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Convergence Makes a Comeback

12/02/2005 07:00:00 PM Eastern

Convergence was buried under the rubble of the dotcom crash, or so several people thought. But what really disappeared was the premature obsession with the spectacular.

Convergence is finally taking center stage with a trillion dollars globally at stake, and it is fundamentally changing broadcast, cable and content delivery.

So what is convergence? At Deloitte, we define convergence as the combination of two previously discrete business lines, products or services that result in a new alliance, value chain or economic model that generates value, often changing the structure of existing industries. It’s shifting the balance of power and altering the basis of competition.

Convergence is now real because three elements have come together almost simultaneously. First is the digitization of nearly all information, which provides a common means to represent all forms of communication. Second is high-speed connectivity; networks are becoming faster and more pervasive—wired and wireless. And third is a seemingly endless advance in technology in which speed, memory and power improvements allow a device to do more. That redefines the limits of what is possible.

In order for convergence to be successful, it also must involve platforms, organizations, and products and services. Platform convergence is the foundation.

Systems and protocols allow information in any format to move from one place to another—from the creator to the producer, from the supplier to the consumer. And virtually all convergence offerings require input and cooperation from more than one organization.

Organizational convergence is simply the alignment of interests. The ultimate objective for convergence is to deliver products and services that address previously unmet customer needs.

The convergence marketplace Deloitte sees is bred out of successful execution and advance of each element. Think beyond existing broadcasting, cable and content delivery to mobile video, 3G devices, VoIP, IPTV, mobile and online games, video and audio downloads, ringtones, “videotones,” digital cinema, and all matter of broadband devices and applications.

That’s why we believe that, between 2005 and 2008, total convergence revenue could reach $567 billion and, by the end of the decade, could reach a staggering $1 trillion.

It’s no longer a case of watching while competitors indulge in convergence follies. Distinct convergence winners and losers are emerging. The winners will share in quite a jackpot between now and 2010.

Kern is deputy managing partner for Deloitte’s Technology Media & Telecommunications practice and the managing partner for media and entertainment.

 

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