The largest jump in numbers is expected to come next year, iSuppli said, when subscriptions will hit 15 million, tripling 2006 totals. The leap will come about through a large number of telecommunications titans entering the IPTV market, said analyst Mark Kirstein, vice president of multimedia content and services for iSuppli.
"Throughout 2004, 2005 and some of 2006, you had small carriers deploying services on a regional basis," Kirstein said. "In 2006 and 2007, you have large carriers like Verizon and AT&T offering IPTV, as well as some international carriers."
As the big boys belly up to the table and the industry evolves from offering basic voice, video and data as separate services to one that integrates the offerings and includes greater interactivity, IPTV is expected to grow to a $27 billion business from its current level of less than $2 billion, Kirstein said.
Video services will represent the largest slice of the revenue pie, accounting for nearly 87 percent of the revenues. Those video services are expected to expand beyond TV network and cable programming to include a much larger offering, such as user-supplied content and narrow, niche content.
Expected to differ from traditional TV network programming on several fronts, IPTV can offer interactivity, integration across multiple platforms and enhanced services. Interactive functions could include e-commerce, communication and electronic voting. Kirstein envisions some of the enhanced services to include on-demand gaming, music and home networking management.
Revenues from media services and advertising to IPTV operators are expected to account for 14 percent of the $27 billion revenue pie in the next four years. These two combined areas currently represent less than 7 percent of the industry's revenues.
"IPTV changes the proposition (for advertisers)," Kirstein said, noting IPTV operators will increasingly find ways to allow interactive advertising, resulting in higher ad rates.