Will IPTV thrive in a recession?

Convention wisdom, at least in the U.S., says that when economic times get bad, people stay home more, and television becomes more important to them as an entertainment option.

There have been strong indications this is true. Restaurants are reporting more empty tables — except at McDonalds, which last week reported increasing sales. Certainly consumers have been spending less on Christmas as more people are laid off or worry they might be.

But can we assume that more consumers are going to stay home and spend more to get a better TV product? I don’t think so.

Research firm Dell'Oro Group said set-top box (STB) sales were off in the third quarter, but that decline was mostly in satellite and cable STBs, with IPTV sales up 30%. The problem is consumers are seeking to save money on their TV purchases, Dell’Oro warned.

“The consequence of the recession on the set-top box market will likely be subdued growth as fewer consumers choose high-end services, like high definition and digital video recorder, and more choose basic services that come as part of a bundle,” commented Greg Collins, vice president for Dell’Oro. “The economic difficulty and very tight credit markets will result in significantly less home construction and thus a smaller market opportunity for set-top boxes.”

On top of this news, SES Americom, which had hoped to tap Tier 2 and Tier 3 markets for its wholesale IPTV service, is shutting that service down. While the IP Prime offering has 70 small telecom operator customers, they collectively have only 10,000 customers.

So there is no guarantee of IPTV success, even as features such as multiroom DVRs are added. So what can providers do? AT&T very quietly is giving its IPTV customers a price break when they ask for it, even though the company said it’s nothing special, just business as usual.

I suspect all service providers in the telecom space are going to have to be very price-sensitive over the next several months, as the global economy struggles its way out of the recession. Retaining customers now will earn more money later and cement grateful customer loyalty, as well.

This recession is deep and difficult enough that past lessons may not hold true, and service providers will be wise to listen to what their consumer customers tell them, in the way they respond to promotions and how many call in to cancel services or trim their bills.