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Consumers to Spend Over $200 Monthly on Home Entertainment and Communications, According to Rider Research (1/6/2006)

Some 85% of the 101 million US homes will soon spend over $200 monthly on home entertainment and communications, according to Rider Research. That's over $240 billion annually for phone, pay-TV and Internet-delivered entertainment.

The phone, cable TV and satellite TV companies have begun a war that could last a decade for that lucrative market. At the recent phone and cable TV companies' annual trade shows, the companies discussed what their strategies and tactics will be. Rider's new report, "The Single Play and Its Power to Disrupt," details what they said they plan to do.

About 15% of US homes have cancelled their phone service in favor of mobile phones and/or Internet telephony (VoIP). The trend will continue, putting pressure on the telcos to replace the lost revenue by getting into the pay-TV business and selling more broadband subscriptions.

Consumer spending on Internet-based entertainment will grow rapidly, including music services such as iTunes, the emerging online movie services such as Vongo and Movielink, plus the coming Internet-based video services such as Akimbo and Brightcove.

The phone, cable TV and satellite TV companies will each seek to become the dominant supplier in the home communications and entertainment market. It'll be a door-to-door battle with each company determined that its set-top box goes into the majority of homes.

Currently the most popular marketing ploy is the discounted price bundles of "triple and quadruple plays" -- residential phone, mobile phone, pay-TV and Internet access.

The next evolution will be "the single play," the integration of the now separate services into one with the consumer getting one bill each month.

The single play includes services such as displaying caller ID on the TV set and allowing mobile phone users to watch news and sports highlights, TV shows and other videos. A new hybrid phone being developed could be used both to make calls over the Internet when at home and over the mobile network when away.

Four major US cable TV companies have a joint venture with Sprint to develop a mobile phone service that can be integrated with their pay-TV, broadband and phone services.

AT&T and Verizon have embarked on major initiatives to run a fiber optic cable to or near to every home in order to deliver pay-TV and broadband speeds that equal what the cablecos offer. They are also seeking to gain full control of their mobile phone services.

The satellite TV services won't throw in the towel. News Corp.'s DirecTV is spearheading an initiative that would give them a broadband capability, perhaps using wireless networking.

www.riderresearch.com