residential VoIP Bluetooth in Automobiles Household Wi-Fi Entering the Plateau Portable Media Players Wireline Home Networking (Dedicated Ethernet Wiring) Digital Terrestrial TV Video on Demand Digital TV (Cable, Satellite) Appendices Hype Cycle Phases, Benefit Ratings and Maturity Levels Recommended Reading Publication Date: 3 July 2007/ID Number: G Page 2 of 42

3 LIST OF TABLES Table 1. Hype Cycle Phases Table 2. Benefit Ratings Table 3. Maturity Levels LIST OF FIGURES Figure 1. Hype Cycle for Consumer Technologies, Figure 2. Priority Matrix for Consumer Technologies, Figure 3. Hype Cycle for Consumer Technologies, Publication Date: 3 July 2007/ID Number: G Page 3 of 42

4 ANALYSIS What You Need to Know The pace of change in consumer technologies continues to accelerate. The transition to digital media is almost complete, and the technology to handle that media is evolving rapidly. The response of the industry to the market opportunities presented by this digital era has disrupted business models, while presenting a multitude of opportunities. The sheer number of opportunities for consumer electronics vendors, media companies and service providers has exploded as the Internet has shifted to a mainstream media delivery platform. The consumer electronics industry has begun to address the complexity of electronics, but networking solutions are still too complex for the average consumer. Media companies have begun to use alternative distribution methods that make their content more accessible, but they are still reluctant to let consumers enjoy complete control over legally acquired media content. This is despite the fact that consumers have grown to expect control over the media that they consume. The complexity of consumer technology, combined with the desire of media companies to control consumer behavior, puts a drag on the growth in consumer products for the digital home. There will be considerable experimentation with media delivery models. Consumer electronics vendors must be sensitive to the needs of the consumers, as well as the content owners, and balance these needs. For the media companies and consumer technology providers to thrive, they must enable reasonable consumer behavior without compromising copyright laws. Gartner recommends the following: Consumer electronics vendors Negotiate with media companies to reach an agreement on technologies that offer an adequate (not perfect) protection of content, without keeping potential consumer electronic products from the market. Network equipment vendors Networking technology is at the center of the digital home. Because of its complexity, the many benefits of home networking technology are not accessible by the average consumer. For the vision of the digital home to become a reality for the typical consumer, significant advances in troubleshooting and network management tools are needed. Without these, the high return rates that plague the industry will be a permanent problem. TV service providers Realize that the platform for delivery of your content will include IP networks. The service must incorporate and deliver the consumer's personal content, Internet-delivered content and traditional pay-tv content to fixed and mobile devices. Like it or not, networks in the home will have to be supported, and this includes personal and copyrighted content. Cellular phone service providers The content that resides on mobile terminals will not necessarily be delivered via your network. Consumers will want to supplement this content with personal content, especially music, that they place on their handset. Media companies Do not use digital rights management (DRM) technologies to try to control consumer behavior. Enable reasonable portability of legally acquired content, and use DRM and forensic watermarking technologies to identify gross offenders and prosecute them under the letter of the law. The Hype Cycle Consumer technologies are exploding in the era of digital content. Consumers are faced with a growing array of devices and Internet-centric services that are designed to help them find, create, Publication Date: 3 July 2007/ID Number: G Page 4 of 42

5 store and consume content. Mobility is an important aspect of this growing trend, because consumers are finding that they want to take their content with them on dedicated devices, cellular handsets and other devices that access content in real time from services delivered via multiple networks. Although much of this content is for personal entertainment, much of its functionality can be applied to work environments. Therefore, much of this consumer technology is finding its way to the workplace, and the impact on IT organizations is significant. The impact on the media industry is even more significant, because advances in consumer technologies are causing fundamental changes in media industry business models. Consumers are faced with a rapidly growing landscape of media to choose from. As they struggle to find the media that they want to consume, they seek out devices and services to help them navigate the massive amount of content available to them, in a struggle to personalize their media experience. Much of the media content is consumer-generated media that is uploaded by amateurs and made available to consumers via sites such as YouTube and Veoh. An increasing amount of this content is collections of media drawn from different sources and put together in mashups that make it difficult for media providers to track what is happening to their content as it becomes this consumer-generated media. The Internet is increasingly a dominant source for media content, and devices and services that use the Internet to deliver media to consumers are growing rapidly. The technology that is central to this explosion of consumer technologies and services is connectivity. Every consumer electronics manufacturer is touting a vision of the digital home that has content flowing freely between multiple devices in the home and on portable devices that are synchronized with their computers. Mobility of content from these synchronized sources, as well as media delivered on demand, is an increasing priority for consumers. This vision is increasingly the desire of connected consumers who want their content anywhere and anytime on any device that is available to them. This vision has not yet been realized because of its overwhelming complexity and content-protection barriers. Consumers have yet to adopt the WAN services, opting instead to load content from their PCs or use Wi-Fi hot spots to gather the media that they desire at the moment. As long as data plans stay as costly as they are and carriers attempt to maintain a walled approach to media services, consumers will continue to avoid WAN services. Consumers have clearly shown that they want to identify and acquire media that suit their tastes and be able to consume media in any manner that they choose. Anything short of this will likely be rejected by the market. The desire for snippets of content continues to grow as long-form content diminishes in importance. Consumer technologies that facilitate this sampling of content will likely prevail. This Hype Cycle attempts to portray this rapidly changing landscape and give Gartner's perspective on where each of these technologies lies on the adoption curve. Hype Cycles related to this one include the media industry and PC technology Hype Cycles. Publication Date: 3 July 2007/ID Number: G Page 5 of 42

