world scenario series - weforum.org
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world scenario series - weforum.org
WORLD SCENARIO SERIES 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 1 COMMITTED TO IMPROVING THE STATE OF THE WORLD Digital Ecosystem Convergence between IT, Telecoms, Media and Entertainment: Scenarios to 2015 Executive Summary 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 2 The views expressed in this publication do not necessarily reflect the views of the World Economic Forum. World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 E-mail: [email protected] www.weforum.org © 2007 World Economic Forum All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system. 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 3 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 4 Digital Ecosystem: Scenarios to 2015 Introduction Introduction To understand how the Digital Ecosystem could music. These creations can be original or remixed plausibly evolve in the coming 10 years, we need to from existing content. South Korea and Japan, both look at the critical uncertainties and those factors considered more mature digital markets, show very shaping the ecosystem’s evolution. high levels of involvement and growth in user- Broadband adoption, technological advances generated content and community participation and decreased operating costs have pushed the IT, (figures 1 and 2). In time, the young and highly Telecommunications and Media and Entertainment active contributors to online content will grow older and industries into a period of great flux. As they their behaviour patterns will become the standard. Increasingly we note the fertilization of the converge, they are forming a space we could call the Digital Ecosystem. This emerging Digital Ecosystem is generating traditional media by the online world. For example, user-generated content is increasingly seen on many risks and challenges for government policies, traditional media channels, such as television as well as presenting new opportunities for creating programmes and newspapers. Services are arising social and economic value. Just as any healthy eco- to facilitate this – Scoopt, for example, brokers blog system enables its stakeholders to interact to the content to news editors and takes a commission. benefit of all, a healthy Digital Ecosystem will simultaneously enable its commercial participants to create Figure 1 economic value and deliver well-being to society. South Korean young internet users actively contribute to online content Purpose of using the Internet – South Korea, 2006 The critical uncertainties we focus on are user Intellectual Property Rights, security and privacy. 80 74 70 60 50 User empowerment 52 48 46 37 40 Digital users are taking control of when, where and 30 how they consume digital content. They are no 20 longer mere consumers: they increasingly participate 10 0 in the Digital Ecosystem in other ways – as contributors to online communities and as creators and distributors Community Home page/Blog Percentages empowerment, market structure, market regulation, 22 20 25 13 12 17 11 14 3 Internet Users 6-19 20s 30s 40s Age group 50s 60s + Source: 2006 Informatization White Paper, National Computerization Agency, Republic of Korea of digital content and services. Communities are also being created around infrastructure development, Figure 2 such as when members of a community agree to share their wireless internet access. Number of registered users of blogs and social networking services, Japan March 2005 to specialist knowledge and advice. Communities also present opportunities for opinions to crystallize. Most are not industry-led, but rather evolve organically. Million persons Through communities, users interact and share digital content with like-minded people and get access Japan experiences a rapid rise in users adopting usergenerated content and social networking services 10 8 8.68 7.16 159% 6 4 March 2006 545% 3.35 Their power is growing as pressure from communities increasingly often influences business decisions. Increasing numbers of digital users are creating 2 2 0 1.11 Blogs Social Networking Services digital content in forms such as blogs, web pages, photos, videos, characters in games, animations or Source: U-Japan Policy, Ministry of Internal Affairs and Communications, Japan, October 2006 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 5 Digital Ecosystem: Scenarios to 2015 Introduction DIGITAL LEXICON “The world was so recent that many things lacked names, and in order to indicate them it was necessary to point.” Gabriel Garcia Marquez, One Hundred Years of Solitude Digital Ecosystem “Digital” means any data that exist in binary form. GOVERNMENTS An “ecosystem” is an interdependent and dynamic network of living organisms and their physical environment. The “Digital Ecosystem” is the space USERS MEDIA & ENTERTAINMENT formed by the convergence of the media, telecoms and IT industries. It consists of users, companies, governments and civil society, as well as the infrastructure that enables digital interactions. COMMUNICATIONS Digital user INFORMATION TECHNOLOGY Any consumer, producer and/or distributor of digital content or services, personal or business, for purposes such as communication, information, entertainment, education or civic engagement. Digital community (or online community) A group of people who are connected online, for purposes that include communicating, sharing knowledge or exchanging content. Many communities are highly cooperative and establish their own unique culture. Contributors put in significant time for typically no monetary gain, at least at present. Digital content Any digital information, such as music, video, text, graphics or games that can be consumed. Digital services Any service that assists users in making the most of the digital infrastructure, such as aggregating or customizing digital content, enabling communication and supporting hardware or software products. 