November 8, 2005

The future of TV in China…look to the what is shaping up in the USA or not?

Filed under: Technology,Tencent — Administrator @ 4:47 pm

Recent announcements by major broadcast and cable networks, digital recording devices, and Internet portals in the US are blurring the lines between TV and Internet…what ramifications will this have on the future of TV advertising and content? What are the implications for China?

Below is a summary of some of these events:

(November 7, 2005) David Lieberman from USA TODAY reports that, “Tailored, ad-free TV gains ground

CBS and NBC delivered another hammer blow to the traditional TV economic model on Monday by agreeing to let some Comcast and DirecTV customers pay 99 cents to watch certain hit shows on demand and ad-free

(November 6, 2005) Michael Singer from CNET reported, “Yahoo, TiVo to connect services

Users of Yahoo’s TV page will be able to click on a record-to-TiVo button directly from a television program listing to remotely schedule recordings.

There seems to be a couple things going on here: (1) Networks are waking up to the fact that advertising dollars are eroding and must search for alternative pools, and thus video-on-demand as well as digitalizing content for the web seems to be two solutions; (2) Internet portals are looking to go the other way, for example TiVo is one of the few devices that provides consumers with the ability to both record broadcast and Internet videos and deliver this to the TV.

In a sense, we are truly seeing the convergence of channels, rather than mediums…I guess the question is who benefits the most from this convergence? It seems to me it might be the online players as they are leading the charge in real-time/rich media/contextual advertisement, for example, Yahoo reported a YoY 46% gain in 3Q05 advertising revenues…

…the networks by moving towards video-on-demand (or even a rental model) seem to be acknowledging the inadequacies of traditional TV advertising model…

Back to China and how events in the US might impact the environment out here…

Based on our analysis, TV accounted for 40% of total advertising spend in 2003, we expect this to decline to 32% at end of 2005. This decline largely comes on the back of an increase in interactive/web based advertising spend, which we are forecasting to grow on a 2005 to 2009 CAGR of 25% to US$1.5 billion.

If you trust that these numbers at least illustrate the macro trend, then what should we be looking to invest in to ensure we’ll hit the next wave — that is if we aren’t already in the next wave?

And finally, does this make IPTV irrelevant and portals, such as Tencent’s QQ increasingly more relevant?

mmm…I think it does…

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