6 Figure 1. Hype Cycle for Consumer Technologies, 2007 visibility Legal File Sharing/Legitimate P2P Fixed-Mobile Digital Video Broadcasting - Handheld Converged Voice Service Mobile TV Broadcasting Ultramobile Devices HD Optical Disc Players Network DVR Portable Personality PC-Based Media Center Video on Demand Terrestrial Digital Radio Digital Terrestrial TV (HD Radio) IPTV Wireline Home Networking OLED TVs Mobile TV Streaming (Dedicated Ethernet Wiring) Microprojectors Online Game Consoles Portable Media Players Digital TV Widgets (Cable and Satellite) Wireline Home Household Wi-Fi Networking Bluetooth in Automobiles (Coaxial and Power Line) Residential VoIP Media Distribution via Game Consoles Consumer Telematics Broadband Video on Demand Mobile Video on Demand HDTV Displays Next-Generation Satellite Digital Video Recorders Interactive TV Video Chat Over IP As of July 2007 Peak of Technology Trough of Plateau of Inflated Slope of Enlightenment Trigger Disillusionment Productivity Expectations time Years to mainstream adoption: obsolete less than 2 years 2 to 5 years 5 to 10 years more than 10 years before plateau Source: Gartner (July 2007) Publication Date: 3 July 2007/ID Number: G Page 6 of 42

7 The Priority Matrix Many important technologies surface in the consumer technology Hype Cycle. These include coaxial and power line networking technologies, because these may offer the bandwidth to transport multiple streams of high-definition (HD) video in the consumer's home and HD optical disc players, which will deliver content to the rapidly growing HDTV market. Online game consoles stand to change the business model of the gaming industry and media distribution platform for every type of media. With rising game development costs, developers and publishers will struggle to find additional revenue sources for next-generation game titles. Connectivity of the console creates a platform for the distribution of TV shows and movies, including HD versions of this content. This same connectivity enables episodic business models and in-game commerce. The digital video recorder has finally achieved critical mass in the market but may migrate to the network-based implementation of the technology, pending legal battles between the media companies and TV service providers. Mobility is growing in importance as consumers increasingly expect to be able to gain access to any content at any time. This will give rise to ultramobile devices that deliver an uncompromised Internet experience on a battery-operated pocket-size device. These devices are early in development but will grow in importance during the next few years. In addition to the technologies that are rising in importance, many emerging technologies merit attention, such as organic light-emitting diode (OLED) TVs, portable personality solutions and microprojectors. These technologies, although not proven, have the potential to have a significant impact in the market. Publication Date: 3 July 2007/ID Number: G Page 7 of 42

8 Figure 2. Priority Matrix for Consumer Technologies, 2007 benefit years to mainstream adoption less than 2 years 2 to 5 years 5 to 10 years more than 10 years transformational Digital TV (Cable and Satellite) Broadband Video on Demand IPTV Portable Media Players Digital Video Recorders Video on Demand high Digital Terrestrial TV Residential VoIP Legal File Sharing/ Legitimate P2P Online Game Consoles Consumer Telematics Interactive TV Portable Personality moderate Mobile Video on Demand Next-Generation Satellite Wireline Home Networking (Dedicated Ethernet Wiring) Bluetooth in Automobiles Fixed-Mobile Converged Voice Service HD Optical Disc Players HDTV Displays Household Wi-Fi Mobile TV Streaming Network DVR Digital Video Broadcasting - Handheld Media Distribution via Game Consoles Microprojectors Mobile TV Broadcasting Wireline Home Networking (Coaxial and Power Line) OLED TVs PC-Based Media Center Terrestrial Digital Radio (HD Radio) Video Chat Over IP Widgets low Ultramobile Devices As of July 2007 Source: Gartner (July 2007) Off The Hype Cycle Broadband video phones have stalled in the market and been removed from the Hype Cycle. Digital radio (satellite) has matured and been removed from the Hype Cycle. Digital TV has been allocated to other technologies on the Hype Cycle, specifically interactive TV, HDTV displays, digital cable and satellite, and digital terrestrial TV. Universal search has matured and been removed from the Hype Cycle. On the Rise Media Distribution via Game Consoles Analysis By: Van Baker; Andrew Frank Publication Date: 3 July 2007/ID Number: G Page 8 of 42

