Frank E. Dangeard
Media & Technology :
The Rise of Electronic Content
Distribution
Journées Internationales de
l’lDATE
23 Novembre 2005
Safe Harbor Statement
Certain statements in this presentation, including any discussion of
management expectations for future periods, constitute "forward-looking
statements" within the meaning of the "safe harbor" of the U.S. Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
based on management's current expectations and beliefs and are subject to a
number of factors and uncertainties that could cause actual results to differ
materially from the future results expressed or implied by the forward-looking
statements due to changes in global economic and business conditions as well
as conditions specific to Thomson’s business, and regulatory factors. More
detailed information on the potential factors that could affect the financial
results of Thomson is contained in Thomson's filings with the U.S. Securities
and Exchange Commission.
Agenda
Technology Trends in Media
Examples of ECD
Common Elements in ECD
Thomson and ECD
Technology Trends in Media
Technology Trends
Content
Digitalization
Move Towards
HD
Media,
Entertainment &
Communication
Industries
Next Generation Networks
New business models. New entrants. New competitive landscape.
Page 5
Digitalization of Content

Linear content creation v.
parallel content creation



Emergence of new players



Rapid growth, TV production
is leading the transition (~75%
of production) but;
Feature film production will
represent ~50% in the next 35 years
Multiplication of contributors to
content creation
New content creators
Current Use
of Digital
Technology
Estimate in
3-5 Years
News, Sport
100%
100%
Episodic Sitcoms
80%
98%
One Hour Drama
20%
50%
“A” Title Feature
Films
<5%
30%
“B”/”C” Title Feature
Films
20%
50%
Medium
Fragmentation of distribution channels,
including « new media » groups
Page 6
Towards ubiquitous HD

Content Production :
 Content creation is moving towards 2k and 4k (“A” title feature films) and HD (“B” titles feature
film, sitcoms, TV series, etc.)
 Content owners transfer their feature film libraries to HD resolution
 Transition to HD is now throughout the post-production workflows: Digital intermediates,
Creative services, DVD authoring

Broadcast and Networks :
 Live programming is mostly done in HD (news, sports )
 Broadcast infrastructures are upgraded to handle HD format (switcher, servers, etc.)
 HD compression formats being standardized
 As a result
 HD programming in the US doubled every year for the past 3 years
 In Europe Premiere, TPS, Sky, Belgacom announced launch of HD channels before 2006.
 PPV channels for Cable & Satellite have been launched, offering a significant HD content

Access products:
 Access products are becoming available in HD format (Digital STBs, …)
 Consumers widely adopted HD-ready TV displays
 HDTV viewers expected to nearly quadruple to reach 52 million viewers by 2008
Page 7
New Generation Networks

Networks are evolving towards generalized use of IP technology
 Evolution initially driven by IT industry (data transmission)
 Generalization of file-based solutions in the content industry as a key enabler

TelCos are well positioned to implement this all-IP transition
 Build-up on legacy infrastructures
 Same infrastructure can deliver phone, video-telephony, TV, messaging services

Roll out of IP technology leads to emergence new opportunities, and drive 50%
growth year on year in the NGN market
 New services including interactivity and personalization features built around IPTV,
MobileTV or VOD solutions
 New players are yet to appear in a extremely scattered market
Page 8
Examples of
Electronic
Distribution
Electronic Content Distribution Architecture
Managed Services
Content Facilitation
Content Preparation
Delivery Infrastructure
Content Distribution
Content Storage
Core Network
Content Management
STB/PVR
Store Front
PC
Retail Portal
Video Headend
DRM Administration
Access Network
White Label Storefront
Content Delivery
Devices
Electronic
Program Guide
Portable
Video Player
Mobile Handset
Authentication, Authorization, Accounting, Clearing and Reporting
Common architecture. Multiple « go to market » models.
Page 10
Example 1: Digital Cinema
Digital Services and Technologies
Rollout
Digital
Content
Capture
Content
Files
Digital Content
Preparation &
Post-Production
Theatre Management
Systems/Server
Network Operation Center
Transmission
Uplink
Internet
Monitoring
Support
Content
Files
Fiber,
DSL,…
Broadband connection
Digital Distribution Network
Multiple digital projectors
Activity Management
Digital Cinema
Services
Encryption/Encoding
System Maintenance
Installation
Content
Files
THEATRES
Security/Key Management
Business model is agreed : roll out starting in 2006
Page 11
Example 2 : VOD
Multiple Forms

