What Asia can tell us about the future of TV and Video

Benjamin Joffe, CEO | Plus Eight Star | December 2008

www.plus8star.com

China | Japan | South Korea

Cross-Market ConsultingMobile & Internet Innovation

Agenda

1. Why looking at China, Japan & Korea?

2. Is advertising the only valid business model?

3. Some services giving hope

4. What are the barriers?

5. How about mobile?

1. Why China, Japan & Korea?

In Japan & Korea, broadband is among the fastest and cheapest on Earth (100Mbps for <30 USD)

3G penetration in Japan and Korea is over 70%

3G

use

rs

% of Internet connections measured above 5Mbps(Source: Akamai, 1H2008)

USA

Japan

China

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80%

1. Why China, Japan and Korea?

China is the world‟s largest market

Japan is the most “mobile literate”

Korea is the most “Internet literate”

2. Is advertising the only valid

business model?

Can advertising revenues scale for video services?

TV

Movie

Paper

New media

Outdoor

TV/video

6% of totalad market

US$23.8billion

Time

Content / $

Revenues

Content /

Costs

Costs start

before

revenues

Curve of

Unclear Hope

“We‟re profitable!”

Hockey Stick of

Broken Illusions

“The model is flawed”

What if…?

Source: Plus Eight Star

Everyone

Here

today

#1 | YouTube is still not profitable

#2 | Ad revenues grow “linearly” (?)

#3 | Content grows much faster

#4 | Costs follow content

#5 | Ad$/Content goes down

#6 | …囧

Facts and Assumptions

Winter is at the door.Who will survive?

Where are the people? Do

people reduce travelling

budget due to economic crisis?

-- at Ad: Tech, Nov 25, Shanghai

Hans Geng

Nielsen-Net Ratings China, CEO

Poor ad market share

TV/video

3 main categories

Remaining issues for UGC

IPRContent Control

Faster growth brings more players to new media

e.g. CCTV online, Phoenix TV online

Looking back

#1 Internet winter had 2 types of survivors

(1) Game companies(2) WVAS providers

Tencent Sina Sohu Shanda

NetEase: online gaming

Tencent: virtual goods, gaming,

WVAS

Sina: ad

Baidu: ad

Stocks

Are B2C models safer than B2B?

Easier to sell to end-usersthan to companies?

Promising revenue models

#1 | Pay per view

#2 | Monthly subscription

#3 | Premium services

#4 | Rev. share w/ producers & “sharers”

#5 | Connection with e-commerce

2. Is advertising the only valid

business model?

Ad-only models seem to have problems

Now, online video is already a mediaSo there must be some solutions…

3. Some services giving hope

Profitable Video Sharing Site

Founded: October, 2004

Revenue: 10 million EUR

80~90% from ads

Breakeven in Q1 2008

3 million subscribers

10 million UVs/month

2% CTR = 20x Naver! (leading portal)

P2P saves 40% expenses

Pandora TV vs. YouTube Korea(Page Views)

Pandora TV

YouTube

Korea

Number of Page Views for Pandora TV and YouTube Korea

200

100

300

400

500

Page

Vie

ws

(mill

ion

)

Sources: Daum directory

Aug.07 Jul.08

Over 3 times!

Companies (advertisers)

Provide advertising contents with payment

>80% of total revenue

Pandora TV | Business Models

Content Creators

Creating/posting and Sharing UCC contents

• Share ad revenue with content creators & sharers

• Charge users premium content/option

‘CUPI’ convertiblevirtual currency

Video + E-commerceNico Nico Douga

”smiling videos”"Japan's YouTube"

7 million members in

total by Jun 08

Paying members: 200,000

(started July 2007)

Mobile members: 1.7 million

(started Aug 2007)

<2027%

20s47%

30s18%

>308%

Male: 71%

Female: 29%

Breakdown by gender Breakdown by age

Main features

• Registration only

• On-video comments

– Over 1.2 billion comments on 1.1 million videos

– Average: 1,000 comments per video!

• Most of the content focus on local pop culture

– Anime, video-games, J-pop music videos, etc.

The text on the videos is based on a

timeline, which allows a new form of

asynchronous communication.

In fact, we see ourselves as a

communication service using videos

-- at “Infinity Ventures Summit”, Nov. 2008, Sapporo

Seiji Sugimoto

CEO, Niwango

Revenue sources

Premium members200,000 (June 2008)

5 USD / month

Online ad300,000 USD / month

Affiliate links820,000 USD / month

Monthly revenues2.1 million USD

47%

14%

39%

Affiliate links related to

mouse and pet product

Video + e-Commerce=

Social Commerce or TV Shopping 2.0?

Online/Offline mass media?

