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The Digital Revolution

Speaker Transcripts

Selling Travel on Digital Teletext
Lawrence Lawson, Teletext Ltd

I would like to just make a couple of comments from the earlier presentations. Ian from NTL forgot to mention that we are a broadcaster and a player in digital. We have been allocated capacity on multiplex two, the terrestrial multiplexes, that's the ITV and Channel 4 multiplex. We are considered and recognised by broadcasters, retailers, consumers who have done a lot of research. Digital Teletext could actually play a very important new role in terms of driving digital television. We are a player, we do run text services and have done in this company for the last six years. I have been involved personally for the last 13 years and certainly within the next few weeks, we will become an even bigger player.

I am going to make a statement that our company believes that TV will become the main means of holiday distribution in the UK within 10 years and over the next 35 minutes, I hope to be able to substantiate this claim and make you believe so also.

Three factors come into play that I believe will shift the retail experience from the High Street and into the home and I want to examine some of the issues around these - those being consumer behaviour and buying habits, economic and social factors affecting the travel industry. I hate to describe the technology, not from a technology perspective. I'm not a technologist, I'm a marketing salesperson essentially. So this will really be from a marketing perspective. I would also like to make the point that Teletext is not a technical company. We are a publisher and a marketing company. That's not to say that we're not very heavily involved with the technology. We have a large team of people working on analogue service and developing the digital service and we are working very closely and directing the technology that's going into the set top boxes that are being produced by the various platforms.

First of all, looking at consumer buying habits. I want to examine some of the factors around consumer buying habits and try to describe how some of these will shift people from the High Street into their living room. CONVENIENCE is an obvious one. Proximity to the retail outlet - you have to go down to your High Street. You could potentially purchase the product from the comfort of your own home. EASE - the consumer does want the easiest way to shop. I also believe that the consumer is not and will not be prepared to purchase products 6, 12 and sometimes 18 months in advance of delivery or consumption. I believe there is a growing intolerance to the length of time from purchase to actual consumption. CHOICE is an interesting one. Ian mentioned earlier on about vertical integration. Vertical integration i.e. preferred product selling by the multiples will lead to limited choice being offered to the customer within High Street shops and I believe that on TV one should and one could offer a great deal of choice. Consumers could go to various retail shops up and down the High Street, but again that would limit the convenience. People do want a one-stop shop. Also people want choice and comparison, not only of one product but also of different retailers. COST - with holidays, the consumer is certainly driven by price, price is a very important factor when making a decision. It does not necessarily mean cheap but it does often mean competitive and value for money and one factor of choice leads to competitive prices. CONFIDENCE IN THE PURCHASING PROCESS - one of the areas often talked about when people talk about online transactions and non face-to-face retail activity. The telephone has taken 10-15 years to become an increasingly acceptable way of purchasing products and will continue to do so. The consumer is becoming more confident in buying over the phone, in giving credit card details and making transactions. The holiday consumer is also very sophisticated. They know what they want, they know that if they pay £99 for a product they will get a £99 product. One interesting area in which we've done some research at Teletext shows that 98% of the people who have actually bought a holiday off Teletext would do so again, so there is a very high degree of satisfaction. The consumer also wants control. Control was one of the things talked about a great deal earlier on today and is one thing that digital certainly gives the actual user of the technology. People want to purchase and browse at their own pace, on their own territory, making choices that are theirs and are not pressurised.

Looking at social economic issues in the travel industry. Again, fairly obvious ones in terms of premises costs, - there are big, fixed and variable costs involved with having High Street presence. There is a lot of wastage involved with High Street presence. I don't know any that are open 24 hours a day, 365 days a year. Shopping at home can allow this. Paper costs in terms of brochure prices. Again, I did a presentation here several weeks ago and Ian mentioned the figure that I picked up. People routinely pick up half a dozen brochures when they are looking to make a travel purchase. Paper costs have escalated dramatically over the last few years and there's no reason to believe that they won't continue to do so. If you can put that brochure onto an electronic medium, it makes distribution of information much cheaper. EU employment legislation. Again, something Ian touched on a couple of weeks ago. Minimum wage now introduced at £3.60 per hour, working week a ceiling of 48 hours. That might not be too impactful on the industry at the moment but I believe that there's a trend and it's a trend that will increase labour costs and lead to less flexibility of labour. If you can put things on electronic media, you can overcome some of those inhibitors.

DISINTERMEDIATION. A lot of talk recently related to technology. Technology does allow direct access from the manufacturer directly to the consumer but I believe that retailers should not shout foul about the developments and about the people who supply their products. After all, it's an issue about efficiencies of scale. What the retailers need to show is that they are better at retailing, (after all that's what they have traditionally done), than the manufacturers are at selling. The majority of companies that advertise on Teletext are the retailers because they are the experts in selling.

