iTV based retail or tCommerce was at one stage seen as the ‘killer app.’ of interactive TV, however disappointing early results led to widespread scepticism. A new Datamonitor report argues that iTV retail and iTV branding will become important elements of digital operator and broadcaster strategies, as these groups exploit links across an increasingly broad range of programming and interactive services.
The report, iTV branding and retail – Business model and service development to 2006, recommends that for most product and service types, branding-focused strategies will be more appropriate than iTV based retail, with the result that the TV will remain primarily a brand-building environment.
tCommerce was the wrong focus for early iTV investment
The high initial focus of digital TV operators, such as Sky Digital and NTL, on iTV based retail owed a great deal to the hype surrounding eCommerce with the early development of iTV in Europe coinciding with the height of the dot.com boom. Walled garden-based iTV services were seen as providing a familiar alternative to the Internet, giving consumers more convenient access to interactive services and allowing companies to target those without Internet access.
The early walled garden iTV experience, however, turned out to be very disappointing for both consumers and companies, with a lack of awareness and low level of functionality restricting usage and revenues, while the associated costs made it virtually impossible for companies to achieve a return on their investment. Subsequently many companies discontinued this investment and the iTV development focus of operators necessarily shifted to entertainment and the channel environment, particularly enhancement of popular programming such as sports events, reality TV, and quiz-shows.
Next stage of development hindered by economic situation
The more advanced European digital TV markets are now reaching the point where there is sufficient awareness and usage of interactive TV to enable the development of the next stage of iTV strategies; the provision of advanced iTV branding and retail services across all available iTV environments. The increasing sophistication of enhanced programming enables the provision of a broad range of branding and retail services within editorial channels and retail channels, either on a stand-alone basis or linked to walled garden services, totally transforming their positioning and the user experience.
However, the financial difficulties facing many digital operators and the advertising recession will hinder development, with groups anxious to avoid the mistakes of the last few years and focusing on achieving a reliable return on any new investments. As a result, Datamonitor expects only gradual development, with certain operators most notably Sky Digital, leading the way. However, over the next few years iTV branding and retail will become core components of operator and broadcaster portfolios of interactive services and their commercial offering to advertisers and partners.
iTV branding and retail need to be part of an integrated iTV offering
Datamonitor believes that operators need to develop integrated interactive TV strategies, positioning iTV branding and retail within a broad portfolio of interactive and programming interests and exploiting the associated synergies and links to drive awareness and usage.
It will be vital for iTV branding and retail services to exploit a strong presence in the channel environment and close association with programming, as well as having a high profile on regularly used iTV services, such as the interactive program guide. Furthermore, the success of services, particularly those within editorial channels, will require that products are relevant to the actual viewing experience, rather than simply the program content.
However, while these factors will determine awareness of iTV branding and retail offerings, in order to motivate use or elicit a response, services will need to be entertaining or provide viewers with an interesting experience. While discounts and competitions may attract users in the short term, as these become commonplace they will lose their appeal and may be counterproductive.
Only select product types should exploit iTV retail
iTV branding and retail will not radically change business models, in the main it will simply enhance advertisers’ existing strategies, enabling them to extend or strengthen contact with consumers. Interactivity will considerably increase the brand-building power of the TV, allowing businesses to provide the audience with a personalised or otherwise more involving experience and generate consumer data or leads to be developed through another medium.
However, due to the technological limitations of iTV and the entertainment and leisure focus of its usage, only a small number of product and service types will be appropriate for direct retail through iTV. Beyond retail channels, which are ideally suited to exploiting iTV for sales of general consumer goods, these will be products closely associated with the TV-viewing experience and not requiring complex purchasing decisions.
Due to a high level of association with programming and their emotive nature, Datamonitor expects travel and media items to provide the greatest variety of iTV retail opportunities and to dominate consumer iTV retail spend.
The TV will remain primarily a branding environment
Datamonitor forecasts that consumer spend on iTV retail in Western Europe will exceed $6 billion in 2006, equivalent to almost $100 per digital TV household. However, while iTV may increase overall consumer spend on certain product types by driving impulse purchases, most of this spend will simply be transferred from the Internet or the high street.
In fact, consumer spend on iTV retail will remain dwarfed by that on content. In 2006 total iTV retail spend is forecast to reach only 16% of the spend on digital pay-TV services, excluding iTV games and gambling. Furthermore, of the total iTV retail spend by consumers, only a very small proportion will actually go to the operators and broadcasters; these groups will earn most of their iTV branding and retail-related revenues from sales of airtime and iTV services to businesses.
iTV branding and retail will therefore not radically alter the commercial focus of the TV environment. In particular, the TV is the most powerful branding environment and while iTV will enable direct retail in some areas, the TV will remain primarily a branding environment.