Can Internet-Based TV Succeed? Towards a Sequential Framework for Market Entry

The advent of the Internet alleviates the access bottleneck to TV distribution channels and softens licensing requirements. This lowers entry barriers to TV markets via the Internet in various forms. This paper takes the German TV sector as an example to analyze the attractiveness of TV markets for new entrants. A sequential framework for entering TV markets is introduced. The skills set of an Internet-based TV provider for such an entry is examined. Technical feasibility, legal aspects, and potential sources of revenue are considered. Potential above average profits due to the market's oligopolistic structure, as well as an increased contestability thanks to lower market entry barriers render the German TV market attractive for new entrants. In early 2002, Internet-based TV still faced severe technical and legal constraints. The analysis suggests that once these constraints have been overcome, the Internet can be an attractive additional distribution channel for television. While existing revenue sources from the TV sector are expected to be transferable to a certain degree, the value of innovative revenue sources based on online sales cannot yet be determined. This value will depend on the future acceptance of interactivity by the viewer (e.g. Owen 1999). Claudia Loebbecke, Marcia Falkenberg