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TV set-tops set to take off

These advanced devices are poised for enormous growth over the next five years, led by the popularity of gaming machines.

Interactive TV set-top boxes are poised for enormous growth over the next five years, according to research released today, led by the unexpected popularity of online gaming machines.

The global market for these devices is projected to climb from 6 million units in 1998 to more than 55 million in 2002, a 76 percent annual growth rate, according to market research firm International Data Corporation.

"Our survey indicates consumers want [information appliances]," said Sean Kaldor, vice president of IDC's consumer devices research. "Most of these deployments will be in the Net TV space"--advanced TVs or TVs with advanced set-top boxes that add the capability to connect to the Internet.

Interactive television will manifest itself in three waves, according to the report.

"In the near term, the cable companies that are deploying Net TV will force millions of units into the market," Kaldor said, adding that interactive gaming consoles from companies like Sony and Sega will be also be a source of growth. "The gaming companies are also making the transition."

Estimated shipments of information appliances
Device 1998 2002
Gaming Consoles 848,000 15 million
Net TVs 1.4 million 11 million
All devices 6 million 55.7 million
Source: IDC

By mid-2000, set-top boxes deployed by cable companies will begin to make way for set-top boxes sold at retail stores. This is because cable companies are mandated by the FCC to begin offering cable set-top boxes at the retail level by July 2000 and stop leasing boxes by 2005. In the third wave of Net TV, many functions previously available only on such set-top boxes will be integrated directly into the television set itself, Kaldor said.

Interactive television, in the form of cable, satellite, or retail set-top boxes, will grow from 1.4 million units in 1998 to 11.5 million units by 2000, IDC predicts.

Sales of such interactive gaming consoles, which will offer online gaming and some Web browsing, are expected to jump from 848,000 units in 1998 to almost 15 million in 2002.

Other analysts are more conservative in their predictions, but concur that the market will eventually be huge.

"Our statistics are considerably more conservative for online gaming," said Seamus McAteer, an analyst at Jupiter Communications Web technologies strategy group. "There may be 15 million consoles shipped, but that doesn't mean they will all be connected."

Retail set-top boxes like those from WebTV will not necessarily disappear as cable companies roll-out their products, Kaldor said, because WebTV offers a more robust feature set than the early versions of products from cable providers.

"Cable companies will do what they feel comfortable with, a lot of solutions that will even be free," he said. "WebTV knows what's going on. They don't box themselves in--they're going to continue to make partnerships," such as a recently announced alliance between Sega of Japan and WebTV.

The explosive growth of gaming consoles and set-top boxes is offset by the decline of other consumer interactive devices, such as screen phones and "smart" appliances, Kaldor said.

"There is consumer interest in desktop-based telephones with a screen that provides email or Web browsing, but the price point isn't right yet," he said.