Network Insight Institute

Martin Hoffman

Martin Hoffman, CEO, ninemsn

I am going to bring it down just to a pretty basic level after my two distinguished co-discussion openers, Phil Sykes and Judi Tucker, in terms of economy-wide visions: to really just talk a little bit about the way I see consumers right now and over the short term, say 12 months to 18 months, and how they are really using broadband in their homes and the sort of opportunities that is creating for a number of parties.

At ninemsn we recently did some research about 2000 internet users and asked them to compare a number of different forms of media: TV, radio, newsprint and the internet. We asked them: which is the most essential, which is the most informative, most enjoyable, and most entertaining. The point from this slide click here is that on that first category of most essential, when the internet user is using broadband they almost double the rating that they give the internet in terms of its essentialness. So the starting point is that broadband simply makes the internet better. It is always on, it is faster, you get the stuff done that you want to get done, be it your banking, your broking, your shopping, your research, your news. So the first point fundamentally, and a very important one from the perspective of a broadband seller of services to the household, is that broadband makes the internet better.

But it goes further than that. It actually changes the role of the internet in the household. When asked to rank those four different types of media by which is the most enjoyable, television obviously comes first and the internet comes last in narrowband households. Click here to view slide. Those narrowband households still rank highest in terms of it being most essential but they don't see it as very enjoyable; it is merely a functional task, and a frustrating one at that. But when they are a broadband household, internet jumps to number two slot in terms of being most enjoyable. Still behind television, and for one of my shareholders that is a good thing I am sure. But certainly higher than radio and magazines, and it starts to become a more enjoyable medium. People start to get emotional and entertainment benefits from the internet.

This girl in the slide click here to view slides is not watching television, she is not watching even a DVD, she is not even playing a video game. She is using her PC and a particular version of Windows called Windows Media Centre which was launched recently in the US. It may well be launched here in September 2004. Windows XP Media Edition is a single unified full screen portal for TV, personal video recorder, movies, music, photos, radio and a range of third party content. It is designed for viewing and remote control interaction from a distance. To use the cliché, turning that two-foot experience of the computer screen into the ten-foot experience. Moving from the study into the lounge room. That is what the PC will increasingly do. A menu-type structure is being used, so you can see it can be done with remote control, single hand across all forms of media with images as Judi Tucker was talking about. It is utilising the existing household broadband internet connection as a forward and back channel. Importantly, all the applications are developed from standard HTML protocols and designed and optimised for viewing on a home television.

This particular application, this particular edition of Windows has received very positive reviews. I won't bore you with them. My point is not to boost Microsoft's prospects with this release, but simply to make the point that this convergence of the PC and consumer electronics is happening right now. The role of broadband for the consumer is much wider than simply faster internet, as we know internet sites today. I might also as a point of provocation for discussion later on query the competitiveness of this sort of platform as compared to the forthcoming FOXTEL ITV platform, noting we share a common shareholder again.

Now to consider developments in some other broadband content services. In terms of online gaming, we have here the Xbox click here. As a point of full disclosure there is another small company by the name of Sony that I understand has an alternative service to the PS2 platform as well. But this platform is really quite interesting and if you haven't seen a demonstration of this I really urge you to do so. This is about real time on-line gaming with people all over the world. It is about talking while you play with VOIP. So you are talking tactics with your team mates, you are taunting your competitors, your voice masking itself to Darth Vader if that is your preference.

You are keeping your games fresh by downloading new levels, characters, items and missions. You have a list of your friends so that when you go on-line, you can see who of your game friends are on-line when you are, wherever they happen to be in the world. This is happening right now, today. It really is a different experience that broadband is making possible in the home beyond simply the faster internet websites as important as that is. This platform will also shortly have instant messenger capabilities, and on-line music capabilities as well. So we have a really quite interesting application right now.

I am told that broadband video on demand is here and happening now in Australia, at least in Canberra if that counts. Perhaps that is why Canberra gets it first. Video on demand is delivered by the TransACT network in the ACT and soon also in Perth I understand with one of the power utilities there. I am yet to see a demonstration of this working. They certainly claim to have full VCR functions in terms of pause, rewind, fast forward and so on. It is starting to look a lot like TV, like pay TV, like digital TV right there.

Here is an example to show that not all my examples are from my shareholders. The on-line video subscription with Realnetworks in the USA: the RealOne SuperPass. Launched just over a year ago in the USA, it has about one million subscribers now, paying $9.95 per month. It contains basically news: BBC news, CNN and CNN Money, ABC news, the Weather Channel and the Wall Street Journal. In terms of sports: FOX Sports, major league baseball games, audio of every single game, NBA, Nascar, and CNN Sports Illustrated. It also has over 60 premium, commercial-free music channels, and what they describe as irreverent, bizarre, stupid, outrageous and hilarious short films and spoofs. But I think the point is that if you were a news fan, here is a broadband video subscription channel. You see what you want to see, when you want to see it. You can condense it, you can repeat it. That sort of product is starting to look, as I said, a lot like a very viable alternative to a pay TV subscription.

That is broadband, that is the PC, that is today. The alternative service to the RealOne Network, which has been announced by MSN in the US, is that rather than being a subscription service, they have said the same sort of high resolution on-demand news, sport and entertainment content will be free to consumers. But here they are talking about being ad-supported and combining TV ads with web advertising and the added value of that in terms of interaction and information. Click here to view slides. Fifteen seconds of video ads for every 5 or 6 minutes of content. Not as much as free-to-air TV, but not bad. So I think here is broadband giving examples of both subscription models and advertising-supported models that are very interesting indeed. Having spent a lot of time now talking about pushed content from traditional brand-name media operators, it is really important not to forget that the internet has already shown that often the greatest value is created by enabling people to create and share their own content. Be that content an ebay for sale ad, be it a match.com dating ad, be it simply the sharing of email. It has been about communication, and broadband will only accelerate that in terms of its enablement of the sharing with people you care about, of images that you care about. It is quite interesting that the correlation between the number of broadband household connections tracks very closely to the number of digital cameras sold in this country. Followed after digital still photography with a range of video and multimedia services as well. Despite coming from a main media background, we try to never lose sight of the fact that a lot of what this technology is about is letting people communicate with the people they want to talk to, with the images that they care about. I think broadband has a huge role and a huge business opportunity in that respect as well.

So in closing click here to view summary, the points I wanted to make were that broadband makes the internet as we traditionally know it better and more enjoyable. That is what consumers are saying now. But it is doing a lot more as well. I think it is making real the convergence of the PC, consumer entertainment, and the consumer electronics industries. It enables completely different environments, and I think Xbox on-line gaming is a great example of that. It starts to enable genuine alternatives to subscription TV channels and it opens up significant new advertising opportunities. At ninemsn we are incredibly positive about broadband. We know it makes a real difference to our business and it can make a difference to a number of other businesses as well. I thought Phil Sykes' slide was great in terms of seeing the time-shifted take-up of DSL services. Sometimes we need to remind ourselves that it is not all doom and gloom here.

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