The announcement that LGE, Sharp and TP Vision are uniting to create a standard platform for connected TV (the Smart TV Alliance) is a significant boost to the prospects for the category. We believe that the future of digital entertainment will be shaped by a battle between the different ecosystems: iTunes v. Android being the most familiar theme, but by no means the only players.
It is easy to list the necessary conditions for success: a large developer community to offer choice in apps, a diverse content library and a huge audience base. The only snag is that these things feed off each other; the audience attracts the developers while the content choice attracts the audience.
Developers complain that the diversity of Smart TV platforms means that they repeatedly have to port the same application for different brands – one said that 75% of R&D was spent on porting. Solving diversity is therefore a key to transforming the economics of the business – it makes it cheaper to originate content. At the same time it also pools the audience and kick-starts the virtuous cycle.
We should see further pooling of platforms in the coming months. It is already reported that Toshiba will be joining the Smart TV Alliance. The alliance has already propelled itself to a No.2 position in Smart TV shipments in North America, Western and Europe, according to our Quarterly Smart TV Shipment Report.
TV brands will have to identify their competitors carefully. If they consider that other CE brands are the biggest threat, then they face a classic prisoner’s dilemma. However, perhaps the greater threats are from non-CE companies: Pay-TV, Amazon, Apple and Google. If they refuse to cooperate, then the whole Smart TV category could wither and the market switch to tablets, smartphones and set top boxes.