An increasing number of cable and internet service providers are examining the delivery of TV over the Internet in the development of their customer offerings, with BT’s announcement (28/6/05) that it intends to trial TV over broadband services being just one such example.

“Opportunities for provision of TV over the Internet will be an area examined closely by the media, telecom and technology sectors over the next few months, as the way in which these organisations access their customers increasingly converge. There are a number of challenges that will need to be addressed in the development of web TV and establishing how this application can successfully and effectively be delivered to users,” comments Jolyon Barker, head of the technology, media and telecoms team at Deloitte.

“These challenges include how customers will interact with such applications i.e. will it be over a traditional TV set or over a PC/ desktop? Who is going to supply the content? How will rights management be agreed upon? How will studios and producers manage the increased piracy risk that may arise as a result of delivery of TV over the Internet?

“With the advent of TV delivered over the Internet, it is likely that we will witness a number  of strategic alliances (and in the longer term M&A activity) as key players in the telecoms, media and technology sector look to maximise opportunities to reach customers in this way.

“The question of whether customers will want to view TV on their PCs is an important area for consideration. With increased bandwidth and better compression techniques more and more people are choosing to download programmes and films onto laptops and PCs. But it is also clear that watching TV on a PC has its limitations.  In its current format consumers actively and laboriously have to search out and download content using a keyboard and a small computer screen.  If this is the future then the likelihood of TV-over-Internet becoming the main way we access our evening's entertainment is limited.

"However, if watching IPTV on a main screen in the corner of a room can be made easy, immediate and cheap (i.e. by producing better applications, better compression systems and better bandwidth capacity) then the consumer will be wowed.

"If TV-over-IP does succeed in this way then it is possible that TV broadcasters might need to reassess their value chain to maintain their dominance.  The time-shifting capabilities of the computer could mean people begin to fast-forward through adverts, a practise that would erode the traditional business models of broadcast television.  It is also likely that it would result in a greater need for product-placement in programmes or sponsored content to turn a profit.   

"Furthermore, the 'digital long tail' effect of the Internet - something exploited by Amazon very successfully - could result in a rise in niche content opportunities.  The potential of the unlimited scope of the Internet is that programmes and films that are in low demand or have a low sales volume on conventional broadcast platforms can, if managed correctly over the Internet, collectively make up a market share that rivals or exceeds current 'hits'.  In such a way, IPTV could enable niche content providers to produce material that could reach massive 'niche' markets who had hitherto never been able to access such material,” comments Barker.

According to Howard Doberman, media director for Deloitte: “There are 5 factors which will help determine the future of TV on the web, which include:

1. Cost
   Given the aggressive price-based competition with Broadband and low margins we're likely to see a move away from the all-you-can-eat charging model we've seen over the last couple of years to one based on bandwidth.  This will be a big test in measuring consumers appetite to pay for a   service they already receive - particularly when the average household expenditure on TV channels (Sky) and consumer electronics for the viewing experience (home cinema, PVRs etc.) has never been higher. 
2. Bandwidth
   Despite the increases in bandwidth we've seen since its launch, the wholesale product required to deliver TV on the web (4Mb+) is still not available.
3. The move to digital
   Media businesses are investing unprecedented levels in digital content production and distribution.  As a result it's inevitable we'll see increasingly impressive Mobile TV and TV over IP innovations. 
4. Spectrum scarcity
   This is a key issue for traditional broadcasters.  Spectrum scarcity, coupled with increasing bandwidth, will inevitably lead to more and more TV content over the web.  Digital rights management becomes all the more important, with traditional broadcasters exploiting their content via the web with increasingly innovative business models.  But in by-passing spectrum ownership as a barrier to entry, and with the increasing trend for home grown content production, we're likely to see an emergence of newly independent IP broadcasters. 
5. Broadband experience
   Cable / ISP providers are placing increased emphasis on the 'broadband experience' as a way to differentiate and raise margins.  Being first to offer a workable TV over the web, video on demand, iTunes for movies etc. will help drive market dominance."

Ends

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is the UK's fastest growing major professional services firm based in 21 UK locations, with over 10,000 staff nationwide and fee income of £1,246 million in 2003/2004. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.