TECHNOLOGY. You've got the push from consumer demand, you've got the pull from the industry and various factors there. They are both moving in the same direction and I believe that direction is to move from the High Street to the home. Technology is an enabler of this to happen. It will facilitate those market dynamics that are taking place

Let's look at that technology. I want to examine some of the features around digital technology and what they mean in terms of marketing. First of all digital allows data to be ordered and stored very easily. Data might well be in the form of text, graphics, photographs and indeed video and obviously audio. Floppy disks is an ideal example of that - a nice convenient cheap way of storing information. Digital information is easy to compress. In broadcasting terms, what you broadcast in digital is essentially only what changes. You don't broadcast everything as you do in analogue all the time. So it allows for efficiency and compression. It's easy to speak to. It's a relatively common language and that means different applications, different appliances, could theoretically speak fairly easily to each other. So somebody could take a photograph with a digital camera, put it onto their Web site, put it onto email and send it off to a friend.

Also the other implications around digital technology, it gives increased functionality. It's easy to retrieve data from a consumer point of view and it's easy to control that data. It's easier to use. It's much more user friendly. The type of service that I'm going to show you shortly and the type of services we will be launching in a few weeks time are much easier to use than the current analogue services. It also means increased capacity. Partly related to their compression. In terrestrial analogue we currently have five channels and that goes up to 30 channels at the end of this year using less capacity. On cable I think they are talking about 200 or 300 potential channels. On satellite a similar type of figure. What does that mean? Higher quality. The BBC are pushing very much high quality production and wide screen television. But also importantly, it means potentially cheaper and that means lower entry barriers.

WHERE IS THIS SORT OF TECHNOLOGY LEADING TO? What are the three areas that are there now or being developed as we speak. I want to examine the Internet digital TV from a video programming point of view and digital TV from a text information point of view and examine the pros and cons of each of those media from a marketing perspective.

THE INTERNET. You can obviously have a wealth of information. Hundreds of databases, enormous databases, scattered all around the world and information is literally at your finger tips. Certainly very interactive. You go off and ask for something and that gets done and loaded onto your PC after a few seconds. It's on demand. What I mean by on demand is that it's information that you want when you want it and to a reasonable extent it's also mobile. You can be essentially anywhere in the world and pick up the Internet. The negative parts that everybody is familiar with. Very unmanaged. A real mish mash of information. Similarly, obviously uncensored and the obvious fears around that. It is an individual experience as Ian was saying - lean to and lean back. The Internet is a PC application as it exists at the moment and currently slow and costly to use but obviously things are changing fairly rapidly.

DIGITAL TV. Positive attributes. Its greatest positive attribute is that it's very visual. It gets over a lot of information, a lot of entertainment, it's a social experience. On the negative side, it's relatively expensive to produce, compared to other media, as video production is a much higher cost. Importantly, though, it's linear and what I mean by linear is that the viewer doesn't have control by saying I don't what this now, I want something else and actually going to that information. What you see is what is dictated by the broadcaster and this is something I am going to pick up on in a short time.

DIGITAL TV TELETEXT. Obviously, a lot of positiveness on that. It's easy and cheap to update. For example at Teletext we supply 70 PC terminals to our holiday clients up and down the country and over a standard telephone line, they can connect to our computers in Fulham and update their information, their offers, as and when they want to at no additional cost. That, therefore, maximises the advertising space, the promotional space that they have and they can change information and react very quickly to market conditions. It's also on demand. It's what the user wants when he wants it. He's in control. It's not linear as video is. In analogue, the Teletext service that we currently publish and the change that digital will be achieving is a move that retains all the good things about analogue Teletext, (up to date, latest information, on demand), but will also overcome a lot of the bad things, i.e. the presentation, appearance of the product, the speed of delivery and speed of access via the consumer and the general user friendliness. What we are hoping to demonstrate to you is that we are giving a lot of the control back to the viewer. In support of this overall claim,- that I believe that purchased holidays will move significantly into the home over the next few years - is that currently something like 10% of holidays in UK are bought via Teletext. That's a figure that's increasing rapidly. It's increased from 2% to 10% in just five years. So this is a rapidly increasing figure.

