Archive for January, 2005

ONLINE ADS ON THE MARCH – APRIL2004

Saturday, January 29th, 2005

The Australian online advertising market grew 41% in 2003, to reach $236 million, according to the 2003 online advertising expenditure report of the Audit Bureau of Verification Services. Spending grew 51% to $137 million in the six months to December 30.

Personal banking and the finance industry generally was the top spender in general advertising but the recruitment industry maintained its position at number one for classifieds.

Full year 2003 revenues for general advertising grew 30% to $80.7 million. Classifieds revenues grew 44% to $86.3 million while search and directories advertising increased 53% to $69 million.

General advertising grew 64% in the second half of 2003. Classifieds grew 24% and search and directories grew 31%.

See also:
Australia – ISP Market – Revenues
Australia – Internet – Web Sites, Web hosting
Australia – Internet Market – Residential Market

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GOVERNMENT AND PEOPLE POWER

Tuesday, January 25th, 2005

Increasingly it appears as though the government is going to get away with the privatisation of Telstra without much change to its current flawed telecoms competition policies – this despite the fact that virtually everybody is warning the government against this.

Professor Alan Fels; Professor Peter Gerrand; ACC’s chief, Graeme Samuel; the government’s own Productivity Commission; all opposition parties; industry bodies and consumer organisations – they all agree that the government’s current telecoms policies are flawed and that serious changes are required.

Will the government listen? I don’t think so – unless these industry and community leaders begin taking a much stronger stand on the issue. It would also be timely for some of the chiefs of industry to indicate the importance of state-of-the-art broadband infrastructure to the national economy.

There is certainly a bit more of a groundswell now and I, for one, will be trying to push it further. Only when we have enough reputable people standing up for this issue will we be able to influence the government.

Without good government regulations we will see a continuation of Telstra’s borderline anti-competitive business practices. They are all aimed at slowing down competition and delaying investments. Competition is essential, not just for affordable prices, but, more importantly, for innovation.

We are behind the eight ball in Australia. Other countries are 3 to 5 years ahead, and their economies are profiting from these new developments much earlier. Their companies can produce new products and services and start exporting them to the countries that are lagging behind – that is, Australia.

I don’t believe this is for good for our country. We should be right up there with the other leaders!

Under the current circumstances (self-regulatory regime) Telstra is in a position to continue these borderline practices indefinitely. With its vast army of lawyers and financial resources the incumbent is under no real threat from the ACCC, who only has access to limit government funds

Most serious competitors have long since abandoned their legal challenges. They simply can’t afford the money or the distraction, and they have been relegated to eating the crumbs off Telstra’s table.

In a privatised world – if you believe that Packer and Murdoch are dominating the Australian media politics, what about Telstra? Its market is six times larger than the Australian media market. The political power that Telstra would have in a privatised environment will be far greater than the government’s. It will apply the same strategy as it has done in respect of the regulatory situation. Around the country there will be an army of political lobbyists, with gigantic budgets, all employed by Telstra.

And it can easily buy media companies and extend its monopolistic and anti-competitive behaviour into that market as well. Once it is privatised, Telstra will use every means to prevent any further regulations being laid down. It will be ruthless in this respect, using expensive PR, media and political lobbying strategies

All of the above can be fully justified by Telstra’s management and its board as being in the shareholders’ interest. But, as I have argued before, there is more to telecoms than financial gain alone. In every other country except Australia it would appear that the governments understand this, and they have either maintained ownership of at least part of their national telco (27 out of the 30 OECD countries) or they have imposed very strict regulations on their national telco (UK). The USA is big enough, and has enough infrastructure-based competition, but the government there is also employing a strict hands-on approach.

I cannot understand why the Australian government believes that we are different, and that we can privatise Telstra without imposing the same sort of security measures that have been put in place in all those other countries. This is the same government that advocates competition reform – obviously only in areas where their own finances are not affected.

Why can’t we have a proper debate on this? Why is the government behaving in such an undemocratic fashion by abandoning the structural separation inquiry? Why is it ridiculing those who are asking the sort of questions posed above?

But be careful – we don’t need another BAG (Broadband Advisory Group). The participants of that group may have enjoyed being involved in policy-making matters, but they were definitely sidetracked. Before they even began their area of operations was already curbed, and their watered-down recommendations could not be used to address the real issues – such as real commitments to infrastructure roll-out, regional policies, industry structures, etc.

The Estens Inquiry was a bit more successful, but it was also heavily restricted, and it was not able to address the real structural issues either.

