UK: Media Predictions - TMT Trends 2008 – Part 1

Last Updated: 22 January 2008
Article by Deloitte Technology, Media & Telecommunications Industry Group

Most Read Contributor in UK, August 2017


Welcome to the 2008 edition of the DTT Global TMT Industry Group's Media Predictions.

As predicted in last year's Media report, social networking has continued to gain in popularity, and our suggestion that concerns about privacy and user safety would grow proved correct. New media, too, have enjoyed a positive year, although their power relative to traditional media has been more openly debated, and the continued dominance of television, radio and print more widely acknowledged. Also, as suggested last year, the success of virtual worlds was put in perspective during 2007, as accurate usage data became available.

The so-called long tail remained tightly curled, with most consumers defaulting to populist content, rather than spending time seeking niche content. VoD grew, as expected, but from a low base and at a much slower pace than others suggested, largely because of limited available bandwidth, and its knock-on effect on quality. However, on the Internet, user-generated content continued to reign supreme, with the volume of uploads and downloads continuing to surprise, though not as much as the prices paid for companies in the sector. And as suggested, mainstream media companies started to use social networking sites as a means of promoting their content and schedules.

The use of one form of participation in television – competition television – has been affected by a number of inquiries into authenticity. The print media began to make more symbiotic use of the Internet, and record revenues were posted for online activities. And China, as predicted, remained a hard nut to crack.

The outlook for the media sector in 2008 is similarly varied. This year's Predictions cover potential obstacles ahead for online advertisement; a novel reinvention of the e-Book; the growing carbon footprint of the living room; the increasingly complementary relationship between Internet TV and its broadcast cousin; the decline of online piracy and the growth in counterfeiting; the diversification of movie theaters; the possible reinstatement of music as a tangible, as opposed to virtual, product; the legitimization of the Internet's newsmakers; the growth in offshoring in the media sector, and the continued travails of convergence between media and technology.

I am often asked how the DTT TMT Global Industry Group's Predictions differ from the many similarly titled reports produced by other organizations. I believe Predictions has a unique combination of objectives and methodology.

The Predictions series provides a diverse selection of views and thoughts that challenge, inform and engage industry leaders and executives. It neither aims, nor claims to be a comprehensive forecast of every anticipated event. Its aim is to provide a point of view, but by the very nature of predictions, the outcome may differ from original expectations.

The inherent unpredictability of the global media sector can be mitigated by having a robust methodology that synthesizes multiple sources of information and a wide body of opinions that require thorough peer reviews. The 2008 series of Predictions has drawn on internal and external inputs from conversations with member firm clients, contributions from DTT member firms' 6,000 partners and managers specializing in TMT, and discussions with industry analysts. As last year, Predictions for the media sector has been able to draw upon the insight gleaned from a series of 20 interviews with leading executives from around the world on the key industry theme of digitization. These interviews have been published in a book, Digital Dilemmas, available online (

I hope the result of our endeavors provides you with plenty of food for thought for the year ahead. On behalf of DTT's Global TMT Industry Group, may I take this opportunity to wish you all the best for an enjoyable 2008.

Igal Brightman
Global Managing Partner
Technology, Media & Telecommunications

Executive summary

Online advertising is 15 years old in 2008. Since the first banner advertisement was sold, online advertising has grown into a $42 billion industry. However, 2008 could see online advertising face a barrage of obstacles. One barrier may be growing antipathy to the online advertisement itself; another could be growing opposition to the tracking of online behaviour. And to cap it all, growth in broadband connections may slow in a number of key markets. The advertising sector should make its case in 2008. It should communicate the quid pro quo of Internet advertisements for end-users, for example in the form of free content. The industry should position online advertising as an element of the media mix within a campaign, not as a solitary platform with a mission to take on traditional media. The sector should monitor regulation carefully. The more successful online advertising gets, the more subject to regulatory scrutiny it may become. And the sector should be prepared in 2008 for rising competition from traditional media formats.

While the e-Book may fail to thrive in 2008, e-Reference may gain traction. One of the biggest obstacles to the mass adoption of the e-Book in 2008 and beyond may be the profound affection for the traditional, paper-based book. There is however proven value in digitizing the word. Many business and academic texts spanning a wide range of disciplines, sectors and subjects are already available, and most typically consumed, in digital format. Reference texts may therefore be best suited for digitization. The e-Book sector should consider which texts could become more valuable as a result of their conversion into electronic format. Suppliers should also consider all the ways in which digitization could add value, and hence further distinguish it from the traditional form of the book. Functionality such as connectivity, search or handwriting recognition would all serve this end.

Environmental concerns are likely to affect the media sector in 2008. The proliferation of technology in the living room is creating its own distinctive carbon footprint, and this is expected to grow in 2008 and beyond. One organization forecast that the total power consumption for all information, communication and entertainment devices could reach as much as 50 percent of a household in Northern Ireland's power consumption by 2020. The media and consumer electronics industries should consider how the carbon footprint of the living room could be reduced without the need to revert to antiquated technology. One approach would be to reduce unnecessary power consumption, for example by forcing devices into standby when not in use. Some manufacturers have brought out more efficient devices, but these greener products come with a higher price tag.

