Digital TV: Far More than Meets the Eye

Television viewers could soon find themselves in a "walled garden" of digital flora if the predictions of a new report are correct. The report, called Digital Television: How to Survive and Make Money, was generated by technology-analysis firm Ovum. It outlines the changes taking place in the broadcast industry as a result of the digitization of the medium and the Internet.

"In the short term, broadcasters will look to develop alliances with content owners to help them develop interactive content," says John Moroney, a principal consultant in Ovum's new-media group. "This will be delivered over the broadcast channel to offer maximum returns to broadcasters. Interactive services will reinforce the thematic content of the channel and increase advertising revenues associated with traditional programming."

In the report, Ovum defines the "walled garden" as interactive technologies, such as shopping and electronic games, that are available as broadcast services within the broadcaster's environment. Ovum predicts that by 2005, "walled garden" interactive services will represent about 20% of the total revenue of digital broadcasters.

According to the report, digital television significantly changes the balance of power between content owners and television distributors. Ovum points out that large, monopolistic, vertically integrated corporations dominate both content production and distribution in today's media industry. "This is mainly because the barriers to entry are high in terms of access to content and distribution," says Moroney. "New digital technology will impact the cost of production and distribution, leading to restructuring and a need for new content strategies.

"But the long-term future lies with interactive services," he continues. "Competitive forces in the market will ultimately require broadcasters to offer interactive access. Once this is the case, the broadcasters will need to ensure that their content is more attractive than that delivered on the Web in order to minimize revenue losses."

Over the next 10 years, Ovum predicts that Internet and TV environments will be forced closer together as user demand becomes increasingly driven by content rather than basic communications services. "It is an intrinsically appealing concept to provide access to broadcast and Internet content through a single interface, be it a PC or a TV," continues Moroney. "It is likely that content owners will also be able to obtain benefit through hyperlinking from the TV environment onto the Internet."

But Ovum also points to a number of technical limitations that restrict such developments. Each application that a user might want to access has its own pattern of demand for network resources. "Today, no single platform can meet the demands of all types of applications," concludes Moroney. "The TV world has developed effective means for broadcasting video to users, but it does not support interactive hypertext well. The Internet is able to support the delivery of hypertext, but it remains poor for delivering audio and video."

The report also predicts that, after a slow start, cable will catch up with satellite to become the dominant distribution platform of digital services by 2004.

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