3 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 6 Digital Ecosystem: Scenarios to 2015 Introduction Some artists and bloggers have successfully parlayed Life can make money as they keep the intellectual their digital creativity into an income producing activity property rights over content they create. Contributors or a professional career. Also we find increasing to YouTube and MTV Flux, on the other hand, give coverage in the traditional media on events and up the right to commercialize their content. A middle celebrities born and bred online, such as the FIFA way, revenue sharing, is exemplified by Revver, which Interactive World Cup 2006 and Kamini, a French distributes user-generated videos along with advertising rapper who became famous on YouTube, was and pays the creator half of the advertising revenue. It is still early days for user contribution and signed up by a major label and received in about collaboration through communities. As communities every television show. Collaboration enabled by communities, for mature, who will take the leading role in defining example wikis, remains largely a leisure activity. But their operating processes and systems: industry there is a nascent trend towards commercial online players or, through an organic process, users user collaboration, as in open source software themselves? Will industry capture more of the community projects. Platforms for user-generated economic value arising from user creativity or will content are increasingly supported by venture grassroots communities increasingly incubate capital. In the last year, many leading platforms of commercial innovation as users pool their skills user-generated content have been acquired by and resources? media giants and internet portals: Google acquired YouTube and Jotspot; Viacom acquired iFilm, Atom Market structure Films, iVillage and Quizilla.com; Yahoo acquired Players in the Digital Ecosystem are moving beyond Jumpcut, and Newscorp acquired MySpace. their traditional boundaries. Aggregation and distribution There are various models for capturing economic value generated by user creativity. Users of Second Figure 3 of content are especially hotly contested, as shown in figure 3. Players move into adjacent activities and new players emerge Content Generation Delivery platforms Aggregation Connectivity / Transport Consumer devices Interface Content creators move into delivery expand into platforms and services Device manufacturers Network operators enter into content creation and delivery Cable & satellite providers enter the telephony services Portals develop content, expand into networks/WiFi/telephony Attackers deliver content via new networks Users Generated Content Platform Providers 4 Source: Based on McKinsey analysis 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 7 Digital Ecosystem: Scenarios to 2015 the US; in India under the recent government delivery platforms, and device manufacturers aggre- clampdown, companies will not be allowed to use gating digital content. Convergence services blur the unlicensed foreign VoIP providers such as Skype, lines between traditionally separate functions such Yahoo and Net2Phone. South Korea recently gave as in the case of Internet Protocol Television (IPTV) trial licenses for new IPTV network services to two bringing together network and broadcasting activities. consortia formed by key players from the telecom Convergence is also driven by new and independent players with innovative ideas about and broadcasting industries. There is also uncertainty about the strength of bringing together existing technologies to create governments’ commitment to fostering competitive- something new. This raises the question of whether ness in the Digital Ecosystem with the aim of growing established companies will be able to adapt the “knowledge economy”. Many governments proactively and quickly to changing market promote interoperability and open systems by conditions. Or, could they fail and die as innovative enforcing anti-trust regulations and adopting open businesses take over the market? source software and open standards in their own Some providers operate on open standards and make their products and services available digital activities. European public authorities are particularly active through open systems. Others use proprietary in promoting interoperability. French legislation, for systems and closed platforms. Increased business example, mandates that when digital content is cooperation could lead to more interoperability and protected by proprietary digital rights management common standards, increasing the interconnectedness technologies, providers must give other software of networks, IT platforms and devices. But it is also and hardware developers access to the necessary plausible that vertical integration will lead to partnerships technical documentation to make their systems and consortia delivering exclusive content over closed interoperable with it. Apple’s iTunes is under scrutiny systems, with proprietary networks, IT platforms and both in France and elsewhere in the EU. devices featuring interoperability only within silos. Introduction For example, content creators are implementing Will policy-makers and regulators be able to keep pace with emerging technological developments Market regulation and business models, and foster an open and Regulation and licensing are creating headaches for competitive digital environment? governments and uncertainty for industry. In most developed countries, broadcasting and telecoms Intellectual Property Rights (IPR) have traditionally been regulated separately, meaning Digital content is easier than analogue content that new services such as IPTV and VoIP are to share and adapt. Owners of IPR face competing in the same space without being overseen difficulties in tracking and controlling how their by the same regulators. Nine OECD 3 countries have digital content is used, while creative users do already established single regulatory frameworks and not always find it easy to identify and trace rights institutions, and others are planning to follow suit. holders. CreativeCommons.org seeks to tackle 1 2 1 Internet Protocol Television Voice over Internet Protocol 3 Organisation for Economic Cooperation and Development 2 Licensing requirements for new services and these dilemmas by enabling creators to define networks can also help to determine market structure. “some rights reserved” licenses that are more For example, a VoIP provider requires ministry flexible than the two traditional extremes of “all approval in South Korea but does not currently in rights reserved” and “public domain”. 