We should not fall for another whitewash Inquiry. Also, we should insist upon a guarantee that such Inquiries are taken seriously. The government has a cupboard full of reports, all pointing in the same direction, but they have no intention of implementing any of the more structural suggestions made in these documents.

Based on previous behaviour, an unshackled and privatised Telstra will ruthlessly pursue total dominance in the name of shareholder value. I know that we don’t want this. While I have generally been given support for my arguments there have also been people who have told me that I was being pessimistic. It is interesting to note that it is now these people who are warning of the dangers of the current government telco and media policies.

There are plenty of ways out of this doomsday scenario and, as I have been saying since 1999, there are win-win scenarios in structural separation models. If structural separation is not a goer at the present time, then we should fight even harder to transform the industry and market policies of the current self-regulatory regime into a much stricter regime – one that will give the ACCC more far-reaching powers of intervention, linked to immediate penalties appropriate to a thirty billion dollar company. The Ofcom model in the UK is perhaps the best example to look at.

Paul Budde

See also:
Australia – Privatisation of Telstra
Telstra – Private or Public – an analysis
Telstra Corporation Limited – Corporate Strategies Analysis – 2004
Telstra Corporation Limited – Broadband Analysis – 2004
Telstra Corporation Limited – Infrastructure Analysis – 2004

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Interactive games Statistics – 2002-2004

Tuesday, January 18th, 2005

There were mixed results in the interactive games world in the first half of 2003. Price cuts, promotions, new hardware and titles all helped growing the market but it was still down on year-on-year figures, according to researchers Inform (now GfK). The only format to suffer a drop in games sales was the PC, with shipments falling by 6% a month in early. But the PC remains the dominant games platform with a market share of 33%.

Most console formats experienced double-digit growth in software sales. During the first months of the year Nintendo’s GameCube software sales increased by 44% after a handful of retailers dropped the price of the hardware to less than $150.

Microsoft’s Xbox grabbed an extra 0.5% market share. The main force behind this growth was a batch of new releases, headed up by Electronic Arts’ Lord Of The Rings: Two Towers.

In April 2004 Microsoft’s Xbox took the number one spot for the first time in the games market, according to figures release by GfK Marketing Australia. Xbox achieved 50% share of the next generation console market, selling 15% more units than PlayStation 2, with Nintendo taking 7%.

By that time Microsoft claims it had sold close to 500,000 Xbox consoles in Australia, generating a total of $300 million in retail sales. The Xbox console was at that stage priced at $249 and is available from leading retail outlets.

 

Table 6 – Retail sales of leading games consoles ’ 2003

Game console

Share of retail sales

Game Boy Advance

7%

Game Cube

5%

Play Station X

10%

Play Station 2

29%

Xbox

13%

PC/Mac

36%

(Source: Paul Budde Communication based on Inform Pty Ltd data)

 

Exhibit 3 – Key games statistics – 2002

          The total retail value of the Australian electronic games and edutainment market was over $820 million in 2002, up 39% from 2001;

          Australians spent $2.3million per day on interactive games – about the same as they spend on movies;

          There were, in 2002, an estimated 2.5 million interactive game players, mainly youngsters;

          About a third of all households in Australia have a dedicated games computer installed;

          Over 60% of all household PCs installed are used at some time for computer games;

          Computer games exports were approximately $100 million in 2002.

(Source: Paul Budde Communication based on Inform data and research)

 

According to Inform Pty Ltd, the value of the PC games sector increased by 6% in 2002, a marked slowdown compared with the previous year’s growth rate. This sector has felt increased pressure from the next generation of console products, and PC games software has turned into more of an impulse buy, with 40% of all titles now retailing for under $20. In 2003 PC games started to face even stiffer rivalry with the introduction of online console gaming to Australia.

The next generation console formats, the PlayStation 2, Xbox and GameCube, were the main drivers behind 2002’s result, accounting for 69% of the year’s revenue. These formats were the first to make a real push into expanding the games market beyond the 18+ years demographic, a move highlighted by the success of a number of titles with higher levels of mature content. A rise in the number and popularity of Hollywood-licensed games, franchised games brands and increasingly lifelike graphics also augmented sales performance.

Nintendo’s Game Boy Color (GBC) and Game Boy Advance (GBA) formats dominated the handheld console sector. Although the GBA didn’t manage to match the GBC’s level of sales in 2001, it did manage to achieve healthy sales throughout the year despite the popularity of mobile phone gaming.

