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Smart TVs have a future in video, but not as the hub of the Smart Home

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During a post-CES debrief hosted by Videonet recently, it was suggested that while Smart TV makers may win the sales battle against secondary streamer devices (like streamer boxes and dongles), they are definitely not winning the battle for eyeballs in Pay TV homes and they are not going to be the central hub for the Smart Home. Advertising could become a surprise lead revenue opportunity for the Smart TV portal providers, however.

Jeff Binder, General Partner at private investment firm Genovation Capital, LLC, made it clear that if you want to judge the success of Smart TV, you need to judge manufacturers on television set sales above viewers. “If you judge their success by how they compete with a Pay TV operator, that model has yet to show it has any real value from a revenue perspective. On the other hand, they enable access to Internet video services that otherwise are only accessible through secondary devices, so to that extent Smart TV has been quite successful.

“The most important thing for Smart TV manufacturers is to win the sale so the consumer walks into a store and wants to purchase the TV set, and in this sense Smart TV has been extraordinarily successful. Manufacturers are far less concerned about the ongoing activity [of the content portal business]. If you judge them against secondary [connected TV] device manufacturers, Smart TV is winning and ultimately will win in that contest.

“The Smart TV manufacturers have the tools and scale, and R&D resources to keep innovating at a pace that is difficult for smaller scale providers like Roku or even Apple TV to keep up with.”

Jon Watts, Director and Co-founder at the research and consulting company MTM, suggested the only reason for a Pay TV customer (like a BSkyB subscriber in the UK) to go to a Smart TV portal is if content is available there that you cannot get on the traditional platform. “At the moment there is not that much content that would encourage people to move to those Smart TV services and off their operator EPG,” he argued.

In homes where people are going into the Smart TV portals, the attraction is overwhelmingly video, however. David Mercer, VP, Principal Analyst, Digital Consumer Practice at Strategy Analytics, noted that his company’s research consistently shows that the one thing people want from a Smart TV portal is television.

“They gravitate straight to the video apps they are familiar with like BBC iPlayer and Netflix,” he told the live audience. “Those apps and services are clearly part of the TV experience, they are progressing and there is real usage and market growth. But beyond the video space, when you look at the user experience concepts like voice control and user recognition, which many of the big vendors view as part of the Smart TV concept, the jury is still out.”

Mercer welcomed all efforts to improve the Smart TV user experience, including through the introduction of new Operating Systems, like the way LG is now using webOS.
“In our research, consumers are quite shocked by how slow and clumsy Smart TVs are relative to other devices, so anything to tackle that particular hurdle is important.”

Watts reckons Smart TV manufacturers are still grappling with the challenge of making it easy to consume VOD content. He thinks the innovation that matters is around connecting second devices to the televisions rather than navigation paradigms on the television set itself. “In that respect, manufacturers are losing the battle to the second device and other software manufacturers,” he contends.

Having noted the efforts revealed at International CES to improve the user experience, Mercer noted the regular changes in direction. “Every time CES comes along, the latest innovation is presented as the answer to all the problems of the past but by the next event there is another answer being presented. Year after year the CE vendors go back and tweak what they did or sometimes throw everything out and start again. Where was Google TV this year, for example? There was no mention of it at all.”

All three panelists dismissed the idea of television manufacturers becoming the hub of the Smart Home, with their own ecosystems of interoperable devices built around an operating and apps platform that can host third-party services like energy monitoring, home security and automation.

Binder declared: “That is a much tougher battle for them than video. I am not sure it makes a lot of sense in an age when smartphones and tablets are carried around the home to have the Smart Home portal and its OS centred around the television set.”

Watts agreed, saying it was questionable whether TV manufacturers have the brand loyalty or the ability to interact with other devices that are necessary if you want to be at the centre of the Smart Home. “There is a role there for them – to make sure their television sets are interoperable with the emerging standards. But either the big Internet apps providers and software businesses or, possibly in some markets, the Pay TV operators with their quad-play services, are in a much better position to drive this market.”

He thinks second screens [i.e. tablets/phones] are better positioned to present the User Interface that will act as the consumer control point. So for Watts, the Smart TV will not even be the UI for someone else’s Smart Home platform.

Mercer noted a sense at International CES 2014 that the Smart Home is gaining momentum and people are starting to overcome some of the interoperability problems. But he agreed that this is a tough market for television makers to get into. “It is very difficult to see how they can play a direct role.”

Jeff Binder believes that if there is a surprise winning ticket to emerge for the Smart TV manufacturer market it could be advertising, maybe around 2016. “That might be the one that ends up being the big revenue generator in that sector,” he suggested.

Answering an audience question, the panel offered advice on what Smart TV manufacturers must do to make their product more appealing to a wider audience. It was: Integrate with as many companion devices from as many different companies as possible, making that as easy and seamless as possible (Jon Watts); Offer as much content as you can, including through app integrations with Pay TV services (David Mercer); and Simplify the User Interface (Jeff Binder).

You can listen to the Videonet webcast, ‘What we learned about the future of TV at CES 2014’ on-demand and free by registering here.

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