Video-On-Demand Predicted To Be IPTV Revenue Generator
Video-on-demand (VoD) is expected to be the chief money maker among different IPTV applications, according to a new survey from Accenture, in association with the Economist Intelligence Unit.
Only 4% of respondents believe that IPTV will yield significant revenues over the next year, although 34% believe that it will generate significant revenue by 2009 and another 57% are at least “somewhat confident” that this will be the case.
Accenture found that the chief hurdles to IPTV consumer adoption are considered to be a dearth of compelling content and lingering quality-of-service problems. In addition, not a single respondent is very confident that IPTV will spur significant revenue growth within a year of launch, and no more than half are fairly or very confident of generating substantial revenue by 2009.
A recently released study from Research and Markets forecast that the number of global IPTV subscribers will grow from 4.3 million in 2005 to 36.8 million in 2009 (see Europe Leading IPTV Boom).
In response to the Accenture survey, 85% of executives at network operators said that they believe discounted prices, through service bundling, will play an important role in persuading consumers to spend on triple or quadruple play in the next 12 months. However, Gartner has released research which says that bundling will result in IPTV revenues rising from £336 million in 2006 to £3 billion in 2010 – a figure which the analyst expects could be much higher (see IPTV Take-Up To Struggle).
The outlook for three years time is agreed to be rosier than in the short term, as the cost of equipment falls and the technology improves, while providers will be bringing more content to customers through revenue sharing, distribution agreements or even by developing their own content.
However, Accenture notes that content sourcing will increase costs (with survey respondents believing this will be a barrier to household take-up) and, perhaps more importantly, the competitive environment will have changed. Cable and direct-to-home operators are pinpointed by the executives surveyed as the single greatest obstacle to IPTV adoption in three years’ time.
A high proportion of respondents said that, with content currently being acquired in a multitude of ways, distribution without rights of ownership will be the primary means of sourcing IPTV content over the next year. However, Accenture points out that Disney and AOL Time Warner are testing PC-based services that bypass operators’ set top boxes and offer free content, which is tied to advertising that viewers cannot fast forward. Three years from now, only 14% of operators expect to depend on simple content distribution. Instead, 41% expect to rely on a more complex blend of models that includes revenue sharing and distribution of content with or without rights of ownership.
Respondents to the survey, having deemed video-on-demand to be the chief money maker among IPTV services, said that integrated internet services would be next (covering TV browsing, email and instant messaging), followed by gaming and personal video recording.
Advertising is low on the list of possible money makers for 2009, although broadcasters and content providers are more confident about its potential than telecoms operators. Accenture says that it sees this as surprising, as IPTV platforms offer the ability to combine precision targeting with the impact of television. It says that advertising appears to be a potentially overlooked area in current network operator plans, and represents an opportunity for revenue growth.
Accenture also points out that IPTV will have to be of high quality if customers will pay for it, as there is a wealth of free content available on the internet, not to mention terrestrial television. In the short term, the ability to bundle voice, internet and video/TV services in discounted packages will offer the greatest appeal to customers. Once the flow of content begins in earnest, most respondents believe that VoD will then take over as the paramount revenue generator.
A report last year by Screen Digest said that by 2009 the total number of IPTV subscribers in Europe will rise from 658,000 to 8.7 million, accounting for 0.9% of the European Pay TV market (see IPTV To Have Significant Impact On European Markets).