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The Untapped Potential of IPTV is Interactive

According to Pyramid Research, the introduction of video services calls for a fundamental business transformation for telcos as they become media and entertainment companies.

From operating a network to provide voice and Internet access services, wireline operators will move to operating a video network as well. Besides the network management challenges and investments, operators will have to learn how to operate a new business as effectively as they can to maximize opportunities.

As a media company, an operator will work closely with companies that it formerly has not, including content providers, consumer electronics providers and advertisers. Moving into the video space, content suddenly becomes very important and could determine whether a business will succeed or not.

Operators have to understand the dynamics of the content market, develop content strategies for target segments and license content. Not all content succeeds; however, the content that does, creates audiences that can be monetized in many ways. Operators must find ways to leverage these audiences.

Operators will be able to tap into the massive advertising opportunity with video services and diversify revenue streams. Nielsen reports a 2 percent per-year drop in commercial viewing figures over the last decade, with a corresponding trebling of costs for advertising.

With the increased functionality and interactivity of IP networks, the capabilities of advertising on IPTV could be a far more tempting proposition. Unlike broadcast TV, advertising on IPTV can be a “pull” as well as “push” medium; by expressing an interest in a product or service, the consumer indicates to the advertiser a propensity for a certain product or service.

The more responses, the greater the accuracy in developing customer profiles and better targeting of advertisements. Consumer interactivity is an important ingredient of IPTV's raw potential. However, to date most broadband service providers have not taken advantage of this key point of strategic distinction. It's not clear yet if the roadblocks delaying these capabilities are related to platform limitations, or strategic myopia.

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