CEOs Discuss Strategies for Realizing the Value of Convergence
Posted on September 20, 2000
by Jeanne Gellman
NEW YORK - At the PricewaterhouseCoopers 2000 Convergence Summit held in New York on September 19, 2000; CEO's representing the top entertainment, media and communications companies explored how to realize value from the coming together of content, communications and technology. Two themes that emerged during the Summit are that the demand for capacity and content is seemingly infinite and that the key to being successful in these thriving and converging communications industries is developing a focussed business strategy.
Gary Cohen, Co-Chief Operating Officer of Global Crossing Ltd., believes that the convergence of the telecommunications, media and entertainment industries has created a cycle that is fueling an ever increasing demand for capacity and content. The last mile, according to Cohen, is being widened not just in terms of bandwidth, but also in terms of how it is going to be used. This is causing greater activity on all networks which is leading to a greater demand for capacity and content. The result, said Cohen, is that "there is an insatiable appetite for broadband to come to all of our neighborhoods."
Edward Breen, Executive Vice President and President of the Broadband Communications Sector within the Communications Enterprise of Motorola added that this growth has moved faster than anyone had expected. For example, said Breen, Motorola was surprised by the immense demand for cable-modems in North America. "Motorola will supply North America with 8-10 million set-top boxes this year," said Breen. "Our projections a year ago were half that amount." Breen believes this demand will only multiply further as more markets become fully digitized.
Supporting such optimistic perspectives on the future of the telecommunications and media industries, the PricewaterhouseCoopers' Global Entertainment and Media Outlook: 2000-2004 predicts that the global entertainment and media industry revenues will grow at a seven percent annual rate to near the $1 trillion dollar mark by 2004. The Global Entertainment and Media Outlook: 2000-2004 also forecasts that double-digit Internet and cable industry growth will propel the United States to a $445 billion industry total in 2004. Asia/Pacific, stoked by double-digit increases for station, cable and DBS distribution and Internet spending, will grow nearly as fast as the United States -- peaking at $217 billion in 2004. Continuing the trend, the outlook states that double-digit Internet growth will carry Europe to a $313 billion total five years from now.
According to Kevin Carton, Global Leader of PricewaterhouseCoopers Entertainment and Media Practice, "These forecasts show the significance of the entertainment and media industry on the world economy and the role digital technology has in driving that growth. The Internet is clearly the main catalyst for this economic surge, and we estimate this segment of the market alone will be worth $75 billion within five years." Copies of the Global Entertainment and Media Outlook: 2000-2004, which was released at yesterday's Summit, can be obtained by visiting ..\..\..\From the Floor\www.pwcglobal.com\outlook2004.
Staying Focussed
The flip side of all this good news is that telecommunications and global entertainment and media companies are facing some new challenges. With so much consumer demand for content and capacity, many of the speakers at the Summit warned that companies should avoid the temptation to move too quickly to expand into new lines of business outside their own area expertise. In short, the key to success in this dramatic, unpredictable and constantly changing business is staying focussed.
According to Ivan Seidenberg, President and Co-CEO for Verizon; focus both in terms of business and geographic presence is at the core of Verizon's strategic plan. Rather than spreading into as many overseas markets as quickly as possible, Verizon is focussing on becoming a tier one player in North America first. "You have to be strong someplace to be global," said Seidenberg. To this end, although Verizon has a presence in 30 countries, the company plans to focus on building-up it's customer base in North America first and will then leverage the traffic from that region to expand into other parts of the world. Seidenberg expects it will take another 5-10 years for Verizon to become a truly global company.
In addition, Seidenberg said that Verizon "wants to do what its always done but better." This means that Verizon will "need to stop itself from dabbling in things it shouldn't do." Therefore, Seidenberg sees Verizon's role in the entertainment and media side of the industry as providing access to as many consumers as possible. Rather than creating content, "we want to create eyeballs," said Seidenberg.
Motorola's Breen agrees that the convergence movement doesn't necessarily mean that telecommunications companies should start providing content or that content providers should start offering Internet service. Similarly, Cohen stated that Global Crossing knows that it's role is to be an enabler for the growth of capacity and services and will continue to focus on building-out networks rather than moving into other lines of business. "Our ambitions," said Cohen, "are limited to what we have the skills and capability to deliver."
Several speakers also believe that companies must focus more than ever on fostering consumer loyalty at a time when consumer have more choice than ever before of content and how it will be delivered. According to Joshua Sapan, President and CEO of Rainbow Media Holdings, Inc., "We can't force people to move from one platform to another, and we can't tell people where to go. They are going to go where they want." Therefore, Sapan believe that in such a highly competitive market good branding and providing a superior consumer experience is essential. |