The imminent demise of television will be forecast in 2008. But the sector should remain in overall good health throughout the year. There is also a good chance that Internet television will have contributed to the fortunes of traditional television. This outcome may appear perverse, particularly when Internet television has been regarded by some influential commentators as a direct competitor to traditional television. But it appears that Internet television is another medium whose quality, content formats and audience differ largely from traditional television audiences. Traditional broadcasters should work out how online channels can complement or supplement broadcast content, rather than cannibalize it. Internet television may find it more profitable to serve as an additional route to market for traditional television than to try and rout the incumbents.

Steady growth in the number of broadband connections around the world has enabled online piracy to grow. The increasing speed of broadband connections has made movie, television and software piracy feasible. But during 2008, persuasion may start to win the battle against digital piracy. A two-pronged attack via education and punishment – in the form of denial of broadband access and fines – may start to take effect. However, even if digital piracy were to be completely defeated in some markets, the bigger battle against piracy – the sale of counterfeit media – would still not be won. Supply and demand for piracy should be managed on a coordinated basis. Controlling supply should involve a joint approach from the media industry, governments, professional bodies, ISPs and any major sources of bandwidth, from universities to enterprises. The media industry should also identify any sources of internal leakage of content. The threat of fines may dissuade casual pirates, but a more effective approach could be education. The evidence so far is that the battle to win over hearts and minds can be successful.

In recent years, the movie theater has enjoyed strong growth. Its robust state may make it the perfect time to consider how to re-invent a format which has seen relatively little innovation in the past 10 years. There are a number of growing threats on the horizon, including the potential for economic downturn and the growth of alternative sources of entertainment. In 2008, PC ownership, broadband connectivity and game console penetration are all expected to grow. The movie theater also faces competition from other entertainment venues, from sports stadiums to concert halls. Technological advance is another catalyst for the reinvention of the movie theater in 2008, with a key change being the growth in digital movie theaters. One of the major benefits of digital movie theaters is flexibility. It enables theaters to become local rather than homogenous, perhaps attracting a larger, more varied, more loyal audience as a result. But the biggest change the transition to digital could make for theaters may be the need for suitable equipment to enable the screening of events, ranging from sports fixtures to concerts. While planning for digital transition, theater owners should also consider the need for new skills. Digital movie theaters are more IT-centered than analog.

While music fans are happy to pay several hundred dollars for an MP3 player and a similar amount to see live music, the same fans spend an average of only around $20 on purchasing digital downloads for their MP3 players. The reluctance to spend money on digital downloads may be because it is hard for consumers to value intangible products. Customers may be happier to pay, and to pay more, for music if it came in a 'physical' package. Therefore, 2008 could be the year in which music becomes tangible again. The industry could evolve from offering digital downloads for transfer to a device, to selling pre-recorded MP3 players, containing a single album or even an artist's entire back catalog. The industry should look at various ways of making music tangible, while still providing the flexibility of digital downloads. One solution would be to bundle a physical copy, or even an accompanying book or T-shirt, with the digital download.

Historically traditional media outlets have been loath to admit that they have based news stories on material that originated online. Blogs (written by authentic amateurs, not renamed columnists), podcasts, and wikis have simply not been considered legitimate, credible sources of information. But during 2008, it may become increasingly commonplace for traditional media not only to acknowledge the existence of the online world, but also to concede, albeit only occasionally, those stories have been 'broken' by citizen journalists. During 2008, traditional media are likely to move towards a more active and dynamic online presence, as they begin to phase out the historical, now seemingly arbitrary barriers between analog and digital versions. As existing media companies lose their disdain for and fear of the online world, they are likely to start to see the appeal of using the Web as a 'farm team' of up and coming talent. By looking at the online world as a source of content and talent, traditional media companies may be able to increase their relevance, especially for younger consumers and readers. Media companies should be flexible; they may have to raise their pay scales significantly to attract the right kind of talent. There may be legal challenges to permitting user interaction, editing or even comment on published news. In addition, unedited content may result in lawsuits for libel.

The media industry appears to have only dabbled with offshoring. However, 2008 may see further significant offshoring deals, following the agreement last year of a wide-ranging offshoring contract worth in excess of $1 billion. Growing faith in offshoring reflects both consistent quality of supply as well as an increasing ability for western companies and offshored teams to work together. While cost, particularly given the economic outlook, may remain the key motivation for offshoring in 2008, the year may also witness the start of a fundamental change in how offshoring is perceived by media companies. It may increasingly be seen as a means of adding value, not just cutting cost. The movie industry may increasingly look abroad for the creation as well as the production of films. The use of offshored teams to undertake more creative tasks may be encouraged by offshoring specialists setting up marketing and production locations onshore. The media sector should regard offshoring as a strategic imperative, best evaluated proactively. Offshoring has the potential to offer many benefits, but these can only be realized with good execution.

