Will interactive TV ever be able to turn a profit?
Open, as a primary revenue model for interactive TV, has failed to
make its mark commercially. The walled garden retailing platform
has now been incorporated into the Sky Interactive umbrella, adding
a further blow to ailing television commerce, or t-commerce,
confidence.
So, as Sky looks to enhance TV, games, quizzes and gambling for
quick-fix, premium-rate revenue earners, ONdigital is set to
rebrand itself in a bid to boost consumer confidence. Meanwhile,
the BBC has gone cross-platform with its Text service.
It seems the big players are keen to add value to our viewing
experience, but does the cost of rolling out these services
outweigh the benefit, and is there really an effective revenue
model for interactive TV? Tony Ball, Sky's chief executive, aims to
earn £400 a year from each subscriber, of which there are 5.3
million. His plan is to recoup the cost of interactive services
through online quizzes, games, betting and broadcast-driven TV
applications. But despite a recent report by Pace Micro
Technologies which claims that 50% of households in the UK will be
connected digitally by 2002, it seems doubtful users will be
willing to part with that much cash on top of their standard
monthly bill.
Much of Sky's Enhanced TV strategy (running an interactive
application simultaneous with broadcast) depends on its ability to
pull in the punters. With hit TV shows such as Big Brother, which
currently has an enhanced TV application running on E4, viewers may
well be tempted to shell out on a premium-rate phone call for
additional information, to cast a vote, email or for the chance of
winning a decent prize. But despite Carlton's backing, ONdigital
doesn't have the software capability to support lucrative telephony
charges. Therefore, high production costs are largely offset by
interactive advertising revenue - the fruits of which have yet to
be realised.
Meanwhile, betting is proving to be Sky's interactive Golden Goose.
In the company's latest quarterly figures, TV flutters generated
£55m in revenue - 91% of the interactive total. The combination of
gambling's impulsive nature, and the ubiquitous ease of TV, is
proving hard to resist.
Not one to miss out on a winning opportunity, Sky has joined forces
with C4 to launch Go Racing, a channel that allows viewers to bet
online. In addition, Telewest is currently in negotiations with
bookies William Hill.
So, as the main operators mark out their business strategies,
individual channels and t-commerce ventures are also trying to get
a slice of the commercial action. Open, by Sky's admission, is
still failing to make a profit, but this hasn't deterred other
retail opportunists. Within the next few months BrightBlue,
courtesy of Energis and Go interact TV, a subsidiary of Sony, will
launch their own home shopping portals on Sky's interactive
platform.
So how can anyone hope to make a profit? According to Damian Keep,
senior marketing executive at WHSmith.co.uk, "viewers will interact
if they have an incentive". To be successful within t-commerce, he
suggests, you need to equate the right product with the right
environment. "More and more people will be accessing WHSmith via
enhanced programming," he says, albeit buying a favourite CD while
watching MTV, or making an impulse purchase via interactive
advertising.
It seems TV shopping faces an uphill struggle, without effective
content drivers and multiple-access points. "We're committed [to
t-commerce]," says Keep, but the jury is still out on whether
viewers can successfully be converted into consumers.
Born of its parent company Static only six months ago, games
channel PlayJam is also hoping to score interactive dividends.
According to Jeoff Zie, PlayJam's director, "digital interactive TV
is about getting the mix right". Sky may be extending its own games
initiatives, but according to Zie there's plenty to go round. The
key is in "establishing a set of brand values that are stronger
than the next", he adds.
Brand values aside, how does PlayJam make a profit? Well, at the
moment, it isn't. Its primary revenue stream is advertising,
bolstered by the obvious - premium-rate telephony. But Zie claims
he's comfortable with PlayJam's current financial standing and says
the company has a product that can carve a niche in the market.
However, he's cautious not to overforecast in such a changeable
industry with an unpredictable audience.
There is no singular answer as to whether interactive TV has an
effective revenue model, but there's little doubt that viewers
expect more from the box than linear broadcast.
T-commerce, enhanced TV, premium-rate telephony and games may well
provide a collective commercial remedy.
Meanwhile, games channels such as PlayJam could defy market
analysts and build a viable, long-term revenue stream of their own.
However, in an economically uncertain climate, gambling is perhaps
the only dead cert. And it remains to be seen whether existing
business models can subsidise expensive production costs while
waiting for viewers to warm to the technology on offer.
Interactive Appeal
OpenTV Takes Stock of Static
The world's leading
interactive television solutions provider, OpenTV, has snapped up
Static, the parent company of PlayJam, for $59 million. The move is
massive confidence boost for interactive TV revenue
potential.
UK Leads Interactive TV Usage
23% of UK households will
use interactive TV this year, according to a recent report by
Jupiter. Meanwhile, the US projection is only 7%.
WH Smith On Line for T-Commerce
High street giant WH
Smith predicts 45% of its on-line revenue will come from
interactive TV by 2005. CDs and books are two of the most popular
products purchased on-line.
PlayJam Scores Young Players
93% of PlayJam users are
aged 16-24 with a 50/50 male-female ratio. The company registered
"300,000 players in their first four months" of business, although
the direct revenue generated is unclear.
TV's Tops for Shopping
27% of people prefer to shop via
their TV than their PC, according to a recent Gallup report. With
PC penetration 'on the slide' and analogue switch-off set for 2007,
digital TV may provide the winning commercial formula.
WH SMITH - BRANDING OUT CROSS PLATFORM
WH Smith, one of
the high street's biggest brands, now has T-commerce accessibility
across all of the major UK platforms; including Open, NTL,
Telewest, ON Digital and Bush Internet. This multi-channel strategy
is a measure of the company's drive to stay ahead of the
interactive commercial game. Although, by their own admission,
"some deals work and some deals don't" they're determined to recoup
their investments by delivering "value added services" that will
eventually turn digital subscribers into customers. One solution is
to combine retail with high traffic areas such as games and
betting. The company is discussing enhanced programming
possibilities with Respond TV.