Scenarios for interactive TV - Europe's uncertain future

The market for digital interactive TV in Europe will be dependent on many interlinked variables. There are fears among the major players that the possible geographic fragmentation of the industry across Europe will be brought about if national companies aim only at their home user-base. In the U.K., BSkyB effectively holds a monopoly in analogue pay-TV. It may well go digital in the near future. Canal Plus in France launched the first fully fledged European digital programme package in April 1996. No partner has the financial muscle or pay-TV expertise to pose a serious threat. The potential of the Dutch market is small. It has proved to be more difficult in Germany to achieve a rapid diffusion of digital TV services than in the U.K., France or the Netherlands. Attempts to forecast the expected value of the interactive TV market have thrown up inconsistencies. A non-quantitative approach based on in-depth interviews was used in order to formulate scenarios. This took into account work done on possible scenarios for the future development of the Internet. Despite the hyperbole, the Internet is very far from reaching a truly mass market. Indeed user growth rates are likely to slow down, though its theoretical potential is obvious. The future success of interactive TV is more problematic. Interactive TV is mostly an amalgam of existing technologies. Broadcasting is and remains essentially one-way. How much the public will be willing to pay is open to question. Interactive TV technology still poses a number of unresolved technical problems. Unlike the Internet, Broadcast TV has been ring fenced within national and linguistic boundaries and is usually a group or family activity. The interviews in fact showed that uncertainty is prevalent; most felt it was best to sit and wait. Some suppliers of set-top boxes feared that their core business was threatened. Almost all emphasized that the national culture and language and access systems separated the market. Two key variables - transmission infrastructure upgrade, powerful head-end technology - are controlled by a very few large organizations. Nonetheless, four possible scenarios can be drawn. The Desert Islands scenario assumes a completely fragmented market. Competing Islands is less pessimistic. The Gradual Integration scenario presupposes a final agreement on a common reception standard, and Rapid Integration assumes a fast uptake after a slow start. Interactive TV does offer a range of possible new consumer applications, though it is difficult to see when retailing will become heavily based on electronic media. Companies, however, cannot afford to have no electronic-media application ready if the retail sector does move. They should at least research the area in readiness for possible developments. Large investments are unlikely until there is unequivocal indication from the major players that the investment will be worthwhile. There is great potential, and a close eye should be kept on developments. The question remains, however, whether interactive TV will provide the main platform for retailing.