Consumers Unclear on Benefits of iTV

The growth of interactive television (iTV) will occur in small pockets and not throughout entire countries, according to a study by Jupiter Media Metrix, which found iTV will grow at a rate of 83 percent annually through 2005.

By contrast, the number of households that connect to the Internet will grow only by 9 percent annually during the same period, according to the study. iTV growth will be faster in the United States than in Europe, the study found, and it will be limited to narrow geographic regions because it will take time for iTV infrastructure to become widely available. Some individual countries within Europe such as Germany and Sweden will have faster growth rates than the United States, the study found.

Despite its potential dwarf the consumer Internet market, research by digital mogul found that the lack of interoperability and standards will push the rollout of a full suite of iTV services to 2006, and the coalescing of a singular nationwide or global iTV market to 2008, if it does not scuttle the market altogether. Also contributing to this later-than-expected service maturation is the industry’s lack of a significant understanding of what consumers really want from iTV.

“Compared to the potential for iTV, the business-to-consumer Internet was merely an exhibition match,” said Lisa Voldeng, CEO and chief analyst for digital mogul. “What’s going to quash iTV’s potential is that everyone is looking for market leverage by being a so-called ‘Market Gorilla,’ to borrow a technology investment term. The Gorillas’ exclusionary strategic tactics and ‘wham bam’ approaches to service rollouts are creating noninteroperable systems for advertisers, and service suites for consumers whose desires are as yet unknown.”

A study by the Interactive Products and Services Group of Taylor Nelson Sofres Intersearch (TNS Intersearch) found that while dial-up modems and broadband options are leading the way among Internet delivery methods, there is a strikingly low response for Internet access via the television and iTV. Only 3 percent of the respondents said they currently subscribe to services such as WebTV and TiVo, while only 3 to 4 percent who don’t currently subscribe say they plan to do so in the next six months. Seventy-eight percent of those who do not subscribe to Internet-access TV and 75 percent who do not subscribe to iTV say they have no interest.

Even though television seems an unlikely instrument as the Internet tool of choice during the next six months, younger consumers (ages 18 to 34) are expressing interest in the types of services iTV can provide. Specifically, when asked which activities they would like to perform using their television, many were interested in the ability to order videos on demand, personal video recording, surfing the Web, shopping for and purchasing items and sending emails. The TNS Intersearch study was conducted among 1,022 U.S. adults ages 18 and older by telephone from April 11 to April 15, 2001.

But even though the idea of accessing the Internet via television confuses some consumers, others like the idea of being able to purchase online using a television. A study, sponsored by set-top vendor Pace Micro Technology and conducted by Gallup, found that 27 percent of the 1,000 contacted consumers preferred television commerce (t-commerce) to buying using desktop PCs. Household goods, appliances and furniture were the most popular types of items that people wanted to purchase via t-commerce. About 23 percent said those types of items were their preference. Cosmetics and toiletries, clothes, movie, theater or concert tickets, and CDs and videos followed close behind, all achieving scores of 19 percent or higher.

By contrast, banking via the television was attractive to only 9 percent of those surveyed.

“T-commerce, delivered via interactive digital TV, is being built on a sustainable digital TV business model,” said Neil Gaydon, president of Pace Micro Technology Americas. “Consumers are adopting this technology primarily as an entertainment service, and t-commerce comes as part of this package.”

Gaydon also said that t-commerce was attractive to consumers because they need not make an additional investment to become interactive, nor do they need to learn to use a new technology. Age also plays a role in the t-commerce study. Forty-two percent of respondents over age 50 expressed an interest in purchasing items via iTV, while only 25 percent of those between ages 18 and 34 expressed interest. The type of product was also important. For instance, relatively few said they would buy groceries via television, but many said they were interested in buying books, CDs, or tickets.

Most Desired Interactive Activities for TV
Activity Age
18-34 35-54 55+
Order movies on demand 33% 20% 10%
Personal video recorder 24% 9% 3%
Surf the Web 22% 13% 4%
Shopping & buying 18% 13% 10%
Send email 17% 17% 9%
Interactive TV guide 16% 9% 3%
None of the above 14% 28% 36%
Source: TNS Intersearch’s AllNetDevices contributed to this report.

Related reading

Overhead view of a row of four business people interviewing a young male applicant.