I should now like to show you the product we are developing and it's fairly close to the product we will be launching in a few weeks time. I am using a PC. I am using Director, I think, as the software package but what we've done with that is mimicked as close as we can the specifications as we understand them, that are going to exist in the set top box. This isn't a fudge. This is what you will actually see when the service is launched. This is as true to life as you know it, but it's still a prototype so there will be enhancements and developments as we move along. On digital terrestrial, we are allocated our own channel number so Teletext now becomes a channel in its own right. We have been allocated button 9 on the remote control. As you navigate around it immediately you can see a completely different look and feel to the service, much higher quality graphics, introduction of photographs, proportionally spaced time faces and, interestingly an absence of numbers, because what digital Teletext allows is the use of different ways of navigating around the service that we believe are going to enhance and make usership of the service much easier. For example we now have pop-up menus. As with PCs, people are familiar with pop-up menus. You can use fast-text keys. You will notice at the top, there is provision for putting in page numbers if you want and there will still be a requirement for accessing around the service using page numbers. The remote control has up, down, left and right, a select button and, mimicking that, the viewer can simply navigate their way around the service. It's not all going to be immediate but it's going to be a lot faster than it is at the moment but I'm not going to lie. It's not going to be instant access to pages on all the pages. Some will be, as this demonstration shows. This is the TV guide and again using a fairly familiar mechanic, using bookmarks, to allow the viewer to scroll instantly to new pieces of information across the service. Also the viewer can go into a lot more detailed information. Going back to the TV guide, for example, by scrolling along the service, they can pick out details of that particular programme or, alternatively, actually use Teletext as, what has been termed, an EPG, an electronic programme guide, for finding the information, and clicking on that particular thing. If, for example, I click on This Morning, I would go to the This Morning programme on ITV. So it becomes a mechanism for actually navigating around the service and we believe that's going to be tremendously powerful, because it means people are going to come to Teletext, ideally before they go elsewhere to find out and navigate around the TV services.

Just a demonstration of the type of graphics we can incorporate. Full screen, full colour graphics, photographic quality image. Let's look at a few more pages. A little bit of a delay in accessing one page to another. I showed you TV and that's currently the most highly viewed section on analogue Teletext. One of the others is weather and the viewer can move around the service at will. Today's weather, tomorrow's weather, the long term outlook. As well as having national weather, we will regionalise, something terrestrial services and indeed cable are able to do. Satellite may not be able to do this quite so easily but we'll offer information on a regional basis and obviously advertising on a regional basis. Again, today's weather. A high degree of graphics, getting over a lot of information, much more attractive for the user and much more user friendly and intuitive in terms of navigating around the service. As well as regional weather, we could indeed go down to and will be supplying weather on a local basis, city by city. Another very highly viewed area of the service is Sport. There's going to be sport and, in particular, football. Sky TV has essentially over the last two years built up their client base via football. We're going to concentrate on this. We're going to have a lot of football information on there and we can look at the service here. We have information on the various leagues. Again, the viewer brings up a pop-up menu, goes to the section he wants to find some information on and up comes that information and he can toggle between the various pages at will. Results - again, similar. We will be updating results as they happen. Our information is supplied directly from the Press Association and as well as having raw information on scores, we will also have the match report behind that information. Stories. Football extra will be our area of covering football stories and if the viewer wants to go and find out some more information, all he does is press the relevant key. Again photographic quality images, easy navigation around the services using fast-text, using scrolling and the viewer can scroll through, backwards and forwards. So, that's pretty close to the service we will be launching in a few weeks time when we go live.

I told you about some positive points with Teletext, but I do have some negative points. I'm not completely biased. We do have limited capacity. I want to make it clear to people that you won't be able to put your brochure on screen. In fact, I don't believe you will be able to put your brochure on any broadcast digital service, whether it be terrestrial, cable or satellite. I did a quick calculation yesterday. I picked up a brochure, standard size, 160 pages, standard in terms of number of photographs, amount of text, amount of illustrations and to broadcast that information in one go, ie that gives the viewer access to whatever he wants when he wants it, was going to use 16 megabits of information. Putting that into context, the digital terrestrial multiplexes, of which there are five, only have 24 megabits each so it's going to use virtually a whole multiplex. The transponders on satellite are about 32 megabits per transponder. So to put one brochure onto a satellite transponder will use quarter the capacity of a terrestrial multiplex or half the capacity of a satellite transponder. And I think it's important to say that because I think there is a lot of misconception developing in the marketplace that people think, great, I'm going to stick my brochure up there, I am going to reduce my paper costs and I'm going to sell lots of holidays. One needs to bear in mind that there is limited capacity.

The other thing about digital TV, as it exists at the moment, is that it is not interactive. I thought Ashley's comments interesting about interactivity (and I wholeheartedly support his view) that interactivity, from a consumer point of view and also from a client point of view and from a technology point of view, is not going to happen over night. There's going to be a migration from text type of services to interactivity. That's the type of conversations we're having with our clients.

