Ladies and Gentlemen,
some of you know that I founded and directed the Bertelsmann Broadband Group, which - on a European level - prepared broadband services, interactive television and multimedia content for DSL- and upgraded cable networks. In the meantime, in coincidence with the acquisition of the majority of RTL group, we merged the activities of Bertelsmann's Broadband Group with those of RTL New Media. I always suggested to do that, not only because it was a bit ridiculous that the Broadband Group at least in Germany more and more competed with its sister company RTL New Media, but mostly because next-generation television can't be separated from the old TV economy.
I'm now still with Bertelsmann, but in a consultancy role. Thus, dear journalists, I'm not announcing anything today which you may cite as Bertelsmann- or RTL group-policy. But this is also the reason why the organizers of this conference invited me; they did not want a company presentation, but wanted to listen to a more independent voice.
Some people always expect from those speeches very concrete answers on questions which interest them personally. They want to know how they should change their strategy, which set-top-boxes and video servers they should order, how their investment budgets should be developed and - this is a very common question - which shares they should buy. What they would like is that I give concrete answers like "Fire your marketing manager", "Avoid the d-Box", "invest in fiber optics" or "Don't trust German Telekom".
All this may be true, but I never give such concrete answers. The only thing I really do is to recall the fundamentals of electronic media business, to speak about the criteria for successful implementations of new technology and to bring into mind the rules which should be never forgotten if you deal with consumers and your real business is not to sell chips, boxes or bandwidth, but your real business is to sell convenience and fun.
What are these fundamentals, these criteria, these rules, concerning multimedia content and next-generation infotainment services? Well, today I want to present the five most important ones. Here they are:
- Don't get fascinated by technology. Think as a consumer.
- Don't get impressed by headlines. Explore the real story behind.
- Don't separate old from new media. They belong together.
- Don't forget the c-words. They will change our lives.
And finally: - Don't get frightened by the crisis of the new economy. Go ahead and innovate!
Because when we speak about multimedia content and next-generation infotainment services the decisive question is not, how technical the future is going to be, but how simple, how comfortable, how convenient.
Yes, it's true: In the last ten years - within a period of time which, in the context of the history of mankind, is merely the bat of an eyelid - digitalization, data compression and data transfer have made enormous changes to our lives. But we should never forget that these technologies were only successful because they solved a real problem. Snail mail is too slow, that's why e-mail is a success. Phone boxes are far away; that's why we all have mobile phones. Banks close early; that's why we pay with credit cards.
But nevertheless, a lot of people in technology companies think that from now on a new technology will have success because it's a new technology. And that is wrong. Because the consumer does not share this view.
Some weeks ago, at a conference organized by SUN Microsystems, a speaker described how the home of the future will look like. He said that the microwave oven will have a screen, that the software of the toaster will be updated automatically and that all appliances in our household will be linked to the Internet. Then somebody interrupted the speaker and said: "I do not want that my refrigerator calls the supermarket and orders Champagne."
No, new technology will only have success if it solves a real problem. Thus, whenever somebody comes to you and presents a new technology in the entertainment industry, ask the decisive question: Does this technology change inconvenience to convenience?
If it is does not, it may be nice to have. If it does not, it may be fun to use. But it will not trigger new mass market products.
Do you know these stores like Sharper Image with all these nice to have gadgets? I love those shops. And I often buy things there. And then I come home and my wife asks: What do you need that for? And I have wonderful explanations why it was absolutely necessary to buy this speaking clock or battery-driven ashtray or self-sharpening pencil. But I know, deep in my brain, that in two weeks I will not use it anymore, yes I will even have forgotten that I bought it.
So much about Microsoft's Web TV. No, this was a joke.
Thus, I repeat: Technology will have success when it turns inconvenience to convenience. Let's have a look on some examples, and let's begin with a positive one, the Palm Pilot.
This little pocket computer is wide-spread, you can buy it everywhere. It works from the beginning without having to install drivers or optimize the configuration. Its battery power lasts for several days or even weeks. The applications are stable and most of them are not bigger than some kilobytes. You can download approximately 10.000 programs via the Internet, with immediate fulfillment, and there is a huge competition between software companies. You can use it as an organizer, as an e-mail-terminal, as a GPS-receiver, as a mobile phone, as a remote control for your TV-set, as a reader for customized news or as a game device. Though it still lacks some features, like a bigger screen and a faster processor, it is my prototype for future mobile devices.
