Tune in to interactive opportunities

Those of you who thought that interactive digital television had withered away and died are apparently wrong, or so the founders...

Those of you who thought that interactive digital television had withered away and died are apparently wrong, or so the founders of investment group First Tuesday would have you believe, writes Danny Bradbury.

First Tuesday held a conference last week to address the issues raised by the integration of television and conventional digital services. The panel - entitled What will we watch next? - addressed issues such as what TV will look like in the future and how companies can structure business around it effectively.

The digital TV market can be separated into two main areas: interactive and non-interactive systems. Non-interactive digital TV capitalises on higher quality audio and video signals and has been offered by companies such as Sky Digital for some time. But the real area of interest for companies wanting to exploit a new channel for e-commerce lies in the interactive (iDTV) space, populated by companies such as Open and OnDigital.

Open, formed in 1996, launched its service in October 1999. Backed by companies including BSkyB and BT, it takes a walled-garden approach to interactive services, offering access to information and online purchasing among partner companies that join the service. OnDigital, on the other hand, focuses on Internet access via the TV. Both use telephone links for their connectivity.

John Browning, co-founder of First Tuesday, is predictably enthusiastic about the iDTV market, and heralded a convergence of television and conventional Internet access into a new market for consumer-oriented interactive services. "As we start to put interactivity into television, we have to work out what things will be interactive and how they will mesh with existing media," he said.

There is nothing like the use of the word media to get people fired up about a market. After all, it is what the whole Internet explosion has been based on for the past five years. Nevertheless, there are considerable pitfalls to the use of iDTV for transactional services, and Browning admitted as much. He takes Japanese bank HSBC - one of the backers of Open - as an example.

"HSBC said 'we don't need to develop Internet banking because people will do it all on the TV', but this hasn't happened," he said. Who wants to do their banking with the kids tearing around the living room? Who wants to think about debt management when trying to watch Coronation Street?

Nevertheless, while some services are not suitable for interactive television, there are many that are and there are signs that the digital TV market should not be ignored.

A recent report from market research company Ovum, entitled Digital TV and Telecoms: Opportunities and Threats for Market Players, revealed that digital TV will have a significant number of subscribers in the next few years and the proportion of people using interactive services will grow dramatically.

There will be 62 million users worldwide this year, rising to 357 million in 2006, according to the report. While only 12.9 million of those users will be interactive this year, 60% of them will be taking advantage of such services in five years' time. Digital TV-based e-commerce transactions will total $251m (£172m) this year worldwide, said the report, growing to $44.8bn in 2005.

One of the most significant concerns for those wanting to get into this market is a lack of standards. "I think that they are trying to develop operating system standards, but what you need more is a markup language standard and that is a level that they haven't addressed," Browning said.

Consequently, according to the Ovum report, the repackaging of content originally designed for the Internet for interactive TV will become a core competency for content producers over the next few years. Some TV companies will offer direct Internet access, and many interactive TV services will be standalone, meaning that they will not be linked to programme content.

Nevertheless, while exploiting this sector to the full, content providers will also want to take advantage of such facilities as programme linking, so that content reflects what is on the screen.

As if learning Hypertext Markup Language, Java and server-side scripting was not enough, new media companies will now have to integrate such technical know-how with traditional issues surrounding programme scheduling and advertising costs. The message is clear: turn on, tune in, wake up.

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