Companies need to consider how management may become more complex, how processes may need to be redesigned and which onshore staff would need to be retrained to be able to make full use of the advantages of offshoring. In 2008 many media companies may rush into offshoring as a means of cutting costs. The more forward-thinking media companies should already have identified which processes to offshore, which suppliers to use and where to base themselves, by the time the crowds arrive.

The media sector has particularly benefited from the transformational potential of technology in recent years. In 2008 the convergence of media and technology is highly likely to spawn a wide range of new products, services and even companies. Many of these initiatives should in time prove to be commercially successful, but some might fail for avoidable reasons. One common cause of failure may be because companies might focus overly on reaching the limits of what is technologically possible, as opposed to evaluating commercial realities. A further challenge could be legal. A company may develop a brand new service only to discover that it could face legal challenges in accessing its target audience. The convergence of technology and media could cause some products and services to fall in value. Some companies, while enjoying great success in building a user base, may find it far harder to monetize this base retrospectively. A number of factors have to be aligned for the combination of media and technology to be worth more than the sum of its parts. First, the technology needs to be robust, familiar and easy to use. In addition, the service has to comply with laws and regulations in every market where it is offered. Where digitization of analog content has occurred, the content should be more valuable as a result, and there also needs to be a realistic plan for generating revenues from end-users.

Obstacles ahead for the online advertisement

The first banner advertisement is claimed to have been sold to a legal firm – in 19931.

In the 15 years since, online advertising has enjoyed massive growth. In 2008, it is expected to generate $41.6 billion in revenue, a 23 percent increase on 2007 and more than the commercial radio sector2.

Online advertising's largest single company, Google, was, at the end of 2007, one of the United States's five most valuable companies3. And Web advertising has also been a growth story for traditional media companies, even if online's growth has not always made up for declines in core product revenues. US newspaper groups generated $750 million from online revenues in the first quarter of 2007, a 22 percent increase on the same period in 20064.

In 2008, following a year in which over $10 billion was spent on acquiring specialist online advertising companies5, both new and traditional media companies are hoping to increase earnings from Web advertising. The rate of growth in online advertising is projected to grow six times faster than traditional media through 20096. By 2010, online is forecast to represent one-tenth of all advertising spending7.

Two of the largest social networking sites, whose implied valuation could be upwards of $10 billion, are expected to generate the majority of their revenues from advertising8. One ISP plans to generate all its future revenues from advertising9. Online television services, such as Joost and Babelgum, aim to be solely advertising funded. The video games sector is looking to add to product sales and subscriptions through in-game advertising, which one analyst has forecast as being a $700 million market by 201010.

However, 2008 could see online advertising face a barrage of obstacles.

One barrier may be growing antipathy to the online advertisement itself. One 2007 survey of US consumers found that over three-quarters of respondents considered Internet advertisements more intrusive than those in print. Nearly two-thirds claimed that they paid more attention to print advertising than to that on the Web. Over a quarter stated that they would pay for advertisement-free online content11.

The coming year may also see growing opposition to a key feature of online advertising: the tracking of online behaviour, whose main purpose is to enable the delivery of targeted advertising. In 2007, resistance was already being manifested in the form of organized lobbies and a 'do not track' campaign. Some websites decided to differentiate on the basis of privacy, with one search engine offering a non-tracking version12; another started offering consumers the option of blocking advertisements13. All such initiatives could dampen the efficacy of online advertising, a key advantage of which is superior metrics on consumer behaviour.

Confidence in online advertising could be further undermined if high profile industry figures continue to question publicly online advertising's revenues and valuations14.

And to cap it all, a key underlying driver for the growth in online advertising, broadband connections, may slow in a number of key markets. Two of the largest markets for online advertisement, the United States and the United Kingdom, are expected to experience slowing growth in net broadband subscriber additions.

Bottom line

A key mission for the advertising sector in 2008 should be to fight back against its critics by demonstrating – without rhetoric – its capabilities.

This is likely to require testing various types of online advertisement with consumers. Copying and pasting existing advertising formats that have worked in other media, such as the equivalent of the 30-second spot from television, or the full-page color spread from magazines, is unlikely to work.

An Internet user, whether attending to email or interacting with a social network, is active and engaged, and may therefore find advertising intrusive. Online agencies and their clients should be prepared to experiment with radically new forms and formats, and should also be prepared to learn from inevitable failures. The advertising sector may also want to explain to end-users the quid pro quo of Internet advertisements, for example in the form of free content.

The advertising industry as a whole should increasingly consider online advertising not as a solitary platform with a mission to compete with traditional media, but rather as an element of the media mix within a campaign. For campaigns to be successful, media buyers need to have a comprehensive understanding of all media, and the strengths and weaknesses of each. The advertising industry should also ensure that advertisers, their customers and end-consumers become aware of the different formats of online advertising, from banners to viral advertisements. Media buyers in particular need to know which form of online advertisements to use, at what time and with which combination of traditional advertising media.

