U.S. Consumers Still Not Sold on iTV

Nearly three-quarters of consumers still need to be convinced that interactive television (iTV) is the indispensable enhancement the industry believes it to be, but a couple of iTV applications in particular may be the key to adjusting consumer attitudes.

The popularity of two iTV applications — video on demand (VOD) and interactive program guides (IPG) — suggests that the right product may indeed win acceptance, according to a study by Statistical Research, Inc. (SRI).

The study, “How People Use Interactive Television,” was conducted as part of SRI’s “The Home Technology Monitor.” It asked consumers if they were interested or not interested in interacting with television programs, and 72 percent of respondents told SRI they were not interested; the proportions were virtually identical for homes that already have iTV services and those that do not. Among homes with iTV capabilities, respondents said they rarely or never use interactive links in TV shows and TV-based Internet and email, which SRI says demonstrates a need for either more aggressive marketing or more relevant services.

By contrast, 73 percent of those with pay-per-view (PPV) access via a set-top box said they buy PPV movies, and 43 percent said they buy other PPV programs, such as sports and entertainment specials. The SRI report also shows that PPV customers are willing to pay higher prices for video-on-demand (VOD) capabilities such as 24-hour access to a given movie.

Interactive program guides (IPGs) also proved to be a popular concept with consumers. Almost two in three homes that have IPGs said they use the guides more now than when they first got them. More than half (53 percent) said they channel-surf less now than before they had an IPG, and 82 percent said they use TV newspaper listings less.

The move toward more widespread adoption of iTV has been slow in the United States, unlike in Western Europe where they will form mainstream consumer services in the next few years. Despite the downturn in economic and investment conditions, International Data Corp. (IDC) forecasts 79 million households will be enabled to access interactive TV services by 2005, representing 51 percent of regional TV households. Western Europe is the leading region in the world for iTV services, which go beyond interactive guides to include applications such as gaming, shopping and banking through the television, already has 14 million households receiving iTV content.

The mass-market deployment of iTV can be traced back to 1995 in Western Europe. By the end of 2000, 7.2 percent of households accessed a service. Notable increases are forecast by IDC for the next two years, despite the worsening economic outlook. By 2005, more than 45 percent of households will be accessing interactive TV applications.

“The development of interactive TV differs from other technologies in targeting a wide demographic base of households and displaying incremental growth,” said Jason Armitage, senior research analyst with IDC’s European Consumer Devices program.

Interactive applications have also demonstrated the ability to generate additional revenues for service providers. In the meantime, costs for service providers are declining. Technology providers are focusing on leveraging existing applications and offering low-cost solutions. Hardware costs have also declined. On the other hand, costs incurred from having to reprogram content for individual platforms have inhibited the development of interactive TV. Technology providers are responding by cutting the time-to-market of launching new interactive applications and moving to solutions based on open standards.

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