Imagine your desktop-PC or laptop would have these features. But the reality is quite different. Why does "plug and play" never work? Why is every new piece of equipment which you buy always and exclusively shipped with an outdated driver? Why do operating systems crash?
Recently, all the programs in the Microsoft Office 2000 suite I had just installed crashed immediately after I tried to open them with the simple command "Create new file". True enough, it only took an hour or so to find a solution in the Microsoft Knowledge Base in the Internet. You just have to open the registry, look for one of the 15,000 entries, ignore several warnings and delete some cryptic lines. No problem at all, really, apart from the fact that, when you're doing all this, you can destroy your whole system with the simple touch of one wrong key.
A friend of mine - he's Austrian, and they're quite inventive - always has a Polaroid camera at the ready next to his computer so he can at least save the visible on-screen data if his computer crashes. This is an intelligent solution for optical data back-up!
What's far worse, though, is that a program dictatorship has developed in the meantime. How's it actually possible that, by mistakenly downloading a file attached to the "I love you" e-mail, you install a virus that goes on the rampage without you being able to stop it? Hasn't anyone thought about not only restricting access to computers for people, but for doing the same for programs?
All that has to change tomorrow, for in a few years' time every relatively modern piece of equipment at the end of the line will be a computer - whether we use it for work, for gaming, for watching TV, for cooking or for sport. And this is when things start getting serious.
Thus, we have to create convenience. And this is the only way people are going to use new technology. The only way we can reach our target group. The only way we can get new customers.
If this is true for hardware, then it is true for software and services and content as well.
There are a lot of companies trying to make you believe that they are in the broadband business, or that they do interactive Television, or that they are the pioneers of convergence.
Some days ago I read in the Financial Times that a certain "Interactive Television"-company was in difficulties. Well, what does this company do? The company produces Web-Boxes which use the TV-screen as a monitor for browsing through the World Wide Web.
Is this interactive TV? No, it is not interactive TV - it is nonsense.
Did you try one of these web-boxes? Then I know what you did: You moved your sofa three meters forward. You took a long, long cable to link your TV-box with your phone line, and you at least once oversaw the cable and crashed into this nice vitrine. You interdicted in- and outbound phone calls in the evenings because you needed the phone line for watching TV. You wondered how these tremendous charges came onto your phone bill and you exceeded the limit of your credit card. You bought new glasses to be able to recognize the letters on the screen, which made your optometrist happy. And you learned that your favorite websites suddenly looked totally different, because the box automatically tore them into pieces, and you hated Microsoft for that, because all what is going wrong must come from Microsoft.
I'm sure you did NOT do all this. But, obviously, a lot of analysts didn't do that either. They just recommended the company.
And they did not read my speeches. 18 months ago, at the Milia in Cannes, I said - please apologize the self-citation -:
Well, anyone just needs to present a rectangular gray small box claiming that with such a box television and internet are merging - then ... boom... the stock price is already on its rise.
I could give you similar examples. There is a company in Switzerland that always said that they were the best and biggest broadband company of the world - fantastic, isn't it? And everybody bought the shares. But what was the concept of this company? They wanted to use the IP multicast technology to distribute content (which they, by he way, didn't have) via satellite networks to local hard disks, requiring special satellite dishes, complicated hardware plug-ins and powerful high-end-PCs. Obviously, no analyst asked the question if people will accept that.
Let's come to rule number three. This rule assumes that you already obeyed to the rules before. Thus, you did not get fascinated by technology, but put the real question on the agenda: Does this new technology change inconvenience to convenience? And: You looked behind the headlines, explored the full story, distinguished between companies that are just looking for short-term shareholder value improvements and those companies that really have the power to implement what they promise.
I know a lot of people which lead separate units, called "New Media" or "New Technologies" or "New Businesses". They are quite happy with their title, but they are not happy with their role. Because they should mirror the whole core business without completely knowing how the core business works.
Let me tell you a little story. When the Bertelsmann Broadband Group started their trials in several German cities we combined movies with E-Commerce. Unexpectedly, after two days of trial and only 20 broadband users, we really got an order. Somebody wanted to buy a book. We immediately organized a conference with our controllers and our lawyer and some people from the management. As we did not have technical links to BOL at that time and our accounting system was not adapted to TV-commerce and the bookkeeping department did not know how to handle it, we finally decided to go to a store, buy it, make a nice package out of it and send it to the customer as a gift.
