Connected TV: Is Consolidation Necessary For Success?

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.

Anonymous

Consolidation (of the kind that SmartTVAlliance represents), while being necessary, might not be sufficient. acTVila exists in Japan for several years now. The SmartTV Alliance has been making noises for a while already (albeit under different guises).. the key problem that the TV world faces is still unknown – do people need apps on TV, if yes, what kind ? Will people lust after a me-too SmartTV proposition – or does someone needs to fundamentally rethink the 10 foot concept ? Does the world wait for Steve Jobs’ hobby to get more mature? Or, with the proliferation of tablets and smart phones, will people want to see the same icons on TV too ? And will they still want to use the TV for FB or twitter or angry birds ?

All that said, STBs (cable. satellite or IP) still rule the content world. And with triple play and quadruple play services on the rise, the STBs are not going to get subsumed by SmartTVs anytime soon. On the contrary, STBs can claim to be one step ahead in the SmartTV game….

Wish someone had a crystal ball here
Paul Gray

I think it is clear that when content is right, then consumers follow. Our research so far is that consumers use TVs for long-form video apps, plus some snacks (presumably during commercials etc) and things to add context to viewing.
So far no surprise, and it means that the real competition is likely to be (as you say) the big pay-TV providers.
http://www.mediaentertainmentinfo.com/ Nitin Narang

Social networking for apps may be too much for normal TV audience. But there still services which can get combined – home security, video calling etc. It is still early but consolidation and (if) unified standards will definitely help