Organizations looking to increase customer retention have a new tool at their disposal: IPTV.
As soon as the Internet became a part of our daily lives, people began to look for ways to watch television online. However, sufficient infrastructure for this technology needed to be developed for this dream to come true. As a result, we witnessed the emergence of Internet-Protocol Television (IPTV) within the past decade.
Today IPTV is gaining traction for many companies from a variety of different industries. For example, telecom companies are trying to create new value-added services for their customers through IPTV and content owners use IPTV as a new delivery channel.
Even though the terms IPTV and the Internet are frequently intermingled, IPTV is actually more similar to cable and satellite broadcasting. IPTV broadcasts a television signal through set-top boxes over a data network (i.e. ADSL line) instead of air interfaces. It has a closed circuit network and the service quality is sustained by telecom operators or other service providers.
The number of people who access IPTV increased dramatically in recent years. In 2008 IPTV users worldwide were reported as 20 million; in 2009 this figure reached 26.7 million. It is estimated that 81 million people will watch IPTV by 2013, according to the Multimedia Research Group.
As of now, France leads in IPTV adoption with services available from Orange (France Telecom), and Neuf Cegetel. In the United States, which also has wide Internet network coverage, telecom operators offer IPTV services, such as AT&T's U-verse and Very High Speed Digital Subscriber Line (VDSL2) services and Verizon's Fios and Fiber to the Premises (FTTP) technology.
One of the most important tools to differentiate IPTV from other means of broadcasting is content. Content is the essence of IPTV, and is divided into three categories: live television, time-shifted programming, and video-on-demand (VOD). As the content gets richer and the quality gets better, operators will be able to run more successful IPTV operations.
Fortunately, IPTV is maturing rapidly. Telecom operators, service providers, digital platform owners, and content providers are beginning to develop unique, interactive content; they are creating partnerships to contain infrastructure and distribution costs; and they are focusing IPTV efforts as a way to build customer retention.
Peppers & Rogers Group has identified five strategies that stand out as components of a successful IPTV services launch:
1. Content purchasing and management requires experience and professionalism. Service providers should carefully plan how to manage this complex ecosystem. There are many options: Should you create and manage content in house or outsource? How will you deliver the content? Consider two different strategies.
PCCW, a Hong Kong-based incumbent IPTV service provider, created a service called "Now" in 2003 to increase the number of users by offering flexible package and channel options. VOD services support current channels and users are provided access to current films, series, and programs depending on their package and subscription.
British Telecom announced its IPTV services in 2006 with a different strategy. It provides services via a hybrid box through a partnership with Freeview, a provider of terrestrial digital broadcasting. As a result, BT expects to earn major revenue from VOD and interactive services.
Which strategy will achieve success is still an issue of debate, and will also depend on content owners, new regulations, and trends in content sharing and publishing.
2. User-based content will gain in popularity and will be the leading value-added product of IPTV services. Products such as "Design your own TV" content programs and customized subscription packages will put IPTV at an advantage over other broadcasting platforms. Interactivity provides opportunity for differentiation in the market. With the correct positioning of services like distance learning, games, e-government, and e-commerce, for example, it is possible to reach a value-creating and revenue-generating structure.
Microsoft and Alcatel-Lucent's Amigo TV application, for example, is designed to allow subscribers to chat, shop interactively through commercials, and use e-government and e-banking applications through the television.
3. Companies must offer these services in accordance with customer needs and behaviors. This can only be achieved with a customer-centric approach rather than a product emphasis. Customer intelligence is as important as a service launch for further acquisition and retention activities. The service provider must have the customer insight to launch the right interactive service to the corresponding customer segment. There are lessons to be learned from the limited success of current interactive channels that were launched to the mass market.
4. Watch Internet TV like YouTube, Hulu, and Joost carefully. It's free and easily available, therefore it may be a real competitor for traditional television and IPTV. In addition, emerging platforms such as mobile-TV and web-TV should integrate with IPTV as complementary services.
5. Develop partnerships. IPTV companies need to consider satellite and cable TV companies as business partners rather than as competitors. Otherwise, they cannot take the advantage of existing knowledge and cost efficiencies. For example, IPTV operators may consider an alliance with cable operators to outsource shared customer service and repair resources instead of establishing their own departments.
Organizations interested in growing the IPTV market must decide on the unique sales proposition and ecosystem for their local market, then plan launch activities accordingly.
Yasemin Yücel, Ph.D., is a manager in Peppers & Rogers Group's telecom practice. Contact her at Yasemin.Yucel@1to1.com.