According to recent research from the Yankee Group, WebTV's success doesn't hinge on "couch potatoes," . In its latest annual Interactive Consumer Survey, completed in December, Yankee Group analysis shows that while couch potatoes' interest in TV-based, Internet access is debatable, there is indeed a viable market selling into existing PC and on-line homes.

"The media, many analysts, and to some extent WebTV itself are concentrating on the wrong markets," said Gregory Wester, Research Director at the Yankee Group. "If WebTV sold half a million devices over the next 12 months, it would be one of the most successful consumer electronic product launches. DBS, the most successful consumer electronic product launch, sold only 400,000 in its first year. The real question is who are these half million people? Couch potatoes or existing on-line homes? Over the next year or so, WebTV can lose in the couch potato market and still be quite successful."

Yankee Group research shows that current on-line homes may offer the best opportunity to reach the half-million tally. On-line homes score significantly higher (4 times higher than non-PC homes and 30% higher than PC homes), in the Yankee Group's Household Technology Index (HTI), a quantitative measure of a household's propensity to adopt new technology. Compared to even PC homes, on-line homes are 2 times more likely to have multiple PCs, twice as likely to have a personal digital assistant (PDA), 30% more likely to have multiple people battling over access to the home's primary computer, and two times more likely to be very interested in TV-based Internet access.

Mr. Wester likens much of the current analysis surrounding WebTV to initial forecasts of the direct broadcast satellite (DBS) market. "Two years ago, analysts thought that DBS would be most popular with homes that didn't have access to, or didn't subscribe to, cable TV. As it turned out, DBS is quite popular with existing cable subscribers, many of whom continue to pay for cable service after adding DBS."

Mr. Wester went on to say that TV-based, Web access systems must work with Internet service providers to develop a pricing and marketing plan that entices existing Internet users to "add a TV display to their Internet experience." He concluded, "right now, the additional $20 per month is a little steep."