MID Webinar Business Models

Transcription

1 MID Webinar Business Models November 11, 2008 Moderated by Jim McGregor Principal Analyst and Research Director In-Stat

2 Introduction Welcome to the Mobile Internet Device (MID) webinar series featuring: MID Market Overview 6/26/08 MID Hardware Architectures 8/7/08 MID Software Architectures 9/24/08 MID Business Models 11/12/08 Today s host: Jim McGregor, Principal Analyst & Research Director, In-Stat Agenda 5-minute overview 30-minute discussion by panelists 45-minute live Q&A Archive of webinar available at:

3 Panelists Seshu Madhavapeddy General Manager, Mobile Internet Device Business Unit, Texas Instruments Joined TI in 2008 Former president, CEO and founder of various technology start-up companies Guides TI s MID business strategy, software and hardware platforms, strategic partnerships and customer relationships Mike Woodward Vice President, Smart Devices, AT&T Joined AT&T in 2001 Leads AT&T s wireless data device strategy for business and consumer segments including both stocked and non-stocked Bob Sullivan President and CEO of Sullivan and Associates Consulting 28 Years Senior Broadcast Management Positions Including: Vice President, Gannett Television (CBS Division) Oversaw five, Gannett CBS TV Station President and General Manager, WUSA-TV, the Gannett owned, flagship, CBS affiliate in Washington, D.C.

4 Successful MIDs offer solutions Devices Services Content & applications Music Software Video Smartphone WLAN/3G/ WiMAX/LTE Social networking Internet Web 2.0 Ringtones Internet Navigation News & information

5 Ecosystem overview Communication Infrastructure Service Providers ODMs & OEMs Distribution Channels Software Content, Apps/Services, & Advertising Semiconductor Consumer

6 Ecosystem overview Communication Infrastructure Service Providers ODMs & OEMs Distribution Channels Software Content, Apps/Services, & Advertising Semiconductor Consumer

7 Mix of business models Existing Subsidized devices Minute-by-minute/bit-by-bit Service tied to device Multiple services Closed platforms/one point of contact Emerging Subsidized services All you can get Service tied to customer Multiple devices Open platforms/multiple points of contact Single log-on Ad revenue sharing Content revenue sharing Service/application revenue sharing

8 Business model requirements Support technology innovation Support growth for the entire ecosystem Support investment in new communications infrastructure Support enhanced services, content, and applications for consumers Must meet consumers growing and varying expectations Must reduce strain on discretionary income to support continued growth

9 Technology Provider Perspective Seshu Madhavapeddy General Manager, Mobile Internet Device Business Unit Texas Instruments

10 Consumer expectations for MID performance Base Line Requirements: Full web browsing High resolution display Wireless broadband All day power True portability Intuitive UI Opportunities Build ongoing relationship with customers Create new revenue streams for applications and services TI Delivers: Complete hardware and software reference platform for MIDs OMAP 3 processor provides laptop-like performance at low power ARCHOS WVGA Touch WLAN HSDPA 60 GB Hard Drive 13 mm thickness No-compromise internet browsing HD video & music player Ultimate TV & radio experience Games, , photo viewer, widgets Media Club movie purchase

11 It s about delivering content and services Internet Content & Services Client User Interface Applications Middleware Kernel OMAP 3 MID H/W Platform Content & services delivery platform Music Video Social networking Movies News & information Gaming Maps Widgets

12 Engaging with ARCHOS Media Club

13 TI and its ecosystem ease delivery of new applications and content Customers Define solution that offers content & services TI Provide Optimized System Solution TI Ecosystem Apps, UI, Content

14 Service Provider Perspective Mike Woodward Vice President of Smart Devices AT&T

15 Overview Existing smartphone model is thriving Mobile broadband is becoming ubiquitous MIDs offer a compelling opportunity Ecosystem value chain / revenue sources MID business model considerations

16 Existing smartphone model is thriving Business drove early smartphone adoption Processing power, battery life, screen size, keyboard usability have converged for great devices Now 3G handsets combine with rich browsers and apps to deliver compelling handheld experience Device Evolution Business model: SUBSIDIZED Incoming: data plan revenue Outgoing: device subsidy to customers

17 Mobile Broadband is becoming ubiquitous Network and device speed and performance have reached critical mass to grow the market 100 Mbps 10 Mbps 1 Mbps 1.8 Future Roadmap G is a household name Built-in mobile broadband laptops has been a slow starter but is gaining momentum >2010 HSDPA HSUPA HSPA+ LTE Worldwide WWAN by device Business model: COMMISSIONED Incoming: data plan revenue Outgoing: either commission to PC- OEMs (embedded) or Subsidy (cards) Shipments (Millions) External Cards Internal Modems USB Modems Source: IDC

18 MIDs offer a compelling opportunity Rich browsing, open access and new embedded form factors are combining to create the new MID category SUBSIDIZED Premium Notebook Portability Netbook COMMISSIONED MID Smartphone Feature Phone Functionality

