By Paul Gray – Director, European TV Research, DisplaySearch

It has become increasingly clear to me that connected TV is at the point of encountering some difficult problems, particularly in regards to the treatment of non-traditional content by broadcasters and service providers. Here are a few cases from the UK that were highlighted at a forum I attended yesterday:

• Lesley MacKenzie of LOVEFiLM UK expressed a concern that telecom providers and cable companies would de-prioritize video packets from sources other than their own IPTV services.
• Simon Miller of Betfair TV reported that broadcasters blocked Betfair widgets from coverage of sporting events.
• The BBC is forbidding content to be accessed from its iPlayer catch-up service except through the visible iPlayer portal. This effectively blocks content navigation software from unobtrusively accessing and delivering content.

While it is too early to determine the exact nature of these battles, it is clear that content owners are determined to control the exact manner in which their material is viewed. In the longer-term, this will force a dialog between widget owners and broadcasters to build revenue-sharing models. Connected TV will have to introduce a third dimension, broadcasters, to its widget stakeholders, and it is not clear who will take on that responsibility.

This problem is similar to that of billing and payment. It is unlikely that consumers will want to give their details repeatedly to several widget service providers. This has created an opportunity for a payment aggregator—like Apple’s app store—for each Connected TV platform (or indeed all of them!). Payment systems are, at best, immature in current Connected TV offerings, and set makers will need to address this urgently.

This news is not all gloom and doom. Pay-TV providers seem to be analyzing ways to engage people who are not their customers. Their internet-based services are a good way to do business with households out of their cable networks or viewers who refuse Pay-TV (of which there are many in Europe). These consumers are akin to the second wave of mobile phone customers: Pay-As-You-Go. Initiatives, such as Canvas in the UK or HbbTV in France and Germany, are moving in this direction. However, open platforms offer less control for the set maker, but they also require less investment.

TV set makers will have to decide very soon how much they want to get involved in the media business. Sony’s hard lesson from recent years is that success in this area is harder to achieve than expected. Smaller set makers are unlikely to ever be able to deliver the installed base to build a convincing platform. The question now is whether even the largest set makers will find it possible, or indeed, worth the investment. A successful platform will also require an understanding of these complex networks of relationships.