The paid TV market is on the precipice of a fundamental change. Internet and mobile video are challenging traditional cable TV for the attention of viewers worldwide. Consumers are demanding more personalized, unfettered content and video service providers must deliver.

1. Pay TV’s Uncertain Future Vince Vittore Dmitriy Molchanov August 31, 2010

2. Agenda Business and Strategic Issues Radical Redesign of the Home and Services Key Takeaways and Q&A

4. The Wallet Still Rules Decision-Making Base: 562 What could convince you to switch from your primary pay TV provider in the next year?

5. Competition Coming from All Sides Content Owners Hulu, NFL, MLB, NBA, NHL Alternatives PlayStation Network, Xbox, Google TV, Retail STBs, iPad Traditional Competition MSO, IPTV, DBS Cloud-Based Content Netflix, CinemaNow Pay TV Operator

8. Cord-Cutting Attitudes Bases: 5,306 in 2009; 1,069 in 2010

11. Video Game Consoles Challenge the STB Applications Interactive Video Social Networking Information Streaming Multimedia Exclusive Content Sony has led the pack in bringing exclusive content to the game console world with its own reality show, “The Tester,” which airs this winter, and with exclusive content from Marvel for comic book fans. Targeted Advertising Microsoft’s Advertising Business Group has partnered with Nielsen to begin researching ad placement through Xbox LIVE. Honda and Sprint have invested $1 million in advertising opportunities. 3-Screen Both Microsoft and Sony are leveraging their consoles’ well-developed online communities to bring their content outside the living room with PSN and Zune Video. Cloud

13. Agenda Business and Strategic Issues Radical Redesign of the Home and Services Key Takeaways and Q&A

14. Proliferation of Household Devices n=5,804 Percentage of households with at least one of the following devices:

15. Watching Video Frequency Base: People who own the device (Asked in Wave 1)

17. Familiarity and Convenience Are Highly Desired

18. TV Takes on More Responsibility Applications Interactive Video Social Networking Information Targeted Advertising Home Monitoring Videoconferencing Streaming Multimedia Distance Learning Network Management Home Health Care 2010 2015 Services Applications

19. Smartphones Get Even Smarter Mobile Devices Will Interact with Home Networks Home Network 2010 Remote DVR Place-shifting 2015+ Home Network Media Sharing In-Home Input Devices Remote Home Monitoring Remote Elderly Care Both AT&T and Verizon are leveraging smartphones and tablets to control home devices Alcatel-Lucent TeleHealth Manager has been cleared by FDA QCOM’s Skifta application allows users to share their media through their phone when on a friend’s LAN FrontPoint security and Alarm.com applications monitor home security systems

20. Devices Move Into the Cloud Gaming OnLive and Playcast experiment with Cloud Gaming: 1 Mbps for 640 x 480 resolution. Personal Media Ultraviolet creates new open standard for digital lockers backed by Warner and Microsoft. Disney also pushing “KeyChest.” Streaming Multimedia Brick-and-mortar retailers entering digital distribution: Walmart acquires VUDU, Barnes and Noble invests $140 million in e-book distribution. Cloud

21. Applications Moving from Passive to Interactive Customer Attractiveness Interactivity HIGH LOW HIGH Standard Def VoD UGC on TV Social Networks Web on TV Catch-Up TV Interactive TV Content DVR Advanced EPGs Exclusive Content 3-D TV Application Stores NPVR T-Commerce High Def

22. App Store for the TV? Consumer pays for app via iTunes Apple takes 30% of the revenue Apple sends 70% to developer on a monthly basis In the iPhone world In the video world Consumer Content Owner Rights Holder App Developer Operator Consumer Talent Sports Leagues

24. How HDTV Content Is Viewed Base: People with an HDTV set at home; asked in Wave 4

25. Agenda Business and Strategic Issues Radical Redesign of the Home and Services Key Takeaways and Q&A

27. Q&A Vince Vittore, Principal Analyst Service Delivery Architecture, Broadband, Regulation Blog: http://blogs.yankeegroup.com/author/vvittore/ Twitter: @vvittore Recent research: “ A Tale of Two IPTV Telcos, Revisited ” & “ Service Providers Put Interactive TV Advertising to the Test ” Dmitriy Molchanov, Analyst Access Devices, Converged Consumer Applications Blog: http://blogs.yankeegroup.com/author/dmolchanov/ Recent research: “ Mobile Broadband's Next Big Push ” & “ 2010 Anywhere Device Index: Identifying the Next Game-Changer ”

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