TV gets personal

minority concern to the crucial link between the worlds of telecoms and
TV.

For those who have yet to tune in, IPTV represents broadcast-quality TV
delivered into homes via broadband, enabling video-on-demand,
personalised channels and interactive services. Effectively, it is
television with the flexibility, choice and interactivity that we've
come to expect from the internet.

"The logical meeting point of those two things is where you have a bit
of both - the interactivity and personal perspective of the internet
alongside good-quality broadcast content," says Phil Smith, head of
technology and corporate marketing at Cisco Europe. "I think that's
where the world is taking this."

It is not an inherently complicated concept, nor is it merely one for
the future. IPTV services such as BT Vision and Tiscali TV (formerly
HomeChoice) are already available and others, niche and mass-market,
will follow soon. After a successful rollout in France, 3.5 per cent of
viewers have TV delivered over broadband to a set-top box as their main
TV set-up, according to Juniper Networks. In the UK, that figure is only
0.6 per cent. But, as players like BSkyB, Virgin and Orange enter the
market offering triple- and quad-play packages of fixed and mobile
voice, and internet, with most promising IPTV to come, it seems
inevitable that broadband will be the main platform for TV in
future.

"The reason why IPTV is hot now is that it is starting to shape the
media communications industry," says Ian Johnson, MD of Junction,
organiser of the IPTV World Forum. "2006 was the first year when you
could see a clearly-defined strategy from Europe's major telecoms groups
that suggested they can make TV work to their advantage. The subscriber
projections are still modest in comparison to satellite and cable, but I
think it is being taken much more seriously now."

TV via broadband

Analyst Gartner predicts that 48 million households will receive their
TV via broadband by 2010, with strong growth expected in Europe. But,
first the platform needs a clear pitch and plenty of powerful advocates,
which it has acquired over the past year.

In December, BT launched its IPTV service, BT Vision, with a menu of
on-demand movies, TV hits, kids' shows and music videos, all channelled
through an adapted Freeview box using Microsoft technology. Movies start
at £1.99, music videos at 19p and near-live football is coming
with the next Premiership season. BT's move might appear to be a grand
departure for a telecoms firm, but it is protecting its market share.
Its core broadband business has been attacked by free or low-cost
rivals, leaving it little choice but to fight back with new value-added
services built around premium content.

"Broadband margins have fallen, and the same goes for voice, so the
added value is in services," says Johnson. "TV is one of the most
compelling of those services. IPTV is a defensive strategy for the
incumbents - it is basically all about voice and broadband."

TV content looks set to be a valuable tool in encouraging consumers to
sign up to IPTV. "If you look at what BT invests every week in broadband
internet, you could make many Hollywood films for the same money," says
Agency.com innovation director Mark Hopwood. "The world's biggest IPTV
project is AT&T in the US. Companies like that could commission original
content just as a promotional giveaway."

BSkyB, meanwhile, is busy recreating itself as a voice and data
provider, cross-marketing bundled services to its eight million
satellite subscribers. Its IPTV service has yet to be unveiled, but it
has a clear incentive to convert subscription-averse consumers to
pay-as-you-go, video-on-demand deals, especially as BT and others are
threatening to do the very same thing.

Frederic Huet, UK MD of research firm Greenwich Consulting, says: "Sky
realises there's quite a big market for people who might not want to
have a high monthly subscription. Two-thirds of households don't have
Sky and about 10 million have BT broadband, so there is clearly quite a
base for BT to sell to."

Outweigh risks

Who will win is hard to say. Many commentators believe there can only be
one or two players in a market that requires free or heavily subsidised
set-top boxes in every home. Others believe the market offers enough
potential to outweigh the risks.

"All the players have strengths and weaknesses," says Neal McCleave,
Tiscali TV's managing director, media services. "We have the attitude
that competition in the market is a good thing. If we were the lone
trailblazer trying to educate the market about IPTV and VoD, our
ambitions would be capped. The fact that we have a lot of other major
brands out there, coming from different worlds, attracting the market is
a good thing."

On the vital question of what this means for advertisers, it is fair to
say that IPTV offers challenges and opportunities in equal measure. The
first being the chance to provide targeted TV ads, informed directly by
the content consumption data coming back from viewers.

"IPTV will allow TV ads to be much more targeted down to an individual
level," says John Wood, MD of integrated agency Beechwood. "Advertisers
will be able to pick out specific demographics, or even specific
individuals, and target accordingly. Different TVs will receive
different advertising messages and that is a fundamental shift in the TV
market."

Assuming IPTV does have the impact that many expect, the ads we see on
our screens will probably be different in form as well as content. "The
traditional 30-second spot ad that interrupts your TV viewing will
become less important while sponsorship, brand-funded content, banners,
interactive spot ads and pay-per-click advertising will become more so,"
Wood adds.

A big strength of IPTV is that it potentially offers more accountable TV
ads at a time when the mass-market impact of the medium is acknowledged
to be slipping. Measurement and targeting are credited as the major
strengths of the platform, but, in reality, no standard has emerged to
take care of either.

"One of the big things that companies in the IPTV area are asking us to
look at is how to predict audience," says Chris Hogg, senior customer
relationship manager at online ad-serving firm Adtech. "The classic
scenario in broadcast is that you buy 100,000 impressions. With IPTV,
the way it is consumed, the advertiser is more likely to say, 'I want
100,000 people to see my ad and I want them each to see it three
times'."

A world glued to internet-driven TV sets, being served only ads that
appeal directly to their demographic, is obviously an enticing prospect
for brands. But, in spite of big hitters moving into the market, some
believe IPTV's future is as a comparatively niche medium, rather than
one that will rid the world of satellite dishes. "If you want your
heavy-duty television, your 200 channels and Sky Plus, you will still go
for Sky," says Charlie Horrell, chief executive of IPTV specialist
Packet Vision. "You won't find an IPTV provider with the eight million
homes that Sky gets."

What you will find, believes Horrell, is niche IPTV communities whose
members may not even have to pay on the basis that they are desirable
advertising targets. "I can see a niche for students or high-earning
financiers. The big winners will be the small, fast-moving businesses
who see a niche and go get it."

Audience numbers will be on the modest side for the foreseeable future.
BT hopes to have about 500,000 boxes in place by the end of 2007. With
its acquisition of HomeChoice, Tiscali has inherited a base of 45,000
subscribers and aims to build it to around 500,000, or 35 per cent of
its broadband base, when it launches nationwide later this year.

Until the medium reaches critical mass, IPTV is unlikely to get much
interest from the big brands, except for those testing cutting-edge
formats. "The problem with IPTV from an advertising point of view is
that you can only deliver it to as many people as have your set-top
box," says Oliver Slipper, chief executive of digital rights firm
Premium TV. "Your potential eyeballs are limited immediately."

It is still a nascent market and consumers are a long way from tearing
down their satellite dishes. "In five years there will still be
broadcast because that is a very convenient way to get the same thing
out to a lot of people, but I think there will be a huge amount of
interactivity as well and the VoD model is going to be prevalent," says
Cisco's Smith. The world may not be watching IPTV just yet, but it
should keep its eyes peeled.