Afreeca TV (March, 2006)

Monthly unique visitor: 5 million

Time Period of Staying : 45 minutes

YouTube+ Live broadcasts + Game Portal

BJ = Broadcasting Jockey“Broadizen”

(Broadcast + Netizen)

1.5 million Private Channels run by BJ

“BJ Managers” for content monitoring

Encouraging Creation: Open Studio

Afreeca TV | Business Model

3. Create / Upload / Share

Providing ad platform

for advertisements

1. Premium options

2. Use of Afreeca TV‟s

cybercash „Star Balloon‟Broadizen

(Broadcast + Netizen)

Advertising Companies

Setting-up of

broadcasting

system

Organizations/ Communities

Don’t forget to turn off your webcam…

4. Where are the barriers?

Are users willing to pay?Drawing inspiration from digital music

iTunes=

5 billion songs

More music is sold “online” than “offline” in China and Korea

Ringback tones were created in Korea in 2001

They reached 30% penetration in less than 2 years

Digital music revenues in Japan

Source: Infinity Venture Partners, 2008

90% of digital musicsold in Japan is mobile

Source: China Mobile, 2008

~1.2 billion EUR

Chinese users too!

Affordable content

Mega TV (IPTV) in Korea0.5 USD per TV episode

1 USD for a movie

4. Where are the barriers?

Ecosystem different from traditional TV

Users pay for the right user experience

Need for 1-click payment systems

5. How about mobile?

Mobile TV penetration in Japan and Korea is over 30%

37 million mobile TV phones were sold by June 2008 in Japan

Mobile TV started in May 2006

In Japan over 70% of new handsets are mobile TV-enabled

2008 Trends

Mobile Service Trends: Japan

Mobile TV service “One Seg”

with data menu overlayTwist screen

Internet browsing (left)Decorated and animated mobile

messaging

Mobile TV Mobile web browsing service

Video phone call Mobile widget

Mobile Service Trends: Korea

Is it a success?

Remaining Questions

What business models for mobile TV?(data back-channel? M-commerce?)

Who pays for the infrastructure?

How to attract advertisers?

How to get the right content?

How to charge users for content?

5. How about mobile?

Is it too late for broadcast mobile TV?

Affordable alternatives

Ecosystem hard to create

About +8*

There are more ideas outside your country

than inside

Tom KelleyCEO, IDEO

The 10 faces of Innovation

“Innovation Arbitrage”

• About us– +8* | Plus Eight Star is the leading cross-market and cross-cultural consultancy in Asia.

– We provide local expertise & global perspective on mobile and Internet innovation from China, Japan and South Korea to add value to and accelerate the development of our clients’ businesses.

• Our services– Analysis of proven best practices and business models from Asia

– Other services: executive study trips, market entry strategy, M&A advisory, partners identification, negotiation support.

• Founder & CEO: Benjamin Joffe– 9 years experience with mobile & Internet in Asia

– Selected among “China’s Top 100 mobile industry influencers” in 2007

– Regular speaker at events on mobile and Internet in Asia

– Fluent in English, Japanese, French with working knowledge of Mandarin, Korean and Spanish

Selected References• Adidas | E-commerce strategy for China, Japan & Korea

• Bouygues Telecom | Cases studies of leading Asian Web 2.0 services and virtual worlds

• Deutsche Telekom / T-Online | Benchmark of Korean mobile & Internet convergence strategies

• Hemisphere | Analysis of mobile marketing best practices in Japan and South Korea (Hemisphere is a leading digital advertising agency), analysis of leading social platforms (SNS, virtual worlds, online games).

• Microsoft | Analysis of Japan’s key players and market catalysts for mobile commerce market positioning in China

• DeNA | Case studies of the best practices of leading social networks in China and South Korea (DeNA operates Mobile Game Town, Japan’s leading mobile SNS service)

• China Mobile | Benchmark of Korean leading online communities

• Sands Capital Management | Evaluation of China’s investment opportunities in social networks in China

Social Work

• Mobile Monday– Founder of the Mobile Monday forum in Beijing since 2006 (3,000+

members, 23 events, over 80 presentations).

• Media– Monthly column on Asian innovation for Asian Business Leaders (one of

the leading Chinese business magazines), numerous interviews in international media.

• Events– Regular keynote speaker and moderator at Internet, Telecom, Media and

Investment events

e.g. ITU Asia, Asia Venture Capital Forum, China Mobility International Summit, O’Reilly’s Graphing Social Patterns, Red Herring Asia, Media 08 Conference, Wireless Developer Forum, Open Web Asia, XMediaLab, Mobile Monday Global Summit, etc.)

www.plus8star.com

benjamin@plus8star.com

benjamin0123

http://twitter.com/plus8star

www.linkedin.com/in/benjaminjoffe

www.slideshare.net/plus8star

+81 | Japan

+82 | Korea

+86 | China

Telecom & Internet

+ Added Value

* High quality

Contact Us