Online may never displace radio, print or television – it is more likely to complement and support. Recognizing that, and starting the process of understanding how online advertising adds value, would likely take the industry a substantial step forward.

The sector should also monitor regulation carefully. Much of the focus on controlling advertisements so far has been on traditional sectors. But the more successful online advertising gets the more subject to regulatory scrutiny it may become. While a watershed, a time before which certain content cannot be shown, exists for television and radio, this typically does not apply for the Internet. The online advertising industry should self-regulate and implement technology that would enable watersheds and restrict certain types of advertising, such as for alcoholic drinks.

Traditional media formats may be able to fight back in 2008. The television sector, which for many years has suffered falling revenues in industrialized countries, could be resurgent. One catalyst for this may be relaxation of regulations. For example, product placement is expected to become legal throughout the European Union's television sector. Product placement, worth $1.5 billion in the United States in 2006, generated only $31 million in Europe in the same period15. Additionally, as the process of digitization takes hold in the developed world, both radio and television could proliferate as never before. With more choice and generally better quality (of video and audio), advertisers may find that the sheer scale of traditional media is hard to beat.

Even if the growth of online advertising does slow in 2008, slower growth should be put in perspective. Online advertising is expected to generate tens of billions of dollars-worth of revenues in 2008 from a relatively small addressable market. At the start of 2008, less than 20 percent of the world's population was expected to be online16 and there were only 330 million broadband enabled households17. This compares to an audience of 2.2 billion for radio,18 an installed based of 1.4 billion television sets19 and a global daily paid-for newspaper circulation of 515 million20.

Forget the e-Book. Bring on e-Reference!

While the e-Book may fail to thrive in 2008, e-Reference may gain traction.

At the beginning of 2008 there were few media formats left to digitize. Digital versions of television, newspapers, radio and classified advertising were all being consumed by millions of people around the world.

One of the last untouched formats was the book. By the end of 2008, the book is likely to remain predominantly paper-based. This will particularly be the case for books read for leisure, rather than for study or for work. It is also unlikely that the e-Book – a device designed to hold and display the contents of tens of thousands of books – will have attained anything like mass market status by year-end.

There are many and varied obstacles to making the e-Book commercially viable. Price is a major challenge21. A standard paperback book can cost just a few dollars. e-Books that have been launched in the last couple of years were priced at a few hundred dollars. Then there is the cost of the content or a subscription on top of that22.

Technology is another issue. The technology going into e-Books is improving fast. The latest e-Books feature high-resolution screens that deliver a clarity almost emulating that of ink23. Digital memory has advanced so much that an e-Book can carry an entire library, or even several entire libraries24, much in the same way that MP3 players allow entire music collections to be taken anywhere. Devices can be made shock resistant, even impermeable.

But competing against paper is hard and competing against paper in a book format is even more difficult. Paper is particularly fit for a book's purpose. It enables the book, particularly the paperback, to be more portable, compact, durable and disposable than any electronic equivalent so far25.

But one of the biggest obstacles to the mass adoption of the e-Book in 2008 and for some years to come may be the profound affection for the conventional, paper-based book, which is deeply embedded in our culture.

Technology, no matter how good or how cheap, may never be able to compete with our sentimental attachment to books. After all, people read them from an early age. Books, unlike television and newspapers, are rarely bypassed by younger generations. Most people may prefer to display their libraries rather than confine them in 'digital dungeons'. While a shuffle function makes sense for a music collection, it would be absurd for books. Digital functionality such as search may be little used.

Indeed, it would seem that some media are going to stay paper-based for some time, and the book, the consumer magazine and the commuter newspaper are examples of media that should endure in their existing formats.

While it simply may not be worth it for digital technologies to compete with the book, there is undoubted, proven value in digitizing the word. After all, at the start of 2008, many business and academic texts spanning a wide range of disciplines, sectors and subjects were available, and most typically consumed, in digital format. But there is a critical difference between business or academic texts, and what someone would typically think of as a book. Mention the latter and most people would think of the likes of novels, biographies and anthologies, most typically read from cover to cover. The former are functional, often references, rarely consumed in a linear fashion. Rather they are consulted when specific information is required26.

Reference texts may therefore be best suited for digitization. Providing a doctor on call with the ability to search through tens of thousands of medical records27; a lawyer in court with the facility to reference several years of cases, or a scientist in a laboratory with access to all relevant research could all deliver value. Enabling a room full of text to become more valuable through making it portable and searchable could deliver considerable value.

Bottom line

While there is significant benefit from digitizing the word, not all texts become more useful or more valuable when digitized. Companies in, or thinking about entering, the e-Book market should firstly consider which texts could become more valuable, rather than having to be sold for less, as a result of being digitized.

The name of an electronic text-displaying device is also important. The depth of emotional attachment to the book in paper format may make it better to think of another name to describe its electronic equivalent. Since the texts that would most benefit from digitization would be reference works, e-Reference may be a more apt name.