9 Definition: Game consoles are being positioned as media hubs that are used to deliver content to consumers that is not designated as game content. The early types of content include movies, TV shows and short-form videos. Position and Adoption Speed Justification: Online game consoles are just beginning to achieve a critical mass in the gaming market, with online consoles approaching 10 million units between the different manufacturers. Although the growth is good, it is still well short of the total number of game consoles being used in the market. As a result, the online console does not yet represent a large opportunity for the distribution of traditional nongaming media content. The game console installed base will continue to convert to online gaming, and this platform will evolve to an attractive platform for downloaded media, whether gaming or nongaming content. User Advice: Media companies should look to game console vendors as potential partners for the delivery of nongaming media content. Business Impact: Incremental distribution platforms for media companies will target 18- to 34- year-old males. Benefit Rating: Moderate Market Penetration: Less than 1% of target audience Maturity: Emerging Sample Vendors: Microsoft; Nintendo; Sony Widgets Analysis By: Van Baker; Andrew Frank Definition: Widgets are small pieces of embeddable code that can add feed-driven functionality to a Web page or desktop. Position and Adoption Speed Justification: Widgets are primarily focused on the delivery of news, weather and other information. Initially deployed on the Apple desktop, Microsoft has followed suit in Vista with what it refers to as "gadgets." In addition to PC desktop software widgets, the widgets that are targeted at Web pages are proliferating rapidly, with sites devoted to collections of Web page widgets. Some widgets are being deployed as advertising. User Advice: Use widgets as a means to stay in touch with consumers of your media content. Widgets can be considered valuable by consumers, but they must be maintained regularly and will be abandoned by consumers if the content is stale. Business Impact: This is a tool in the Web 2.0 toolset that can be used to help retain regular communications with consumers. Benefit Rating: Moderate Market Penetration: 1% to 5% of target audience Maturity: Emerging Sample Vendors: Apple; Microsoft Microprojectors Analysis By: Paul O'Donovan; Leslie Fiering Publication Date: 3 July 2007/ID Number: G Page 9 of 42

10 Definition: Microprojectors are small projection devices for computer output that use laser diffraction instead of traditional projection techniques to display static or video images that focus at any distance from the projector on flat, curved or nonuniform surfaces. These will first appear as matchbox-sized peripherals used by traveling workers to accompany traditional notebooks or smartphones. Ultimately, they are targeted to be embedded in notebooks and handhelds, and used as heads-up displays. Position and Adoption Speed Justification: We do not expect to see products incorporating this technology before User Advice: Although the idea of carrying a microportable projector for business purposes may seem attractive, there are issues concerning power consumption and usability in all lighting situations. Because most companies have a number of display devices available for visitors, a microprojector may be an expensive backup. Business Impact: Early microprojector peripherals will enable traveling workers to make presentations in any environment without depending on the availability of full-sized projectors on location. Embedded projectors will enable smaller notebooks to display content to wider audiences than could the basic screen or provide more-readable output in handheld devices. Although there is speculation that microprojectors can be embedded in phones, we believe that the additional size and power draw will make this impractical. Benefit Rating: Moderate Market Penetration: Less than 1% of target audience Maturity: Embryonic Sample Vendors: Light Blue Optics; Microvision; Texas Instruments Recommended Reading: "Cool Vendors in User-Interface Technology Innovation, 2007" OLED TVs Analysis By: Paul O'Donovan Definition: Organic light-emitting diodes (OLEDs) are LEDs with an emissive electroluminescent layer made from organic compounds. The layer is usually made of polymers that emit red, green or blue light when a voltage is applied. A matrix of lines and columns creates an array of pixels that can be deposited onto a range of substrates. The response time of the individual pixels is high, and with no backlight as in a liquid crystal display (LCD), OLED displays offer high-quality, high-contrast full-motion video. Currently, OLED displays are used in handheld portable applications due to high manufacturing costs and because of limited lifetimes of the blue OLEDs. However, recent technical developments in the manufacturing process reduced production costs and will enable larger TV-sized panels to be manufactured, offering an alternative to LCD as a TV display technology. Position and Adoption Speed Justification: We expect to see OLED TVs of approximately 20 inches within the next two years and panels larger than 30 inches within the next four years. User Advice: Although there have been developments to improve the lifetime of blue lightemitting compounds, early OLED TVs coming to market in 2007 will be small-panel models of less than 22 inches. These are not designed for normal living room use, but as the second or third TV in the home. The expectation is that, with ongoing developments to increase the lifetime of the blue compounds to 20,000 hours, manufacturers will be able to produce 32-inch and larger OLED TVs in mass-market volumes. Publication Date: 3 July 2007/ID Number: G Page 10 of 42

