Conclusion and Critical Comments

Based on the observation of potential above-average profits due to the market's oligopolistic structure and on increased contestability thanks to lower market entry barriers, the German TV market seemed to be attractive for Internet-based TV. Both of these observations, when taken alone, indicate market attractiveness for potential Internet-based TV entrants. Seen together, they lead to a well-known phenomenon: as new players enter the market, concentration will decrease putting pressure on profit margins, hence reducing overall market attractiveness.

Additionally, the diffusion of Internet-based TV is hindered by technical restrictions and unsolved legal questions. On the technical side, we note the unsatisfactory quality of picture transmission caused by bandwidth limitations (and the correlated access costs), the absence of a common standard media player, and streaming costs potentially generating negative economies of scale for providers.

Legal issues, however, emerge as the most powerful barriers to the propagation of Internet-based TV. Beyond the unsolved problem of copyrights needed for worldwide distribution, there is still general instability with regard to regulations. While this chapter predicts that technical issues will be solved in the future, estimates about the legal situation are still ambiguous.

Internet-based TV is likely to tap some of the same revenue sources, such as advertising, as traditional TV stations. Innovative sources based on interactivity are at an early stage and thus cannot be evaluated properly. Their success will primarily depend on customer acceptance of interactive functions in the TV environment. These, in turn, will depend on affordability for users, profitability for providers, and accessibility for all.

In summary, at least in Germany, there are moderate chances for the successful entry of Internet-based TV, depending on the content to be broadcast. Internet-based TV streaming news, documentaries, and in-house productions, where international copyrights have been cleared, are seen to have the best short-term chances.

Critically assessing the research framework developed, it has proven to be applicable and helpful for evaluating a total market, but also for consulting individual stations in their strategic decision to enter the Internet-based TV sector. It is clear that the model lacks specific and detailed checkpoints, which remain to be investigated in order to precisely assess market potential and market impacts. A formalized framework for assessing the socio-economic benefits of Internet-based TV remains to be developed. As a result, the validity of some of the statements made can and should certainly be questioned. Nevertheless, as long as the market and the literature are lacking a more in-depth approach, which would be tested for validity, we feel that a proxy such as the one presented here not only provides important insights after a phase of exploratory research, but could also lead to further statistically relevant results that could ultimately be taken into account in political decision-making processes.