Broadband Content Leaving PCs for TV and Stereos

Content providers who think rich media offerings will only get airtime on the PC are mistaken, according to a report by Forrester Research, which predicts broadband’s impact to reach TVs, stereos, and console systems as well.

By 2003, broadband content will be divided sharply by device — PCs will comprise one-half of all broadband devices, while TVs and game consoles will dominate the other half. Multimedia-focused entertainment will gravitate toward TVs and gaming consoles, while streaming interactive content and software updates will flow to PCs, according to Forrester’s report “Broadband Content Splits.”

“Everyone expects broadband to grow rapidly and create a market for new types of high-speed enhanced content,” said Bruce Kasrel, senior analyst at Forrester Research. “What is unexpected is that most of broadband’s impact will be directed to other devices besides the PC. As all types of devices connect to the high-speed Internet, content will shift to the most appropriate device, like digital music files being played back on the stereo system. Media providers must anticipate the most appropriate device for their content and tailor the consumer experience and business models to take advantage of that environment.”

Forrester also predicts that rising broadband penetration will create greater exposure for high-speed content by 2001. Providers embracing broadband as a mass-market phenomenon will ramp up their streaming media production and package interactive content differently for various broadband-enabled devices.

By the end of 2001, broadband connections will double, and all major metropolitan areas will have at least one form of high-speed access, totaling 11 million US households, compared with five million households today. Consumers hungry for broadband will go online more often and for longer periods of time than their dial-up counterparts.

Broadband’s first killer application will continue to be Internet audio. By 2002, 19 million consumers will use the Internet for music downloading, and 25 percent will be broadband users. These users will also expect highly interactive Web interfaces and drive demand for specialty broadband-enabled devices, such as interactive set-top boxes, to experience more robust entertainment options.

By 2002, Forrester predicts that competitive pricing pressure will put high-speed access on the fast track to commodity status, forcing carriers to offset revenue shortfalls with additional services. Consumers will receive a host of broadband-enabled devices and services from which they can receive various entertainment experiences. For instance, cable will exploit its video-centric network to connect set-top boxes and deliver video on-demand (VOD) to TVs and audio on-demand (AOD) services to MP3 devices. To gain entry into the TV delivery business, telcos will counter with video DSL (VDSL) upgrades. High-speed set-top boxes and game consoles will bring broadband connections to 9 million TV screens, linking video game enthusiasts around the world and pushing pervasive gaming into the mainstream.

“Entertainment content will flow away from uncomfortable PCs in the den toward comfy couches in front of the living room TV set,” Kasrel said. “PCs will be left for practical, task-oriented activities. Broadband content will split into two streams — visuals with minimal interactivity on the TV screen and interactive content enhanced with visuals on the PC.”

By 2003, more than 20 million set-top boxes will connect to broadband content, according to Forrester, and 16 million gaming consoles will sport high-speed connections. As televisions, gaming consoles, and Internet-enabled stereos are adopted as broadband conduits, the PC’s dominance as the sole broadband channel will be challenged. In 2005, 191 million devices will connect via broadband. PCs will constitute only 36 percent of these devices, but 70 million high-speed-enabled computers will still need their own content. As other devices siphon away multimedia content, consumers will use PCs only for complex, highly interactive tasks and software downloads.

“With much of the entertainment content on other devices, the PC will focus on interactive content,” Kasrel said. “PCs will become a platform for highly specialized and customized software, while broadband pipes will allow programs to be streamed to the user. We predict that by 2005, nearly $1 billion dollars in revenue will stem from software streaming.”

The demand for digital content in the consumer PC market could be insatiable, according to Kurt King, senior research analyst at Banc of America Securities, who also predicts that broadband will drive the convergence of products, services, and industries.

“Bandwidth outside the PC will soon surpass bandwidth inside the PC,” King said. “Central processing units will be swamped with data flow, and this will have a major impact on the PC/server group over the next two to five years.”

The net effect of exploding bandwidth, King said, is that while corporate desktop demand may be negatively impacted, the demand for more consumer applications and the drive to build the Internet infrastructure would be a tremendous positive for consumer PCs and for servers.

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