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10/31/2000

The United Kingdom Leads The World With Interactive TV, IDC Says

LONDON — OCTOBER 31, 2000 — The United Kingdom continues to lead the world in implementing interactive TV (iTV) with 3.9 million households expected to access services by yearend 2000, according to IDC. Successful mass-market deployment has attracted the interest of a global industry that has witnessed several fruitless efforts in the past to deliver interactive applications through the TV.

 

Successful deployment of interactive TV services requires a substantial user base. "Service providers are therefore faced with the question of how to convince consumers to take up the required hardware," said Jason Armitage, an analyst with IDC's European Consumer Devices research program. "The most successful service providers have realized the key to recruiting a user base is to offer compelling programming content. Content has to be sufficiently attractive to justify charging a monthly fee that will cover the cost of providing subsidized hardware."

The combination of a hard disk into a set-top box, along with a modem, built-in set-top box intelligence, and programming information, has given rise to digital video recording (DVR). Launched in the United States during 1999 by TiVo and ReplayTV, DVR offers consumers the ability to record and manage TV programming.

"DVR technology also presents opportunities, and threats, to service operators and advertisers," Armitage said. "Much has been made of the ability to fast forward through advertising. However, the storage of personal information on the hard disk also creates the potential opportunity for targeted advertising."

TiVo is bringing the first DVR product to the United Kingdom, in alliance with BSkyB, Thomson Multimedia, and the BBC. Launched at the beginning of October, TiVo offers the full range of features in its Personal TV Service, including TrickPlay, the Season Pass, and TiVo's Suggestions.

"The initial challenge for TiVo in the U.K. will be educating consumers on DVR and the benefits of personal TV," Armitage said. "The business model of purchasing a set-top box with a service, although not completely unfamiliar to the U.K. market, will have to overcome resistance from a consumer base that is accustomed to free hardware bundled in with attractive content." TiVo is aware of the critical role played by retailers at the point-of-sale in achieving a successful launch of its retail product.

Competition to TiVo, in the form of set-top receivers with integrated DVR capabilities, will become a reality in 2001. What is still unclear is the willingness of consumers to pay for set-top boxes, even once they have been enhanced with DVR functionality. IDC believes such hardware will have to remain partially subsidized, with the accompanying services continuing to form the key selling point.

IDC's new research Interactive TV in the UK (IDC #KD21G) examines the components that have contributed to the development of iTV in the United Kingdom and assesses the critical success factors for establishing a service. The analysis also examines future potential and where iTV is likely to go next. This bulletin is available for purchase from your local IDC office.

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at www.idc.com.

IDC is a division of IDG, the world's leading IT media, research and exposition company.

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