1. Vision of the future – ROADIBROM Summit Beijing Convergence Digital Broadcasting-Mobile Philips perspective on critical challenges regarding Future Value Chains Arthur Weyns VP Global Affairs

2. 2 Vision of the future – ROADIBROM Summit Beijing 11 What does the future look like? End-user needs Technolog y trends FUTURE Disruptiv e events

3. 3 Vision of the future – ROADIBROM Summit Beijing End-user Needs & Trends People are increasingly looking for: –Personal empowerment ( freedom, control, simplicity) –Engaging in experiences (multi-sensorial) –Creating experimentation & discovery (creativity) –Fluid & open social grouping (sharing, belonging) –Personal care & well being (monitoring, security) –Environmental neutral footprint (sustainable planet)

4. 4 Vision of the future – ROADIBROM Summit Beijing What does this mean for convergence of dig broadcasting and mobile? Lessons from past: Convergence of dig. telecom and mobile Communication Wired Phone (POT) Type of owner family Marketsize (pcs)100 mln /y Place of usagehome Price of devicelow Device lifetime5-10 years Price of serviceslow (zero for IP communication) Price of infrastructure very high (esp digging in cables) # Infrastructure providers 1/country Type of services communication Cordless Phone family 10 mln/y home medium 3-5 years low (zero for in- house& IP comm.) zero (oprators) low (end-user) 1/country ISPs communication Car/Sattelite Phone professional ` 100K - 1 mln/y car/away from home high 3-5 years high 1/country communication Mobile/personal Phone individual 1 bln/y everywhere zero-medim 0.5 years medium Medium/high few /country communication, SMS/MMS, games, ring tones, …

5. 5 Vision of the future – ROADIBROM Summit Beijing What does this mean for convergence of dig broadcasting and mobile? Will Mobile TV become Personal TV/Personal Access Device? TV- Device Home TV Type of owner family Market (pcs)100-200 mln /y Place of usagehome Price of devicelow - high Device lifetime10 years Price of serviceslow (public) medium ( pay) Price of infrastructure high (esp. cable) # Infrastructure providers many Type of services passive TV entertainment Portable TV family 1 mln/y away low 5-10 years zero (public) low (satellite) zero few passive TV entertainment Mobile TV mobile freak? 1 - 10 mln/y everywhere if signal medium 1-2 years low-medium zero few (passive) TV entertainment Personal TV individual 100-500 mln/y? everywhere zero-medium 0.5-1 year? low? low-medium many? interactive info/ TV entertainment communication

6. Vision of the future – ROADIBROM Summit Beijing Managing Content ecosystem becomes paramount in the mobile TV/personal TV era Content Creation Content Distribution Content Aggregation Content Access Consumption Content Access device manufacturers + Ambient solution providers Access Intermediaries Current content creators + Consumer reporter Current content aggregators + ISPs Consumer reporter User communities Broadcasters Telecom operators Satellite operators + ISPs (one –to-many + one-to-one) Family /consumer at home + Individual anywhere NOWNOW FUTUREFUTURE Changes will be disruptive - outcome very unclear

7. 7 Vision of the future – ROADIBROM Summit Beijing Value chain (R)evolution Traditional business models and value chains will change drastically: –Media/Content value chain: consumer-reporter, from mass to individual focus, largely internet based –Advertisement business model: from mass to individual targeting –Key brands: Service & Solution providers iso Device manufacturers Major disruptive events will influence people behaviour : –Global warming –High price of energy –People Migration –Cyber crime –Economic power shifts – - …

8. Vision of the future – ROADIBROM Summit Beijing Uncertainty of Future Use -Currently 50% of mobile TV is done @ home* so Personalization is more important than Mobility -Will mobile TV business evolve into personal TV or even into a Personal access anywhere to my preferred content and community business ? -Interactivity, individual consumer targeting and seamless easy access services may become the most important new value spaces -Content/infrastructure is already paid for * Source: Nokia & Mobile TV operators

9. Vision of the future – ROADIBROM Summit Beijing Uncertainty of Future Business -Can broadcasters and telecom operators remain? -What is the fundamental distinction that would allow both to co-exist? -Will it be a media value chain or a value web? -Infrastructure investments and web-related services have a fundamental different pace. -Product & service life cycles are shortening fast (from years to months) leaving less time for ROI -Degree of penetration largely influenced by price of access and services for the consumer -Industry and media value chains are redefined and de- verticalised

10. Vision of the future – ROADIBROM Summit Beijing Internet & Digital Content exploit these trends more More content leads to high need for personalization Explore & Locate Select / Playlists Acquire Change Share Content Personalization Internet Content & Services Conventional Content & services More Content Available Personalize and give me my content so I can enjoy and share it where & when I want Personalized Content Anywhere, Anytime 7

11. Vision of the future – ROADIBROM Summit Beijing Advertising Industry will pass through most fundamental change in its history fromtowards BrandProduct basedStorytelling based ChannelTop down broadcastInteractive network MechanismPush, preach, persuade, seduce Pull, teach, co-create, Identity-transformation OfferConsumptionLong term support in lifestyle Attraction & interaction Mass media segmented message Invited unique participation Communication & seduction Artificial slice of life Idealised/homogeneous consumer Customer of product Co-creative reality & truth Maintained relation Heterogeneous consumer Partner

12. Vision of the future – ROADIBROM Summit Beijing Where is the money? What are consumers willing to pay for? –The type of access service? Fast access – wireless access – anywhere access – easy/seamless access –The content? Pay and download content/ Pay less and stream content Pay and get high quality Pay and avoid advertisements DRM expected to disappear due to consumer preference for free content Artists more willing to prefer large audiences above royalties to increase their market value thereby generating more income –Nothing? Highly targeted advertisements focused on engaging individuals and/or regional/global coverage could do the trick What is the value of (content) quality? –Lower quality in audio (MP3 vs CD) was accepted to get it fast/more/free –Lower quality in video (YouTube) seems acceptable (when it is free) –Pay for fast high quality could be acceptable

13. Vision of the future – ROADIBROM Summit Beijing Conditions for a bright future Mobile communication created a tremendous new products and services market ( larger than consumer electronics and IT products and services markets combined). … but success was built on a paradigm shift in the traditional telecom market Personal TV could represent an even larger business opportunity but seems to require a paradigm shift in the broadcast, media and advertising industry.

14. Vision of the future – ROADIBROM Summit Beijing Conclusions One thing is sure: a lot will become even more unsure in the coming years Different scenarios for the value chain need to be explored Flexibility is key: –Rapidly switching roadmaps /business models –Willingness to leave old paradigms Ultimately the user will define the direction … to understand and know what he prefers : extensive consumer insight research and experimenting in the market will be needed The ROADIBROM research themes give a good first direction …

15. Vision of the future – ROADIBROM Summit Beijing Lets do this Consumer Research and Market Experiments TOGETHER Thanks!