September 2001 Chapter 15: The Future of Media Usage1  Questions answered in this chapter: What is meant by the digital lifestyle? How will broadband technology impact Internet usage? What are the differences among the following Internet- delivery mechanisms: digital subscriber lines (DSL), cable lines, and satellite? Which household device will serve as the gateway to the Internet? How will increased wireless communications, video-on- demand, and personalized media content further fragment media usage? How will the increased size of media companies allow them to capture efficiencies of scale among diverse audiences?

September 2001 Chapter 15: The Future of Media Usage2 Network and Media Convergence  Digital Convergence Network infrastructure convergence is characterized by the ability to share and transport information Digital telephones Digital radio Digital television Computers Media convergence is characterized by mergers among alternative media companies Radio networks Television networks Magazine and newspaper publishers Film producers Online companies

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September 2001 Chapter 15: The Future of Media Usage4 Digital Lifestyle  Bill Gates (Microsoft Corp.) believes that the personal computer, the set-top box for interactive television, and the video-game console will all be important household devices  Craig Barrett (Intel Corp.) thinks about an “extended PC era”, with consumers adopting PC accessories such as the digital camera, personal digital assistants (PDAs), and digital sound morphers  Steve Jobs (Apple Computer, Inc.) envisions the PC as the home’s Internet portal, the digital hub, where consumers could edit their own movies or create customized CDs with easy-to-use interfaces  Nobuyuki Idei (Sony Corp.) believes that personal electronic devices—such as the PlayStation 2 video-game console—will be the future digital command centers for the home

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September 2001 Chapter 15: The Future of Media Usage6 Analog and Digital Information  Analog signal is a continuous variable Voice over telephone wires, broadcast radio, broadcast television CODEC: analog signal can be digitized through an analog-to-digital conversion process (coding) and can be put back into analog through a digital-to- analog conversion process (decoding) Processing analog signal involves various signal- filtering techniques to reduce background noise Analog signal is difficult to compress

September 2001 Chapter 15: The Future of Media Usage7 Analog and Digital Information (cont’d)  Digital signal is a discrete variable represented by “0” or “1” Computers, digital cell phones, digital cameras, scanners, printers MODEM: digital signal can be converted to analog (modulation) and can be put back into digital (demodulation) Digital signal can be copied, processed, and manipulated virtually without any loss in quality Digital signal is easy to compress

September 2001 Chapter 15: The Future of Media Usage8 Applications of Broadband Technology  Broadband technology is usually defined as having a connectivity speed exceeding 128 kilobits per second, significantly faster than the narrowband speeds of up to 53 kilobits per second achieved over regular telephone lines  The increased use of broadband technology will allow for more applications—such as video-on-demand, multiplayer games, streaming of audio and video, and software distribution—to be offered over the Internet  At the beginning of 2000, Nielsen//NetRatings estimated that only 5.1 million American households had access to broadband technology  By the end of 2005, the Yankee Group projects more than 30 million Americans will have access to broadband

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September 2001 Chapter 15: The Future of Media Usage10

September 2001 Chapter 15: The Future of Media Usage11 Internet Service Providers (ISPs)  National/international ISPs: America Online (AOL), EarthLink, Microsoft Network (MSN)  Regional ISPs: BellSouth, NYNEX, Pacific Bell  Local ISPs: Access Internet Communications in Cupertino, CA; Montana Communications Network in Bozeman, MO  By the middle of July1999, there were an estimated 6,000 ISPs in North America  In December 2000, AOL was the largest ISP in the United States with more than 29 million members, followed by EarthLink, MSN, AT&T, and NetZero

September 2001 Chapter 15: The Future of Media Usage12 Digital Subscriber Line (DSL)  DSL allows for high-speed connections over existing copper telephone wires  DSL requires special “modems” on each end of the connection, in the user’s home and at the telephone company’s central office  DSL “modems” send and receive all data as digital data—no translation to analog signal ever takes place—allowing for faster data transmission  DSL divides the phone lines into several channels which enables to talk on the phone and use the Internet simultaneously—all over a single phone line  DLS “modems” must be within about 3 mile distance from each other  Data transmission speed over a DSL line is about 1.5 Mbps

