Network Insight Institute

Christophe Cazes

Christophe Cazes, General Manager, Marketing & Sales, Thomson Asia Pacific

We have been involved in the digital story in Australia from day one because we were the first manufacturer to be associated with the networks to develop the first STBs on the market. So we know what has been good and bad about the experience from many points of view.

Just a bit of history to understand what has happened and also to draw some conclusions as to how we should drive the take-up, because this is also our responsibility as a manufacturer. I think initially that the national coverage was not there. Soon it will be 90 per cent, but initially it was a bit of a headache to go to a retail store and get people to explain the progress of digital broadcasting, which hampered the sale of STBs.

Content availability is a key aspect of the success of the digital take-up. Also, the availability of wide screens initially was a problem; but now there are many in the marketplace. Initially, it is true that the price of the STB was a bit high; not that we wanted to make enormous margins out of it, but this was the price of the hardware and the chips at that time. But Thomson brought it down to $299 back in November 2002, and this was the trigger point. It was exactly the price at which we were selling in the UK, at 99 pounds, which was also a trigger point. So price is obviously important.

There was also some confusion in terms of HD versus SD boxes. Some consumers did not know whether to wait for the price of the HD box to go down, or to buy a SD box right away. There was a lot of confusion, but I think that has slowed down tremendously, and that now people understand why they should buy a HD or a SD box. Such are the lessons that we have learned from the beginning.

If we look at the only real model for retail free-to-air STBs in the world, that is the UK. This year we will be deploying close to 400, 000 STBs in the UK. Why was the UK so successful? I think first and foremost, because of the content. We as manufacturers provide a device to make it accessible, but what it important and what is driving everything is the content;, and the content on offer in the UK is up to 30 channels, most of which are dedicated digital channels. The viewing experience, with better pictures and sound, is what we have here in Australia. The right price point is also here in Australia now. What is missing in Australia is the wide screen penetration. In the UK more than 80 per cent of new TVs purchased are 16x9, compared with approximately 50 per cent in the rest of Europe. What is also important is the capability of upgrading the software over the air. It is much more affordable to do it over the air than by recalling all STBs and doing it through after-sales service. So I think that once industry has worked this out it will help us tremendously to drive the take-up faster.

In regard to HD, I think you have to understand that only maybe 10,000 or 15,000 displays on the market are able today to look at HD, so you are only addressing a certain part of the market. HD is not the only factor that will drive the mass acceptance of STBs. However, HD will gain an increasing share of the market over the years, mostly from an equipment point of view.

Julie Flynn mentioned that around 93,000 STBs have been sold into the marketplace. Let's be aware that the growth potential is tremendous given the current installation base of 100,000 STBs in a country of 8 million homes and the many efforts needed from the manufacturers' point of view, from the networks' point of view and from the retailers' point of view to drive it up. As I said earlier, we will not be doing it alone. From the networks' point of view, there must be continued investment in content and making sure that the content will be available, sometimes exclusively on digital. But we need also to be able to understand exactly what the next generation of services or type of technology is expected.

We cannot produce STBs if we do not have a standard. We have a standard today, and we have to continue moving it up to higher levels. If there is a change, we need to be informed because research and development takes some time, and whatever is decided today will only come true maybe 6 months or 7 months down the road at best. It is important that the partnership we have established between the manufacturers and the networks goes on because it is the key in developing digital TV. From the retailers' point of view, I think that the confusion discussed earlier is no longer there, and I think that now the metropolitan areas have been taken care of, it is key to focus on the regional areas where the take-up may be even greater.

I would also like to make a few points about markets and market segmentation. Today we mentioned the $299 retail price point for the standard definition STB - how low can we get? It will all depend on chips and components and so on, and the US dollar. The relative strength of the Australian dollar enabled the $299 price point to be reached in the first place. We will try to drive the price down as much as we can, but as usual it is a chicken and egg situation. With regard to HD again, we have an issue of volume; until we get volume we cannot get lower prices on this. And we cannot support any investment from outside of Australia at this point of time; whereas with SD, we can do so out of Europe. But HD is a unique feature in Australia, which may be picked up in Europe in the next few years. Until then the current price of $799 or $899 will remain steady.

What we need to do now that we have all understood the consumer incentive as to what digital TV can be all about, and now that the STBs will be able to provide the base for the networks to develop more services and programming, is get a better product offering. And what we will be launching soon, hopefully before the end of the year, will be what is called a PVR or Personal Video Recorder. It is nice to have digital but if you can't do something simple like recording on digital, the experience of digital is very limited. So I think the PVR, which has already happening in some other parts of the world, will be an important feature of the market.

In terms of market segmentations, we expect the PVR to be a niche market initially but it will expand in time. It is also bringing up a new way of watching TV, because you'll be able to program your PVR to do some time-shift recording. So if you are watching a game of footy, and you are called by your boss, you press a button and it starts recording. When you return to the game, you press a button again and you can watch the match as if you have never left the room. So these are some of the features that I think we will be able to offer to the public, and it is a new way of watching TV.

Obviously, there is a need to develop what the industry is already working on, Electronically-trained Program Guide (EPG). Once you have a 7-day EPG, as exists in the UK, you are able to program 7 days in advance. This is a very easy way to store everything in your hard drive, which will be part of the PVR. And it is through these sorts of products that we will get more excitement from the consumers.

Having said all this, now that we have created a good platform, we have to live up to the excitement we are creating among consumers, we should not let them down because once we have consumers excited by technology, that will help all of our sales and the take-up of STBs.

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