Despite enthusiastic plans for interactive television touted by cable-TV and telephone companies, it’s doubtful that most consumers will embrace such services before the next century, if then, market researchers predict.
Most people don’t have the time, money or desire to use interactive TV to the extent envisioned by media companies, which are destined to lose lots of money as they experiment with new technology, said Dennis Boyce, a senior partner with KMR Group Inc., a Chicago-based research firm.
That view, based on interviews with 2,000 consumers and analysis of market data, is shared by experts at other market-research firms and even by some in the cable-TV industry.
Cable and telephone executives are committing their firms to spend huge sums on new technology primarily because of competitive pressure not to appear timid, said Boyce, whose clients include phone and cable enterprises.
“We’re frequently told by executives that they’ve embarked on these projects for non-logical reasons,” said Boyce, “because they have to demonstrate to their stakeholders that they are technologically progressive.”
Boyce can point to several consumer-electronics flops, from quadraphonic sound to picture phones to three-dimensional TV, as models of what could become of today’s interactive-TV efforts.
But even when one looks to past successes, such as color television and video recorders, today’s interactive TV expectations seem overblown, he said.
“It took 15 years for color television sets to reach 50 percent penetration in American homes and 15 years for video recorders to reach 75 percent penetration,” he said. “But many interactive TV planners are looking for acceptance within five years or seven years.”
Interactive TV would enable consumers to order customized programming, such as movies, from their cable or telephone firms, as well as providing services such as home shopping.
Several marketing misperceptions underlie optimism about interactive TV’s allure, Boyce said. One is that older people might be put off by advanced consumer electronics but that the younger generation is wild about it.
“What we found is that it isn’t age that determines who buys consumer electronics, but economics,” Boyce said. “Affluent Baby Boomers are good customers for home computers and video equipment, but the younger members of Generation X aren’t, because they don’t have the money.”
In the last few years, a majority of people have seen a decline in the income they have available for discretionary purchases such as consumer electronics, as well as a decline in leisure time, Boyce said.
Another misperception among interactive TV promoters is that people want to shop and bank at home and that they dislike using videocassettes to watch movies.
“We’ve found that people don’t like intrusions into their homes,” Boyce said. “They tend to resent telephone solicitations and to feel their names and addresses have been sold to too many advertisers. They don’t want sales people coming to their homes.
“People also like the feel of videocassettes and have become familiar with using them.”
The consumers Boyce’s firm studied included a variety of demographic groups, he said, but they all were familiar with computers and consumer-electronic equipment, so the findings tended to exclude people biased against electronic technology.
Another market researcher also believes that multimedia interactive electronics is probably a decade away from widespread consumer acceptance.
“We are now at the stage of multimedia evolution where enthusiasts are using CD-ROM technology at a relatively low level of functionality compared to what’s envisioned for the future,” said Martin Fleming, a vice president at the Business Research Group, based in Newton, Mass.
“Stage 2, which should get under way in a few years, is where commercial and business applications begin, when you get large-scale corporate networks that transmit voice and video along with text,” he said. “Stage 3, which is consumer multimedia or interactive TV, is still 8 to 10 years away.”
While many technological issues must be solved before interactive TV becomes widely available, the biggest barrier is consumer resistance to spending more money, Fleming said.
“The big issue all these services will confront is how to induce customers to spend more money for video in the home,” he said. “In recent years the cable industry has had a very slow pace of growth in spending for new services.”
Interactive-TV experiments such as those scheduled to start in Orlando, Omaha and several other areas are necessary to determine consumer interest, as well as to solve technology problems, Fleming said, but it is likely that much of the money spent will find many things consumers don’t like.
“What they are doing is rolling the dice,” he said. “A tremendous number of experiments will be necessary to discover what the market wants.”
Executives conducting the tests tend to be less tentative.
James Chiddix, senior engineering and technology vice president for Time Warner Cable, which plans to start offering interactive TV this year in Orlando, said his firm hopes to learn much about technology and marketing from the test, but also is confident that it will offer interactive services, including telephone, to most cable customers in a few years.
“Before the end of 1998, we plan to have upgraded all our systems to the new architecture,” Chiddix said at a recent Cablelabs news media briefing near Denver. Cablelabs is a research consortium sponsored by several cable companies.
Chiddix and his fellow Time Warner executives said they expect people to use interactive TV to order merchandise ranging from postage stamps to automobiles from their homes, as well as to play video games and watch movies.
Alex Best, senior engineering vice president for Cox Cable Communications, which is launching an interactive-TV test in Omaha, also expressed confidence in the future of interactive television, but he said it probably won’t be commercially available to most customers until the next century.
The next six years, Best said, will find the industry laying the necessary fiber optics, installing signal-processing equipment and experimenting with the market. “We’ll be testing this for several years to see if there’s a business here or not,” Best said.
What those tests likely will discover is that people’s interest in interactive television will wane once the novelty wears off, said KMR’s Boyce.
“They will have to keep creating new diversions to keep people interested,” Boyce said. “It will be very expensive.”
Boyce’s prediction is supported by the market experience of the Interactive Network, a service operating in Chicago and San Francisco that enables people to compete with TV quiz shows and to guess strategies of televised sporting events.
Even though people must pay a few hundred dollars to buy equipment to use the Interactive Network service, after a year more than 35 percent of network customers stop paying its monthly fee and drop the service.
Eventually, Boyce said, the industry will learn what interactive services people want, and it will be a good business.
“But it will be an expensive lesson,” Boyce said, “and in the process of learning it, some of these companies will lose their shirts.”