September 2001 Chapter 15: The Future of Media Usage13 Cable Modem  With the use of special modem, the Internet can be accessed over some cable TV systems through the existing coaxial cable that carries TV signals  By replacing the coaxial copper with fiber-optic lines, cable operators could improve signal reliability and reception quality, increase channel capacity, and support the introduction of two-way interactive services  Cable modems send and receive data at speeds of 2 to 3 megabits per second

September 2001 Chapter 15: The Future of Media Usage14 Satellite Transmission  Types of satellites used: geostationary (22,000 miles above the earth), medium earth orbit (1,000 to 10,000 miles), low earth orbit (500 to 1,000 miles)  Require sophisticated subscriber antennas  Downstream access at speeds up to 1 Mbps  Upstream access is available only by modem or other landline connections through ISPs

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September 2001 Chapter 15: The Future of Media Usage16 Gateway to the Internet  Devices that are likely to serve as the household command center include the personal computer, video- game console, and interactive TV set-top box  Currently, the PC is the primary gateway for most people to access the Internet  At the end of 2000… Approximately 55 million U.S. households (53%) had personal computers Approximately 35 million U.S. households (34%) had Internet access There were approximately 62 million individual Internet users in the U.S.

September 2001 Chapter 15: The Future of Media Usage17 Video-Game Consoles  PlayStation 2 is a video-game console with the potential to access a wide range of broadband services on the Internet  In addition to being a video-game player, PlayStation 2 could function as a SC and DVD player  With their Play Stations, users should be able to bank, shop, and through a television set, as well as download, store, and replay digital music and video from the Web  In addition to a hard drive, the PlayStation 2 has built-in “firewall” ports, which will allow it to transfer data from camcorders, digital cameras, and other PC peripheral devices in the future

September 2001 Chapter 15: The Future of Media Usage18 Interactive Television  Currently, AOL and Microsoft offer basic interactive TV services that allow users to access , chat, and surf the Internet with a set-top box and dial-up modem while watching TV  Forrester Research projects that by 2005, 40 million households will have access to digital set-top boxes, almost an eightfold increase from the 4.9 million households that had access to set- top boxes at the end of 1999  In addition to interactivity, video-on-demand will become more widely available, whereby consumers can choose to watch any movie or television show at any time and can even pause in the middle of it

September 2001 Chapter 15: The Future of Media Usage19 Media Usage Fragmentation  Forecasters see mobile wireless technology as one of the fastest- growing alternatives to PCs for accessing the Web, especially when it is used as an “electronic wallet” or to check on stock quotes, which requires relatively low bandwidth  Palm-size computers as well as cell phones are now enabled to receive wireless data through the Internet  Wireless Web technology will be less likely to take off in the United States, where 55 percent of the population accessed the Internet through desktop computers, compared to 25 percent in Japan  Only 32 percent of all Americans have cell phones, compared to 45 percent in Japan, and 65 percent in Finland

September 2001 Chapter 15: The Future of Media Usage20 Media Content of the Future  With the continued fragmentation of media usage, mergers of content-based media companies will continue as a way to reach different segments of consumers The merger of AOL and Time Warner will allow the company to reach an estimated 60 percent of all American households through its magazines, cable television, movies, books, or online service AOL Time Warner reaches 29 million households through its online service and 14 million through its cable systems, owns 40 magazines through Time Inc., has 37 million subscribers to its HBO channel, and reaches 12 percent of all moviegoers through Warner Bros Studios  The companies that create the network infrastructure will also dominate the media infrastructure Sony acquired CBS records and Columbia Studios in the late 1980s Microsoft developed the MSN Network and has a stake in MSNBC News Channel

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September 2001 Chapter 15: The Future of Media Usage22