Suppliers should also consider all the ways in which digitization could add value, and hence further distinguish it from traditional book form. Functionality such as connectivity, search or handwriting recognition would all serve this end. But these should only be implemented if they are likely to be used, for example if a WiFi connection is required to keep an e-Reference containing medical cases or legal precedents up-to-date. Adding functionality, from Web browsers to email, just because it is available runs the risk of creating a product indistinguishable in form, price or reliability, from a notebook computer.

Focusing on vertical markets may require sector-specific device customization. Medical professionals might need a sealed and wipe-clean device. Engineers and architects may prefer a toughened and damage-proof version.

The e-Reference sector should also pay particular attention to the issue of piracy. For many decades, books have attracted scant interest from counterfeiters because of the high cost of printing and the low margins available even in the legitimate book market. But digital books may represent an altogether easier target, particularly for high-value content.

The living room moves closer to being Public Enemy Number One

These days, it's hard not to feel guilty about our impact on the environment.

Travel appears to be a particularly gluttonous hazard – in almost any form. An analysis published in 2007 showed that walking to the mall creates four times more greenhouse gas than driving there28. At least this is the case for carnivores who eat intensively farmed, greenhouse-gas-producing cows. Going organic is even worse; cattle reared to organic standards emit even more methane29.

So in 2008 it may feel more responsible to stay at home and indulge in the innocent pleasure of watching television, listening to music, or perhaps even playing a video game, albeit one not requiring too much physical movement.

But the proliferation of technology in the living room is creating its own distinctive carbon footprint, and this is expected to grow in 2008 and beyond. The Energy Saving Trust has predicted that total power consumption for all information, communication and entertainment devices could reach as much as 50 percent of a household's total power consumption by 202030. In the United States, consumer electronics' share of household electricity usage tripled from 5 percent in 1980 to 15 percent in 200531.

It would appear that device proliferation has been a key outcome of the convergence of technology, media and telecommunications in the living room. And with it, power consumption has leapt.

How has this happened? Let's take a look at the television.

A television was once a simple, solitary device, combining a receiver, a convex screen and a meager speaker. Today the domestic television's set-up can include multiple, individually powered speakers, video and sound processors, twin receivers, a DVD player, a hard-disk recorder, a satellite set-top box, a digital terrestrial set-top box, at least one games console, and a collection of remote controls. Three years ago, televisions already accounted for 4 percent of residential power consumption in the United States, equivalent to the total amount of energy used in every household in the state of New York32.

Televisions are getting bigger and more power-hungry. And, based on the flat-panel factories being built now, they are going to get more so33. Keeping up with your peers may soon require a much larger room in which to mount your 100-inch screen.

A typical plasma screen generates about 400 kilograms of carbon dioxide per year34. On average, plasma screens consume more power than CRT screens – 9.4 watts per square inch versus 3.4 watts per square inch respectively. The larger the screen, the greater the power consumption and the greater the heat generated. Above a certain size, cooling may be required to prevent the entire room becoming too warm.

Peripherals are also power hungry. A DVD recorder with a hard drive consumes up to 60 watts when in use and five watts when on standby. In other words, over a day it consumes more power while not in use35. A high-end PC, optimized for video games, may incorporate as many as four processors. Upgrading to a third generation games console may also mean increasing power demand to as much as 200 watts. Second generation consoles consume as little as 50 watts36.

Digital switchover, underway in many countries around the world, implies increased power consumption. Additional peak power consumption in the United Kingdom, a country with 61 million people, is estimated to be about 31 million watt hours per day. In terms of cost, upgrading to a digital terrestrial receiver can add up to 3 percent of the energy consumption of a typical home37. As a result, going to the living room to relax and switch off may take on an entirely new connotation.

Bottom line

The media and consumer electronics industries should consider how the carbon footprint of the living room could be reduced without the need to revert to antiquated technology, such as CRT tubes and analog transmission.

One approach would be to reduce unnecessary power consumption, for example by forcing devices into standby when not in use38. The United Kingdom's leading satellite provider, BSkyB, is rolling out this facility to all its customers' set-top boxes over 2007 and 200839. BSkyB has estimated that the saving from this type of power management of its customers with HD and Sky+ boxes would reduce the United Kingdom's carbon dioxide emissions by 32,000 tonnes a year: roughly equivalent to the power required to operate all the washing machines in the city of Liverpool for a year.

Some television manufacturers have brought out more efficient sets. Sanyo has announced plans to sell greener televisions, offering 20 percent lower power consumption – albeit at a 25 percent price premium40. Philips is currently holder of the European Green Television of the Year award, with its prize-winning model rated at 210 watts for a 42-inch screen41. However a typical 28-inch CRT television consumed just 87 watts.

One promising approach is to make wider use of a technology called OEL, currently employed in small screens such as those in music players and mobile phones. The benefit of OEL is that no backlight is required; the self-luminescent properties of the organic materials used in the screen mean that it emits light even when no power is supplied. Power is required only to change the image42. This technology could reduce television power consumption considerably43.

