How are the determinants of demand identified

Contributions to the discussion

Peter Kürble

Determinants of the demand for multimedia pay-TV services in Germany
No. 148 / May 1995
(out of print)


The forecasts for the growth of the market for multimedia services differ enormously. One reason is the complexity of the possible applications subsumed under this term. Another lies in the fact that the market has to be formed first. The examination of the German videotex service "Datex-J" shows on the one hand that forecast differences in the development phase of a market are not unusual. On the other hand, another important insight can be drawn from the experience with this market: for market success, it is not just the technical possibilities that are important, but user-friendliness, price and additional benefits of the new service that are recognizable for the customer play a decisive role. Making this additional benefit clear to the customer can be identified as a central problem for market penetration, especially since the new services are typical critical mass systems to which properties of experience goods can be assigned.

This assessment is supported by the discussion of the German teletext service, which was introduced at the same time, which is free of charge and which can be used via TV remote control. The market penetration at the end of 1994 was 17 million households. At the same time, however, “teletext” still shows a marginal use, which in 1994 was 17% of households and around 9 contacts per month.

The pilot projects with pay-TV that have been started in the USA and some have already been completed indicate that, on the one hand, the technology has not yet reached the level required to serve a mass market, and on the other hand, the willingness of households to participate is rated as low can be. For example, only 12 households are currently interested in the largest US trial in Orlando. Surveys conducted in Canada and the United States also found that many television viewers tend to be passive rather than active participants in the program.

This TV behavior also seems to be very pronounced in Germany: The viewing time has increased again in recent years, but active participation in TV programs has declined, as can be seen from the increasing preoccupation with “other things” while watching TV. Likewise, the useful life of the video recorder, as an equivalent to the future pay TV, is falling and has almost halved compared to 1986.

Since there is still no market for pay TV in the Federal Republic of Germany, the focus was on developments in spending on mass media and various surveys and forecasts. The developments in the monthly expenditures for mass media suggest a saturation limit with a share of the total expenditures of 4 per cent; an observation that can be substantiated by the redeployment behavior of consumers in this sector. The surveys carried out in Germany finally show that although the fictional film is the favorite among television viewers by far ahead of other program forms, less than half of the respondents are willing to pay for such an offer in the form of pay TV. Other surveys have even shown that 69% of the respondents are not willing to make additional expenses and only 6% wanted to buy new equipment to receive the new services at all.

The experiences with the introduction of online services and the results of the surveys and pilot projects seem to be indications that the development of the TV-based MM market will therefore take place rather slowly and that it is to be expected that only that at the turn of the millennium A smaller part of the population will use the multimedia options for spending their free time.

Discussion entry is out of print and no longer available.