iesy Repository GmbH - Irish Stock Exchange

In Germany, the first DVB-T distribution system was piloted in Berlin. In the course of the switch-over from analog to
digital terrestrial television in Berlin, out of the previously analog terrestrial homes, 23.4% switched to cable, 13.1% to
satellite, and the remainder migrated to DVB-T. DVB-T was partially launched in the Rhine-Main area of Hesse in October
2004, and analog transmission was switched off there in December 2004. In North Rhine-Westphalia, DVB-T was introduced
in the area of Cologne/Bonn in May 2004 and in the Düsseldorf/Ruhr area in November 2004. A further rollout of DVB-T in
other metropolitan areas has been implemented or is projected for Bavaria, Lower Saxony, Bremen, Hamburg, Schleswig-
Holstein and Mecklenburg-Western Pomerania. The DVB-T offering may become more successful as it is more widely
introduced and set-top box equipment becomes less expensive. At the same time, the launch of DVB-T, when combined with
or followed by a switch-off of analog terrestrial transmission, offers the opportunity for both cable network and satellite
distribution platforms to gain former analog terrestrial homes.
Video and Television Distribution Over the Internet
As a consequence of improvements in Internet access and data transmission technologies, in particular DSL
technologies, the Internet is increasingly used as a platform for the distribution of television and video-on-demand (VoD)
services to subscribers having Internet access via DSL and FTTH (Fiber To The Home) technology.
The major provider of these video-on-demand services in Germany is an affiliate of DTAG, offering these services
under the brand “T-Online Vision.” Launched in December 2003, T-Online Vision currently offers more than 130 films for
prices ranging from €1.90 to €4.00 (plus charges for the applicable DSL service) on the VoD service. Payment of the fee
generally covers a time period of 24 hours and is paid via the DTAG telephone bill. In March 2005, the first film was
simultaneously broadcast on T-Online Vision’s VoD service and on Free-TV. There are also a number of smaller providers,
such as Arcor AG & Co. KG (via DSL) and, operating under the brand “Alice”, HanseNet Telekommunikation GmbH (via
FTTH / ADSL) that offer real-time streaming television and film services. In addition to “ish Kino”, its video-on-demand
offering available to its digital cable television subscribers, ish has recently launched a pilot project offering video-ondemand
services via its products (video-on-demand over Internet protocol, VoDoIP).
Consumer take-up of video and television distribution via the Internet throughout Germany is currently low, primarily
due to two factors: (i) technical limitations and (ii) low broadband Internet penetration levels. Distribution of video services
and the real-time streaming of television services require substantial investments in compression technology and the
availability of suitable bandwidth levels. However, over time these services may develop into a viable competitive force in
mass market television distribution. Providers of video over the Internet may in the future bundle these video products with
those of other products. Mass market acceptance of video distribution over the Internet requires a high DSL penetration,
which is currently low as a proportion of total television households (19% in 2004). Cable network operators might benefit
from the broader penetration of Internet based television distribution, provided that they continue to be able to provide their
Internet services relying on superior bandwidth (up to 5 Mbit/s) compared to DSL.
End-User Market Characteristics
Germany benefits from certain attractive demographic developments characterized by a growing number of television
homes as well as relatively high levels of disposable income. Average household spend on media and entertainment increased
by 20% from €445 in 1999 to €536 in 2003 and is also increasing its share of GDP. Another indication of the population’s
consumption for television entertainment can be derived from the significant increase of the average daily television viewing
time by German television viewers, which rose from 185 minutes in 1999 to 203 minutes in 2003, representing a compound
annual growth rate of 2.35%. Television penetration as of March 2004 was approximately 92.6% based on 39.1million
households, which on average own 1.5 televisions per household. In addition, the penetration of DVD and home-video
players in German households has significantly increased during the same period under review, with a corresponding CAGR
of 16% in the DVD and home-video sales & rentals market.
144