19 Ecosystem value chain / revenue sources Chipset / OS Devices Carrier Distribution Customers Hardware sales and OS licenses Hardware sales Service fees, activation bounties, equipment margin

20 MID business model considerations?? Carrier Subsidy - Smartphones and MIDs, e.g. iphone subsidized through carrier distribution for long-term customer commitments Third Party Dealer -AT&T certified equipment where AT&T pays a bounty for the activation but the dealer may or may not subsidize the device Up-front/Wholesale -Network/Wireless usage is specialized and therefore predictable and often manageable from a cost perspective Service subsidized with application revenue - Similar to subsidy based on wireless contract, payback occurs over time with revenue on application usage or downloads Advertising - Combination of mobile internet, GPS, search and advertising may deliver compelling customer experience that could generate revenue to offset equipment cost

21 Moving and Selling Content Bob Sullivan President & CEO Sullivan & Associates

22 Pulse Check TV-still dominant: 2008* -TV viewing: -Online viewing: 389 billion viewing hours 800 million viewing hours 1/3 of all household Internet activity happens while also watching TV+ Growing paradox: rising TV viewership and growing popularity of new media TV viewership: Internet usage: 127 hours per month 26 hours per month *Black Arrow (10-08 ) +Nielsen (10-08 )

23 Video: Prime Time To My Time 11 billion clips viewed online in July, 2008* What s working: 5 Billion clips viewed in July, 2008* (30,000 Videos) + (1,000 TV Shows / 400 Movies) *Source: comscore (07-08 )

24 New applications New: Just Announced MTVMusic.com (22,000 Music Videos) 30 million profiles adding video / programs

25 New applications NFL on cell phones: (last Thursday) (Broncos vs. Browns) Feature movies: Videos: + *Source: Nielsen (Most frequently cited movie information web source ages 15-24*)

26 Video Internet TV New crop of special purpose devices: + 12,000 movies / shows on demand (Streamed by Netflix on Internet) Trends Cable Cutters

27 Video: Prime Time To My Time Misses: Titan media: closed summer 08 Break media / ManiaTV / Veoh: October layoffs Yahoo: 1,400 jobs cut: 2009

28 Local news Backpack journalists Multi-tasking staff: -Reporters who shoot video -Photographers who report -Producers who edit -Assignment editors who write Newsrooms of the future Information centers Internet editorial staff hiring Stand alone site development: HS football

29 Online advertising: Print - TV Old model: Selling Internet as value add Banner display ads New model: (not about transactions-about interactions) Stand alone web sales Search / usage / behavioral targeting Precision advertising paying for results (Decreasing sales employee bonuses for print only sales from 95% to 70% in 2009)

30 Online advertising: Print - TV Total local advertising on the web 2008: $12.9 billion (5 x more than 2004) Total revenue local newspaper sites-2008: $3.7 billion* (6.5 % of gross revenues (2011 estimate: 10% of gross revenues) But: 44% of local Internet revenue in % of local Internet revenue in 2008 Total revenue local television sites-2008: $1.2 billion* (3 % of gross revenues) (2011 estimate: 6% of gross revenues) *Source: Borrell Associates

31 Online advertising 2009: Like skeet shooting in the wind * Got the velocity and trajectory down pat Gusts caused by credit crisis-hard to pinpoint the target Offline media: Down 1.4% Online media: Up 7.2% ($13.9b) *Source: Borrell Associates Billions

32 Online advertising Automotive: The 300 pound gorilla is losing weight September / October 08: sales down 30% By year end: 700+ dealership closures 2008 sales platforms # 1: Television (# 1 in 2007) # 2: Internet (# 3 in 2007) # 3: Newspaper (# 2 in 2007)

33 Newspapers: Last call? Current: Still most profitable media web sites but..challenges up / revenues down Future: Will be surpassed by TV* Since 2002: -Overall web advertising: 40.5% compound annual growth rate -(Newspapers: same period: 33%) -(TV: same period: 67%) Layoffs / shrinkage *Source: Borrell Associates

34 Online advertising Keys to survive: Skate to where the puck will be Wayne Gretsky Go where your customers are going Use their technologies to engage Explore unique / creative touch points Create new sales designs to stay connected Monitor brand reputation constantly Constantly scan on your competition

35 Summary The MID market Has elements of existing markets Is dynamic and changing rapidly The business model No single business model Likely to influence traditional markets and applications Requires closer partnerships throughout the value chain

36 Q & A To participate, click on the Ask a Question link on the left side of the interface; enter your question in the box on the screen; hit Submit. We ll answer them during the Q&A session or after the webcast. community.ti.com/blogs/mobilemomentum

37 Contact information Seshu Madhavapeddy General Manager Mobile Internet Device Business Unit Texas Instruments Mike Woodward Vice President of Smart Devices AT&T Jim McGregor Principal Analyst & Research Director In-Stat Bob Sullivan President & CEO Sullivan & Associates SWPT033