IPTV Could Generate Significant Revenue Within 3 Years
More than half of communications industry executives believe that Internet Protocol Television (IPTV) can generate significant revenue within the first three years of service, according to findings of a survey by Accenture and the Economist Intelligence Unit.
However, the report shows that confidence in the short-term outlook remains mixed, with slightly more than half (52%) of respondents saying they are not confident in the ability of IPTV to generate significant revenues within the next 12 months.
On the other hand, one-fifth (20%) of respondents said they are confident or very confident, and more than one-quarter (28%) said they are somewhat to fairly confident, that IPTV will generate significant revenues within 12 months.
Dan Elron, managing director for Accenture’s communications practice, said: “The business case for IPTV, its value-added benefits and its potential remain strong.
“In the long-term, the key to achieving high performance through IPTV is to be visionary, ambitious and open to innovation from many sources. For the shorter term, the key is to quickly adapt to consumer feedback and jump over technology hurdles.”
When asked what they believed would be the principal revenue source for IPTV, about half (46%) of the industry executives surveyed selected advertising.
However, network operators, as a subset of all respondents – which included equipment vendors, consumer electronic companies, content providers and broadcasters/studios – disagreed, with three-quarters (74%) of network operators saying they believe that subscription fees for premium content will provide the largest recurring revenue stream, followed by basic content subscription fees and then advertising fees.
Elron added: “This difference in opinions reflects the broad uncertainty around how media will be delivered and what customers will be willing to pay for.
“Carriers are used to subscription revenues and believe that the IPTV experience will soon be comparable to or even better than current video offerings, whereas media executives are more cautious and skeptical of a scenario where a new revenue stream is created so rapidly.
“The reality is that both revenue streams will be important, but the challenge will be to harness the power of this new technology to create a new video experience that makes consumers and advertisers willing to pay more than they do today.”
When asked to identify reasons for pursuing the IPTV market, the greatest number of respondents (42%) cited new revenue streams, followed by acquiring new customers (28%) and increasing sale of broadband access connections (21%).
Nearly two-thirds (64%) of all respondents, and three-quarters (74%) of network operators surveyed, said they believe that discounted service bundles provide the greatest enticement to buy IPTV.
The ability to move content between devices was also cited as an important enticement, selected by 38% of respondents, as was the convenience of a single bill for multiple services, selected by 31% of respondents.
Yet there are obstacles to IPTV adoption, says the report. One-quarter (25%) of respondents said that the primary short-term obstacle to IPTV adoption is a quality-of-service issue relating to unproven architectures, low bandwidth and other technology issues.
The same number (25%) said they believe that quality-of-service issues will be resolved over the next three years, leaving stiffer competition from alternative TV providers as the toughest challenge to the adoption of IPTV. Another challenge to IPTV adoption, noted by 19% of respondents, is high subscription fees due to the high cost of network access and equipment.
When asked which types of companies are most likely to generate revenue from IPTV, the vast majority (87%) of respondents selected content providers, followed by telecommunications providers (72%).
More than two-thirds (69%) of respondents said that traditional broadcasters have the least to gain from IPTV, a view held strongly by respondents across all company types, including broadcasters themselves.
In research published by Point Topic towards the end of December, it was revealed that IPTV subscriber numbers doubled during the 12 months to June 30 2006 (see IPTV Subscriber Numbers Double).
Meanwhile, an MRG forecast said that there will be over 50 million IPTV subscribers by 2012 (see Over 50 Million IPTV Subscribers By 2010), with global IPTV revenue reaching $16.7 million by that year.