This story is not typical, because it's a very small problem. But I know a lot of companies who have the same problem on a larger scale. They know a lot about Web design, but nothing about fulfillment. And they use the brands, but damage them.
Recently I saw a nice draft for a TV-Spot. It was advertising against E-Commerce. An old couple is standing in front of an antique shop. They finally decide to enter the shop. But they can`t because a roll shutter comes down with the words "please register". Consequently, they type in their names. The roll shutter opens again, but immediately closes, this time with the words: "Case sensitive".
That's the problem with today's e-commerce. Too complicated, no real fun, not secure enough and the fulfillment is often not reliable. When I log in to amazon.com (yes, I have to admit, I do that sometimes, but only for studying our competitor) then I read "Good morning, Werner Lauff". This is nice. What makes me suspicious is the next sentence: "If you are not Werner Lauff, please click here". Hey, how can that be possible that somebody else can log in under my name and know that I recently ordered "Lady Chatterly"?
Thus, don't regard the e-business as an additional one. Make it to your core business.
By the way: A very common mistake is to take a technology idea and think about what you could do with that. This very often leads to the fact that a new business is invented which has nothing to do with the core business. Recently I visited a company which had developed a very good application for set top boxes. But first of all they put so many features in their service that they needed special set top boxes. I recommended to reduce the features with the result that the application fits into all existing and planned set top boxes. They protested, because they were so in love with the front-end of their product that they did not want to miss one single feature. Finally they learned that their application is still wonderful even if the cursor is not animated. The second idea they had was to concentrate on one specific application, which is not a common one now. Thus, in order to trigger that, they had to leave their primary business field and had to enter the media and entertainment business themselves. After only slightly reviewing this strategy, they now are at the beginning of a very interesting development of their company, which wil be highly profitable.
These c-words are connectivity, convenience, communication, communities, customization, (e-)commerce and convergence. For me, this Century is "Century C".
And these C-words threaten established media and bring a lot of opportunities for new multimedia infotainment services.
Let's take the newspapers, the music industry and the television world as examples.
Newspapers. Yes, they are convenient. Newspapers are delivered to your home every morning; in technology terms it's a push service. Qualified people gather information for you, evaluate their importance and write commentaries. You can read your newspaper while having breakfast. And you can take it with you, wherever you want.
But newspapers will lose this advantage of convenience.
If you are looking for a job, you might find it more convenient to search for it in the Internet and directly apply for a job. If you want to get information about products, you might find it more useful to go to a prize comparison service in the web. If you want to buy used goods, it might be more convenient to visit an auctioning site in the net. And while traveling, it might be more useful to read the latest news in a mobile device rather than yesterday's news on paper.
In three years from now, you will get most of your news on mobile devices, linked to broadband wireless networks like UMTS. Of course, a mobile device does not have the smell of a newspaper. But nostalgia is nothing I would rely upon.
Two thirds of the newspaper revenues come from advertising. It's advertising with only indirect commerce. You can't click on the printed ad, get more information about the product and order it.
Thus, E-Commerce is a threat for newspapers. In 2005, most electronic advertising will have immediate ordering buttons, something newspapers will never have.
What about customization of daily paper printed newspapers? This would be very difficult to do. But already now, thousands of services in the Internet offer customized news.
When I visited the MIT in Cambridge recently, a start-up company presented the progress they made by using electronic inc. In five years from now, you will have a device, that you link to your broadband network. You will get your customized newspaper transferred on it. If you want, you get a new edition every two hours. It looks nearly like paper, you can fold it and you can roll it, but it is an electronic device.
Growing Connectivity, the declining advantage of Convenience, the missing possibilities of E-Commerce and the growing need for Customization weaken the newspapers. In addition to that, it's nearly impossible to build communities around a static newspaper or to add communication features to it.
What are the consequences for the industry?
If you already are in newspaper business, I would consider to move faster into the electronic world. To think about the possibilities of wireless transportation. To think about hourly updates, news customization, extending advertising deals to advertising and e-commerce deals. To use the newspaper as your basic medium, but use your content multiple times.
And if you are not in the newspaper businesses: See the chances.
The same is true for the music industry.