If all else fails, there is one argument that couch potatoes could use to demonstrate their green credentials. Watching television or playing video games means staying in – and thus not inflicting the car on the environment. And of course, the bigger the car in the driveway, the more virtuous the viewing may be.

Long live traditional television, thanks to Internet television

The imminent demise of television is forecast perennially and it is highly likely that this call will again be made in 2008. The global traditional television sector, despite the occasional shock, should remain in good health throughout the year44. There is also a good chance that Internet television will have contributed to traditional television's fortunes.

This outcome may appear perverse, particularly when Internet television – the delivery of television to computers over the Internet – has been regarded by some influential commentators as more of a dark knight than a fairy godmother45.

But Internet television is unlikely to kill off traditional television in 2008 largely because Internet television, certainly in its current manifestation, is not traditional television. It is another medium whose quality, content formats and audience differs largely from traditional television audiences.

At the start of 2008, Internet television was characterized by streamed shorter clips rather than downloaded feature films46. The preference for shorter clips may be due to the typical quality of Internet television. Streamed television content is often displayed as half screen because many broadband households do not enjoy the consistent connection of 2 Mbit/s that would make full screen worthwhile47. Downloading a program can take longer than watching it48.

For the majority of broadband households not blessed with fiber or very fast broadband connections in 2008, there is still likely to be a marked difference between watching television on a computer and watching the same content on a television. While the average size of monitor supplied with a computer appears to be growing, the average size of the television purchased for the living room has grown faster still, as has its sonic boom.

In 2008, the quality and volume of content available via Internet television should improve. The number of traditional television companies that are expected to make content they have created or licensed available to an Internet audience is growing. Independent production companies may also use the Internet to reach a wider audience without having to negotiate with broadcasters in each country they want to reach.

Viewers may take advantage of the growth of quality content over the Internet to see programs they have missed. People could use it to keep up with a series, or to follow sports, when they are away from home and do not have access to a television. However, in 2008 it is unlikely that consumers of mainstream television content would regard the arrival of their favorite programs on the Internet from a legitimate source as cause for discarding their televisions.

The quantity of Internet television consumed in 2008 may appear impressive49. At the start of 2008, a single video clip was already able to attract 10 million views within roughly two weeks, equivalent to the audience of a prime-time show in the United States50. In a single month in 2007, US consumers viewed more than nine billion videos51. But this seemingly vast volume equates to just three hours per viewer, per month. By contrast, Americans dedicate on average 4.5 hours each day to television52. Worldwide, despite a steady growth in entertainment choices, including Internet television, the incumbent, sedentary traditional form of television is likely to remain as popular as ever in 200853.

Bottom line

Working out where Internet television fits in consumers' growing range of entertainment options should be a key objective for both traditional and Internet television companies during 2008.

This is particularly important for traditional broadcasters, who should work out how online channels can complement or supplement broadcast content, rather than cannibalize it.

Internet television pure-plays should do the same. They may find it more profitable to serve as an additional route to market for traditional television, than to try and rout the incumbent providers. Pure-plays could be a vehicle to try out and trail content, with the ultimate aim of dragging people back to the television set. The pure-plays, many of which are global, could even use television broadcasters as agents for selling localized advertising.

By serving as a platform for inexpensive, possibly advertising-funded television, Internet television could even help to suppress copyright theft. One possibility for Internet television could be low-cost, legitimate programming on demand. For example, the ability to watch a lower quality download, for a small fee, might appeal to people who are either unwilling or unable to purchase a DVD box set of a television series or a premium television subscription.

Expatriates and frequent travelers may value the ability to tune in to their home country's television stations from wherever they are. Such customers could represent an attractive market for advertisers.

Overall, traditional and Internet television would appear to have more to gain from helping rather than hindering each other.

Overcoming online piracy may not mean the end of counterfeit content

The advent of widespread consumer broadband at the end of the 20th Century was like the advent of transoceanic commerce in the 16th Century – they both changed the nature of piracy. While individuals have for many years recorded copies of music to give away to friends, broadband has enabled music and video sharing with a much broader group of people.

Steady growth in the number of broadband connections around the world has allowed online piracy to spread54 and the increasing speed of broadband connections has made movie, television and software piracy feasible. Online copyright theft, therefore, is no longer confined to the music industry. And digital piracy has remained rife in spite of thousands of individuals around the world being prosecuted for personal piracy.

But during 2008, the battle against digital piracy may start favoring the industry, as a two-pronged attack of persuasion, through education, and punishment, in the form of denial of broadband access as well as fines, starts to bite. The number of casual pirates, many of whom were not entirely sure that their actions were illegal, could decline55.

Regulators, industry bodies and ISPs are increasingly expected to work closer together to identify users whose traffic patterns suggest they are downloading content that infringes copyright. At the end of 2007, the French Government announced proposals aimed at dissuading casual piracy by confiscating persistent offenders' broadband connections56. The UK Government has signaled that it may introduce new laws that would involve ISPs in identifying illegal downloading of content57. In the United States, a judge ordered one website that had been accused of enabling copyright infringement to begin logging user activity and to pass this data on to the plaintiff58.

