Interactive TV - the next boom market?

Or no point in changing the channel?

After the highs and lows of ecommerce on the internet should we get excited about buying through interactive digital TV? Lisa Burroughes investigates what could be the next big channel to market. "Interactive TV will be the Viagra of the Nasdaq." Strong words. But can this battle cry - from a European TV executive this summer - raise the new media industry? Last week broadcasters, new media directors and technology moguls gathered at the European Interactive TV show in London to share news about what's happening in the interactive digital TV (iDTV) space and - more importantly - find out if anyone can make any money from it. There are three core groups involved in the interactive TV market - content producers, network operators (BSkyB, ITV Digital, NTL and Telewest) and retailers - and they have had their successes. Big Brother and Wimbledon tennis coverage this year stand out, while Who wants to be a millionaire is now available via WAP, PDAs, TV, iDTV and on the web. Bruce Vandenberg, head of new media at Celador, Millionaire's production company, told conference delegates that its success proves money can be made from cross-platform content - from licensing, sponsorship and call rates. Channel Four is equally confident in its business model for iDTV. Following the success of Big Brother, Andy Anson, managing director for Channel Four Interactive, said the company is planning to shift its investment away from online (narrowband and broadband) to iDTV because the "revenues are more visible". The broadcaster is developing ideas for game shows like Fifteen to One, news, horse racing and even documentaries. The key to making money, particularly from licensing, is creating something that has international appeal - even if it addresses a niche market. An example is the Irish programme Wanderlust which targets the youth market and is about to go international with cross-platform content licences and online advertising deals. On a more downbeat note, broadcasters and industry analysts at the conference said although there may be a television in 90 per cent of homes, research shows it is beginning to lose popularity versus the internet. Researchers at the Henley Centre have found satisfaction levels among TV viewers is decreasing. "The TV is becoming an ambient medium, something that's on while you're doing the washing up," claimed Andrew Curry, Henley Centre associate director. For entertainment, it seems people are turning to games consoles and PCs. That said, Tom Williams, executive producer of enhanced programming at BBC New Media, acknowledged: "Interactivity increases loyalty and reduces churn rather than increasing viewing numbers." And, for broadcasters, this is a key benefit of interactivity - reducing churn. Stopping the consumer flicking to another channel means more money from advertising. Network operators also believe iDTV offers significant revenue opportunities at little extra cost. BSkyB has around 5.5 million digital subscribers and while it recognises it won't be able to force much more subscription money out of them it hopes to make an extra £50 a year per household through t-commerce by 2003. Will BSkyB succeed in its objective? Its latest financial results show it is already bringing in £13 average revenue per user for interactive services from either phone-based internet or iDTV. And big brands are already getting involved. Only last week Nestle announced an iDTV advertising campaign for Kit Kat. Abbey National and Proctor and Gamble are also committed to iDTV. Ambrose McGinn, retail ecommerce and strategic development director for Abbey National, was upbeat about iDTV bringing ecommerce to the consumer. "We felt years ago and still believe it could be the ecommerce revolution in the home. It'll provide quick, easy access to interactive services." Abbey National reckons its iDTV push, featuring TVs in its stores to wean its customers, is already paying off, accounting for 10 per cent of all ecommerce transactions. Yet McGinn admits the iDTV channel has taken over a year to develop and been expensive. The government is also interested. An NHS Direct six month trial with Telewest in Birmingham has so far shown significant benefits, while Newham Council's IT director, Richard Steel, believes iDTV will be critical to delivering local government services. But perhaps the greatest barrier is the cost of creating content for the iDTV channel. Unlike web ecommerce it isn't as simple as hiring a programmer with good HTML and Java skills. In the UK each network operator uses different technologies in set top boxes, and these are different again across Europe and the rest of the world. Catering for all platforms requires a vast number of programming skills - open, liberate, media headway, MHP, MPEG5, Flash, to name just a few - making in-house development more costly and, in most cases, impractical. The question of programming is even more pertinent when considering the basic lesson that website development taught businesses - usability can make or break a site. Mike Bloxham, CEO of NetPoll, said: "Poor user experience will curtail [user] exploration of interactive TV and more importantly slow adoption." Efforts are being made to create a common platform and ensure users don't experience technology crashes but the problems are unlikely to be resolved for at least another 18 months. In the meantime there are middleware technologies being developed, and as Tanya Field, European director of new media at Discovery Networks Europe, pointed out costs of development can be kept lower by having an international cross platform objective. One popular argument has it that web ecommerce hasn't met expectations because not enough consumers want to buy online. That would mean it's a false economy to shift expectations onto TV viewers. But as Martin Heath, partner at KPMG Consulting, said: "It's not about predicting a market. It's about creating one." With broadcasters like the BBC, Channel Four and Discovery as well as operators like NTL, BSkyB, Canal Plus and many others putting their weight behind iDTV they stand a good chance of succeeding. The economic downturn has meant many iDTV projects have been put on hold but then during a recession consumers watch more TV. The last century saw hundreds of inventions and services people never thought they'd need - and have come to depend on. Few happened overnight. The greatest lesson learnt from ecommerce is not to raise consumer expectations until the market is truly ready to deliver.