From the point of view of the music industry, the possibility to download music without paying one cent for it, is an enormous threat. Connectivity makes music available in digital form. It's convenient, because you don't have to go to a store to buy it. It's customized, because you can get exactly the music you want. On a website, you can build communities around music. And you can offer communication between people.
If you think about broadband networks and the possibility of downloading a song in twenty seconds, if you think about small MP3-Players attached to your Palm Pilot or your mobile phone, if you think about the fact, that the Internet is not regulated and that you will never be able to stop piracy, then - if you already are in the music business - you have to react immediately. Offer people more than piracy websites can do. Offer them not only content, but context. Give them a home, where they can get everything around their favorite music groups. Build communities, offer easy-to-use E-Commerce, organize the communication between users. Bring content to the web that nowhere else exists. Build a gigantic music community. This requires that you change your view of the customer. He is not the buyer of music, he is a member of a community. It is the biggest community in the world.
And if you are not in the music business: See the chances.
Well, let's finally speak about Television. Will the free-TV and the pay-TV-model, which we are so used to, exist forever? Well, think a little bit about the disadvantages and the inconveniences of the existing business model:
First of all, there is the time problem. No-one dictates when I have to read a newspaper or play a CD or start a new book. But if I want to watch a television program, I have to live by the clock. I can interrupt reading the newspaper when I want, leave the book open at the page I was reading, stop the CD and listen to it again from the beginning. That's not possible with TV. Even my visits to the restrooms are dictated by the commercial breaks. Luckily, there are enough of them.
The second problem with traditional television is the problem of the "masses". I can only watch what the masses want to see. Which is why the majority of the ideas for special interest channels have been buried without any pomp and circumstance. Health? Fitness? Travel? Computers? Dogs? Science Fiction? Local News? Yes, there's a little bit of all of it on television, but only at times when it doesn't annoy other people.
The third problem with traditional television is that it's strongly oppposed to buying. I'd like to have lots of products I see on the screen. I'd purchase them spontaneously, too. But this isn't possible.
After all, what does a TV-viewer's buying life look like? Most TV stations think that the ultimate solution is to use the internet for E-Commerce. But the viewer's experience is this one: Watch commercial. Remember internet address. Remember product. Leave living room. Enter study. Tell the children to finish their phone call. Switch on PC. Wait for Windows. Set up internet connection. Start browser. Enter web address. Look around the website. Enter product name. Select product. Confirm. Switch to secure website. Enter name and address. Enter credit card number. Confirm. Leave study. Enter living room. See that the movie has already started. Hate e-commerce.
If you find a simple way to combine TV and E-commerce, then you found the ultimate solution. Click, confirm, click. At the left hand a glass of red wine, at the right hand some cheese, in the middle the remote control. Isn't that a nice ambiance for e-commerce?
Right, then. Why can't I watch a movie when I want to watch it? Why can't I get what I'm interested in at that particular moment? Why can't I react to a commercial by placing an order? Why don't I get advertising that is tailored to my needs? Why must I subscribe to a whole pay channel if I only want to watch one film? Why do I have to leave my living room for checking my e-mail? Why can't I have a buddy list on the TV screen, telling me who else of my friends is watching TV and send him a small message?
This is why the chances for interactive television are so good.
And this leads me to the last rule: Some people now think that broadband will not be successful, because the upgrading of cable networks and the implementation of DSL takes a longer time than expected, mostly due to the lack of financing.
But they confound the hype which has been produced by the stock market with the long-term strategic needs of telcos, cable operators and TV stations. Do you really think that somebody owning the cable will not use it for interactive services, like Internet Access, Telephony, new TV channels and broadband content? Do you really think that a broadcaster will not use all possibilities to build communities and e-commerce around his programs? And do you really think that all telcos which now invest in UMTS and DSL will not offer new and interactive content via these networks?
No, there is no strategic change. The game goes on. Thus, don't get frightened by the crisis of the new economy. Go ahead and innovate! Use new technologies for changing inconvenience to convenience. For adding connectivity, communication, communities, customization, and e-commerce to your content! Use the prospects of convergence! And you will get another "c", the most important one: new Customers.
We all in this auditorium here have the chance to shape the future. Use this chance! Not in distress, unwillingly, because you're forced to, just as a reaction, just to jump on the bandwagon. No, be the first. Leading the field. With entrepreneurial spirit. With the will to create media history. Then it's yours, this beginning 21st century. Then it's yours, this "Century C".
Thank you very much for listening.