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IPTV Predicted to be Loss-Leader in Bundles

The total number of IPTV households will grow dramatically over the next five years, rising from just under 6 million homes worldwide in 2006 to more than 80 million in 2011, predicts a new market study from Strategy Analytics.

Their report, "Global IPTV Forecast: Homes, Users and Subscribers," finds that many subscribers to IPTV will not be paying directly for TV programming or services, but will use IPTV free-of-charge as part of a package of bundled broadband services. This report predicts that the number of households worldwide actually paying for IPTV services will rise from 3.3 million in 2006 to 40.9 million in 2011.

Given the slowly growing momentum for IPTV services globally, particularly within the North American markets, this is one of the few times that I've reviewed a market forecast for telco pay-TV and considered it a plausible assessment. The combination of paid and free 'loss-leader' subscriptions seems like a reasonable assumption.

However, it also raises questions about how long it will take the telcos to recover their significant investment in infrastructure that enables them to deploy IPTV services. Granted, if IPTV services aren't always attractive as stand-alone offerings, a 'key value item' approach may be the most appropriate marketing strategy, but I believe that the profitability implications requires further consideration.

"An intensely competitive consumer communications market is making deployment of new services, like IPTV, a critical objective for many service providers. But service structure and payment models used to deliver IPTV vary widely by region and service provider," comments Martin Olausson, Senior Analyst from the Strategy Analytics Digital Consumer Practice.

"The traditional pay-TV definition breaks down in an environment in which multiple IP services (broadband, VoIP and IPTV) are paid for by a single fee, and in which a growing share of TV programming will not be paid for via subscriptions."

"The jury is still out on how much consumers are willing to pay telcos for IPTV," notes David Mercer, VP and Principal Analyst at Strategy Analytics. "Most telcos will likely offer customers a mix of free, subscription and pay-as-you-go programming models."

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