Who Wants Their ITV? - Industry Trend or Event

Industry Standard, The, Jan 15, 2001 by David Lake

Interactive television has yet to take off with the couch-potato masses. Here's why.

Slightly more than 1 million Americans subscribe to an Internet service provided through their television set, the same number of subscribers as at the end of 1999. But despite interactive TV's lack of growth, it's still seen by industry observers as a talented understudy to the PC, ready to make its own grand entrance onto the technological stage.

In fact, interactive TV recently took the spotlight during the approval of the America Online-Time Warner merger. As a condition of the deal, the Federal Communications Commission said AOL and Time Warner must allow competing interactive television services to access its new cable systems.

But not all interactive television involves the Internet. Some services simply let users access videos through cable lines, or save and replay television programming. But even these types of services have yet to take off, if the recent layoffs and restructuring at personal-video programmer ReplayTV are any indication.

Vegetating in front of the TV while flipping through channels is still a popular activity with many people. Seven out of 10 adults aren't interested in any form of interactive television, according to a recent Cyber Dialogue survey of 1,000 American adults. And only 27 percent of Americans say they are interested in navigating the Web from their televisions. Slightly more, 30 percent, say they are interested in any type of interactive TV service.

The problem is that consumers can't imagine what they'd do with these services if they had them. "There needs to be a killer app that brings people to interactive TV, but so far there isn't one," says Gerome Samson, director of technology and business strategy at Nielsen Media Research. In a Jupiter Research study of people offline, 40 percent said they weren't interested in any interactive TV features. The simple ability to pause and rewind television shows drew the attention of almost one-third of respondents. Other features of interest, like e-mail and news, are hardly unique to this particular platform.

Even more serious than the lack of functionality are the technological hurdles. "Bringing a dialup modem to a TV -- it's not a product with a future," says Strategis Group analyst Keith Kennebeck. Viewer expectations are much higher for television, so slow download times, jerky video and poor sound quality won't fly with this audience.

People with online experience have a stronger interest in a range of features interactive TV offers, but they prefer a different round of services than their offline counterparts. More than two-thirds say they would like additional news information over their sets. And 17 percent say they would make purchases from their televisions -- significantly more than the 9 percent of offline consumers who would like to shop over their TVs.

But so far, the corporate strategy for interactive TV firms has been to appeal to households without a personal computer that are new to the Internet. Unlike more experienced people online, these newer entrants aren't using broadband access -- often making their interactive TV experience disappointing. Going after a more sophisticated audience may be the key. "Early adopters of interactive television will be the same early adopters of all new technology," says Kennebeck.

E-mail: davidl@thestandard.com

                   Most People Like Being Couch Potatoes
               U.S. ADULT INTEREST IN INTERACTIVE TELEVISION
Not interested in Internet access via TV 78%
Not interested in using interactive TV   70%
Interested in using interactive TV       30%
Interested in internet access via TV     27%
BASED ON A SURVEY OF 1,000 U.S. ADULTS.
SOURCE: CYBER DIALOGUE, NOVEMBER 2000
                         Demand for Net TV Is Flat
                  NUMBER OF U.S. INTERNET TV SUBSCRIBERS
4Q98 0.7
1Q99 0.8
2Q99 0.9
3Q99 0.9
4Q99 1.1
1Q00 1.1
2Q00 1.1
3Q00 1.1
INCLUDES ONLY ONLINE SERVICES.
SOURCE: TELECOMMUNICATIONS REPORTS INTERNATIONAL, NOVEMBER 2000
                       A Long Road to Interactive TV
                  U.S. INTERACTIVE TV HOUSEHOLD FORECAST
                     2000 2001 2002 2003 2004
IDC [*]               6.5 14.5 23.6 33.5 43.6
Jupiter Research [+]  0.4  1.7  6.2 16.5 29.4
Strategies Group [+]  1.0  5.2 11.6 19.9 29.8
Yankee Group [+]      1.4  5.0 11.0 18.0 24.0
IN MILLIONS.
(*.)INCLUDES DIGITAL CABLE, PERSONAL VIDEO
RECORDING AND DIRECT BROADCAST SATELLITE AND
INTERNET ACCESS SERVICES SUCH AS WEBTV AND AOLTV.
(+.)EXCLUDES ONLINE PLATFORMS SUCH AS WEBTV AND AOLTV
AND INCLUDES DIGITAL CABLE AND PERSONAL VIDEO RECORDING.
SOURCE: COMPANIES LISTED
                Surfers Spend Almost Half of TV Time Online
               INTERNET AND TV USAGE AMONG U.S. ADULTS ONLINE
Watching TV                    14.1
Online                         11.5
Watching TV while online        6.2
Focused on both the Net and TV  36%
Focused on the Internet         64%
NET ACCESS VIA PC. BASED ON SURVEY OF 1,000 U.S. ADULTS.
SOURCE: CYBER DIALOGUE, NOV. 2000
                 Net Users Want More Information From ITV
            WHAT ONLINE AMERICANS WOULD LIKE FROM INTERACTIVE TV
Get additional news Information    67%
Get additional show information    49%
Vote in viewer polls or surveys    45%
Play along with game shows         42%
Get additional sports information  32%
Get additional product information 25%
Make purchases                     17%
Chat with other viewers            16%
BASED ON A SURVEY OF 400 ONLINE ADULTS.
SOURCE: DDB OPTIMUM, NOVEMBER 2000
                     Most People See ITV as Just a VCR
          WHAT OFFLINE HOUSEHOLDS WANT FROM INTERACTIVE TELEVISION
None of these features         40%
Pause, rewind shows            30%
Up-to-date news                24%
E-Mail                         21%
TV program reminders           20%
Program guide                  19%
Web site access                17%
Additional show information    16%
Bank account access            12%
Networked games                10%
Shopping                        9%
Advertised product information  6%
BASED ON A SURVEY OF 944 OFFLINE CONSUMERS.
SOURCE: JUPITER RESEARCH, AUGUST 2000
                   TV-Commerce to Hit Nearly $6 Billion
                   U.S. INTERACTIVE TV COMMERCE FORECAST
     Forrester Research Jupiter Research
2000        $0.3               0
2001        $0.6              $0.1
2002        $1.4              $0.6
2003        $2.8              $2.2
2004        $5.7              $5.6
SOURCE: COMPANIES LISTED