Internet Appliance Market Worth $5.6 Billion by 2005

Internet appliances will supplement the role of the home PC, not replace it, according to a study from Strategy Analytics.

According to the report, “The Online Home – The Market for Internet and Online Appliances,” the PC will remain the dominant Internet access terminal, but most homes will also use a number of other online appliances. By 2005, the forecasters predict that 91 percent of US homes will be online; 90 percent of them will be using an Internet PC, but 73 percent will also have interactive TV or other Internet appliances.

The report concludes that online TV-based set-top boxes will also become commonplace in the home. Limited demand also exists for a range of new Internet terminals that are independent of the PC or TV, such as screenphones and Web terminals. Sales of such devices will reach $600 million in 2005.

Sales of interactive TV appliances, such as online digital TV set-top boxes and advanced games consoles, will reach $2.4 billion in 2000, an increase of 107 percent. Sales will peak at $4.8 billion in 2003, before declining to $4.2 billion in 2005 under the impact of falling prices. Shipments, however, will reach 7.4 million units in 2000, and rise at an average growth rate of 44 percent a year, reaching 26.4 million units a year by 2005.

“The online home is about multiple devices for multiple applications,” said David Mercer, Senior Analyst with Strategy Analytics. “Consumers will be online all the time, and from many rooms in the home, although they may not even be aware of it.”

The average online home will have 2.7 online devices by 2005. This represents an emerging opportunity for service providers and network operators, who will compete to become the “preferred supplier” to this range of different appliances, according to the report. It will also reinforce the trend toward home networking and the need for broadband, always-on connections.

Approximately 650,000 US homes have some form of networking installed according to the Yankee Group, and that number is expected to grow at a compound annual growth rate of 95 percent over the next four years, when it will reach 10 million by 2003.