Interactive TV: Disappointingly Slow Start, But Potential Is There, Says Accenture

Interactive services were first launched in Europe in the late 1990s, but so far the medium has pretty much failed to live up to its expectations. Earlier in the year Insight Analysis: The Struggle For Interactive Television looked at some of the problems facing the development of iTV services. The promise was always great, but problems of cost, demand, technology and marketing have all dampened iTV’s growth.

Despite its slow start, Accenture believes that iTV will bring financial rewards for the television industry, but believes that these rewards will not necessarily match the original expectations of the industry. Early iTV revenue projections forecast strong growth from interactive advertising and TV-based commerce, says the report. However, whilst these will still be important revenues sources, they are unlikely to be as lucrative as consumer-driven applications, such as video-on-demand, games and gambling, says Accenture.

Games and gambling Accenture says its experience suggests that games and gambling will be amongst iTV’s most compelling and profitable applications and will fit well with TV’s focus on entertainment and relaxation. It adds that although consumer research has shown only a moderate interest in TV games, when offered, the uptake has actually been quite high.

Gambling also has great potential, but regulations may limit it in many markets, says Accenture. Worldwide electronic gambling revenues from iTV are forecast to reach $5.9 billion by 2006, up from $728 million this year, according to forecasts from Informa Media Group (see Global E-gambling Will Be Worth $14.5 billion By 2006, Says Informa).

In the UK, total e-gambling revenues are expected to grow from $317 million this year to $1.3 billion in 2006, in line with a rise in users from 3.6 million to 13.4 million across the same period.

	2000	2001	2002	2003	2004	2005	2006
Total Electronic Gambling Revenues by Source ($ million)
iTV	29	208	728	1,663	2,994	4,324	5,946
Internet	1,646	2,330	3,032	3,926	4,998	6,304	7,936
Mobile	1	16	58	124	223	387	642
Global Total	1,675	2,554	3,818	5,713	8,215	11,015	14,524
Total Electronic Gambling Users by Source (million)
iTV	0.3	2.3	8	18	32	45.8	62.3
Internet	13	18.4	24.5	32.3	42.1	54.1	70.1
Mobile	0	0.3	0.8	1.9	3.6	6.3	10.2
Global Total	13.3	20.9	33.2	52.2	77.8	106.2	142.5
Total Electronic Gambling Revenues by Country/Region ($ million)
U.S.	1,048	1,446	1,798	2,198	2,599	3,043	3,471
Japan	103	195	275	372	473	591	709
UK	82	159	317	545	817	1,046	1,296
Rest of World	443	755	1,428	2,599	4,325	6,336	9,048
Global Total	1,675	2,554	3,818	5,713	8,215	11,015	14,524
Regions
Europe	330	633	1,299	2,414	3,971	5,611	7,643
North America	1,157	1,606	1,998	2,442	2,888	3,381	3,857
Asia Pacific	141	234	379	610	949	1,417	2,138
Rest of World	47	81	143	248	407	606	886
Global Total	1,675	2,554	3,818	5,713	8,215	11,015	14,524
Total Electronic Gambling Users by Country (mil.)
U.S.	5	6.8	8.4	10.2	11.9	13.8	15.6
Japan	0.6	1.1	1.5	2	2.5	3.1	3.7
UK	1.1	1.9	3.6	5.9	8.7	10.9	13.4
Rest of World	6.7	11.2	19.8	34.1	54.7	78.4	109.8
Global Total	13.3	20.9	33.2	52.2	77.8	106.2	142.5
Regions
Europe	4.6	8.2	15.7	27.9	44.7	62	83.1
North America	5.5	7.6	9.3	11.3	13.2	15.4	17.4
Asia Pacific	2.4	3.8	5.9	9.2	14	20.2	29.7
Rest of World	0.8	1.4	2.3	3.7	5.9	8.6	12.3
Global Total	13.3	20.9	33.2	52.2	77.8	106.2	142.5
Source: Informa Media Group, 21.01.02

Video on demand Accenture says that video on-demand (VOD) fits well into TV’s video entertainment focus and that the service appears as one of the most desirable in iTV consumer surveys. True VOD requires a lot of bandwidth (capacity to carry data) and satellite services generally do not have the bandwidth needed for true VOD services. Cable, with higher bandwidth, is a better platform for VOD.

The report says that VOD will prove very popular and will generate ‘robust revenue streams’. Current services, though, have limited content libraries and modest revenues, most of which will return to the film studios.

Video On Demand Forecast Comparisons (households)
	2001	2002	2003	2004	2005	2006
UK					1.2 million
Europe						8.5 million
US	2.4 million	6 million			23 million
Global					26 million
	1.3 million				33 million
Sources:
Frost & Sullivan, 2001
Screen Digest, 2001
Cahners In-Stat/MDR, 2001
Wall Street Journal Industry Forecasts, 2002

Interactive advertising There have been high hopes for interactive advertising, as the Accenture report notes. iTV ads will allow advertisers to move beyond building brand awareness into the arena of making sales and providing interested customers with further information.

“Despite its promise, interactive advertising remains embryonic. There have been experiments and trials, but mass deployment is some way off,” say the analysts. They argue that interactive advertising has substantial long-term potential, but that it will take at least for years before it accounts for a significant portion of total TV advertising revenue.

Recent Jack Myers Report forecasts predicted that iTV advertising revenues in the US would double annually (see US Interactive TV Revenues Will Double Annually, Show Myers Forecasts).

Television commerce Whilst commerce has been the centrepiece of early iTV services, Accenture says that its research shows that consumers are not particularly interested in embedded television shopping.

“Television-based commerce, especially for impulse, branded purchases, may become a significant revenue source, but it will be smaller and take longer to develop than many market projections forecast,” says the report.