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May 9, 2001 Event
Interactive TV: Ready for Delivery or Pie in the Sky?
"Interactive television." This phrase of the future conjures up images of a tech utopia where everything from the movie of your choice to pizza delivery is accessible from the comfort of your remote. Visionaries predicted it would happen, press reported it would happen, investors bet it would happen, and so of course, it hasn't happened. Yet the dream still is alive. The market certainly is large enough: 100 million television-viewing households in the US and millions more abroad. Forrester pegs the space to be worth $9 billion in ecommerce and subscription revenues by 2004. And so a host of entities -- from upstart startups to corporate behemoths -- are honing their strategies and preparing for competition. While the arrival of interactive TV is inevitable, major questions linger around WHEN the medium will mature, HOW the technology will reach consumers -- and of course -- WHO will put together the winning business model.
Many believe that convergence in digital entertainment will occur via some kind of all-in-one set-top device. Even though interactive television has been hyped for years, relatively few players distribute this enabler for the new technology. Examples of current offerings include TV-based Net services such as WebTV, AOLTV, and UltimateTV, or digital video recorders such as Replay and TiVo -- newfangled VCRs that locate and record shows you didn't even know you wanted to watch. However, most previous interactive TV efforts have badly flopped and digital video recording has not proven affordable or attractive for mass adoption. In 1997, Time Warner pulled the plug on its three-year interactive TV trial in Orlando, Fla. after spending $100 million. And over its four-year history, WebTV gained barely 1 million customers -- far below blockbuster market levels.
The infrastructure questions may be even trickier. By what mechanism will interactive TV reach viewers? Cable? Satellite? Ethernet? And what software technologies -- of the dozens in use -- will emerge as the standard? The slow conversion to digital TV, as well as arguments over technical standards, have delayed a mass-market rollout in the U.S., leaving interactive TV trailing far behind Europe. There, couch potatoes can order food or gamble from the comfort of their own living rooms. When the market here finally does emerge, the potential is vast. Television sets will expand their current capabilities to provide a richer entertainment experience that brings elements of the PC world such as games and digital content together with classic Hollywood content. The dream of ordering pizza through your TV may be in your future after all.
The Battle for Digital Living Rooms
Interactive TV: Worth the Wait?
Key Learnings
NEVER THE TWAIN SHALL MEET
Despite the growing set of features shared between them, PCs and TVs are destined to remain separate entities with dedicated functions. The two differ in dimensions of engagement (active vs. passive), social exchange (individual vs. group), and user interface (complex vs. simple.) TV will simply embrace the PC's interactive characteristics. Microsoft's ownership of the interactive desktop has left vendors vying to deliver the Trojan Horse into consumers' homes to own the interactive living room. As the interactive TV niche is still relatively immature, Microsoft has as good a shot as any to dominate the living room experience, making its Ultimate TV the ultimate trojan horse. Once a clear winner is established, pre-existing billing relationships and value added services will lead to a single source for the delivery of home entertainment, including music, programs, movies, games, and a host of applications not yet conceived.
THE "I"s HAVE IT
Interactive TV means many things to many people. The two clear definitions of "interactive" are 1) consumers interacting with TV content (e.g., video-on-demand, Tivo, web-enabled applications) and 2) consumers interacting with others via content (e.g., one-to-one or one-to-many interactions such as TV chat or collaborative viewing.) Interactive TV, however, is not yet an end that offers standalone value to consumers. As proven in Europe and major hotels, it is successful as a means to an end resulting in services and content on demand. Similar to the Internet, interactive TV requires a critical mass of content, applications, services, users, and devices to sustain both a network for communication and a compelling value proposition for usage. Once the infrastructure can deliver robust content and services, interactive TV will be a significant part of consumers' lives.
THE KILLER APP: EVERYTHING'S GAME
What will be the killer app for ITV? A few niches seem to have a natural synergy with an interactive medium. 1) Video games. With high penetration amongst core spenders, interactive gaming seems a surefire winner that will help prove the financial viability of interactive TV. 2) Game shows. The day when at-home contestants can effortlessly impact the outcome of a game show -- or have a chance to win themselves -- is the day when interactive TV moves from plausible to popular. 3) Porn. As with the evolution of so many techology niches from VCRs to the Internet, the interactivity requirements sought by porn seekers will help mature ITV faster than any other single driver. Expect user generated content -- in all areas -- to thrive in an interactive TV world as amateur TV "producers" aim to create their own versions of Survivor and Jackass.
THE RICH GET RICHER, THE POOR GET POORER
Startups are kidding themselves by pursuing interactive TV. It is incredibly expensive to reach millions of users. The only other high probablity success opportunity is to own the pipe and billing relationship. No startup has proven they can. Established telcos, cable companies, and consumer electronics giants will rule this opportunity. Content providers will find themselves particularly at risk: as bandwidth and affordable storage capacity increases, the free interactive exchange afforded by internet-enabled interactive TV will ultimately lead to the napsterization of all content.
QUOTES OF THE NIGHT
"There are only two devices all Americans can use - the telephone and the television."
"Interactive TV is a pipe dream... it will never happen."
"The top 3 killer apps for Interactive TV are Porn, Porn, and Porn."
