Klopfenstein Participant Observer Research: This Should Be HDTV's Breakthrough Year

© 2005, Dr. Bruce Klopfenstein. Best viewed in Firefox.

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A year ago, I spent over 2 months acting as a sales floor representative in the home video department of a large, national electronics retail chain. While sales of HDTV sets last year was impressive, it was clear that many would-be adopters put off the decision because of 1) lack of HDTV programming (especially on DVD), 2) price (which had dropped dramatically from Christmas 2003), and 3) very importantly, confusion over the price/value question as it related to an even more confusion of competing HDTV set designs. The HDTV position now might be comparable to the diffusion of color TV, although CBS was not anxious to promote rival NBC-owned RCA new color TV set and ABC had the most difficult financial situation to make the switch to color. While those issues are not present with HDTV, the common variable is limited programming.



Source: http://www.parksassociates.com/research/reports/tocs/2005/hdtv.htm

As noted by RTOonline.com, "The overall market penetration for high-definition televisions and services is very low. The current subscription rate for HD programming is barely 10% among all digital video subscribers, while only 35% of total HDTV households subscribe to HD video services." Source: Study: US HDTV Sales To Grow 71% By 2009, http://www.rtoonline.com/Content/Article/Oct05/HDTVSalesTOGrow102805.asp, retrieved 25 December 2005. I want to point out that this article was citing a research study from Parks Associates' "Mobile Entertainment Platforms & Services" study of notoriously invalid "intention to purchase" research:



There is the typical "chicken and egg" situation: HDTV programming availability vs. HDTV adoption rate. On the other hand, many (all?) major sports events are being broadcast in HDTV and many (all?) national and international news organizations use 16 by 9 monitors prominently in their newscasts, making it see more of a mainstream product. In addition, the U.S. has one of the best competitive markets with 2 satellite companies competing with each other and the cable companies trying to fend off the satellite competition. The brakes could be put on by consumers given theuncertainn state of the economy as well as the expected high cost of heating homes this winter. That's usually a throw-away line, but this year cost of energy will be a real drain on consumers' ability to spend. It's been a long time since that was included as a possible barrier to a new communication technology.

Gaming on iTV: Can it Work in the U.S.

You may use this content (better still, argue with me!), but please cite my ideas as © 2005, Dr. Bruce Klopfenstein. Best viewed in Firefox.

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I know my limits and one of them is research knowledge about addictions. I know very little about that subject. Unfortunately, from where I sit, betting on the horses is the #1 iTV application in Britain on BSkyB (Rupert Murdoch). Because Murdoch bought DirecTV, there's every reason to believe that gambling will be made available on DirecTalthoughhh I am also not an attorney and don't know the legalities involved. But guess what? Even if the gambling is just for fun with no wagers allowed, it could be a great way for DirecTV (and Echostar and the cablecos) to grab viewers. It might be a great advertising venue whether sponsors come from Los Vegas or from promotions for PPV programs, to name two.

So without any moral judgments, from me, I some how stumbleded upon a web site where the proprietors will be happy to partner with providers to offer electronic gambling on TV and now, of course, mobile phones. http://www.zone4play.com/ does include a video that shows their wares. Another industry about which I can profess no expertise is the "gaming" industry. I strongly suspect the players in that industry will have a keen eye on online gambling. In fact, they'd probably be delighted to have it legalized because they could stamp their well-known brands to their online gsmbling sites as opposed to "crazybruce.youbetyourlife.com" (yes, I made it up).

IPTV Sudden Juggernaut = Inherently Interactive TV

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From my perspective as a student of the diffusion of new communication technologies, I must say I'd be hard pressed to find a technology that has exploded onto the scene as IPTV (Internet Protocol Television). Here is a public schematic courtesy of Agilent | N2X at http://advanced.comms.agilent.com/

One of the many nice things about being an outsider to these related industries is that I am less likely to fall into echo chamber (i.e., the "common wisdom" about things including "iTV is pie in the sky" or "WebTV will be a huge success for Microsoft"). Here is my sense of where IPTV is going and why it is going there so far:

• More and more people are cutting their telephone landlines in favor of cell phones and IP-based telephone (think Vonage).
  