Network VOD : Cable, Telcos, ISPs
 High quality, user-friendly experience : realtime digital TV, sometimes HD

Extensive catalog : several thousand pieces
of content available anytime
 Push VOD : Satellite,
Terrestrial
High quality, user-friendly experience
 Catalog limited to PVR storage capacity :
typically 20 films or 40 shows

 PPV: Satellite,

Cable, Telcos
High quality, not real time
 Web streaming
or download : Content
owners, broadcasters
 Less user friendly : PC based, lower quality
 Pod-casting

Same as above for portable devices
Page 12
Uncertain Business Models
9 M cust.
1 bn streams
 Sold in package
(Subscription
VOD) or “a la carte”
 Today, mostly used to increase
5 M cust.
15 str../Sub/m
customer stickiness through SVOD. Can
cut churn by 50% in the US.
 A « Teaser » to upsell premium
packages and increase ARPU
 Sold “a la carte”

Focus on impulse purchase of
blockbusters, adult content & sports
 Sold “a la carte”
or free
Only hit shows are monetized, the
rest is used as teasers or traffic
generator or web site
 Attempt to desintermediate network
operators

What role for VOD ?
What Business Models ?
Example 3: Mobile Video

Twomass-market
mass-marketworlds
world join
Two
join
Mobile Communications  80% of all Europeans have a mobile
 Over 300 million people
Television
 96% European Households
 158 million households

Technology
Technology:
 Network standards: DVB-H/ T, 3G / UMTS, WiFi / Wimax,
 Security standards
 Authentification, accounting, clearing
 Interactivity

Content
Content
 Different framing
 Different length

 Different advertising
 Different interactivity and cross-selling
Business models
Models:  Operators: support model (ARPU increase, reduced churn)
 Content owners: additional revenues
 Cross-selling (logos, ring-tones, merchandising linked to content
watched, …)
Page 13
Example 4: Corporate Video Networks

PRN is the pioneer in digital signage at retail
with a comprehensive service offering:
 equipment installation and maintenance
 play-list & media assets preparation and
distribution
 content preparation
 ad sales

Network combines the effectiveness of
narrowacasting (34,000 different viewing areas
within 6,000 stores) and the power of a mass
medium (200 million monthly viewers)

Historic 20%+ revenue growth level
Frost & Sullivan Market
Leadership Award in digital
signage (April 2005):
« the sole tier 1 vendor
in the industry »
Business model is agreed and proven : roll-out underway
Page 14
Common Elements in
Electronic Content
Distribution
Common ECD technologies and expertise
 Expertise





Content Capture
Content Preparation
Content Protection
Content Infrastructure Management
Content Access
 Underlying Key Technologies
Compression: MPEG-4 and beyond, scalable compression standard
 Storage and recording
 Archiving, search and retrieval
 Metadata coding

Providers mastering these expertises, skills and technologies
help network operators and content owners
to focus on their core business,
while providing a seamless user experience
Page 16
Content Capture

Digital cameras become more broadly
adopted
 Quality compares to film
 Lower overall production costs
 Increased creativity due to higher
flexibility and shooting convenience
 Immediate review of “rushes”

Digitally captured content feeds
professional networks for faster review,
color correction and editing
 End to end digital workflows are
widely adopted
 Increasing content availability and
affordability
Page 17
Content Preparation (Post-Production)

Digitalization and HD
 Multiplicity of viewing devices formats and
resolutions,
 Increased demand for consistent high quality
experience,

From a single high-end Digital Master, hundreds of
versions are prepared and packaged to fit the
various electronic distribution needs:






Format : NTSC, PAL, HD, QCIF, etc.
Aspect ratio : 16*9, 4*3, etc.
Compression :Mpeg 1/2/4 ; VC1 ; Quicktime ; etc.
Language versioning
Regional cuts/constraints (government approval)
Digital asset management systems (and associated
metadata) becomes strategic to ECD
Content preparation is
at the heart of ECD
Page 18
Original signal
Content protection