 

Table 7 – Retail sales revenue of games hardware – 2000 – 2002

Year

Consoles

Peripherals

Total

($ million)

2000

107

37

144

2001

206

50

256

2002

324

81

405

(Source: Paul Budde Communication based on Inform Pty Ltd data)

 

Table 8 – Retail sales revenue of games software – 2000 – 2002

Year

Console games

Computer games

Edutainment

Total

($ million)

2000

175

67

14

256

2001

221

100

16

337

2002

300

106

12

418

(Source: Paul Budde Communication based on Inform Pty Ltd data)

 

 

Major players

Global companies include Acclaim Entertainment, Electronic Arts, Infogrames, Microsoft, Nintendo, Sony, THQ, and Vivendi Universal.

In March 2004, web hosting company destra entered the electronic games market in a venture with Israeli software developer Exent Technologies. The arrangement gave destra the Australian licence for Exent’s games-on-demand software platform.

Gamers would be charged around $15 a month to stream games onto their desktops. The company aims to distribute these games through ISPs and portals. It is also considering the possibility of selling access to its games through an ‘e-voucher’ system being developed for its online music service. This could help capture the service’s target youth market, most of whom have neither credit cards nor broadband plans.

 

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MIDDLE EAST – TELECOMS AND BROADBAND REPORT 2004

Thursday, January 6th, 2005

Over the last few years this report has propelled BuddeComm right into the international telecommunications research market as the leading provider of up to date high-level telecoms and broadband information on this market. Many governments around the world subscribe to this report as well as United Nations organisations, leading International Aids Organisations and most international telecommunications companies.

For a full Table of Content see: http://www.budde.com.au/publications/annual/middle-east/middle-east.html.

I would also like to acknowledge the invaluable work done on the report by our head researcher, Middle East, Christine M Lewis.

Despite all the upheaval most people and businesses in the Middles East are going on with their daily life. The Middle Eastern telecoms market is changing, with rapidly increasing competition in the mobile sector and slowly reducing state involvement. Licence tenders to operate privately owned mobile networks have recently taken place, are taking place or are about to take place in seven of the fourteen countries. Mobiles are taking market share from declining fixed-line markets in the more developed countries. Internet use and broadband development are generally low for the relative levels of economic development but both Israel and the UAE are significant exceptions.

Key developments in the Middle East telecom market
Middle Eastern countries are beginning to move towards less government involvement and greater competition in their telecoms markets, often encouraged by World Trade Organisation (WTO) membership requirements;
The least deregulated markets in the Middle East is Qatar, which has no competition in any telecom market segment and has not as yet announced any plans to introduce competition. Qatar’s incumbent Q-Tel is also the industry regulator. Despite having by far the highest GDP per capita of the small Gulf countries, Qatar has the lowest mobile penetration and the second lowest Internet penetration;
Seeming low fixed-line teledensity rates in the region are in a large part the result of larger households and the low average age of the population. Qatar, Bahrain and the United Arab Emirates (UAE) all have 100% household penetration or more. Some 60% of the Saudi Arabian population is estimated to be fewer than 20, according to the Economist magazine. This inevitably has a dramatic effect on teledensity statistics;
Fixed-line teledensity is either falling or steady in most of the region as mobile services take market share. Only the less developed (and low mobile penetration) markets of Syria and Iran have experienced recent fixed-line growth;
Change is on the way in the mobile markets of the Middle East, most of which have not been characterised by either a high degree of competition or privately owned operators. UAE is the latest to join the trend, in April 2004 announcing an end to incumbent Etisalat’s total monopoly. Oman and Saudi Arabia are currently engaged in selling a second GSM licence, a second licence was awarded by Iran to a consortium in February 2004, three licences were awarded for Iraq in late 2003 and Bahrain awarded a second licence in April 2003. Jordan is auctioning a third GSM licence. Yemen is also planning to award a third licence but its low economic development would suggest it might not be highly sought after;
Lebanon is an exception. Its government has decided to continue with state ownership of its two mobile networks and a tender to manage the network was completed in April 2004;
Etisalat of the UAE launched Third generation (3G) services in December 2003, the first Middle Eastern operator to do so;
Iraq has been a major market for satellite mobile services in the aftermath of the 2003 war. By July 2003, UAE-based Thuraya had 45,000 subscribers in Iraq, out of its 154,000 subscribers worldwide, and Iraq accounted for 200,000 minutes per day of Thuraya’s daily usage total of 600,000;
Satellite dishes are abundant in the Arab Middle East and, as the footprints of satellites in the area cover the entire Arab region, most TV is pan-regional in availability, ownership and content production. State broadcasters have satellite channels in addition to terrestrial services and there are very many commercial channels, not all of them operating for commercial reasons, sharing inadequate advertising revenue. Most are transmitted by NileSat or ArabSat. A recent development has been the launch of several additional news channels to compete with the loved and hated Al Jazeera.