So, let's talk about digital Teletext. Basically, the reason for me going through the pros and cons of each of those digital types of media that are evolving is that we are developing digital Teletext to actually be a hybrid of all three. We believe it could well be the gateway to broadcasting video and working very closely with video. So you see something on video and you can dig down deeper for text information behind that video. And, indeed, we are working on a product called the information channel alongside ITN to develop a video and text product. We also believe it can be the gateway to the narrow cast distribution channel, ie the Internet. The set top boxes when they are launched, are going to have a wire stuck into the back of them. Where we are positioning the company is broadcast mass information that everybody wants. If they want more detail or more specific information, they have to go remotely and grab that information from an external database. We believe that by creating such a product, we are going to create a product that is ideal as a travel marketing media.

So, limited capacity overcome. I have talked about a wire stuck in the back of a set top box or integrated television and the user going off and grabbing or retrieving that data that's stored remotely. Alternatively, storing data might well be locally. I had a presentation from a company yesterday. They were talking about developing a set top box with 9 gigs of hard disk memory within the box. That's a tremendous amount of storage capacity, equivalent of about 80 hours of VHS quality video. This is a product that is going to be launched in the next 12-18 months that will allow local storage. And indeed there are also products that are being developed at the moment, to write to CD ROMS, DVD, just around the corner. You are going to be able to trickle information, say over a dead period, over night, into remote storage for the user to be able to access that whenever he wants and access it efficiently.

With the wide base technology, one of the other limiting factors is lack of interactivity but now you can have interactivity and I think it's going to come a year or so down the line. I don't think the consumer is ready for total interactivity and I don't think the retailer wants total interactivity and certainly there are big technology problems with the back office systems.

Transactional capabilities will therefore happen. Direct marketing capability is about building up profiles of the consumer, tracking individual consumer behaviour and patterns, very closely targeting of products to the most applicable product to that consumer and targeting them at the right time, may be at the vulnerable time of making a purchasing decision.

Now looking at selling travel on digital Teletext. In 10 years the majority of holiday products will be sold via the television. Why do I believe that? Hopefully I have gone some way to explaining that. Other reasons are, it's happening now. Currently on our analogue Teletext service we are selling 10% and that's growing rapidly. The consumer demands, their lifestyles will demand for easier purchase, industry demands that I talked about earlier on. New technology therefore will enhance the proposition to the user. And the final fact is that everybody else is saying it. I just want to read one or two press cuttings that I grabbed on the way up from the office yesterday. This is from a piece of research that has been done by BT and Channel 4 and basically they were researching the use of publishing URLs, Web site addresses, on the back of TV commercials. They got an exceptionally, surprisingly, high response. 54% of people who responded to that ad go online to a Web site. This is despite the fact that the URL is often too small or not seen on screen for very long. It goes on to say: "the research also suggests that the transition for digital TV and interactive TV services may not be as difficult as some analysts have predicted. Of the respondents to the research questionnaire, 30% were watching TV whilst being online and 44% said they would access the Internet through their TV set." In TTG, earlier on this month, 7 October, BT's travel and leisure general manager said, "the launch of digital television last week (that was the satellite launch) heralded the biggest thing since colour. It also unleashes a powerful new marketing medium capable of interactivity, delivered directly to the consumer's living room in wide screen digital stereo glory. For the travel industry, it offers a way to reach more customers and provide them with information about the holidays they want. Instead of wading through brochures, consumers will have a vast choice of destinations beamed straight to their TV sets, backed up with more information. On top of that, the digital TV gives consumers an immediate response mechanism to request more material or perhaps even book their holidays. Digital TV will be more interactive than any other medium, providing the viewer with a huge amount of extra information about the programmes they are watching. Perhaps in the future, viewers will be able to go directly online to a Web site for more details and to make a booking. Many customers are happy booking their holidays direct, either from brochures or through services such as Teletext, which now accounts for between 10% and 12% of travel sites. It is interesting to note that Teletext is already launching its own beefed-up digital service next month and is well placed to capitalise on the position with the benefits that digital brings. Another interesting fact is that Easyjet are claiming that 40% of their bookings they will believe will be made over the Internet in three years time.

Finally, a report issued from a company called CIA. CIA is one of the UK's biggest media buying agencies and this is a recent report. "CIA Media Vision is advising clients to embrace the digital revolution and formulate a generic digital strategy across business units, encompassing both the Internet and digital television. Experience in this area within the next two or three years is vital in order to secure long term competitive advantage." There are unlimited opportunities for travel brands too, from video brochures to customers' testimonials, from selling direct to operating a 24 hour digital channel. In fact, any middle man in our view should be wary of digital TV as they have been of the telephone and the Internet. Digital television has taken off rapidly in mainland Europe and the same will happen in the UK. If you haven't already considered the opportunities digital television offers, now is the time to start.

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