Whereas some ISPs were accused of turning a blind eye to piracy in the early days of broadband59, the highly competitive nature of the sector in 2008 may cause some ISPs to identify and remove consumer pirates. Illegal file-sharers typically consume a huge amount of bandwidth, which can dampen network performance and reduce overall profitability. ISPs typically charge a fixed retail rate to customers, but their costs are variable. So a customer downloading a movie from the United States to the United Kingdom may incur significant marginal costs for the ISP.

Technology, such as deep packet inspection, which enables ISPs to monitor what content is being downloaded, is likely to become more effective and more frequently used. This is also likely to help accelerate the process of identifying pirates, and may lead to swifter disconnection, or prosecution.

However, even if digital piracy were to be completely defeated in some markets, the industry must be clear in its message that a key battle against piracy would still not be won. Physical piracy – where consumers purchase physical copies of DVDs and, to a lesser extent CDs – is likely to remain significant in 2008. In 2008, the vast majority of pirate DVDs in some key markets are still likely to be based on copies made by individuals using a camcorder in a movie theater60.

The cost of entry to carry out online piracy – a broadband connection and a PC – has fallen steadily over the years. The industry should bear in mind that the cost of making illegal DVD and CD copies has fallen too. At the beginning of 2008, the retail price of an 18x speed DVD burner was less than Ł20 ($41i). A high definition camcorder could be obtained for well under $1,00061.

In 2008, while one battle against piracy may start going the industry's way, the overall war on piracy is most likely to continue to rage.

Bottom line

While 2008 may be the year in which the media industry manages to start to control one form of piracy – the overall campaign against piracy needs to be sustained. If digital piracy does start to be controlled in some markets, the industry should ensure that complacency does not follow.

Supply and demand for piracy need to be managed on a coordinated basis. Controlling supply should involve a joint approach from the media industry, governments, professional bodies, ISPs and any major sources of bandwidth, from universities to enterprises. The media industry should also identify any sources of internal content leakage because much of the material available on file sharing sites is pre-release content stolen by employees of media companies themselves62.

The threat of fines may cause many casual pirates to think twice about whether downloading illegal content justifies the risk of a criminal record. But a more effective approach could be education. The media industry should provide unambiguous guidance on what constitutes piracy63. A second message is to tell consumers and casual pirates what organized piracy may be funding. Some consumers may consider professional media pirates as lovable rogues. The realization that media piracy may be funding the drugs trade or even terrorism may shock some casual pirates sufficiently to change their behaviour64.

The evidence so far is that winning over hearts and minds can be successful. Two US industry groups have found that piracy is less common on university campuses that have educated students on network use and enforcement polices65. Another scheme in the United States provides education on copyright to five-year-olds66.

Demand could also be addressed by providing legal alternatives, from cheaper, basic versions of physical content to online media stores. The latter may involve creating everything from lower-quality streams through to online rental models.

Finally, the media industry could look at ways to make the alternatives to the pirated version far more competitive. For example, making the movie-going experience, which cannot easily be pirated, far more compelling may encourage people to go to a movie theater, rather than watch a pirated DVD in their living room.


i. Currency conversion correct on 10 December 2007 at:

ii & iii. Currency conversions correct on 10 December 2007 at:

1. Web banner, Wikipedia:

2. ZenithOptimedia data referenced in: Beijing Olympics will put TV advertising in front, forecasters say, The Times, 1 October 2007.

3. Google hits $219 billion in success search, The Guardian, 1 November 2007.

4. Rise in online advertising at US newspapers, Financial Times, 27 May 2007.

5. Microsoft acquired Aquantive for $6.1 billion; Google acquired DoubleClick for $3.1 billion; WPP paid $649 million for 24/7 Real Media; Publicis Group SA paid $1.3 billion for Digitas Inc.; Yahoo agreed to purchase online advertising broker BlueLithium for $300 million; America Online purchased Quigo, Tacodo and Yedda. Sources: Microsoft ready for a strategic upgrade, Financial Times, 21 May 2007; Will history repeat itself for the dotcoms? Sunday Telegraph, 18 November 2007; Digital Spending Spree, Wall Street Journal Europe, 6 September 2007; Web ads find unwanted attention, Telephony, 19 November 2007.

6. ZenithOptimedia forecasts the rate of spending on Internet advertisements to grow six times faster than traditional media between 2006 and 2009, referenced in: Online advertising: The message is being spread, Financial Times, 18 April 2007.

7. Online advertising, Financial Times, 26 July 2006.

8. What MySpace-Facebook Rivalry? Talk of a brewing showdown between the two social networks masks fundamental distinctions between the sites' leadership, culture, and ability to make a buck, Business Week, 22 October 2007; Will history repeat itself for the dotcoms? Sunday Telegraph, 18 November 2007.

9. Will history repeat itself for the dotcoms? Sunday Telegraph, 18 November 2007.

10. The shape of things to come, The Business, 17 November 2007; There's a new game in town for television advertisers, Financial Times, 17 May 2005.

