Guest Commentary: Internet and TV aren’t such strange bedfellows

Aug 6, 2001  •  Post A Comment

For the first five years of its existence, the Internet was depicted as the TV killer, dimming the pixels of a moribund living room box. Not so, says the recently released PricewaterhouseCoopers Global Entertainment and Media Outlook: 2001-2005. The Outlook finds that prospects for the small screen are brighter than ever and that the relationship between TV and the Internet might best be described as twins separated at birth, now reunited and revealing their true affinity.
The past year saw increases in overall television viewing. (See Prime-time ratings chart.)
Given that television is a mature industry and that the average household already spent seven hours per day watching television in 1993, the run-up in viewership is remarkable and one not experienced by the radio, magazine or newspaper industries. With the TV household universe expanding, the overall reach has grown, increasing by 2.7 percent in the 2000-01 season and by 14.1 million households over the last 10 years. (See Prime-time reach chart.)
We think the Internet does not cut into television’s audience, as many people believe, but instead that it is contributing to the growth of the television market and boosting advertising revenues for the broadcast and cable networks. Taken another step, we forecast that television viewing will continue to expand-and that the Internet will be a primary driver.
There are many reasons for the symbiotic relationship between the two media. One is the ad hoc convergence that consumers create for themselves: As many as 25 million people regularly log on to the Internet while watching television, up from 18 million in 1999.
Many on-air programs have companion Web sites. Co-viewing is especially strong with sports programming and shows such as “Who Wants to Be a Millionaire” and “Survivor.” In addition, popular Web sites are centered on television programs such as “The X-Files.”
Even where sites do not have content that encourages co-viewing per se, TV networks and programs use the Internet as an adjunct service to provide additional information.
In all these cases, growing use of the Internet and television viewing go hand in hand. We conclude that the Internet and television are complementary media. (See Internet & TV usage chart.)
Moreover, the Internet has raised productivity in consumer households just as it has in the workplace. E-mail allows people to allocate their time more efficiently. So does clicking the mouse in place of driving the car. Thus, we estimate that the time spent using the Internet has cut the time spent on nonmedia activities-but not media use.
One negative effect the Internet was presumed to have on TV viewing was exacerbating the fragmentation of the television audience. Yet the Outlook finds that this long-observed audience splintering is actually driving overall viewing. There are now many more programs available to the average household, with six broadcast networks and hundreds of cable networks. Within households, there has also been a proliferation of the number of sets on which to watch this programming tsunami.
While the growth of multi-set households and additional channel capacity may have less of an incremental impact on television viewing than in the past, growing use of the Internet will continue to be associated with growth in television viewing. Accordingly, we expect that overall viewing will continue to rise-but at a slower pace compared with recent years.
Interactive television is also quite compatible with consumers’ Internet access and usage habits. Interactive television will have a better chance of success if, instead of competing with television programs, it is used in conjunction with television programming.
The expansion of availability of TV plus the Web could prove quite appealing across a much broader audience spectrum. Services that facilitate dual access and reach people who don’t have a computer are coming. AOL Time Warner offers Internet access via television for an additional $15 per month for AOL subscribers and $26 per month for nonsubscribers. Microsoft TV is launching an interactive platform in 2001 that extends its WebTV service.
These initiatives are different from previous interactive television efforts in that they are Web-based rather than server-based and are intended to be used along with television rather than in place of television. We expect this market to expand to 7 million households by 2005.
On the business side, integration of computers, the Internet and sophisticated telecommunications is allowing the television industry to benefit from the efficiency that digital technologies bring. Broadcasters and some cable companies are centralizing their operations in regional network operating centers, realizing economies of scale and scope.
They are forcing equipment vendors to Ethernet-enable their products, ensuring interoperability across multiple suppliers and submitting them to the forces of Moore’s Law (which states that the number of components that can fit on a silicon chip will double every two years). Convergence will cut costs and inefficiencies in the TV industry just as it has in other sectors.
Whether one considers the content, the consumer or the operational convergence, the Internet is proving to be a remarkably beneficial force for television.
Kevin Carton is global leader of PricewaterhouseCoopers Entertainment & Media Practice.