Late last week, Tilgin sold off its IPTV set-top box business to Amino in order to concentrate on the IP Residential Gateway business. The initial sale price was 30 million SEK, plus a potential bonus based on sales performance. Tilgin is just one of many second- and third-tier IPTV suppliers that have sold out to bigger competitors, and the list is only going to get longer as the worldwide recession drags on. The residential gateway business isn't exactly a bonanza, either; Pace is struggling to establish a business there, and the business argument for gateways isn't clear for a lot of operators.
The overarching question is whether or not there's really a market for IPTV services. IPTV is doing well in France, Spain and some other European markets, but in France in particular, consumers can get a complete triple-play bundle including IPTV for not much more than what U.S. customers pay for a single service. In Hong Kong, PCCW was the world leader in terms of subscriber count for a number of years, but now PCCW and China Netcom are merging, and the question is whether or not PCCW has finally saturated the market. In Japan, IPTV services have been all but stillborn, even with the country's largest telecommnuications companies (NTT, KDDI and Softbank) behind it.
In most of the first world, IPTV entered the market as the third or fourth choice for video services, after broadcast, cable and satellite. Where IPTV has been really successful, one or more of the following is true:
1) The IPTV services are offered at a dramatically lower price than competitive video services (that's certainly true in France.)
2) Local competitors let the IPTV services take hold with high prices, bad customer service, etc.
3) The IPTV provider offers non-video services that the local competitors couldn't match (in the U.S., Verizon's FiOS data service offered far faster speeds than cable operators, and Verizon used that advantage to sell FiOS TV into those same customers.)
4) The existing local video choices are rudimentary or nonexistent.
Where advanced cable services are available, it remains all but impossible to differentiate IPTV services from cable. The interactive features of IPTV are nice, but there's nothing that the cable industry can't match. Even satellite providers are getting into the interactivity game with Internet connections on their set-top boxes.
I do believe that there is, and will continue to be, a market for IPTV, but it's smaller than most of the analysts have been forecasting, and even smaller than I forecast when I was in that business. We'll continue to see tremendous pressure on second- and third-tier IPTV hardware and software suppliers to merge, discontinue their IPTV product lines or go out of business. We'll also see tremendous pressure on IPTV service providers to differentiate their offerings by price rather than functionality. Ultimately, IPTV will be just one of several video options for consumers.