Tuesday, October 03, 2006

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…

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