11 Business Impact: OLED display panels will find multiple applications in handheld and mobile applications, as well as in the consumer TV market. We see OLEDs as a successor to the LCD panel, offering lower power consumption, higher contrast ratios and thinner, lighter displays. OLED panels are already being developed for laptop computers, reducing the average weight by at least 30%. For the TV market, when OLED TVs reach lifetimes in excess of 20,000 hours and recent developments in manufacturing costs enable the same or lower cost-levels as LCD panels today, OLED will displace LCD and plasma as the de facto TV display technology for the mass market. Benefit Rating: Moderate Market Penetration: Less than 1% of target audience Maturity: Emerging Sample Vendors: Cambridge Display Technologies; Sony; Toshiba; Universal Display Corporation Terrestrial Digital Radio (HD Radio) Analysis By: Van Baker; Michael McGuire Definition: Otherwise known as high-definition (HD) radio in the industry, this is the broadcast of digital radio signals in the spectrum that is occupied by the radio frequencies. This technology uses the Digital Audio Broadcasting and Digital Radio Mondiale standards (in Europe, Canada and parts of Asia/Pacific), in-band-on-channel (called "HD radio" in the United States), and digital multimedia broadcasting (in South Korea and China). Digital radio enables multicasting, data services and potential new revenue for radio broadcasters. Position and Adoption Speed Justification: HD radio has finally hit its stride, with many major radio stations broadcasting in HD and promoting it during their broadcasts. There are finally an adequate number of digital radio receiver suppliers, and the products are taking hold in retail. The question remains as to whether consumers will adopt the technology. It is expected that this technology will mature fairly quickly because of the benefits of digital over analog. User Advice: Look to auto manufacturers to see how extensive their deployment of digital radio receivers is in their new models because this may clarify the future of HD radio. Business Impact: The deployment of digital terrestrial radio has the potential to accelerate the demise of analog radio, but it will still be with us for quite some time, unless the U.S. Federal Communications Commission chooses to reclaim a portion of the radio spectrum. Digital terrestrial radio is a bigger threat to digital satellite radio than analog because it may slow its adoption. Benefit Rating: Moderate Market Penetration: Less than 1% of target audience Maturity: Emerging Sample Vendors: Blaupunkt; Boston Acoustics; Kenwood; Panasonic; Sony At the Peak Network DVR Analysis By: Elroy Jopling; Patti Reali Publication Date: 3 July 2007/ID Number: G Page 11 of 42

12 Definition: Network digital video recorders (DVRs), alternately known as network personal video recorder (PVRs), are similar in their consumer functions to their stand-alone DVR (PVR) counterparts, enabling the consumer to record, store and play back content with DVD-like functions. The primary difference between DVRs and network DVRs is that the DVR has storage on a hard drive within the set-top box, while the network DVR storage is on the network. For larger operators, the required storage will grow to be in the thousands of terabytes. Position and Adoption Speed Justification: Adoption of network DVRs will vary by geography. North American cable and IP television (IPTV) operators are interested in the technology, and it is not difficult to deploy. Also, from a business rationale, the return on investment is attractive because a lower-priced set-top box can be used and truck rolls can be reduced. However, U.S. courts have ruled that network DVRs supposedly contravene copyright laws, even though the network DVR works similarly to a stand-alone DVR in storage functions and playback features. The issues are primarily business ones, related to payment for copyrighted content, and ultimately, it will come down to the crafting of agreements between service providers and content owners, as well as what service providers are willing to pay for extending the rights for this content to network DVR platforms. The court ruling is under appeal. Cablevision is the plaintiff in the case and has discontinued plans to introduce the network DVR. Time Warner Cable, however, has worked with the content owners and networks, introducing its network DVR functionality. The timing and outcome of the legal maneuvering are questionable. Network DVR will evolve more quickly outside of North America where copyright laws are not as aggressively pursued. Also, although North American cable operators have been successful in deploying DVRs, the same is not true in other geographic locations. From a business case perspective, many service providers in other regions will skip the set-top box DVR and move directly to the network DVR because of the higher capital expenditure requirements for set-top based DVRs. Examples of this strategy already exist in some European countries and will provide significant potential in high-growth markets such as India and China. For most non-north American countries, network DVR adoption will be based on their IPTV rollouts. User Advice: For telecommunications companies and cable operators, network DVR provides a potent weapon against satellite operators while addressing the growing demand for personalization and customization of the consumer video-viewing experience that time-shifting technology enables. Regional implementations will vary because of copyright laws, and their interpretations and carriers must be prepared to address these discrepancies with different strategies. No matter what the regional differences are, the operators must have a working relationship with the studios and networks. Part of this relationship is educating the studios and networks about the accruable benefit of the network DVR. The consumer will continue to timeshift. A network DVR can offer significant benefits over a set-top box DVR. A network DVR can handle how advertisements are treated, from not allowing ad skipping to enabling the advertiser to update and replace old advertisements for more targeted advertising. Business Impact: Network DVR will affect most, if not all, the players in the consumer paytelevision value chain. For consumers, its positioning facilitates greater time-shifting and moving to a "what you want and when" world. Although cable and telecommunications companies benefit from lower capital and operating expenditures, satellite operators will be the losers if they don't enable a robust and viable return path with greater enhanced video capabilities other than push video on demand. Benefit Rating: Moderate Market Penetration: 1% to 5% of target audience Maturity: Adolescent Publication Date: 3 July 2007/ID Number: G Page 12 of 42

