When it comes to technology innovation we are in a strange hiatus period in TV at the moment. After the confusing rush of SmartTV initiatives over the last few years, we have come to a short pause in disruptive innovation. The odd dongle is being launched (Google Chromecast and Roku etc) and the odd confusing new entrant is arriving (eg Netflix) to confuse things. But in the big scheme these are minor things (yes, even Netflix) and we are in a waiting period before the next big platform innovations hits to make sense of it all.
The big realisation of the last few years is that we are NOT moving into a world of ‘cloud’ TV – well at least not yet. There is a growing consensus that there is one more generation of set top boxes (STBs) to come – in much the same way that the games industry realised it needed one last generation of consoles before cloud gaming could be a reality. These set top boxes will be more akin to media servers in our home than the simple decoder boxes we started with.
With this in mind, there are rumours of a big new STB operating system and perhaps even a new box coming out of Sky. Youview are heralding a raft of new innovations now that funding and shareholder issues are resolved. Virgin are teasing the industry with a ‘will they, won’t they’ debate about replacing Tivo with the Horizon box being rolled out in other UPC countries; and Freeview are discussing a new generation of ‘Freeview Connected’ devices.
As we wait there is one other thing that has come clear. TVs is no longer a stand alone service. It has been bundled into a bigger ‘triple-play’ telecoms business with content and tech services increasingly becoming intertwined. BT’s decision to give away football to subscribers of their broadband service was a wake-up call. Football was meant to be the crown jewels of the pay TV business and here was a telco giving them away in return for broadband loyalty? In this context it’s hard to avoid the idea that content is being commoditised in this new connected era.
But, if true, what replaces content as king? It can’t be broadband as that is the ultimate commodity – its hard to tell the difference between providers. But what else do we care about? The rise of the ‘gadget’ in the consumer market has given us a hint. The amount of time and effort that a consumer will expend buying, configuring and updating their phone and tablet has never yet been replicated in the TV world. We buy a telly or STB and expect it just to work. We don’t add to them or change them and it would probably invalidate the warranty if we tried. While we might sit with friends and compare phone functionality, we very rarely compare set top boxes. However, the next great tech wave to hit our homes might change this.
The near complete penetration of broadband in the UK market, and the emerging ‘app culture’ among home services providers means we are finally making credible steps towards the ‘smart’ or ‘connected’ home. The arrival of apps like Nest and Hive – controlling aspects of home management through a smart device – hint at a wave of tech innovation that is about to break.
Strangely the TV industry (or at least the triple play TV telcos who now provide our TV) are in a great position to capitalise on it. In this first wave of the connected home, TV owns the key bit of kit – the home gateway – and the STB plugs right into it. Also, it seems that TV is a service that will get consumers motivated to buy new devices and spend time configuring them. Our consumer research show that consumers are interested in home automation ideas, but not enough to get off the sofa to self-configure them. With TV however, consumers will invest time and effort in new systems if it means they can access telly in new rooms or on new devices.
This means that TV can capture revenues in these new areas. The new generation of set top boxes that have emerged in the US offer home automation, security and networked media, pushing a full TV service to every screen in the house. TV companies that offer these new services have seen a resurgence in subscriptions – functionality is now king. It would have been interesting to see the market reaction had UPC or BSkyB bought Nest.
However, for the UK platforms this vision is problematic. The pay TV telcos can move toward services because they offer broadband and home gateways. The free-to-air platforms may need their shareholders to un-shackle them to innovate in this area. Up till now, the FTAs have been able to ape the services and functionality that has been pioneered by the pay TV market because it has just involved upgrading kit (ie adding PVR functionality to set top boxes). However this new range of services needs a deeper engagement with the consumer. Most importantly, the FTAs need to be allowed to develop user relationships and keep data (as Freesat have very quietly started doing).
For all the platforms, success in this area is dependent on being in control of your software and services road map. This is where the YouView project gets interesting with three competitive companies (including YouView’s own retail business) sharing an operating system and a road map. The question that people are starting to ask is whether BT and TalkTalk can truly compete in a TV-centric connected home era if they have to share a development plan with each other, and with a company that competes with them in the retail sphere.
They need to show the market that they can innovate separately around a shared operating system. Most importantly, we need to see if their operating systems can be flexible and expandable to include a range of web hosted services aimed at more than just TV. Interesting times ahead!
Note: this article is an extract from Q2 of Decipher’s Quarterly ‘Future Media’ Report 2014. For more information please contact email@example.com