By Theresa Wise and David A. Hall
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PDF Help In recent years the television industry has invested heavily
in digital infrastructure, from satellites to two-way broadband networks, in
anticipation of the financial bonanza that was to come from interactive
television (iTV). But since interactive services were first launched in Europe
in the late 1990s, revenue from iTV has been slow to materialize, and
underneath the high expectations there is a sense of disappointment. Will
interactive television ever live up to expectations?
The Changing Prospects for Interactive
Services Despite iTV's slow start, Accenture believes it will bring
financial rewards for the television industry, although the rewards will look
different from what the industry originally expected. Early iTV revenue
projections forecast robust growth in interactive advertising and
television-based commerce. While these will be important revenue sources, they
most likely will not be as lucrative as consumer-driven applications, such as
video-on-demand, games and gambling.
- Games and gambling. Games and gambling
cover a broad scope, from classics like Tetris to playing along with television
game shows to wagering on sports events. Our experience suggests that games and
gambling will be among iTV's most compelling and profitable applications. They
also fit well with television's focus on entertainment and
relaxation.
Although our consumer surveys indicate only a moderate
interest in games, when they are actually offered, the uptake has been quite
high. Gambling also has great potential, but regulatory issues will limit it in
many markets.
- Video-on-demand. Rather than structure
television viewing around network schedules, video-on-demand (VOD) allows
viewers to request movies and television shows when they want them.
Video-on-demand fits well with television's video entertainment focus, and in
surveys consumers rank VOD as one of the most desirable interactive
services.
True VOD is a bandwidth-intensive application.
Satellite-based services generally do not have the bandwidth to offer true VOD.
With their greater bandwidth, digital cable networks can better offer VOD
services.
We believe that video-on-demand will prove very popular and
will generate robust revenue streams. Still, the near term, video-on-demand
services will have limited content libraries and generate modest revenue, much
of which will flow to the movie studios.
- Interactive advertising. Advertising is
a key television revenue source, and the industry has high hopes for its
interactive form. Interactive advertising allows television advertisements to
move beyond brand awareness toward consideration and purchase. Viewers are
invited to learn more about products, receive coupons, sign up for free trials
and even buy on impulse. It also allows television to move from mass-market to
highly targeted advertising with which different households watching the same
program see different advertisements, based on their demographics and
interests.
Despite its promise, interactive advertising remains
embryonic. There have been experiments and trials, but mass deployment is some
way off. Accenture believes that interactive advertising has substantial
long-term revenue potential, but it will take at least four years before it
accounts for a significant portion of total television advertising
revenue.
- Television-based commerce.
Television-based commerce can be implemented either embedded in the video
stream or outside the video stream in a "walled garden," which keeps the
consumer connected to the television. Within walled gardens, retailers can set
up shop in Web-like shopping malls, where viewers can order a pizza for home
delivery, book a holiday, and purchase CDs, videotapes and electronic
products.
While walled garden commerce is a reality in European iTV
services, embedded commerce is still some way off. With embedded commerce,
viewers could use their remotes to buy the CD of a music video they are
watching or to order goods shown on a television shopping
channel.
While commerce is the centerpiece of early iTV services,
surveys by Accenture suggest that consumers are not particularly interested in
embedded television shopping. This may be because much of the Web-style
eCommerce occurring in walled gardens does not fit well with television's
passive and entertainment-focused characteristics. Television-based commerce,
especially for impulse, branded purchases, may become a significant revenue
source, but it will be smaller and take longer to develop than many market
projections forecast.
Which Role to Take? With near-term iTV revenue prospects uncertain, what should
television companies do? Accenture believes they should use this pause in the
development of interactive services to prepare themselves for when the market
does take off. To thrive in the evolving digital broadband landscape,
television companies must first decide which segments of the industry they will
target and then adopt appropriate strategies.
Content originators, such as program
producers, need to take a 360-degree view of the media and platforms available
to them. They should grow by leveraging their brands, talents and rights across
television, print, the Internet and other media. This will open new revenue
streams and increase the value of quality content.
Channel operators, such as cable and
terrestrial networks, can no longer prosper with a single channel. They should
grow by developing a suite of branded channels that will give them the clout to
secure advantageous carriage deals with platform operators, crowd out
competitors and permit cross-promotion.
Platform operators, such as cable and
satellite operators, should grow by deploying consumer-driven applications,
such as video-on-demand, games and gambling, that also differentiate their
platform. They must also create an environment in which content originators and
channel operators can innovate and profitably create interactive broadband
content.
Developing Key Interactive TV
Capabilities Once they decide on their strategies, television companies
will need to develop the key capabilities—in areas such as production, asset
management, rights management and consumer insight—they will need to prosper.
Content originators will need to analyze which genres and
rights have the most potential for broad exploitation and then reengineer their
production processes so that multiple media and interactivity are planned for
from the beginning rather than added at the end.
Asset management and rights management will be key for both
content originators and channel operators. Asset management is vital to
effectively manage content and other assets across multiple media and channels.
And both will need a rights management infrastructure to manage rights and
royalties and to ensure the secure distribution and consumption of digital
content.
Regardless of the role—content originator, channel operator
or platform operator—consumer insight will be an important capability. It will
help content originators exploit their content, particularly as they expand
into unfamiliar media. For channel operators, consumer insight, in the form of
viewer data, will bring a variety of benefits: opening the door to targeted
advertising, helping to develop new programming; and it promises more accurate
ratings data. Finally, as platform operators experiment with different
services, they will need to closely monitor consumer behavior so that they can
build on appealing services and drop those that don't perform up to
expectations.
To develop an interactive TV strategy, television companies
will need to decide where in the industry they are playing, choose their iTV
strategies accordingly and develop the key capabilities they will need. All
this will take effort, but the rewards could be enormous.
The Accenture brochure "Pause or Play? The
future of interactive television" provides more information about
Accenture's interactive television research and analysis.
Theresa Wise, partner—Accenture Media
& Entertainment, is based in London.
David A. Hall, research
manager—Accenture Communications & High Tech, is based in London.
For more information, please
contact us.
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