No content protection, no business

Content protection will not come from a single technology solution
but from a variety of solutions, which combined, can prevent piracy
 Encryption : protection
 Digital Right Management : manage content rights & access
 Fingerprinting and watermarking : tracking and authentification of
pirated copies
 Camcorder-jamming : against in-theater bootlegging

Multiplicity of ECD offers and requirement for seamless experience
from consumers lead to DRM interoperability requirement
Page 19
Content Infrastructure Management
Broadcaster
Commission
production
Production/Studio
Post-Production
Scheduling
Content
Preparation
Play-out
Transmission
Audience
Origination
Services
Production
Ingest
Versioning
Services
Graphics
Sound
services
QC &
TX Control &
Ad Insertion
Compliance
Monitoring
Master
Control
Transmission
Origination is a critical link in the broadcast industry value chain



Complexity linked to fragmentation of
channels (content preparation, versioning,
ad,..) and quality of service
Significant but scalable capital investment
Expertise and innovation from focused
services companies
Allow editors and operators to focus on their core business by « outsourcing »
Digital Centers and Services management:
Page 20
Content Access
Broadband network operators need to differentiate their service
offers to the consumer
 Content Access Product (dual / triple / quadruple play) are a key
differentiator for network operators
Gateway/STB/… are « network equipment » products
Cisco / SA
Access Products and Home Network
 Home Networking is key to
Wireless Lyra
mp3 player
Media Centre
PDA
extend the reach of operators Laptop
Sat/DTT/cable STB
within the home
A reduced set of standards
must be agreed upon to
create mass market
Web Tablet
Mobile TV
Bluetooth & IP DECT Gateway
momentum and adoption
Wi-Fi Phones

Game Console
IP STB and PVR
Page 21
Thomson and
Electronic Content
Distribution
DISTRIBUTION
CUSTOMERS
CONTENT
Mission Statement
Thomson is a technology company
focused on image and video,
serving the Media & Entertainment industries
Page 23
Key Clients
Long-term relationships with M&E customer base
Page 24
Three Divisions
End-to-end
Services
Systems
& Equipment
Technology
Physical Media:
Film Services
Broadcast & Networks
"Grass Valley"
Research
Physical Media:
DVD Services
Access Platforms
& Gateways
Licensing
Post-Production
Services
Network Operations
Services
Electronic Content
Distribution Services
Page 25
Satellite – Cable
Terrestrial
Silicon Solutions
Telecom
Connectivity
Software & Technology
Solutions
2010 Assumptions
M&E Clients

Some consolidation in M&E in Europe;
emergence of significant M&E groups and
markets in Asia (particularly China and
India)

M&E clients will have outsourced many of their
activities

China and India will have become mainstream
markets
Electronic Content

Electronic delivery of content into the home will
have emerged. Consumers will continue to buy
pre-recorded content at retail, but will also be
purchasing/renting content (events, etc) directly
from home

In addition to film print, digital delivery of movies
to cinemas will have developed
Media Technologies

The transition to high definition (HD) will be
complete

Mobile video will be pervasive

Intellectual Property will remain a key
differentiator and significant source of direct and
indirect revenues

Security technologies and services to combat
piracy will have been implemented

China will have become a technology
standards-setter
Page 26
IP Devices and Solutions

Network operators will have largely switched to
IP technologies

All networks will have ‘triple play’ offerings

‘Connected products’ will be ubiquitous inside
and outside the home

Home networking will have been implemented
Two-Year Plan (05-06) – Framework for Growth
Post-Production
Physical Media
Services
(DVD + Film)
Electronic Distribution
Services
(Dig. Cinema & VoD)
Network Operations
Services
Telcos / ISPs
Set-Top Boxes
(Satellite, Cable,
Digital Terrestrial)
Services
Networks
Broadcast systems
& equipment
Systems &
Equipment
Home Networking
Silicon & Software
Solutions
Growth
"Engines"
Page 27
+
Primary
"Boosters"
+
Secondary
"Boosters"
Technology
=
€1.5-2.0 bn
revenue growth
by end of 06
(full year basis)
Systems & Equipments
ECD opportunities in S&E: mobility, HD, ProAV, NGN developments at
the edge of the network
Capture, production,
Content access
network head-end
Cameras
(HD,
ProAV,..)
Servers
Telecine /
Dataciné
Encoders
MPEG4 HD,
DVB-H
Page 28
IP-STBs
DSL Triple-Play Gateway
Remote mgt and Gateways
Switchers
Routers
DSL VoIP Gateways
Cable VoIP Gateway
Cable Triple Play Gateway
Post Production