Price US$795

Exhibit 1 – Countries covered in the report
Afghanistan

Bahrain

Egypt

Iran

Iraq

Israel

Jordan

Kuwait

Lebanon

Oman

Qatar

Saudi Arabia

Syria

Turkey

United Arab Emirates

Yemen

Available in pdf format from Paul Budde Communication Pty Ltd
Paul Budde Communication Pty Ltd, PO Box 2643 Bucketty NSW 2250 AUSTRALIA
Tel. 02 4998 8144 (international x 61 2 4998 8144) Fax 02 4998 8247 (international x 61 2 4998 8247)
E-mail office: pbc@ budde.com.au E-mail private: paul@budde.com.au
Web site: www.budde.com.au

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LET’S BE BOLD AND OVERHAUL AUSTRALIA’S MEDIA POLICIES

Tuesday, January 4th, 2005

I have no reservations in principle about changes to foreign ownership and cross-media rules, or about a merger between Telstra and a TV station. However, due to the fragmented condition of the regulatory environment, such a deal would result in even further monopolisation within our industry. Telstra will naturally take advantage of the situation created by the government – one in which there are separate regulations for telecommunication, broadcasting, pay TV, digital TV and datacasting. The other party to watch here, of course, is News Corp. As I foreshadowed in a submission I made in 1996, the current regulatory environment is an untenable structure for a converging industry in which it is possible to deliver telephony over broadcasting networks and TV programs via the telephone cable.

The Coalition election victory is another good reason for the government to take the bull by the horns, sort out the media mess, and come up with an all-encompassing regulatory regime for media. But if the proposed changes to the foreign ownership rules, published in their report which was released in March 2002, are any indication of what we can expect we shouldn’t expect much from a vision or an overall strategy.

The media policy will also be discussed at our:
Privatisation Roundtable on November 24th

I still maintain that, without an overall plan of action, it will be hard for the government to define a good set of media ownership rules. Media policies in the past have led to the formation of semi-monopolies in telecommunications, broadcasting and pay TV. With the convergence of technologies this fact is assuming greater importance and should be given urgent attention by the Australian politicians.

Cable-based distribution, including Fibre-to-the-Home, is proving to be the preferred information highway in both Europe and North America. And new developments in Australia are pointing in that direction also. The digitalisation of Foxtel, the demise of the Optus network and the fact that broadcasters are being forced to use the cable TV network to remain relevant in the wake of, for example, new interactive services – all these issues are now emerging.

The consequences of the current media industry developments have formed the essence of my ongoing quest for a national media vision. The solution is a no-brainer: all technologies should be treated impartially; let them be regulated by the ACCC and give the ABA control over all content-related issues; make sure that content and service providers have access to the infrastructure; and ensure that content available to other infrastructure providers on unbiased and commercially viable conditions.

As a nation we should concentrate on outcomes rather than on processes. The outcome of government policies should be aimed at more competition – something that as a rule happens when you get more players – rather than protecting the old guard and letting them merge and become concentrated at a higher level, which will inevitably result in a lessening of competition.

Key issues that need to be addressed to improve media policies include:
Separate broadcasting, cable TV and telecommunications infrastructure ownership to develop competition between these platforms. The most important issue here is that Telstra needs to divest itself of its interests in Foxtel.
The current digital TV policy is unworkable and it is unacceptable that we must wait till 2008 before changes can be made. There is no way the government can scrap analogue TV by that time. We should face up to the facts and act now by scrapping the digital TV policy and starting from scratch with a full assessment of all media.
Customers can only be asked to pay a fair price if the services can be provided. This means removing high access charges for broadband, pay TV, digital TV, as well extra charges for exceeding download limits, which Telstra could start implement for true broadband services.
The further exploitation of cable-based infrastructures (Telstra and Foxtel monopolies) needs to be underpinned by a solid business plan that takes the national interest into account.
The current level of radio and FTA TV must be maintained. New developments should take this into account. Both the government and the public demand a good level of FTA services. The social aspects of a media policy need to be acknowledged by Telstra/Foxtel/FTA.
Intellectual property rights and smartcard fraud need to be addressed.
A policy should be formulated to address access charges.

Paul Budde

See also:
Australia – Broadcasting and Digital TV – Analysis and Overview 2004
Australia – Free-to-Air TV – Regulatory – Content Overview and Analysis
Australia – Free-to-Air TV – Regulatory – Control Overview and Analysis
Australia – Pay TV – Analysis and Overview 2004
Australia – Pay TV – Regulatory – Telstra-Foxtel Divestiture
Australia – Analysis – From telecom to media monopoly

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