Digital convergence is coming of age

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Europe’s economy is beginning to reap the benefits of ever-more interlinked and interoperable online technologies, but many obstacles remain to be overcome, experts have told the Commission.

A report, entitled “Interactive Content and convergence: Implications for the Information Society”, was prepared for the Commission by an international consortium of media consultancies and law firms and published on 25 January 2007. 

It concludes that: “Broadband internet and mobile networks now make it possible to broadcast, stream or download digitised content from a diversity of platforms to a variety of devices, often on an on-demand, interactive basis.” 

The report goes on to say: “Digital convergence is turning the now ubiquitous TV sets and mobile handsets into a terminal for interactive applications and download services. The new technological environment creates great opportunities for European content providers and platform operators.” 

The report also contains some caveats and points out obstacles to the spread of digital content in Europe: “European markets are not always at the forefront of digital distribution of content and are lagging behind more advanced markets in some aspects. By some measures, Europe is second behind Japan and Korea (but before North America) for mobile content distribution and mobile TV, and second behind the US for broadband content distribution.”

The report states: “Europe has indeed witnessed an impressive array of new media developments over the last 18 months in terms of supply (launch of online and mobile content services, new media deals), as well as on the demand side (usage and technology adoption)”. The researchers examined all important aspects of the revolutionary developments taking place presently in the way content is delivered:

  • Textual content (see EURACTIV LinksDossier on the publishing industry) generated, in 2005, the most important revenues on the internet (around €850 million per year). This was, however, equivalent to no more than 2% of the publishing industry’s total annual revenues. By 2010, this percentage is predicted to raise to 5.4% or €2 billion, coming in second after games. 
  • Online and mobile games generated almost €700 million in revenues in 2005; they are predicted to become the single biggest source of revenue on the internet, generating €2.3 billion in 2010. 
  • Video and Movies: This market is deemed to become the fastest-growing in the near future, with an expected growth of revenues from €30 million in 2005 to €1.2 billion in 2010. The lion’s share of revenues, researchers say, will come from membership-based video-on-demand services. 
  • Music: The foremost market for online distribution in Europe, with Apple’s iTunes still in the lead. In 2005, €120 million in turnover and €67 million in profit were generated. Until 2010, these figures are expected to increase by a factor of ten. 
  • Radio: 15 million Europeans listen to streaming radio broadcasts every week. By 2010, that figure is expected to more than double, and 11 million Europeans are expected to listen to podcasts regularly. Radio will, however, remain to be first and foremost an on-the-air medium, with €250 million or 5% of all radio advertising revenues coming from the online market.

Information Society and Media Commissioner Viviane Reding said: "The long-awaited digital convergence is becoming an economic reality, creating great opportunities for Europe's consumers, content providers and technology industries. To capitalise may require casting a fresh eye at the technical and legal issues where a modernised and internal market-oriented approach would add value to European content. As I am preparing my 'Content Online in Europe's Single Market' package for the second half of 2007, today's study will prove very useful."

Internal Market Commissioner Charlie MCreevy said: "I want Europeans to be able to access their favourite works wherever and whenever they want, on whatever platform they want. Mobile phone. Internet. It shouldn't matter. We need to get our framework for licensing right. Insisting upon managing copyright on a territory-by-territory basis makes no sense when there are no borders online." 

For the European Broadcasting Union (EBU), Heijo Ruijsenaars  stated: "It would be a serious error to believe that the Internal Market's Recommendation of October 2005 would be a panacea for all sectors. It is certainly not for broadcasters. The main reason why the Recommendation is inappropriate for the broadcasting sector is simple: it is intended only for sales of music recordings, or what might be called the 'iTunes' of this world. For some, this may be regarded as useful, but does it really help to promote European content?"

ETNO, which represents European Telecommunication Network Operators, pointed out: that "online content markets are growing with extraordinary speed", adding: "In a rapidly-changing area characterised by multiple uncertainties, it is particularly important that any interventions are evidence-based, properly targeted, and in full conformity with the subsidiarity principle. This needs to be consistent with existing policy initiatives - including those where Commission departments other than DG Information Society have the lead."

The convergence of different information-society technologies, such as cable television and radio, fixed-line and mobile telephony and the internet became a reality only quite recently, as a result of technological progress that made high-bandwidth connections available to most citizens in the developed world, using different mobile- and fixed-connection methods. Convergence is expected to completely change the way people access digital content. Consequently, it will result in many new business models and have important job-creation effects. 

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