The PC will not be successful as a hub for watching interactive video, and business ventures based on selling movies over the Internet are destined to fizzle out before they begin, according to a Jupiter Media Metrix (Nasdaq: JMXI) study released Thursday.
Only 11 percent of consumers surveyed by Jupiter said they would beinterested in viewing movies online, mainly because they thought Internet connections were simply too slow to watch videos.
Consumer aversion to watching interactive TV over the Web may change down the road, Jupiter analyst Lydia Loizides told the E-Commerce Times. At this time, however, consumers “want something where they can sit and relax and enjoy” videos, rather than merely view them over a PC, Loizides said.
“As you look into the future, what becomes more interesting is some typeof home media server” that would connect to the Internet and distributeprogramming to different devices in the home, Loizides said.
TV’s Promise
By contrast, for those in the TV industry, the market for video on demand (VOD) is growing, Jupiter said. Among online consumers surveyed for the report, 28 percent said they would be interested in ordering movies or other first-run events to watch on their TV sets. Jupiter estimates the market for such services will total US$642 million by 2006.
Jupiter said motion-picture studios should work with cable and satellite TVoperators, as well as “potential content distributors” like iNDemand, StarzEncore and Intertainer.
In the meantime, Loizides said the movie-rental business has nothing to fear. According to Jupiter, VCRs have three times the market penetration of premium cable services.
Moreover, only 9 percent of the consumers surveyed for the report said theyexpect to purchase or upgrade cable services over the next year. Eight percentsaid they will upgrade their VCRs or buy new ones, and 16 percent will buy new orbetter DVD players.
No Threat to VCRs
“The industry heralded VOD as the entertainment technology that would unseat theVCR from the home and obliterate the video rental market,” Loizides said.”That’s unrealistic.”
On the other hand, the report found, consumers who currently use their cableor satellite companies’ pay-per-view services are likely to turn to VOD ifit becomes available.
“The greatest value lies in shifting the pay-per-viewaudience to VOD and generating incremental revenues,” Loizides said.
“Studios, operators, cable networks and the rental market must prepare tocounter the effects, both positive and negative, of VOD on theirbusinesses,” she added. “Failure to do this will result in another blowto the advancement of interactive television.”
Consumers Want More
Right now, these companies are not doing all they can to give consumers what theywant, according to the Jupiter survey. While 45 percent of the Internet userssurveyed said they rent videos at least once a month, only 6 percent orderpay-per-view movies or events during a given month.
“There is opportunity for content owners to create a new, incremental VODchannel around the pay-per-view and rental window while off-loading thecustomer-acquisition and capital-investment costs onto the operator,” saidLoizides. “Studios should directly cut deals with operators and otherdistribution partners, such as HBO and Blockbuster, and become their owndistributors.”
However, cable and satellite companies will need to improve customer serviceto deal with the increased business, she added.
Changing Market
Just how quickly the VOD market evolves depends on factors such as how the infrastructure is set up, who owns the assets, and the precise nature of consumer demand, the report found. Consumer demand will develop as customers become more educated about theadvantages of VOD.
“It’s really up to the operators to instill the virtue of the service,” Loizides said.
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The consumers being polled by Jupiter now are not the consumers that will be buying interactive TV as it becomes available in the future. The kids growing up on X Boxes and Playstations will be. Web connected TVs and greater bandwidth are only a matter of time. The consumers of tomorrow are not the couch potatoes of today that only want to “sit and watch”. The success of reality TV is a good indicator that people like to live vicariously. The next step is immersion rather than voyeurism. The companies that figure out how to do this with high entertainment value will be big winners. Wait and see!