Converging Technical Lifestyles - UK - October 2007

Table of Contents

• Issues in the Market
• Main issues
• Definition
• Abbreviations
• Market in Brief
• Convergence field wide open...
• ...but the race will be a long one...
• ...with broadband the engine for all success
• Barriers to take-up led by cost, complexity and quality...
• ...with lack of back-up yet to raise its head
• Convergence or connection?
• Digital divide shifting from age to affluence
• Convergence bundled through the back door
• PCs may stay in the background
• TV leads through position, not power
• Games consoles underachieving
• Smart choices in the mobile sector
• Insights and Opportunities
• Compatibility, not competition
• Give remotes the simple touch
• Consoles need to hit the ' new game' button
• Don' t forget the home phone
• Internal Market Environment
• Key points
• Access to technology
  • Figure 1: Availability of digital communications services, 2005 and 2006
• Britons spoiled for platform choice
• Take-up of technology
  • Figure 2: Computer, Internet and broadband take-up, 2002-06
• Mobile gets head start in convergence stakes...
• ...but broadband set to put TV and PC back in the race
• Satellite v Freeview
• Barriers to use
• Risk of online traffic jams
  • Figure 3: Estimated bandwidth requirements, by application
• Complexity of use
• The consumption environment
• Limited (battery) life-expectancy
• Technology issues
• Broadband connection speeds
• Internet capacity
• Spectrum access
• Next-generation Networks
• Wi-Fi and WiMAX
• Faster speeds, even wider coverage
• Service bundling
• Regulation and legislation
• Unbundling leads to bundling
• Broadening the spectrum for convergence
• Fights over rights?
• Price and competition
• Usage caps
• Broader Market Environment
• Key points
• Demographic trends
• Bridging the digital divide
  • Figure 4: Trends in the age structure of the UK population, by gender, 2002-12
• Approaching a third aged 55+
• DTT an important technology for convergence among older groups
• Converging upmarket
  • Figure 5: Forecast adult population trends, by socio-economic group, 2002-12
• Convergence flies the nest...
  • Figure 6: Forecast adult population trends, by lifestage, 2002-12
• ...but smaller homes require fewer devices
  • Figure 7: UK households and one-person households, 2002-12
• Economic climate
• Consumers have cash to spend on converged devices
  • Figure 8: Trends in personal disposable income and consumer expenditure, 2002-12
• Lack of interest
• Consumer mobility
• Strengths and Weaknesses in the Market
• Strengths
• A connected country
• Development of wireless technologies
• Service bundling
• Growing technological awareness
• Strong consumer electronics market
• Weaknesses
• Vulnerability to technical failure
• Consumer caution
• Concerns over performance and complexity
• Digital divides
• Digital rights management
• PCs/the Internet
• Strengths
• Weaknesses
• Interactive television
• Strengths
• Weaknesses
• Games consoles
• Strengths
• Weaknesses
• Mobile phones
• Strengths
• Weaknesses
• Case Studies
• IPTV: Joost
• Track record and funding create a potential pace-setter
• Open access by year-end
• Demographic targeting of adverts
• A window on the TV world?
• Interactive television: Sky Active
• A video magazine
• An alternative model of convergence -- revenue convergence
• Games console: Xbox 360
• Connected hub or converged device?
• Re-inventing the walled garden
• Xbox versus Apple TV?
• Mobile phone: Nokia N95
• First sighting of GPS
• Web browsing and email
• Sound on vision...
• ...but mobile' s memory and life limits remain issues to resolve
• PCs and the Internet
• Key points
• The recent past
• OK computer -- consumers get with the program
  • Figure 9: Computer, Internet and broadband take-up, 2002-06
• Internet age created the possibility of convergence...
• ...but broadband made it reality
• Escape from the bedroom
  • Figure 10: Market size and forecast of the laptop market, by volume, 2001-11
• The present
• Download trends add video to audio
• Challenging the console: episode one
• Changing focus: from distribution to communication
• The future
• Broadband access to widen further...
• ...and sit at the heart of convergence -- on all devices
• Challenging the console: episode two
• Where next: Centre stage or behind the scenes?
• PCs and the Internet: the consumer
  • Figure 11: PC ownership, June 2007
• No substitute for Internet access
• Consumers dislike being chained to their desk(top)
• Activities done through PCs
  • Figure 12: Activities done through PC in the last 12 months, June 2007
• Not all Internet users are early adopters
• Some functions fit together better than others
• Future convergence: a two-way street?
  • Figure 13: Activities done through PC in the last 12 months, by PC ownership, June 2007
• Laptops lead in convergence stakes
• Activities done through PCs by demographic analysis
  • Figure 14: Activities done through PC in the last 12 months, by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage and mobile provider, June 2007
• PCs not doin' it for the kids
• Do women want divergence, not convergence?
• Broadsheet brands
• Older children hold their parents' hands
• Interactive TV
• Key points
• The recent past
• Rise of the red button
  • Figure 15: Digital television penetration, October-December 2006
• Penetration driven by choice, not necessity
• Freeview growth shows price is still an issue
• New sets for new services
• The present
• iTV reaching those on the wrong side of the digital divide
• Some services more interactive than others
• iTV convergence centres on the living room
  • Figure 16: UK television reception, by platform, October-December 2006
• The future
• Increased interactivity for DTT
• Putting the TV in IPTV
• Converge or die?
• Interactive TV: the consumer
  • Figure 17: TV reception at home, June 2007
• Strong links between Internet and multichannel TV...