5 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 8 Digital Ecosystem: Scenarios to 2015 Introduction Digital Rights Management (DRM) technologies are widely used to protect IPR. Many industry of a user’s online identity are used to provide them players are developing competing corporate DRM with customized services, but there are privacy platforms. Others promote global open standards dangers when the organizations who collect or such as the Digital Media Project, often with the have access to this data do not behave ethically. support of public institutions. Countries throughout the world have adhered 4 World Intellectual Property Organization Parental control and other filtering systems are increasingly used to protect children from harmful to the WIPO 4 Internet Treaties, the international digital content, amid concern about information they framework for copyright in the digital environment. can access and are providing about themselves. However, IPR are determined by national laws in A majority of teens admit to doing things online that individual countries that differ both in details and their parents do not know about. in levels of enforcement. This creates uncertainty. Cross-border enforcement of laws on privacy, For example, computer software code is protected security and protection from harmful digital content by copyright, but opinion differs widely among are costly and difficult. Standards differ among national jurisdictions on whether business models jurisdictions, and to enforce national regulations enabled by software’s functionality should be requires international cooperation and human patentable. investigative resources. Furthermore, what is The Digital Ecosystem’s stakeholders need to balance the interests of rights owners and the public. Will intellectual property laws be able to ensure that considered to be harmful is strongly influenced by local values and political regimes. Are the industry and public institutions able to creators can commercialize their work and protect cooperate and build the required trust of users in it from plagiarism, while also providing a framework the Digital Ecosystem? Or, will it descend into an that encourages creativity? anarchic and uncontrolled state? Security and privacy For the Digital Ecosystem to create an enabling framework for economic and social development, the online environment must command trust in terms of privacy, security and protection from harmful digital content. Identity theft and fraud are increasing, despite advances in technologies to protect users and transactions; in addition, public awareness of online security and privacy issues is low. Tracking techniques such as Radio Frequency Identification and location detection systems will add further to the information users already reveal about themselves through their consumption of 6 digital content and services. Data about the behaviour 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 9 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 10 Digital Ecosystem: Scenarios to 2015 Executive Summary Executive Summary The Digital Ecosystem is forming as the Information Technology, Telecommunications, and Media and Entertainment industries converge, users evolve from mere consumers to active participants, and governments face policy and regulatory challenges. Its stakeholders are questioning the shape and size it will take. They are aware of their inter-dependencies necessary to enable the Digital Ecosystem to evolve into a healthy environment that both creates economic value and adds well being to society. The key questions for the scenarios When reflecting on the future of the Digital Ecosystem, two critical questions stand out: 1. Will social and economic value creation be industry controlled and led, or organic and community-led? SOCIAL AND ECONOMIC VALUE CREATION IS INDUSTRY CONTROLLED AND LED • Processes and systems by which users contribute and communities operate are defined by industry players. • Aggregation of products and services is performed by industry players. • Users contribute to value creation but most valuable digital assets are commercialized by industry players. • Innovation is mostly industry-led. ORGANIC AND COMMUNITY-LED OR • User and community contribution occurs through independent, open platforms. Members of the communities set the rules for the underlying processes and systems. • Aggregation of products and services is performed by users and/or their communities. • Users and communities contribute significantly to value creation and successfully commercialize their products and services. • Communities are incubators for innovation through an organic process in which skills, competences and resources are pooled. DIGITAL BUSINESS ENVIRONMENT EVOLVES TOWARDS 2. Will the digital business environment evolve toward a more open or closed system? 8 AN OPEN SYSTEM • Interconnectedness of networks, IT platforms and devices enabled by more interoperability and common standards. • A constellation of players. • Regulatory environment that supports openness. OR A CLOSED SYSTEM • Closed systems with proprietary networks, platforms and devices; interoperability within silos. • Vertical integration between content, services and conduits. • Regulatory environment that limits openness. 