13 Sample Vendors: C-Cor; Cisco Systems/Scientific-Atlanta; Ericsson/Tandberg Television; Kasenna; Sun Recommended Reading: "Dataquest Insight: The Future of the IPTV Experience" Portable Personality Analysis By: Leslie Fiering; Neil MacDonald Definition: Portable personality is a set of tools and technologies that decouples users from dependence on a specific computing device and enables them to recreate their preferred work environments across various system types and locations. At its core, a portable personality needs to be stored somewhere in a centralized server, in the cloud or on a flash drive that the user carries. Gartner's portable personality architecture includes a set of user data, applications and preferences (the preferred work environment); a method to "package" these together; a place to store it; and a way to deliver it to any number of "target" systems, which could be PCs, notebooks, thin clients or smartphones. Position and Adoption Speed Justification: There is strong demand for "zero-weight" PCs the ability to have full PC computing functionality anywhere and at any time without the need to carry heavy devices or be restricted to only one specific machine. The key enablers are rapid price drops for flash storage and advances in PC virtualization, which provide multiple ways to package and deliver portable work sessions. The inhibitors are the lack of secure, standardized end-to-end solutions and, most importantly, the uncertainty of finding trusted target PCs or other target devices in each required instance. User Advice: Portable personality solutions are not ready for mainstream adoption. Major limitations in regard to security, compliance, licensing, application compatibility and information protection must be addressed. However, portable personality can be viable in situations in which known, trusted target PCs are available for example, in managed machines in which you want mobility among PC systems throughout the enterprise, whether in a local campus or throughout a worldwide network. Business Impact: The portable personality eliminates the need for a user to carry a heavy device from location to location (such as from office to office or from the office to home) or through airports. The user is also free to use different types of devices at different times or for different types of jobs. More-progressive IT planners are looking for ways to isolate personality from the image and the enterprise dataset to make the user more portable. The user can work from any machine in any office, and migrations would be facilitated by eliminating the personalization step. Benefit Rating: High Market Penetration: Less than 1% of target audience Maturity: Emerging Sample Vendors: Ceedo; LogMeIn; Mobikey; RIngCube; U3; VMware Ultramobile Devices Analysis By: Leslie Fiering; Van Baker Definition: Ultramobile devices (UMDs) are a new category of handheld computers running on Intel's Ultra Mobile Platform silicon optimized for low cost, multiple radio support and long battery life. There are two major designs: the ultramobile PC (UMPC), which is now on the market with seven-inch touch screens running Windows, and the recently announced (due in 2008) Publication Date: 3 July 2007/ID Number: G Page 13 of 42

14 mobile Internet device (MID), which is an Internet-centric design running Linux with a four- to fiveinch screen. The MID will be consumer-oriented and is likely to provide greater volume potential than UMPCs by offering entertainment, information, "staying in touch" and location-based services in a smaller, more-convenient form factor. Additional microprocessor vendors are likely to create devices in the UMD category or else redefine the category to showcase their strengths. Position and Adoption Speed Justification: The first wave of UMPCs were introduced in 2006 and are still in the "proof of concept" phase. MIDs are expected with the next generation of the Ultra Mobile Platform code, which is due in 2008 and named "Menlow." Significant gains in price, battery life and radio support are expected in User Advice: The current products do not merit significant attention from corporate IT, because of the immaturity of product, but planners should monitor progress during the next two years for potential UMPC niche implementation in the latter part of the decade. Although MIDs will largely be consumer-oriented, many employees will buy these devices to access Web-based enterprise applications. Business Impact: UMDs will mainly be consumer "life style" devices, which may become business , sales or image-viewing platforms. Benefit Rating: Low Market Penetration: Less than 1% of target audience Maturity: Emerging Sample Vendors: Founder; OQO; Samsung Recommended Reading: "Intel Targets Two Platforms for New Devices" "Intel Embraces Linux for Its Mobile Internet Devices" Fixed-Mobile Converged Voice Service Analysis By: Katja Ruud Definition: Service convergence is when an operator offers services that are integrated across stand-alone services, such as voice mail or a directory system that embraces voice over Internet Protocol (VoIP) and cellular subscripts. A fixed-mobile converged voice offering is a similarly integrated voice offering using one handset. Position and Adoption Speed Justification: There are more offers now than in 2005, but still only a few commercial fixed-mobile converged voice services. However, several more are in trial and further service launches are expected during the remainder of 2007 and beyond. Current services now use Wi-Fi to connect to the fixed network, but the range of handsets continues to be limited. User Advice: Users should carefully assess the potential return on using these services, including the cost of swapping out the established handsets. Mobile operators may provide location-based tariffs in response or larger buckets of minutes to counter a potential threat. Business Impact: This affects the voice services and enterprise uses, and provides an opportunity to eliminate duplication of voice services within one enterprise. Duplication can be costly as illustrated by duplicate handsets, duplicate subscriptions, duplicable numbers and management of multiple providers, including provisioning and billing. Fixed-mobile converged Publication Date: 3 July 2007/ID Number: G Page 14 of 42