Thomson’s Creative Services include:
 Numerous services: mastering, color correction, editing, visual
effects, subtittling, mastering, sound mix, 3D computer animation …
 Accross 3 markets : feature film, TV-Broadcast and Advertising
One of the two world leader in
 Visual effects
 Theatrical & TV broadcast post-production
Post-production represents an addressable market over $6 bn… and
growing
Page 29
Network Services (1/2)
Network Operations / Infrastructure Management
Traditional
Networks
Emerging
Networks
In-store TVs /
Digital
Signage
Corporate /
ProAV
Cinema
Advertising
Digital
Cinema
VoD
Broadcast
Digital Center Management + Other Services
 Originally focused on traditional broadcast operations
 Currently expanding to deliver end to end services from content
preparation to diffusion, and to manage the full complexity
A growing need for management of digital centers
Page 30
Network Services (2/2)
Managing the complexity
NTL Newman St –
UK
Freeview
DTT (UK)
ABC1
Thor 2
Astra
1G
Hotbird
4
Telenor – UK
DMC – UPC
Amsterdam
NTL
Eutelsa
t West
1
Sirius 3
BT Madley (UK)
Orbit - ME
BT
T ower
BT Teleport (UK)
Showtime - ME
Astra
2D
Bi-Directional
155 Mbit/s
ASIMUX
ViaSat – UK
Telewest
Super
Head
End
DTH
Cable
34 Mbit/s
ASIMUX
Chiswick
Page 31
BSkyB -UK
Cable Head
End
NTL
Super
Head
End
DTT
EMEA Households
Other ECD Services

Thomson intends to provide other ECD services as business models firm out :
Content
Facilitation
Content
aggregation
 Meta Data
Aggregation

Content
Preparation
 Bonus material
for VOD
Content
Management
White label
Store Front
 Hosting and
 Store Front Design
Storage
 Asset
Management
 Offer Creation
& Maintenance
 Outsourced Store
Front Managed
Service
 Offer Management
DRM Administration,
Authentication,
Authorization,
Clearing & Reporting
 DRM
Packaging and
Administration
 Transaction
Management
 Transaction
Reporting
 Platform and Device
Agnostic
These opportunities are being defined in the context of working
groups with content owners and network operators
Page 32
Example : Digital Cinema (1/2)

Support from 7 studios for Technicolor Digital Cinema initiative
(DreamWorks, Sony Pictures Entertainment, Universal, Warner Bros, New
Line Cinema, Twentieth Century Fox, The Weinstein Company)

At least 15,000 screens to be digitally-equipped over a 10-year period

Up to 5,000 screens to be equipped during the initial 3-4 year period

Across North America (US and Canada)

Beta Test to start early 2006
Rollout agreement enhances Thomson’s strategy to be a leading service
provider in end-to-end digital content preparation and distribution
Page 33
Example : Digital Cinema (2/2)
Digital Services and Technologies
Rollout
Digital
Content
Capture
Content
Files
Digital Content
Preparation &
Post-Production
Theatre Management
Systems/Server
Network Operation Center
Transmission
Uplink
Internet
Monitoring
Support
Content
Files
Fiber,
DSL,…
Broadband connection
Digital Distribution Network
Multiple digital projectors
Activity Management
Digital Cinema
Services
Encryption/Encoding
System Maintenance
Installation
Content
Files
THEATRES
Security/Key Management
Thomson provides solutions for all aspects of the digital value chain
Page 34
Conclusion
Digitalization is
underway
Infrastructure
being built
New Business Models
New Appplications
New Industry Landscape
Business Model Changes
Media, Entertainment &
Communication :
• disruptive environment, but
• new opportunities to generate
incremental revenues by making
content more broadly and
securely available
Page 35
Risk to
traditional
businesses
Opportunities
for growth
Thomson is uniquely positioned :
• to provide services to operators
and content owners along the
ECD value chain
• to be the catalyst to facilitate this
digital transition
Frank E. Dangeard
Media & Technology :
The Rise of Electronic Content
Distribution
Journées Internationales de
l’lDATE
23 Novembre 2005