• ...and particularly cable
• Interactive activities done through the TV
  • Figure 18: Interactive activities done through TV in the last 12 months, June 2007
• TV-based interactivity more ' passive' than ' active'
• New services gaining popularity
• Interactive activities by TV reception
  • Figure 19: Interactive activities done through TV in the last 12 months, by TV reception at home, June 2007
• Cable viewers look most receptive to online convergence
• Most popular interactive activities through TV by demographic analysis
  • Figure 20: Most popular interactive activities done through TV in the last 12 months, by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage and mobile provider, June 2007
• Next most popular interactive activities through TV by demographic analysis
  • Figure 21: Next most popular interactive activities done through TV in the last 12 months, by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage and mobile provider, June 2007
• iTV can bring convergence to women...
• ...but not so much to the young
• Games Consoles
• Key points
• The recent past
• Expanding the field of play
• Consoles wield convergence clout
• The present
• Convergence now
• Unfulfilled potential
  • Figure 22: Interactive activities done through games console, September 2006
• Price as important as capabilities
• The future
• More walled gardens?
• Static games consoles: the consumer
  • Figure 23: Games console ownership and purchasing intentions, June 2007
• Focus on pure gamers obscures convergence potential
• Can Wii fix it? Maybe Wii can
• Premature ageing a problem for the sector
• Most important static console features
  • Figure 24: Most important static console features, by platform, June 2007
• Little convergence interest among the current console crowd...
• ...but newcomers are even less convergence-aware
• Handheld games consoles: the consumer
  • Figure 25: Handheld games console ownership, June 2007
• Handhelds more popular than statics
• More positive picture for PSP
• Super Mario Brothers to the rescue?
• Handheld console features
  • Figure 26: Most important handheld console features, by platform, June 2007
• Music, video and gaming already converged -- and popular
• PSP for individuals, DS for communities?
• Mobile Phones
• Key points
• The recent past
• Market reaches saturation point
• UK goes 3G
• Operators cannot hold for call revenues
  • Figure 27: UK mobile phone market, 2005 and 2006
• Demand for data gathering pace
  • Figure 28: UK mobile phone revenue segmentation, 2001-05
• The present
• Internet goes mobile...
• ...as does TV...
• ...but relevance and cost remain barriers to growth
• The future
• Falling prices to boost data traffic
• 3G or not 3G?
• Convergence between the phone and PDA?
• Mobile phones: the consumer
  • Figure 29: Activities done through mobile phone, June 2006
• Main functions widely used...
• ...but mobile users concerned about cost...
• ...and security
• Most popular activities done through mobile phones
  • Figure 30: Most popular activities done through mobile phone, by gender, age, socio-economic group, region, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage and mobile provider, June 2006
• Next most popular activities done through mobile phones
  • Figure 31: Next most popular activities done through mobile phone, by gender, age, socio-economic group, region, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage and mobile provider, June 2006
• Two types of mobile convergence -- business and pleasure
• Mobile convergence available to all...
• ...and on all networks
• The Consumer: Enthusiasm for New Technology
• Key points
• Type of technology buyer
  • Figure 32: Type of technology buyer, June 2007
• Convergence set to be a slow sell
• Type of technology buyer by demographic analysis
  • Figure 33: Type of technology buyer, by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage and mobile provider, June 2007
• Early adopters: young, male, affluent
• Replacers: older, female and skint
• Type of technology buyer by technology ownership
  • Figure 34: Technology ownership, by type of technology buyer, June 2007
• Satellite today, Freeview tomorrow
• Early Adopters stand back in static console market
• Smart money on the smartphone
• Type of technology buyer by interactive activities done on TV
  • Figure 35: Interactive activities done through TV in the last 12 months, by type of technology buyer, June 2007
• Type of technology buyer by activities done through TV
  • Figure 36: Activities done through PC in the last 12 months, by type of technology buyer, June 2007
• Type of technology buyer by activities done through mobile phones
  • Figure 37: Activities done through mobile phone, by type of technology buyer, June 2006
• The Consumer: In-home Convergence
• Key points
• Attitudes towards in-home technology
  • Figure 38: Attitudes towards in-home technology, June 2007
• Benefits of convergence already understood
• Biggest barrier to take-up is not an insurmountable one...
• ...although consumer jury is still out on IPTV quality
• Targeting opportunities
• PC/Online Convergers
• Console Convergers
• Frustrateds
• Non-Convergers
• Target groups by demographic analysis
  • Figure 39: In-home technology target groups, by gender, age, socio-economic group, region, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage and mobile provider, June 2007
• PC man is gadget fan
• Consoles strong on value
• Young not immune to frustrations of technology
• Non-Convergers older and mid-market
• Attitudes towards in-home technology by type of technology buyer
  • Figure 40: Attitudes towards in-home technology, by type of technology buyer, June 2007
• Early adopters set convergence pace...
• ...with the Cautious and Replacers still waiting for results
• The Consumer: Mobile Convergence
• Key points
• Attitudes towards portable technology
  • Figure 41: Attitudes towards portable technology, June 2007
• Significant resistance towards mobile convergence...
• ...with technical issues to the fore
• A solid core are pro-convergence...
• ...but non-core functions do not determine purchasing patterns
• Targeting opportunities
• Convergers
• Frustrateds
• Non-Convergers
• Portable technology target groups by demographic analysis
  • Figure 42: Portable technology target groups, by gender, age, socio-economic group, region, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage and mobile provider, June 2007
• Affordability drives mobility
• Frustrated by static standards
• Non-Convergers worth pursuing
• Attitudes towards portable technology by type of technology buyer
  • Figure 43: Attitudes towards portable technology, by type of technology buyer, June 2007
• Forecast of Consumer Demand for Converging Technologies
  • Figure 44: Share of technology buyers, 2007
  • Figure 45: Convergence in-home and/or mobile within buyers' profiles, 2007
• Nearly 100,000 ready for converging products in 2008
  • Figure 46: Forecast of purchasers of converging technology, 2007