15 voice services are aimed at meeting the requirements for mobility and convenience in the form of one handset, one voice mail and one number, and to do so at a lower cost than relying on a pure cellular solution. Depending on options from mobile operators, the effect can be moderate from a cost perspective and high from a convenience perspective. Benefit Rating: Moderate Market Penetration: Less than 1% of target audience Maturity: Adolescent Sample Vendors: BT Group; TeliaSonera Legal File Sharing/Legitimate P2P Analysis By: Michael McGuire Definition: Direct data transfers among end-user PCs (popularly known as peer-to-peer [P2P] file sharing) is being used for legitimate video and music distribution. For example, BitTorrent launched an online media network, which has movies, video, music and game content licensed directly from rights holders. The models can be consumer paid or advertising paid, and they use playlist sharing, friends' recommendations or other viral effects to support legal distribution of entertainment content. Position and Adoption Speed Justification: Beyond BitTorrent, entities such as Joost (developed by the team that created Skype) will use a P2P architecture to distribute licensed content. In addition to the pure P2P networks, some content delivery networks (CDNs), such as CacheLogic, leverage P2P infrastructure to lower delivery costs. User Advice: Backbone providers, telecommunications companies and media companies that want to get into the exploding market for online video delivery must examine and review P2P or BitTorrent-based architectures as important alternatives to traditional network architectures for delivering large video files. Business Impact: This technology leverages low-cost distribution models and reduces the use of pirate P2P sites by offering legal alternatives. It has the potential for significant impact on IPTV providers' tiered-pricing models. Carriers will likely compete on distinctive services, such as HD content, or get P2P service providers to pay for caching-type services. Benefit Rating: High Market Penetration: 1% to 5% of target audience Maturity: Emerging Sample Vendors: BitTorrent; CacheLogic; imesh; Peer Impact (owned by Wurld Media) Digital Video Broadcasting (Handheld) Analysis By: Carolina Milanesi Definition: Digital video broadcasting handheld (DVB-H) is based on the digital video broadcasting terrestrial (DVB-T) standard which is used to broadcast digital terrestrial television. DVB-H was developed to account for the limited battery life and reception problems associated with the use of smaller handheld devices such as mobile phones. To optimize battery life, for instance, it uses a technique called time-slicing, where bursts of data are periodically Publication Date: 3 July 2007/ID Number: G Page 15 of 42

16 received, enabling it to power off when it is inactive to save power. To improve performance over DVB-T, DVB-H uses forward error correction. Position and Adoption Speed Justification: Many DVB-H trial projects were run in 2005 and 2006, in Australia, Finland, France, Germany, Italy, Spain, the U.K. and the U.S. Commercial services were launched in Italy, Albania and Vietnam in 2006, and more launches are expected in 2007 and 2008 in countries such as Finland, France, Germany, Russia and Spain. The key hurdle for widespread launch of commercial DVB-H services remains the lack of free spectrum. Although we expect mobile TV to become a key service forwarding the future, we believe broadcasting television will be only one part of the TV/video offering that carriers will have. Furthermore, this will be a pushed service, rather than a service that consumers will demand. User Advice: Mobile carriers should: Guarantee quality, variety and exclusivity of content Drive uptake so that the market looks interesting to advertisers and they can experiment with advertising-funded content Make mobile TV a unique "TV experience" Business Impact: Mobile TV broadcasting will affect all areas of video production, rights management, syndication and advertising. Benefit Rating: Moderate Market Penetration: 1% to 5% of target audience Maturity: Emerging Sample Vendors: DiBcom; LG; Nokia; Philips; Qualcomm; Sagem; Samsung; Texas Instruments Recommended Reading: "Dataquest Insight: Revenue Model for Mobile TV Needs Tuning" Mobile TV Broadcasting Analysis By: Carolina Milanesi Definition: This involves the broadcasting of digital TV programs to cellular handsets using technologies such as Digital Video Broadcasting Handheld (DVB-H) and Terrestrial Digital Multimedia Broadcasting (T-DMB). Position and Adoption Speed Justification: Many trial projects were run in 2005 and continued in 2006, in countries such as Australia, Finland, France, Germany, Italy, Spain, the U.K. and the U.S. Commercial services were launched in a few markets Italy, Germany and the U.K. among them in the second half of 2006, to add to those already operating in South Korea and Japan. In the U.S., MediaFLO has recently launched a commercial service with Verizon Wireless. The key hurdle for widespread launches of commercial DVB-H services remains the lack of free spectrum. DMB technology remains confined to Asia for the time being. Although we expect mobile TV to become a key service going forward, we believe broadcasting television will be only one part of the TV/video offering that carriers will have. Furthermore, this will be very much a pushed service, rather than a service that consumers demand. User Advice: Mobile carriers should: Publication Date: 3 July 2007/ID Number: G Page 16 of 42