11. Survey of 2,200 US consumers undertaken in 2007, commissioned by Deloitte Development LLC.

12. offers a version of its site, called AskEraser, that does not retain any information on customers, EU privacy verdict set for new year, The Register, 11 October 2007.

13. AOL to let users block targeted Web ads, The Hollywood Reporter, 1 November 2007.

14. Maurice Levy, CEO of Publicis, warned that too many media companies were relying on advertising for their business model; Barry Diller, IAC/InteractiveCorp chairman commented on the $15 billion valuation of Facebook, referenced in: Publicis chief predicts online ad bubble will burst, 12 November 2007; Andrew Harrison, chief executive of RadioCentre, a trade body in the United Kingdom, suggested that LastFM would struggle to justify its price, referenced in: Will history repeat itself for the dotcoms? Sunday Telegraph, 18 November 2007.

15. PQ Media, referenced in: In the picture, The Economist, 1 November 2007.

16. See:

17. Global Broadband Household Subscription Forecast, 2007-2011, Strategy Analytics, 30 July 2007.

18. The Impact of Mobility, New Media Age, 2003. See:

19. Ibid.

20. World Press Trends: Global newspaper circulation, advertising on the upswing, World Association of Newspapers, 4 June 2007.

21. Amazon pushes Kindle book reader, but will anyone buy it? Beta News, 19 November 2007.

22. Print books hold more than just the words, Star Gazette, 23 November 2007.

23. Amazon Kindle, CNET Reviews, 19 November 2007.

24. Amazon's Kindle e-Book: hot or not? The Inquirer, 19 November 2007.

25. The latest chapter of the e-Book, BBC News, 27 March 2006.

26. Shouldn't Technical e-Books Cost More than Their Printed Counterparts? Planet e-Book. See:

27. It is estimated that 15% of published e-Books are medical/healthcare texts. See Medical Publishing in the Future, Blackwell Publishing, 25 April 2007.

28. Walking to the shops 'damages planet more than going by car', The Times, 4 August 2007.

29. Ibid.

30. Based on research for homes for Northern Ireland, New gadgets 'wasting more energy', BBC News, 4 July 2007.

31. Energy hogs in your living room, CNET News, 22 November 2005.

32. Ibid.

33. Panasonic readies world's largest plasma television factory,, 11 January 2007:

34. Do flat-screen televisions eat more energy? BBC News, 7 December 2006.




38. The United Kingdom's consumption of energy by devices in standby mode has been estimated as being the equivalent of two power stations. See: TV 'sleep' button stands accused, BBC News, 22 January 2006.

39. BSkyB is to help customers reduce their household energy bills with the introduction of a feature that automatically switches inactive Sky set-top boxes into standby mode overnight. Since the launch of Sky digital, BSkyB claims the energy consumption of new standard boxes has been reduced by 50 percent.

40. Sanyo to unveil 'green' television, Business Line:

41. See:

42. Sony's lean, green organic screen, The Times, 12 April 2007.

43. Sony to sell next-generation TV screens, CBS News, 12 April 2007.

44. Has the death of mainstream TV been exaggerated? The Guardian, 26 November 2007.

45. For example, see: Vint Cerf, aka the godfather of the net, predicts the end of TV as we know it, The Guardian, 27 August 2007.

46. Most watch short video clips online, The Daily Reel. See:

47. The Joost bandwidth problem, Daily IPTV, August 2007.

48. Slow downloads could delay advance of video on demand, The Times, 22 January 2007.

49. The past and future of online video, BBC News, 30 October 2007.

50. Reviewing the collision of traditional TV and IPTV services: what does the future hold? Web TV Wire, 18 November 2007.

51. US viewers watched an average of three hours of online video in July, ComScore, 12 September 2007.

52. State health department announces first statewide TV turnoff week, New York State Department of Health, 28 March 2007.

53. Couch potatoes, The Economist, 19 July 2007.

54. In France, as broadband penetration rose, so did file sharing. Pirates face crackdown over movie downloads, The Guardian, 24 November 2007.

55. Millions turn to net for pirate TV, BBC News, 27 November 2006:

56. France unveils anti-piracy plan, BBC News, 23 November 2007.

57. Minister of sound, Music Week, 24 November 2007; Illegal 'hub' a problem for entertainment, IT sector, Business Standard, 22 November 2007.

58. MPAA accuses TorrentSpy of concealing evidence, CNet, 11 June 2007.

59. Minister of sound, Music Week, 24 November 2007.

60. Technology 'can beat piracy', BBC News, 13 October 2006:

61. Pricing information obtained from e-commerce websites, including

62. British and Dutch police raids shut down the world's largest pre-release pirate music site, IFPI, 23 October 2007.

63. Millions turn to net for pirate TV, BBC News, 27 November 2006:

64. Mob pirates: menace or myth, Wired, 19 August 2005.

65. RIAA piracy makes it to the Ivy League, TechWeb, 20 November 2007.

66. Kindergarten Kopyright, Forbes, 26 November 2007.

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