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Commentary: Digital could be the market opportunity for AOLTV

Because a large demand for Net access among non-PC owners doesn't exist, AOL's attempt to sell boxes to access the Web through a television is likely a difficult market opportunity.

By Adam Daum, Gartner Analyst

Gartner has said ever since WebTV was launched that a limited market exists for dedicated boxes that access the Internet through a television.

Consequently, WebTV's less-than-stellar success

See news story:
AOLTV service to hit market Monday
is no surprise. That is not WebTV's fault; it did not get the technology wrong. However, everyone who wants access to the Internet already has a PC. These consumers have little incentive to pay extra to get a diminished online experience through a television.

Gartner research indicates that large, latent demand for Internet access among non-PC owners doesn't exist. For America Online and its AOLTV initiative, this means that trying to sell boxes to access the Internet through a television is a small and likely difficult market opportunity.

However, delivery of such functionality through a digital cable (or digital satellite) shifts the discussion from the separate set-top box market to demand for the Internet through the television.

With digital delivery, a better business case can be made for a "walled-garden" service--a set of proprietary services somewhat akin to the old, closed AOL and CompuServe online services--rather than open Internet access.

AOL's merger with Time Warner would give AOLTV distribution over Time Warner's cable system--the second-largest in the United States. It also would become a bargaining chip in delivering services over other cable TV systems.

AOL would benefit from forming partnerships with large cable operators to manage the TV portal, which leverages AOL's strengths in content and services--but as a walled-garden service. That's where a strong market opportunity exists.

(For related commentary on Set-top boxes and how they work, see registration required.)

Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.