17 Guarantee quality, variety and exclusivity of content Drive uptake so that the market looks interesting to advertisers and they can then experiment with advertising-funded content Make mobile TV a unique "TV experience" Business Impact: Mobile TV broadcasting will affect all areas of video production, rights management, syndication and advertising. Benefit Rating: Moderate Market Penetration: 1% to 5% of target audience Maturity: Emerging Sample Vendors: DiBcom; LG; Nokia; Philips; Qualcomm; Sagem; Samsung; Texas Instruments Recommended Reading: "Dataquest Insight: Revenue Model for Mobile TV Needs Tuning" HD Optical Disc Players Analysis By: Van Baker; Michael McGuire Definition: Next-generation optical disc players include Blu-ray and high-definition (HD)-DVD optical disc players. These competing formats offer consumers the ability to play back movies in HD, including 720-line progressive scan (720p) and 1,080-line interlaced scan (1080i) resolutions. The capacity of these discs is three to five times that of dual-layer DVDs. Position and Adoption Speed Justification: The rise of two competing incompatible formats in the market shows that the consumer electronics industry has a short memory. The last time the market had two competing formats (VHS and Beta), delays resulted, and adoption failed to accelerate until a clear winner emerged with 20% penetration and at least a 20 percentage point lead in market share. Consumers will likely wait until a clear winner emerges before purchasing a next-generation DVD player. The wild card in the mix is the Sony PlayStation 3 game console, which has a Blu-ray player built in. The console has been slow to penetrate the market. This has given the HD-DVD format a foothold that was larger than expected in the early going and prolonged a format war that could have been over by now were it not for the PlayStation 3 problems. This has delayed the emergence of an eventual winner in the market. We have begun to see the emergence of dual-format players, but they are expensive and will likely not solve the problem. In addition, Time Warner has proposed a dual-format media option, with Blu-ray on one side and HD-DVD on the other, but this has gained little momentum in the market. User Advice: Media companies should publish content in the format that they prefer to prevail initially but should be prepared to switch to either the winning format if one emerges or both if it looks as if a war of attrition is taking place. PC vendors should wait until a winner emerges but, in the interim, offer both formats in build-toorder configurations. Business Impact: This technology will ultimately become mainstream, but it will take a while because of the competing formats. In the interim, it will increase costs for media companies, which must distribute content in each format to satisfy a small market or try to pick a winner and surrender the potential associated with the competing format. The technology will affect consumer electronics companies and media companies, as well as TV service providers. TV manufacturers will be the least impacted, because the interface for most HDTVs has already Publication Date: 3 July 2007/ID Number: G Page 17 of 42

18 been established (whether Digital Visual Interface [DVI] or High-Definition Multimedia Interface, which is backward compatible with DVI). Benefit Rating: Moderate Market Penetration: Less than 1% of target audience Maturity: Emerging Sample Vendors: Sony; Toshiba Sliding Into the Trough PC-Based Media Center Analysis By: Van Baker; Jon Erensen; Stephen Kleynhans Definition: PC-based media centers use PCs to capture, access, store, synchronize and consume digital entertainment content. Although late-model PCs can provide at least some of these capabilities, few systems are primarily purchased to serve as an entertainment hub. Media center use implies the ability to bridge content to a TV or traditional entertainment system in the home and enable familiar media access scenarios (for example, remote control for navigation and media control or a 10-foot user interface for full-screen interaction and full-fidelity audio). Media center PCs fall into these categories: Used for storing and consuming traditional media, including video, movies and music (for example, as an entertainment device) Connected to a traditional entertainment center (TV, home theater or stereo system), whether directly or indirectly (direct memory access), although this should be considered a subset of the first category Position and Adoption Speed Justification: The maturity of the PC as a media center differs, based on the location in the home. Living room PC deployment remains immature, because of the inherent instability that comes with a consumer programmable device, which, in turn, makes it a poor choice as a dedicated TV platform for the average consumer. However, when deployed in bedrooms, dens and other traditional locations in the home, advanced media-handling capabilities are seen as a bonus by consumers, who want to explore the opportunity for consumer-created digital media or access the rich-media content that is available through the Internet. The penetration of the PC-based media center will increase dramatically with the adoption of Windows Vista, because the Windows Media Center Edition capabilities are included with the premium home version of the OS. This will expose many more consumers to the advanced media-handling capabilities of the PC-based media center. Apple includes media capabilities in its Macs, which ship with a remote and the Front Row 10-foot user interface. Furthermore, the arrival of Apple TV has increased consumer awareness of the ability to link a TV to a PC through a media adapter. Although few PCs will be in the living room, increasing home networking options and system performance are letting more consumers use their PCs to record or watch TV, store or synchronize music libraries, or manage a family archive of digital memories. However, complexity and mismatched user expectations remain impediments to broad acceptance. User Advice: Assume that most of the Windows Vista systems sold to consumers will have media center capabilities and that consumers will increasingly use these features to access richmedia content and produce consumer-created digital content, such as digital movies, podcasts and video blogs. This platform will present media companies with significant opportunities for distribution of traditional media properties. Consumers will increasingly use PCs to watch Publication Date: 3 July 2007/ID Number: G Page 18 of 42

