The IPTV conundrum in Asia

This blog is a reaction to a White Paper I read called “The IPTV conundrum in Asia” by Parks Associates.

Hong Kong has 500,000 IPTV subscribers. Part of this may be due to the density – it is much easier and cheaper to wire inside a building than to a building. Once you are inside, you can light up 20 floors times four flats – 80 subscribers with 1000 feet of cable. Try that with 80 homes in say, Milwaukee, Wisconsin and you are talking about covering at least 10 acres and 10 miles of cable.

Of course the main reason that many Asian countries including parts of China such as Hong Kong, but most notably Korea are much further along than the US and Europe in Broadband to the home. A notable exception – India.

Another good reason is that Asian content providers, being more realistic than their western counterparts have been willing to give their content to the IPTV providers. Again, a notable exception has been Indian content-owners but that has changed recently.

According to the paper there are two rules of thumb for Asia (I believe this applies even in the US):
1. Consumers may like the instant gratification offered by video-on-demand, but they won’t live without the linear (i.e. traditional) format of TV today.

2. “Cheap is good: free is better” – consumers are hesitant to purchase expensive equipment from operators. Low-cost set-top boxes have thus become a key ingredient for success.

I agree completely with the first item – it is a well known fact that consumer behavior takes as long as a generation to change. The second point is also well-made, but the conclusion is arguable. Instead of low-cost set-top boxes, the providers need to combine set-top boxes with PVRs or at least DVD players. And these set-top boxes need to be operator-neutral, or customers will balk at paying to be tied to one operator.

An interesting finding of the paper was that “Asian consumers are more comfortable than other people in the world ….(with PC-TV convergence, which) … has already occurred in terms of how consumers view the various platforms. I wonder if this has to do with the fact that all these gadgets appeared in homes at about the same time unlike in the west. It could also be that Asians, unable to resist a bargain (it is in the genes), see potential savings in the convergence. As my uncle used to joke “Indians will fly to the US (or Europe) standing if airlines offered it inexpensively enough”.

Another very interesting point – the appeal of an interactive program guide is actually lower in Asia than the US or Europe. I have no idea why this should be so, perhaps a reader can enlighten me.

One seemingly unimportant sentence in the paper stood out for me – “…getting Asians to pay for the features they desire will be difficult”. Wrong! However, getting them to pay for features that the providers want them to want (because it fits their business model) will be. At least from the Indian experience, it is clear that if there is compelling value, and people want a feature, they are willing to pay for it. Take for example DVD players. I have spoken to several industry experts and front-line businesspeople who said the rush to buy DVD players was unprecedented. In just a few years DVD players have become more pervasive than VCRs ever were.

And that is the bottom line. Give consumers what they want – and they will pay for it. What a concept, huh?

So what do consumers want? They want somebody to manage all the content that is available to them. In addition, they want niche content – programs in their language (remember India has 22 languages) even when they live outside the normal reach of that language.

It also means being able to watch anything anytime. The intelligent functions of a PVR will definitely sell well. In our demos, people love the idea of being able to record all episodes of their favorite shows, or simply pausing live TV.

There is a growing segment of Indians who are traveling both for business and pleasure, and many that have returned from long foreign sojourns who want more than what is available on Cable TV. This is what India’s marketer call the “Aspirational Segment”. They want not just Hollywood movies, but the content that relates to the lifestyles they left behind in the US or Australia or elsewhere.

More on that later…

Learn from TiVo

This is an old one that I had published in 2005 elsewhere - but it is still relevant.
One thing we can learn from TiVo’s stumbles is to not ignore the customer. And more importantly, to know who your customer is.

TiVo avoided the consumer – they still do. They did not have a good process to support sales. And their support is abysmal. Did you know they removed email support? The on support available is by phone – and it is only an automated system – rarely do you reach a person. And of course if you bought a TiVo branded by another company you are completely out of luck. Here is a company that seems to be going backward not just technologically but also in customer service attitudes.

As I have mentioned, they knew that people who buy TiVos become TiVo evangelists, yet they did not mine these people. Check out TivoCommunity.com – the tone there is more like a Linux mailing list than a user community. Any user who asks a “newbie” question gets jumped on.

I myself have sold people on the benefits of a TiVo (grudgingly of course – who wants to make the competition stronger), and they have gone out and bought them. Not only that they call me up and tell me how they love their TiVo – these are rational people, mind you! I evangelized TiVo for a while before I realized that the business I wanted to be in needed something like a TiVo to use as a platform. And I decided to build my own.

TiVo should have set up a selling process that demonstrates the benefits of TV. Try asking someone at Best Buy or Circuit City about a TiVo, and the most you will learn is that it’s like a VCR with a hard disk, and that you have to pay $12.95 a month for the service. Demonstrate it once, and you would have a stampede that your cashiers could not handle. Selling anything with many and complex benefits requires salespeople, not shelf stockers.

But one really important things that many surveys and industry experts have pointed out is this – TiVo’s best customer is not he 18-35 male electronics and gadgets buyer. Surprised? I was too. Although the buyer is usually a male, most users and evangelists are their female counterparts, and often have children. My wife, who is as close to a Luddite as anyone I have met, loves TiVo. It’s simple – she can control how much TV the kids watch, what they watch, and most important, when they watch it (on weekends after homework is done). And does TiVo market to this segment? Not a chance. In their place, I would have put together a Tupperware-type network to sell TiVo – one mother to another. Anyway, no one has offered me the VP Marketing position there, so I will make my own!

I think early on TiVo decided their customers were going to be the DirecTVs of the world. That is why they kept courting the satellite and cable companies. But when push came to shove, they decided they were too good to partner with the likes of Comcast. That really triggered the resignations you heard about after CES 2005. Suddenly they are mouthing off about how TiVo is more than just a set-top box, and consumers want more than the ability to store programs and fast-forward and rewind. The CEO Mike Ramsay went so far as to say that the Cable TV business was not the business of the future. Well Duh! And it took you how long to figure that out? TiVo should have figured that out long ago – many people including yours truly did. And they were in that business! That’s like finding no WMD in Iraq. Again, I can’t resist it – Duh!

Of course, it’s not all over for TiVo. Ramsay is right about disruptive technologies like TiVo and even better technologies like L3 destroying the Cable business over time. But mind you, we are talking twenty or more years for the cable business to go away. And then you will have Internet TV businesses that… oh, yes, might be called Comcast and Time Warner…