WHITEPAPER: Just How Disruptive are Smart TVs?

Hamish McPharlin – June 2013

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[DOWNLOAD THE FULL WHITEPAPER – PDF]

INTRODUCTION

It was 2007 when Yahoo! rolled out a partnership with device manufacturers called ‘Yahoo! Widgets’ that delivered information to your TV set via an internet connection. Suddenly, the ability to call up a quick weather report, news headline, or social media feed was in TV sets on the UK High Street.

This occurred against a backdrop in which other companies were also trying to supercharge the TV experience that had evolved little for many years prior. Here in the UK, Sky were pushing ‘Red Button’, a method of delivering interactivity to TV programmes and commercials using a combination of instructions via satellite and the dial-up services of the Set Top Box. By 2007, this format was under pressure as it had become clear that nothing short of a proper broadband connection to the Set Top Box was going to give a compelling enough experience for this new format to attract mass usage.

The seeds of the modern day ‘Smart TV’ were sown during these years, and given a kick as the digitisation of media arrived. As average broadband speeds increased, opportunity arose for broadcasters to develop online VOD players to deliver their programming online, and now we see a slew of broadcaster apps as they roll out on smartphones, tablets, and Smart TV sets.

My parents own a TV older than me. It sits in the kitchen, big rabbit ears sticking out of the top, and resembles a toaster. For many years, owning a TV of this…. vintage…was considered acceptable behaviour, but it is getting harder and harder to hold to this kind of refresh cycle. TV’s are getting bigger, crisper, flatter, lighter, and more functional. At the time of writing this article, I am mired in a decision I couldn’t have fathomed 7 years ago: My 4 year old 50-inch Plasma TV is starting to look a little frumpy and I somehow want to spend yet more money to get a flatter LED TV. While I’m at it, I notice with glee the raft of broadcaster apps, Netflix, Skype, YouTube, and other functions a new LED Smart TV offers. There are increasing reasons to buy a new Smart TV both in terms of industrial design and functionality, and the refresh rate is rising. The bottom line is that Smart TV’s inevitably eke their way into households at a steady rate. There is no question that they will gain significant penetration. The only question is how disruptive their content services will be to the status quo.

SMART TV’s IN THE UK

At Decipher, we track how new technology is impacting UK media consumption through a bi-annual report called Mediabug, and the ownership and usage of Smart TV’s is a key element. Mediabug reports Smart TV’s being in around 14% of broadband enabled UK households as of February 2013 (Mediabug Wave 2 2013). Around 80% of UK homes are broadband enabled. Reasons for buying are diverse. There are early adopters who want to try a new toy, those who were going to get a TV anyway and wanted to buy the best available, and there are those who had no idea their TV was ‘Smart’. Ownership does not imply usage.

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Industry reports of how many of these 14% have actually connected their Smart TV to the Internet vary wildly, but they usually paint a sorry picture of more than half of Smart TV’s being left unconnected. We take issue with these numbers, as they count all Smart TV’s ever sold, even the old original ones from as early as 2009. The simple fact is that older Smart TV’s are wired only and don’t support current firmware or apps. Lumping their connection rates in with more recent models that support Wi-Fi, webcams, gesture control, and a multitude of new apps is folly.

Mediabug shows us that as Smart TV’s evolve year on year, connection rates are rising. Those bought in the last 2 years have connection rates of 83% (2011) and 86% (2012). When you buy a new Smart TV, it scans for your Wi-Fi network as easily as it scans for channels, and prompts you for your password. And with apps such as BBC iPlayer, ITV Player, 4 on Demand, YouTube, Lovefilm, Netflix, and Skype, and new apps arriving via software update, reasons for not connecting are reducing.

ANOTHER ENTRANT TO A BUSY MARKET

The UK has a mature and aggressive media industry, powered by the twin forces of Government funding and a great consumer appetite for paying for and using media services. More than half of UK households have a Pay TV subscription of some kind, and we see growth year on year in media consumption across TV, online, and on mobile devices.

With the rollout of consumer broadband in the 2000’s an interesting shift in power emerged. Broadcast transmission had always been the incumbent distributor of TV content into homes. Freeview and Pay TV platforms such as Sky and Virgin Media were the sole distributors of broadcast and so enjoyed the benefits of having a direct ‘relationship’ with the viewer. As consumer broadband became capable of supporting video to the home, broadcasters developed their own online VOD Players. They were now able to also deliver their content directly to consumers via their website and internet-connected devices; bypassing the traditional distributors. A product of these developments has been a rising tension between the role of ‘platforms’ and ‘broadcasters’ in this supply chain, and the eternal question: Who gets to have a direct relationship with the consumer, and derive income directly from it?

However, the battle is bigger than this. The reality is that Smart TV’s aren’t just another device to offer apps to consumers, such as a smartphone. They sit in the lounge room and TV Set Top Boxes plug into them. If they offer sufficiently compelling fare, viewers might decide they don’t need their Sky Movies subscription anymore, or indeed a Pay TV subscription at all. As such, Smart TV’s actually add to the ‘tension’. The device manufacturer becomes a third player in the battle for the living room.

Continue at link below…

[DOWNLOAD THE FULL WHITEPAPER – PDF]

» More about Mediabug

» More about Decipher Media Research


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