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 11 Digital Ecosystem: Scenarios to 2015 • The extent to which established companies will be able to adapt proactively and quickly to changing market conditions; • Executive Summary Other issues are also key to how the Digital Ecosystem will evolve in the coming years: The degree to which stakeholders will cooperate – businesses amongst themselves, with users and with government – to build an ecosystem where all stakeholders can thrive; • Whether the industry and public institutions will be able to cooperate to build trust in the Digital Ecosystem and ensure the robustness of the internet infrastructure; • The level to which intellectual property rights and patents can be exercised and protected without losing the richness of incremental distributed innovation; • The intent of governments to foster market competitiveness and harmonize legal frameworks and cross-border enforcement. Guided by these issues and key questions, three scenarios emerge for the Digital Ecosystem. The different paths for the Digital Ecosystem through to 2015 are shown in figure 4. Figure2.1 4 Figure Digital Ecosystem: Scenarios Digital Ecosystem: Scenarios to 2015to 2015 Youniverse ENVIRONMENT OPEN Middle Kingdoms SOCIAL AND ECONOMIC VALUE CREATION ORGANIC & COMMUNITY-LED Safe Havens CLOSED BUSINESS CONTROLLED & INDUSTRY-LED 9 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 12 Safe Havens Safe Havens describes a digital world in which online security concerns create a clamour from consumers, businesses and governments for virtual safe havens. Industry Digital Ecosystem: Scenarios to 2015 responds by vertically integrating to create secure walled environments that provide all digital services. Because they operate on closed standards, growing numbers of users start to feel constrained by the walls of their safe havens. The scenario is written as a special, feature-length editorial by an outspoken business correspondent of an online magazine belonging to one of the vertically-integrated digital service Executive Summary providers. The author reflects upon the forces that shaped the Digital Ecosystem between 2007 and 2015. Middle Kingdoms Middle Kingdoms describes a digital world in which consumers, governments and forward-looking businesses push for interoperability, enabling a bewilderingly wide array of niche offerings to become viable propositions – and a Digital Ecosystem dominated by intermediaries that effectively connect users to like-minded individuals and to the highly specialized suppliers that can best meet their needs. In the middle of the space between consumers and suppliers lie the kingdoms where the power lies. The scenario is written as an official company blog of a leading intermediary in which the company founder reflects in a series of blog posts on how the Digital Ecosystem’s evolution enabled his business to grow from being a start-up in 2007 to a powerful global player in 2015. Youniverse Youniverse describes a digital world in which the rise of organic grassroots communities as powerhouses of economic value creation turns traditional business thinking on its head. This leads to the rise of new organizational structures and to digital experiences that are highly personalized. Some companies find ways to capitalize on this distributed innovation – they survive the period of uncertainty and change to see a new day dawn in the digital world; on others the sun sets for good. This scenario is written as extracts from a community website between 2007 and 2015. The community is set up for members of the tech-savvy young generation to discuss the Digital Ecosystem’s evolution after the website’s creator finds this scenarios document lying on her boyfriend’s kitchen table. 10 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 13 2013-2015: Sophisticated young tech-savvy users, frustrated by limits on their creative freedom, step up their disruptive activities. Conglomerates retaliate through the courts, but “Independent Online Communities” (IOCs) become more numerous and influential as mainstream consumers increasingly believe that industry control is too powerful. Governments remain supportive of digital conglomerates, but are no longer so public about it. 2007-2008: Consumers demand open and interoperable products and services; governments actively support open systems and competition. This joint pressure moves the Digital Ecosystem inexorably towards more openness. This is a time of great dynamism, competition and experimentation as businesses prioritize harnessing usergenerated content and community involvement to improve the development of services. Executive Summary 2009–2012: Amid apparent stability, digital service conglomerates offer a broadly similar range of bundled, customized services based on proprietary platforms that lock users in. Governments gain much-needed control through cooperating with a few powerful providers in national-level regulatory forums and licensing new converged services. Less tech-savvy users appreciate advances in convenience, privacy and stability. However, disruptive innovation outside the walls quietly gathers momentum. Digital Ecosystem: Scenarios to 2015 2007-2008: An unstable geopolitical environment and a series of highly publicized breaches of data security leads to a sense of concern engulfing the digitized world. The public demands virtual gated environments. Governments react by de-emphasising antitrust concerns and developing close working relationships with dominant players. Consolidation, mergers, acquisitions and exclusive deals gather pace. 2013-2015: Stability and choice become established features of the digital world. The value network is organized around a few large and powerful intermediaries – whose success is determined by their expertise, quality of service and brand identity – and a fragmented market of specialized providers. It becomes easier to exercise intellectual property rights and more consumers start to earn revenues from industry platforms. 2009-2012: Amid a stable geopolitical environment, industry-government co-regulation establishes common standards on privacy and security. Intermediaries become the de facto leaders of the digital world as a virtuous circle emerges that mutually strengthens the need for intermediaries and the viability of niche products and services. 