Digital television connections will grow from 62 million in 2001 to 350 million in 2006, according to research by Ovum, which also predicts that television commerce (t-commerce) revenues will be worth $45 billion by 2005. This is in addition to revenues from other services such as pay-TV, gaming, education, and information, which will exceed $60 billion.
Possibilities for telcos and TV broadcasters exist within the Digital TV market. “As Telcos and traditional TV broadcasters are vying for market position, each sector must guard its strengths and exploit new opportunities,” said Shirley Brown, Ovum’s senior consultant in the New Media Group Television. “Television is good at developing and delivering programming content to mass audiences. Telcos’ strengths include strong customer bases, established billing arrangements, and effective customer management systems. By guarding existing revenues and building service offerings in the convergent space a market leader will emerge.”
Digitization of broadcasting transmission breaks down the barriers between the Internet, traditionally a telecommunications domain, and the traditional media-oriented television sector. Convergence of the two sectors occurs with interactive services offered to consumers either through their television or personal computer. Consumers will be able to send and receive email, browse the Internet, buy goods and services, and play games through their television sets, while increased bandwidth to homes via telecom networks will enrich Internet services with broadcast quality video and audio, bringing television to the PC.
Competition between telcos and TV broadcasters centers around increasing viewer numbers to gain advertising revenue; maximizing consumer expenditure on transactions (commerce); and forming alliances for popular entertainment services including movies, shows, and video games.
Once television interactive services have reached maturity they will compete head-on with the services offered by the Internet, and similarly the Internet will rival television in information, entertainment, and educational video and audio services.
A study by TechTrends, Inc. reveals that 46 percent of consumers are interested in TV-based e-commerce services (t-commerce), but interest levels vary greatly among different applications. For instance, while 53 percent of consumers are interested in printing product information or coupons from their TV set, only 33 percent are interested in ordering restaurant meals for immediate delivery.
According to the study, “TV-Based E-Commerce: An Investigation of Consumer Interest, Pricing and Payment Preferences,” the most likely users for t-commerce services include premium cable and DBS subscribers, active online shoppers and frequent customers of home shopping channels. The fact that more than 80 percent of the most active home shopping channel customers are interested in t-commerce shopping (27 percent of whom would pay a monthly fee for the service) suggests an optimistic future for home shopping retailers like QVC and Home Shopping Network.
“Even consumers who do not shop online represent an opportunity for online retailers,” said Adriana Weinfeld, TechTrends research analyst. “Our research shows that almost half of these consumers are willing to pay a monthly fee to shop for products directly through their TV set. Since there are twice as many consumers who watch TV as surf the Web, Internet-based retailers like Amazon.com and Yahoo could dramatically increase their available market by expanding their e-commerce services to the television.”
Electronic banking and investing is another promising t-commerce application, in which 34 percent of consumers have expressed an interest. However, since fewer than 6 percent of consumers are willing to pay more than $3 per month for this type of service, leading online brokers should not expect most consumers to pay more for TV-based financial services than they currently pay on the Internet.