19 traditional television content, listen to radio programming and consume short- and long-form content, outside of the traditional living-room venue. These consumers come from an attractive demographic in terms of media consumption and disposable income. As such, they are an attractive market for any type of business. Business Impact: The PC-based media center is an effective platform for the delivery of any media type, as well as rich-media advertising. As such, businesses should plan to make further use of the Internet-based delivery of products and services. This delivery can be via advertisingfunded business models as well as direct product sales, subscriptions and rental models. In addition, any company that uses TV as an advertising medium has another platform in the home for the delivery of advertising in long- and short-form content. Benefit Rating: Moderate Market Penetration: 5% to 20% of target audience Maturity: Adolescent Sample Vendors: Dell; HP; Intel; Microsoft; Sony; Toshiba IPTV Analysis By: Adam Daum; Patti Reali Definition: Internet Protocol television (IPTV) refers to video services delivered to TV sets over managed IP telecommunications networks. The networks may be copper, fiber or fixed wireless; the video streams may be standard or high-definition; and the services typically employ advanced compression (AVC) technologies such as MPEG-4, H.264 or VC-1. IPTV services are normally provided by telephone companies in competition with cable or satellite TV providers; however, cable TV companies may use IPTV to deliver their services to households that are not passed by cable. Position and Adoption Speed Justification: IPTV has the potential to be transformational. For telephone companies, it provides a way to respond to triple-play offerings from cable TV operators, to enter the digital media ecosystem and to establish a platform in the home to support a wide variety of future services. For consumers, it could transform the TV-viewing experience, improving navigation and options for on-demand consumption and integrating the TV with both the PC and mobile devices. However, many factors will slow adoption. These include consumer inertia, lack of product differentiation, market saturation, highly competitive multichannel TV markets, immature technology, telephone companies' lack of experience in content aggregation and marketing, unproven business models, and increasing competition from video delivered via the public Internet. User Advice: Expect market development to vary by region, with U.S. markets lagging because of delays in infrastructure build-out, high investment requirements and lack of clarity in the regulatory area. Europe will remain the leading region in the short term, spearheaded by France, but we expect the Asia/Pacific region to become the leader in subscriber numbers from Key beneficiaries in the midterm will be the equipment technology suppliers and system integrators. Service provider opportunities are contingent on the ability to differentiate services, especially in regions with significant satellite and cable deployment. Service providers should therefore look beyond premium content in their search for differentiation, considering price, unbundled content, consumer-generated content, interactive services, Publication Date: 3 July 2007/ID Number: G Page 19 of 42

20 integrated communication services, convenience/flexibility, navigation/search and an improved overall customer experience. Business Impact: IPTV will help drive convergence of the communications and media industries. In addition, it offers a new distribution channel for media, new revenue streams and bundling options for telephone companies, and an opportunity for cross-platform integration of services and applications. Benefit Rating: Transformational Market Penetration: 1% to 5% of target audience Maturity: Emerging Sample Vendors: AT&T; Belgacom; BT; Deutsche Telekom; Fastweb; France Telecom; PCCW Limited; Swisscom Recommended Reading: "IPTV World Forum 2007 Offers a Reality Check" "IPTV in France: Free Tests Low-End-Disruptor Model" "Customer Experience Is King" "Key Issues for Carrier Network Infrastructure, Applications and Wireline 2007" "Hybrid TV Services Explore New Approach to European Markets" "Leading IPTV Carriers and Their Technology Vendors" "Findings From the Gartner 2006 Global Research Meeting: IPTV Is a Platform, Not a Product" "Forecast: IPTV Subscribers and Service Revenue, Worldwide, " Mobile TV Streaming Analysis By: Carolina Milanesi Definition: This refers to the streaming of live TV from cellular networks to mobile handsets using narrowcasting or multicasting technology. Position and Adoption Speed Justification: As more third-generation (3G) networks are launched across the world and as mobile operators try to find ways to convince consumers to transition to them, video streaming has been growing in importance, and many live streaming services are now being offered. User Advice: Mobile carriers should offer the right content at the right price. Operators should add a few basic channels to the data/entertainment packages they offer, with more available as premium content. Mobile operators should not count on advertising to substantially subsidize TV services in the next five years because the subscriber base remains relatively limited. As the installed base grows, making it more attractive to advertisers, mobile operators should experiment with advertising possibly offering an opt-in/opt-out option to users because the level of tolerance will be different. Business Impact: The majority of consumers will be receiving TV services as part of their monthly data or entertainment bundle. Of the total subscribers in 2006 that subscribed to a TV service, only 5% of cellular subscribers actually paid for a premium service. This number will grow to 29% by Of the remaining subscribers, only a minority will be active users of TV services. Publication Date: 3 July 2007/ID Number: G Page 20 of 42