2007-2008: In a context of geopolitical stability and government support for open markets, fundamental change is underway in the Digital Ecosystem. There is an unstoppable push from a small but highly active and influential segment of digital users and communities to take control of their digital experience. Consumers become dissatisfied with traditional industry offerings. Grassroots communities grow in power and pose fast-developing threats to businesses that do not ride the wave of user and community participation. 2013-2015: A new paradigm emerges based on interoperability, open systems and common standards. The line between users and producers is further blurred as open-source supporting software and collaborative community structures become more sophisticated and back-office support services increase efficiency and reduce costs. The internet becomes extremely decentralized. Community connectedness creates focal points for common interests, and spurs distributed innovation across the world. 2009-2012: Established businesses face a stark choice: find ways to attract a community or face obsolescence. Novel organizational structures and price differentiation models emerge. Distributed innovation models, leveraging community strength, become mainstream in software, media and entertainment. Traditional aggregators are superseded by Personal Digital Agents that collate the opinions and experiences of friends and specialist communities. 11 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 14 Middle Kingdoms Youniverse Digital Ecosystem: Scenarios to 2015 Safe Havens Comparing the three scenarios This table compares some of the most import aspects of the scenarios. Executive Summary 12 Safe Havens Middle Kingdoms Youniverse Global environment • Unstable global geopolitical environment spurs protectionism. • Societies unite around their local distinctiveness. • Global geopolitical stability fosters international cooperation, understanding and openness. • A worldwide culture and sense of global community grows. • Global geopolitical stability fosters international cooperation, understanding and openness. • There is global connectedness and collaboration around common interests. User empowerment • Industry accepts user and community involvement as part of corporate strategy, but tightly controls it. • Industry succeeds in capturing most of its economic value. • Grassroots communities play a fringe – but growing – role. • Industry embraces user creation and competes for it, albeit under rules. • Community activities remain largely social. There are limited but growing opportunities for economic value creation. • Users take the driver’s seat: they determine the rules of their participation and collaboration, and personalize their experience. • Organic communities are economically significant. Market structure • Locally and regionally based large and vertically integrated consortiums dominate, offering end-to-end customized bundles on proprietary, closed and incompatible platforms. • New entrants face huge entry barriers. • Distinct Digital Ecosystems emerge, both regionally and within and outside industry control. • Value network is organized around a few large and powerful intermediaries and a huge variety of specialized niche businesses. • Low switching costs and low barriers to entry. • Open standards and interoperable systems lead to a globally unified Digital Ecosystem. • Value network is fragmented, volatile, highly innovative, entrepreneurial and dynamic, harnessing the power of communities. • Specialized offerings targeting niche markets dominate. • The Digital Ecosystem is diverse and bottom-up, based on open standards and modularity. Market regulation • Anti-trust concerns and non-discrimination by service and content providers are de-emphasized. • Networks and convergence services are subject to licensing. • Governments actively support open and interoperable systems, and intervene to guarantee market competition. • Responding to the lobbying power of users, governments foster the self-governance of digital communities, take a minimum interventionist approach to licensing, and support incremental innovation. Intellectual Property Rights (IPR) • Industry players implement corporate proprietary IPR technologies. Infringement is energetically pursued through legal channels. • Exercise of IPR is facilitated: – interoperability of digital rights management technologies – advances in identity and content management systems – global collective management organizations – effective international cooperation. • IPR are diversified. Open source and “Creative Commons” licensing become mainstream. • Businesses adopt interoperable digital rights management technologies and refrain from heavy IPR enforcement. Security and privacy • Close cooperation between governments and industry players leads to more control and security. • Limited privacy as consortia track all a user’s digital activities. • Industry players self-regulate to maintain brand equity. • Government-industry co-regulation improves cross-border enforcement. • Third-party identity banks give users increased control of their digital identity. • Successful public-private initiatives reduce fraud and increase digital security. • Self-governing communities become commonly accepted. • Users own and manage their digital identity. Innovation • Innovation takes place inside the consortia and focuses on distribution infrastructure and packaging services. • Limited grassroots disruptive innovation. • Innovation is industry-led and focuses on harnessing community power, personalization, and the development of niche services. • Innovation is community-driven, distributed, and highly incremental. • Businesses experiment with organizational structures to exploit user and grassroots innovation. 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 15 70121_DES_br:Mise en page 1 17.1.2007 18:34 Page 16 g y g , , COMMITTED TO IMPROVING THE STATE OF THE WORLD The World Economic Forum is an independent international organization committed to improving the state of the world by engaging leaders in partnerships to shape global, regional and industry agendas. Incorporated as a foundation in 1971, and based in Geneva, Switzerland, the World Economic Forum is impartial and not-for-profit; it is tied to no political, partisan or national interests. (www.weforum.org) y