1. Don Kennedy Managing Director IDG Communications

2. Obstacles & Opportunities The Whitebox Channel Goes Home Don Kennedy Managing Director IDG Communications ANZ

3. The vision Media Center PCGames Console Appliances/Home Security Systems Digital Mobile Devices Digital Cameras/Camcorders Wireless Connectivity Home Theatres (Audio & Video)

4. Where we are – the pluses Consumer acceptance of many types of digital products –Cameras/camcorders –Multimedia mobile phones –DVD players –MP3 –Micro-storage devices –LCD and plasma screens

6. Where we are – the pluses Consumer acceptance of many types of digital products –Cameras/camcorders –Multimedia mobile phones –DVD players –MP3 –Micro-storage devices –LCD and plasma screens The Digital Living Network Alliance

7. Where we are – the obstacles Market –Weak broadband uptake in Australia

9. August 31, 2004 Broadband hits the million subscriber mark in Australia, but higher speeds – not lower prices – will drive future growth A.T. Kearney report predicts a “quiet revolution” for 2005 in entertainment, voice and data applications AROUND 15% of Australian households and 30% of small to medium enterprises will have broadband by year’s end, with subscriber numbers doubling to one million over the past 12 Broadband growth

10. Digital TV growth The number of pay TV subscribers... rose 8.3% in 2003-4

11. 1,000,000 broadband + 825,000 cable (non-digital) + 275,000 digital cable 2,100,000 The 10% (non)solution

12. Where we are – the obstacles Market –Weak home PC network uptake –Early adopters (only) for digital home networks –Security issues –Legacy investments –Ease of use issues –Where’s.net? Technology –Standards and technologies are not all here yet (802.11e, Ultrawideband, HomePlug, IPv6)

13. Even more issues in Australia Australians are missing out on a TV program recording service that has cult status in the United States because of a lack of co-operation between broadcasters on technical standards

14. Where we are – the obstacles No compelling case for consumers at the mass market level

15. What Do Consumers Want to Connect? A survey of households with PC networks Survey of 1,079 US Internet households © 2003 CEA and Parkes Associates n = 198

16. Interest in Multimedia Networks Survey of 1,079 US Internet households © 2003 CEA and Parkes Associates

17. What consumers want Digital home products should be easy to instal, provide obvious value and be affordable Products must interoperate with each other and with existing consumer electronic devices like TVs and stereos Device communication and collaboration with each other must be simple and seamless Source: DHWG Working Paper

18. Consumer Value Propositions Greater convenience and ease of use More flexibility in selecting a range of products from different vendors Content in the home can go mobile (and mobile content can come home) Confidence purchases will work together and are future proof Source: DHWG Working Paper

19. What the industry needs Adapters that bridge the CE, mobile and PC worlds and support consumer’s existing home devices CE, mobile and PC vendors must routinely deliver new and exciting digital home products that meet consumer needs for functionality, reliability, performance and simplicity

20. What the industry really, really, really needs The widespread adoption of multimedia networking components is contingent upon the availability of compelling entertainment content – the kind end users will want to access, download, store and stream

21. Should the Channel Go Fishing in the Home Pond?

22. Value Chain of Home Networks Digital Content –Audio/video (including interactive) –Games –User-created pictures, movies Access –ISPs, Cable/Satellite, Digital Free-to-Air, Multimedia Phone Services Platforms –Products –Service, support, installation, help desk

23. DIGITAL CONTENT

27. DIGITAL ACCESS

28. Key drivers of digital home market Source: ARN Reader Survey

29. DIGITAL PLATFORMS

30. Channel expectations for growth Source: ARN Reader Survey

31. Channel expectations for growth Source: ARN Reader Survey

32. Where the IT channel isn’t Source: ARN Reader Survey

33. The changing landscape The new competition from white goods distributors New business models moving into mass market products New products and services to sell

34. Convergence diverges A-V VARs –Early adopters and gadget lovers pay premium for new features and improvements –Sophisticated users require installation, service and support Infrastructure specialists –Convergence technology a minor percentage of total cost (e.g., of a home) –Price is king and brand loyalty unlikely

35. And some not so new threats

38. Another channel buster? YES –Proven model –Same products at lower prices –Spend money on marketing, not retailing –Use storefronts for product review and comparison NO –Customers need detailed information and advice –Home networks require service and support –Technology will continue to change and upgrades/updates will involve technical decision-making

39. The opportunities Begin selling digital convergence products NOW and expand to include traditional CE products Broaden your solution offerings to include integrated entertainment networks Develop expertise in-house to become an early player in the architecture and building space. This is a long-term investment

40. Action Items Educate your company about digital convergence Stay on top of new trends in digital home products –Interactive gaming –Tivo –Photo sharing

41. Obstacles & Opportunities The Whitebox Channel Goes Home Don Kennedy Managing Director IDG Communications ANZ