Demand For Interactive TV Services Could Put Satellite At Disadvantage

[Satellite News 07-04-08] Television viewing and video consumption is about to enter a paradigm shift, one that could put satellite at a disadvantage to new providers such as Internet Protocol TV (IPTV), according to an industry analyst.
    “The future is in highly interactive television,” said Steve Rago, the principal analyst with iSuppli, an electronics market research firm. “The way things are going now, I can say that in the near future, IPTV will be able to provide better and much more innovated services.”
IPTV Acceleration Puts Satellite in a Corner, a report released by iSuppli in May, signals the beginning of IPTV’s invasion of satellite-TV’s interactive programming concept, citing figures that traditionally characterize a shifting market, said Rago. For IP providers, interactivity not only means the ability to timeshift viewing to create a custom programming schedule but also the ability of viewers to interact with advertisements, a familiar feature to those who use modern Internet search engines. The secret weapon for IPTV service providers is using the Google model for target advertising.
    “It’s going to be exciting,” said Rago. “On your TV, there’s going to be multiple IP sessions going on. Now you can broadcast extremely targeted advertisers. You know exactly who is watching the program, what time they’re watching it and you even know where the home is.”
    Consumers also will be able to interact with advertisements, acquiring more information on products upon request. When asked whether these features would prove more exciting for customers or advertisers, Rago admitted that this particular feature will not be a selling point for customers. “It will create a large revenue stream for the service provider,” he said. “They have the information, which is part of this paradigm shift. But for customers, it’s a feeling of being in control. Users want to be in control.”
    AT&T most likely will be the first to deploy interactive advertising on its U-Verse IPTV service, said Rago. “It will definitely be one of the major companies, but not for another two or three years. They’ll run tests in 2008, but there won’t be this expansive interaction service this year,” he said.
    If the interactive TV is the future, this could cause problems for satellite providers, but the industry is far from extinction, and there are several battlefronts where the medium can still compete with IPTV, said Rago.
The first is an area that satellite companies are comfortable with — rural areas. “There is a plethora of rural telephone companies in the [United States],” he said. “Some of them only have 20,000 subscribers. They’re very small companies but they’re all finding success with IPTV. You would think that they are going head-to-head with the satellite providers, because the cable companies are not in these areas for the most part and there’s no competition.”
    Rago is surprised that the satellite companies generally have allowed IPTV companies to secure a beachhead in rural telephone markets and ignored the speed at which they are establishing a communications infrastructure. “I can’t believe what I read about IPTV companies putting in fiber optics in these areas,” said Rago. “There are equipment vendors making a living selling fiber-optic equipment to these little telephone companies with the whole purpose of eventually bundling these services. Here’s a pocket you think would be extremely strong in the satellite camp, but it isn’t.”
Another strategy for satellite TV sustainability is creating hybrid services with IPTV companies and using European companies like BskyB as a model. “Companies like BskyB have actually purchased broadband services from a landline company. The broadcast TV comes from the satellites and the interactive services come from the broadband network. They do this so they’re able to compete,” said Rago, suggesting companies in the United States follow suit.
    Fortunately for satellite TV, IPTV is far from perfected, giving satellite operators time to improve their offerings as well as develop new business strategies. The major U.S. IPTV providers do not have the broadband capability to provide individualized interactive experiences for viewers, and the money is in that crucial ad revenue. Satellite companies like DirecTV already have a head start on interactive ad campaigns, and although they are not as specific in terms of demographic targeting, it can be argued that customers are not watching at TV for the commercials.
    “There are still some hurdles to clear with IPTV in terms of bandwidth and quality,” said Rago. “It’s still a ways off.”