By 2005, 91 percent of US homes will be online, according a report by Strategy Analytics. Ninety percent of these homes will be using an Internet PC, but 73 percent will also have interactive TV or other Internet appliances, which means that TV will have to come a long way in the coming years.
Sales of interactive TV appliances, such as online digital TV set-top boxes and advanced games consoles, will reach $2.4 billion in 2000, an increase of 107 percent. Sales will peak at $4.8 billion in 2003, before declining to $4.2 billion in 2005 under the impact of falling prices. Shipments, however, will reach 7.4 million units in 2000, and rise at an average growth rate of 44 percent a year, reaching 26.4 million units a year by 2005.
According to Strategy Analytics’ study “Interactive Digital Television: Worldwide Market Forecasts,” 56 million homes around the world will be watching digital TV by the end of 2000. The UK is the world’s most advanced market for digital TV, with an expected 29 percent of homes having switched to digital, followed by the US (24 percent), France (15 percent) and Spain (15 percent).
During 1999, consumers installed more than 17 million digital set-top boxes in order to access new digital and interactive TV services. This year’s global set-top box sales are forecast to reach 28 million units, and by 2005 annual sales are expected to have reached nearly 92 million units.
The leading digital TV operators, such as TPS in France, Open in the UK, and Teledanmark in Denmark, are now offering interactive and online services such as email, home shopping and banking, and games, providing new competition for PC-based Internet Service Providers.
“Millions of consumers around the world are demonstrating their readiness to pay more for better television,” says David Mercer, Senior Analyst with Strategy Analytics. “Service providers can now reap the benefits of the interactive capabilities of digital television by launching e-commerce and advanced interactive services.”
More than 8 million homes in Europe have access to interactive TV, and by 2003, 40 million European homes will have access, according to the “Interactive Television Outlook 2000 Report,” by Myers Reports and eMarketer. In 1999, interactive television revenue will total $665 million. By 2004, that total will reach $15.4 billion.
Research done by Mercer Management Consulting has found that early versions of interactive TV, such as programming with embedded content, program guides, and interactive shopping channels, are drawing a promising response among consumers in the US and Europe. The US, which has long been a premium TV market, is seeing the first introductions of interactive TV services like TiVO, Replay, and AOL-TV.
Mercer’s research also found that the most complex, investment-intensive services were not necessarily the ones most preferred by consumers. For example, more people wanted a searchable program guide than one that was intelligent enough to remember their interests and recommend shows. Interactive television may also have a greater impact on consumers’ Internet behavior than the Internet has had on television. When current Internet users were presented with the option of buying enhanced television entertainment that included Internet functionality, fully half of those interested in enhanced television said they would drop their ISP service.