Just in time for the IPTV World Forum, which gets underway tomorrow in London, we have announced our latest view on IPTV subscriber numbers for 2014.  Our modeling shows global IPTV subscriptions reaching 68 million by 2014, with the bulk of the growth coming from Asia Pacific and Western Europe.

IPTV’s stratospheric growth has slowed somewhat in the past six months,  and while I wouldn’t go so far as to call it a “speedbump,” I think it is an important deceleration that others in the industry have picked up on as well.   IPTV still has some pretty impressive hurdles it needs to overcome, not the least of which is how it is defined.

IPTV? Internet TV? 

Ask three average consumers what IPTV is, and you’ll likely get three different answers—the industry terminology is imprecise, confusing, and somewhat sloppy.  But I guess we could say that about a lot of things.

Strictly speaking, and  according to the ITU, IPTV refers to “multimedia services such as television/video/audio/text/graphics/data delivered over IP based networks managed to provide the required level of quality of service and experience, security, interactivity and reliability."  The key word in that definition is “managed.”

Internet TV is a totally different beast, and refers to unmanaged content offered over the public Internet—think Hulu and BBC iPlayer. 

To make things even more confusing, there are “hybrid” solutions, such as Verizon’s FiOS TV, which while not delivered over IP networks, still fall under the broader category of “Telco TV.”   We include both IPTV and Telco TV in our estimate.

And I want this because…?

Doesn’t that sound great? 

Truth be told, that’s about as far as some companies go in explaining their value proposition.  Without clearly defining it, it’s a bit of a stretch to expect customers to line up and buy it.  We’ve pointed out this shortcoming  in the past, and, to be fair,  IPTV providers are making some progress in terms of (more) clearly articulating what the benefits are of the service. But there’s still a lot of work to do.

While some may find a Facebook widget on the tv screen to be a premium upgrade and reason enough to switch—I envision myself immediately disabling it. 

In short, the IPTV differentiation strategy needs to go beyond Facebook and weather widgets.

Ultimately, it’s a question of perceived value for money

I’m fond of pointing out that perception trumps reality.  Give customers the illusion of choice or control, and they’ll stick with you.  Same goes for value.  When consumers feel ripped off, as I did last week when my cable bill increased by $20 with no net added value, they leave.   Strategy Analytics’ consumer research, which I have referred to several times on this blog, has consistently confirmed this price elasticity.

In both the US and Europe, we’ve found a low “perceived value for money” among digital television consumers, and a high propensity to churn when offered a price break of only 20%.  Consumers are willing to make the switch if the price is right.

The promise of IPTV has been well reported, though its execution has been somewhat lackluster. The jaw-dropping array of interactive options and the game-changing addressable advertising applications seem to be stuck in a state of permanent vaporware.  IPTV must begin to deliver on this promise—and go beyond merely matching the cable offering. 

To succeed, it needs to over-deliver.