The past 18 months has seen a precipitous rise in online video, with leading site YouTube joined by start-ups such as Joost, catch-up TV services from broadcasters and, latterly, social network players such as MySpace TV.
The recent surge in demand has been driven by the BBC's iPlayer, prompting analysts Screen Digest to upwardly revise its forecasts for free-to-view UK web TV consumption from 800 million streams and downloads last year to 1.5 billion in 2008, with 2.8 billion predicted by 2012.
What though of IPTV, the business and technology model that predates the online video explosion? Services such as BT Vision similarly offer TV over IP but deliver a managed service over private networks to the TV, rather than to the PC over public internet.
The distinction is important since IPTV providers can guarantee the quality of the end experience, unlike online video sites, which are at the mercy of bandwidth fluctuations and possible pixellation.
After a slow start since launch in December 2006, the speed at which BT Vision is signing up customers is accelerating. By December 2007 it had 60,000 and is now nearing 200,000 customers, claiming to be on target to reach 2 to 3 million “in the mid-term”.
Currently, the only other IPTV player in the UK is Italian-owned ISP Tiscali TV, which aims to have 200,000 subscribers by the end of 2008 despite recently recording a fall below 40,000 and being dogged by speculation that it is about to be sold.
Virgin Media has mothballed on-demand plans for its non-cable customers until at least 2009, but is still actively exploring IPTV as a complement to its existing (cable) on-demand services. It has been trialling HD IPTV over its soon-to-be-launched 50Mb broadband service with entertainment channel VoomHD.
Mobile operator O2 scotched rumours it was to launch a UK IPTV equivalent of the Czech Republic's O2TV, but Orange is pressing ahead with plans for a broadband TV service after an aborted launch last December. Orange UK director of digital TV Tim Pearson confirmed the company was “on target” for launch later this year following trials with some of its 1.5 million broadband customers.
Like BT Vision, Orange TV will be a bundled “free” broadband offering including Freeview's digital terrestrial channels and video on demand. Content deals have been inked with MGM and Disney-ABC International, giving consumers access to movies from Disney, Touchstone and Miramax studios. Orange parent France Telecom has already rolled out Orange-branded IPTV services in France, Spain and Poland.
Although in competition with BSkyB, Virgin Media and the myriad of online video publishers, BT Vision has several big initiatives up its sleeve for 2008. It will launch an HD service either by streaming on demand, for which it has begun to upgrade households to the 24Mbps broadband technology ADSL2+, or by pushing HD content to the hard drive of BT Vision's V-box PVR.
This summer BT will port its service to the Xbox 360, providing the company with a strong entrance into the online gaming market and playing to its strategy of getting BT Vision onto multiple platforms.
However, since the Xbox is not equipped for digital terrestrial transmissions and BT Vision relies on over-the-air DTT to receive Freeview and Setanta Sports, Xbox 360 users won't be able to receive BT Vision's live TV channels via the console.
Perhaps most significantly, BT Vision will begin targeted advertising - excellent news for advertisers (which only want to hit relevant eyeballs) and viewers (who don't have to watch irrelevant adverts). “We've only just begun to explore the potential of broadband connected to the TV,” says BT Vision chief executive Dan Marks. “The next stage is going to be providing under-served communities with niche and more specialist content; bringing transactional opportunities and targeted advertising into the living room.”
One key area that IPTV services are going to be able to capitalise on is digital switchover. Since BT and Tiscali both provide services without TV subscription costs (although a broadband fee is required) “for many people IPTV is going to look like a cheap way to ensure that they're enabled at switchover,” says analyst Richard Broughton. BT Vision's website already mentions that people can “get set” for switchover with the V-box.
IPTV will be moderately successful in the UK, according to Screen Digest, with at least 1 million subscribers by 2010. However, it's unlikely that BT, Tiscali or Orange will achieve the penetration of either Virgin or Sky unless steps are taken to supply IPTV boxes en masse to households. "Until consumers really get used to on-demand viewing on their TV, and until studios open up their content a little more to platforms, IPTV will remain simply a slightly improved version of Freeview,” contends Broughton.
Not surprisingly, Marks disagrees: “By connecting a broadband line to the TV we can deliver high-quality content instantly and securely to the living room. Moreover, we are bringing together the interactivity of the internet with the impact of TV and that creates a new kind of entertainment that will change people's viewing habits pretty radically.”
“IPTV in the UK is much more than Freeview and movies on demand,” adds Tiscali TV's managing director, content strategy, Jonathan Sykes. “IPTV has a great deal of untapped functionality. We're entering a tremendously exciting time of content and service innovation.”
One of the chief tasks of IPTV marketers is to effectively promote the service to differentiate it from the array of other phrases entering public consciousness such as catch-up, DTV, Tivo, PVR, on-demand and iPlayer.
“As with any new consumer technology there is some confusion in the market about IPTV,” notes Pearson. “One of the things we've done internally and externally is to never refer to it as IPTV, but always as digital TV. Our aim is for Orange TV to be very simple for the customer to interact with.”