Service Providers Set to Win Largest Share of Digital Home Profit Pool

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Controlling key control points in the $90 billion digital home value chain will be determined by who owns the service relationships.

Broadband service providers who can combine network access with multiple service offerings will likely dominate the digital home market, a revenue pool that research consultancy The Diffusion Group predicts to approach $90 billion by 2010.

According to "Control Points and Profit Distribution in the Networked Digital Home," TDG's latest report, the digital home revenue and profit landscape will be determined in large part by which players dominate key "control points" in the digital home.

"Most of the profits generated in this new market will be driven by services and applications, not by devices per se," said Dr. Predrag Filipovic, senior consulting analyst with TDG. "Redistribution of revenue will be determined in large part by which service segments can gain and maintain ownership of the various control points. Broadband service providers are in the best position to exercise control point dominance.”

For example, broadband services providers:

1.    Have ownership of the physical link to the home (that is, the last-mile broadband plant);

2.    Are exercising significant influence over digital rights, asset management, and video standards (in many cases because they maintain significant content holdings);

3.    Own and manage content delivery, device management, and operations system and support software/middleware, and;

4.    Are amassing unique and defendable intellectual property such as content creation and imaging technologies, as well as operating systems.

Filipovic argues that the extent of control point ownership exercised by broadband service providers will be determined by the type of in-home network architecture that becomes pervasive. Whether a hub-controlled heterogeneous or distributive architecture becomes dominant will in large part determine to what extent hardware players (such as HP, Dell, Sony, and Samsung) and software stalwarts (such as Microsoft) can gain control of the digital home revenue and profit landscape.

TDG's new report on the digital home market space, "Control Points and Profit Distribution in the Networked Digital Home," investigates how new technologies and service models will alter revenue and profit distribution by both cluster and industry segment. The report also offers strategic insights into how different value chain players including CE, PC and service provider companies should position themselves to win out in the battle for control point ownership.

For more information about TDG's new report, "Control Points and Profit Distribution in the Networked Digital Home," visit TDG's website at

About The Diffusion Group (TDG Research)

The Diffusion Group is a consumer technology research and strategic marketing firm built by a team of seasoned consumer technology analysts. Our mission is simple: to provide timely, actionable intelligence designed to best position new consumer technologies for rapid diffusion. TDG is committed to providing market research and strategic consulting services based on conservative, real-world analysis and market forecasts grounded in consumer research. For more information about The Diffusion Group, visit our website at


Andy Tarczon


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