Margherita Pagani (I-Lab Research Center on Digital Economy, Bocconi University, Italy)
DOI: 10.4018/978-1-93177-738-4.ch009
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Interactive multimedia and the so-called information highway, and its exemplar the Internet, are enabling a new economy based on the networking of human intelligence. In the digital frontier of this economy, the players, dynamics, rules, and requirements for survival and success are all changing. The difficulties in sustaining the business models, which have been recently created worldwide, makes this topic extremely relevant in order to understand the sustainability of competitive advantage in the television environment. How will the market for digital interactive television develop? We are going to be consuming more communication, both broadcast and narrowcast, and at least for the immediate future this communication will take digital forms. Costs and prices are falling because of technological progress in processing and transmission, and because of increased supplies of spectrum from the government, not merely for economies of scale in sharing pipelines. Conventional television seems to satisfy a demand for which interactive television is not a very good substitute. Many studies in the economic literature of leisure time use (Robinson & Goeffrey Godbey, 1997) shed light on the demand issue, and they affirm that part of the allure of television is freedom of choice and interactive television may actually be less appealing to people if they must invest more energy and imagination. Managers must not forget that the final player of the iTV value chain is obviously the end user, whose behaviour and preferences are critical factors determining the success of the other players and of the whole industry. Future demand and penetration of interactive TV is expected to grow very fast. Forecasts assert that Europe’s iTV penetration will reach 44% of European households by 2007, up from only 11% in 2002,1 with four countries (UK, France, Spain, and Italy) driving the growth and accounting for 70% of Europe’s iTV households. When considering these projections it is useful to remember the “crossing the chasm”2 paradigm in the technology-adoption lifecycle model. Crossing the chasm is jumping that empty area between the innovators’ segment and the early majority. The early adopters are iTV enthusiasts and are always looking forward to experience technology innovations. Being the first, they are also prepared to bear with the inevitable bugs that accompany any innovation just coming to market. By contrast, the early majority is looking to minimise the discontinuity with the old ways, and they do not want to debug somebody else’s product. By the time they adopt it, they want it to work properly and to integrate appropriately with their existing technology base. Visionary early adopters and the pragmatist early majority have completely different frames of mind about technology; because of these incompatibilities, early adopter surveys don’t help to really understand and to predict accurately how consumer behaviour might change as a response to the introduction of the new technology.

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