• The telcos may have been too slow to respond, but they have heard the wake-up call loud and clear and they know what I've known for years: the future of the Internet (the web) is video.
  
• It was only a question of how long it would take before the major players (TV and Hollywood) would realize they need to be in the video-to-the-home business. The telcos know it now.
  
• At the last U.S. Telephone Association representingg smaller telephone companies) heard the IPTV message and that it was going to be highlighted at 2 major conferences this year.
  

Video i-Pod TV Deals Buck U.S. Model of TV Use

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I'm impressed with Gavin O'Malley's article that just came into my mailbox. Before I had a chance to comment on the $2/show downloads to video iPods, Mr. O'Malley beat me to the punch, albeit with a different angle. Once again, what this model announced by ABC, CBS and Apple, flies against how Americans are used to getting their media content, which is subsidized by advertising. Ironically, Mr. O'Malley points out that the video I-pod users have the worst of all possible worlds by both 1) having to pay for content that is free in their homes and 2) having to suffer (yes, I did say suffer) through the advertisements while watching their PPV, formerly known as "free TV", show in tiny-TV.

Source: Rich Media Insider for Monday, November 21, 2005:
http://publications.mediapost.com/index.cfm?fuseaction=Articles.showArticle&art_send_date=2005-11-21&art_type=33 retrieved 21 Nov. 05.

DRTV = Inevitability of iTV

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Perhaps it is so obvious that so many other iTV observers seem to have missed it (let's see how many pick up on this after it's published today, Monday, November 21, 2005). I have sought in vain some figures for the actual size of the Direct Response Television Advertising market. Again, Bowflex is the one example DRTV product I happen to see most often (and despite its hefty price tag, its prevalence on television-especially cable/satellite, suggests that people are buying them. Check e-Bay for some sense on how many actually chose to use them...although they're surely a tough sell on e-bay because of the shipping challenge).

OK, so I finally hit paydirt on the size of this market, and its this market that has everything in the world to gain through the adoption and diffusion of interactive television in the United States (reminder, we're being provincial here because the U.S. market is both huge and unique in its lack of iTV adoption until now):

In 2003, the latest year for which figures are available, advertisers spent $24.3 billion on direct-response TV ads--a 6.9 percent jump over 2002, according to Veronis Suhler Stevenson's Communications Industry Forecast, an industry bellwether. That represents about 41.6 percent of all TV media buys (according to TNS Media Intelligence, in 2003 total TV media buys equaled $57 billion). Although for some this may seem remarkable, it's not hard to see why DRTV--once the province of Ginsu knives and Ab Rollers--has come of age and is being embraced by large brand marketers who once shunned it. Source: Calling All Brands, by: Grillo Jr., Victor, MediaWeek, 1055-176X, July 11, 2005, Vol. 15, Issue 27, retrieved from Database: Communication & Mass Media Complete. Retrieved on 21 Nov. 2005.)

So for those who wish to buttress their support for getting involved in iTV, here's some evidence to augment your argument. As an academic, I am more interested in other uses of iTV, but recognize Bowflex and other DRTV advertisers will drive the market and, perhaps, the early technology of iTV. The reason iTV must be extraordinarily attractivee to DRTV advertisers is that iTV can create a 1 to 3 click behavior to purchase behavior versus the current multi step (write down the toll-free number, find a phone not in use, call the number, be placed on hold, identify yourself, identify the product you wish to purchase, give your method of purchase including the reading of 16 credit card digits plus the security code on the back, give your address and telephone number, wait for supervisor OK, hang up the phone).

So I, for one, will watch the offshow betting sites and domestic infomercial sites for hints at the application of iTV to the U.S. television system. Then my students and I will see if those applications might be used for other purposes. Stay tuned.