In-Home Digital Convergence: Reality TV, Or Not Ready For Prime Time?

New York, NY -- Most Americans don't know how to make the most of new digital video options, while many remain concerned about hidden costs and ease of use of devices making their way onto the market, suggests a new study from Ipsos, the global survey-based market research firm.

Still, over half (61%) of online American adults are at least open to considering devices that connect PCs with consumer electronics for more convenient access to digital content. Based on this research and two key assumptions (see below), Ipsos estimates that upwards of 900,000 consumers may purchase Digital Den-type devices in the next year if they can be offered at $100.

Among the group who would consider these media hub devices, movies and TV are as much in demand as music, though music content is much more available in a digitally portable form at this point (see Chart 1 below). Said Todd Board, Senior Vice President of the Ipsos Insight Technology & Communications practice: "This finding has been consistent over the past year and also fits with other data we see, indicating that video content indeed could be the catalyst for greater consideration of in-home convergence devices and investments."

"Consistent with this latent potential, when we ask online Americans what benefits, if any, they would expect from these kinds of `media hub' devices, fully half envision the convenience of being able to connect content across devices --basically, the same half who are at least open to considering these technologies" (see Chart 2 below).

Will It Work As Promised?

However, when online Americans are then asked what kinds of barriers or concerns they envision with using media hubs, sizable concerns remain around hidden costs and scepticism about whether it will really work as described.

Said Board: "In this already time- and attention-starved world, Americans are asking themselves, `Once I start wading into these new devices that work with my Media Center PC to share stuff around the house, do I then have to buy cables, antennas, a new TV for the second bedroom, and so forth?' It's quite the Pandora's Box."

The results are part of ongoing research by the Ipsos Insight Technology & Communications practice on in-home digital convergence (the "Digital Den"). In this case, Ipsos Insight researchers teamed up with forecasting and modeling experts at Ipsos Vantis. The most recent wave of data, in which 2,140 Americans were interviewed in depth, sheds new light on current barriers to consumer consideration of media hub-type investments, and includes a provisional category forecast for media hubs.

Ipsos Vantis Vice President John Kiser explained the process: "When we presented a brief description of a media hub-enabled way to consume converged digital content, we asked some key measures of the survey respondents that we can map back to dozens of comparable studies. In this way, we can calibrate consumer perceptions of the Digital Den concept, and see where it's weak or strong, and also translate that to a volume forecast."

Survey respondents were asked to rate the Digital Den concept description based on likelihood to seek more information, likelihood to purchase, liking of the overall concept, price/value, uniqueness, believability, need fulfillment, and whether they had enough information to make a purchase decision.

"We found that while consumers gave fairly `average' ratings for the Digital Den concept on uniqueness and believability, they gave lower-than-average ratings in terms of seeing a real need, feeling they had enough information to really assess the idea, or simply just `liking' the idea," Kiser said (see Chart 3 below).

The researchers acknowledge that consumer response to a given product idea can vary depending on how it's described in the survey, just as it can vary depending on how it's marketed in the real world. "As always, we aimed here to be realistic in providing a somewhat brief overview of the concept, similar to what the average consumer might get from reading a product overview in an ad or website. The topline is that there is not an acute enough need felt by enough consumers - and this in turn may be driven by the need for more information about how this would all work," Kiser said.

Media Hubs Can Learn From TiVo

Kiser continued that the need for more immersive education may hinder the adoption of media hubs as they did in the earlier days of the TiVo DVR. "Media hubs are where TiVo was a few years back. Various stakeholders in the emerging digital content channel need to work together to educate consumers and build their comfort and curiosity, just as TiVo had to with partnerships over time."

Kiser concluded by providing a provisional "next 12 months" forecast for media hub devices, varying across three potential price points: $100, $200, and $300. The near-term forecast at these price points comes with two key assumptions: that consumers at large know about as much as told them in the Ipsos survey, and that they can obtain these devices and capabilities from `reputable' and logical providers and channels (see Chart 4 below).

Based on these assumptions, upwards of 900,000 consumers may purchase Digital Den-type devices if they can be offered at $100, with lower estimates at the $200 and $300 price points more in line with current offerings. The Ipsos Vantis data strongly suggests that movement toward a $100 price point would be a significant catalyst for the media hub market. Added Board: "This in turn would help ramp up the base of consumers who can get full value out of downloaded movies and TV programs, instead of watching them on the family PC or tiny screens in most cases."

About This Study

These national survey research data were collected between March 10 and 20, 2006, with sample drawn from the Ipsos U.S. Online Panel. Data are based on 2,140 online surveys among a representative sample of teens and adults age 13+ across the United States. The survey results can be said to be within 177 2.1 percentage points of what they would have been had the entire age 13+ online population been surveyed. Data are weighted to reflect the general population of U.S. teens and adults in terms of gender, age, income, and region of residence.

For more information, please contact: Todd Board SVP, Technology & Communications Practice Ipsos Insight [email protected] 415.597.4013

or

John Kiser Vice President Ipsos Vantis [email protected] 925.327.2007

About Ipsos Insight

Ipsos Insight is a marketing research consultancy that provides solutions to Fortune 500 companies in the areas of market assessment, brand management, innovation, and new product development. Our industry experts combine the discipline of marketing with the science of marketing research to offer expert consultation and strategic advice that builds powerful brands.

Our client service teams specialize in consumer products, technology, communications, health, pharmaceuticals, financial services, entertainment, retail, foodservice, agrifood, energy, utilities, and lottery and gaming. To learn more, please visit www.ipsosinsight.com.

About Ipsos Vantis

Time and again, successful companies around the world choose Ipsos Novaction & Vantis to help them make intelligent and profitable business decisions. Ipsos Novaction & Vantis boasts a comprehensive market research system that integrates consumer behavior with advanced marketing models and statistical methods that allows us to forecast demand and optimize product configurations with exceptional accuracy. Our offerings are designed to help in four key areas: new product development (needs identification, concept screening and forecasting sales); feature optimization and pricing; brand and market management; and sales and marketing effectiveness. Our worldwide experience, network of experts, and quality consistency give our clients a substantial competitive advantage at all market levels.To learn more, please visit www.ipsos-nv.com.

About Ipsos

Ipsos is a leading global survey-based market research company, owned and managed by research professionals. Ipsos helps interpret, simulate, and anticipate the needs and responses of consumers, customers, and citizens around the world.

Member companies assess market potential and interpret market trends. They develop and build brands. They help clients build long-term relationships with their customers. They test advertising and study audience responses to various media. They measure public opinion around the globe. Ipsos member companies offer expertise in advertising, customer loyalty, marketing, media, and public affairs research, as well as forecasting, modeling, and consulting. Ipsos has a full line of custom, syndicated, omnibus, panel, and online research products and services, guided by industry experts and bolstered by advanced analytics and methodologies. The company was founded in 1975 and has been publicly traded since 1999. In 2005, Ipsos generated global revenues of e717.8 million ($853.8 million U.S.).

Visit www.ipsos.com to learn more about Ipsos' offerings and capabilities.

Ipsos is listed on the Euronext Paris Premier Marchй, and is part of the SBF 120 and Next Prime Indices as well as eligible to the Deferred Settlement System (SRD). Euroclear code 7329, Reuters ISOS.LN, Bloomberg IPS FP.