Smart TV will remove the need for streaming devices like Chromecast

Despite the success of Google’s Chromecast, digital media adapters (DMAs) like this dongle device and its more expensive rivals Apple TV and Roku boxes are being characterized as a temporary fix for consumers seeking Internet video on the television screen. Strategy Analytics, the research and consulting firm that closely monitors consumer device behaviours, is predicting that “DMA penetration will remain below 10% of Western European homes through to 2018 as functionality shifts to Smart TV. Prominent DMA vendors will look to get positioning on Smart TVs or forge partnerships with Pay TV operators.”

The DMA category emerged as a way for tech-savvy consumers to stream personal media files from a PC to the TV. They broadened their appeal as a way to stream video from the Internet via pre-installed or downloadable on-demand video applications and they are considered a relatively cheap way to deliver OTT content to the big screen, Strategy Analytics notes in a recent report ‘Battle for the Living Room: The Future of TV Devices in the Home’.

According to the Strategy Analytics Connected Home Devices Service, 21 million digital media adapters shipped worldwide in 2013 with Apple TV taking 40% market share, Roku accounting for 17% and Chromecast reaching 16% despite making its entry mid-way through the year.

The report notes that Chromecast differs from its main DMA rivals because it is not a standalone device and can only operate in conjunction with a paired handset, tablet or PC that has a Chromecast app installed. The device does not employ a user interface but once a connection is established with the control device it is capable of streaming either dedicated Chromecast apps or any video that is playing in a tab of a Chrome browser on the paired device. “Significantly, it is relatively cheap at $35, especially when compared with other DMAs such as Apple TV ($99), Roku’s streaming stick ($50) and the recently launched Amazon Fire TV ($99).”

The analyst firm does not think that Chromecast and devices like it will herald a long and golden future for the digital media adapter, however. Instead, Strategy Analytics views this category as a short-term consumer solution.

“DMAs exist because of the failure of other devices already installed in the living room to address some basic audience desires in accessing OTT content on the big screen. Existing solutions can be expensive, limit what content you can access or are built with another principal reason for existing in mind, like gaming. Chromecast in particular addresses all of these shortcomings at an impulse price point, resulting in it being the fastest growing Connected TV device currently on the market.

“There is no doubt that in their current state, DMAs offer a lot of value for the consumer who is looking to get access to popular OTT-first services. Moving forwards however, the rise in ownership of Smart TVs and IP-enabled set-top boxes, which will increasingly replicate the usability and functionality of a DMA, will lead consumers to question the necessity of owning a separate device.”

The report predicts that unless the likes of Google, Apple and Amazon manage to integrate their software directly into TVs and operator controlled set-top boxes, a key challenge for suppliers of DMAs (as well as vendors of other Connected TV devices) will be in securing distribution of premium Pay TV focused content. “This is no easy feat considering the distribution of commercial OTT services on non-TV devices tends to be subject to tortuous negotiations between service providers and channel owners,” it says.

Chromecast may not be the break-through TV product Google has been looking for, therefore, but Strategy Analytics notes that Google has other options in its TV strategy, notably the Android OS for television. Some commentators have been predicting that the still-fragmented Smart TV platform market could consolidate around the established super-OS’s Android and iOS (if Apple finally makes a software push into television). And the report notes that despite the efforts of the Smart TV Alliance and Netrange to consolidate the apps development environment around a common apps framework, “a more agreeable environment for app developers and content providers would be a Smart TV world in which one or two operating systems dominate, much like in the Smartphone market.”

Noting Google’s aspirations of controlling the TV experience in the living room and the failure of Google TV, Strategy Analytics notes: “For all the benefits of its Chromecast dongle device, this is not a fully-fledged entertainment platform. Therefore it would seem logical that Google would want to compete with Apple and Amazon via widespread deployment of Android in the living room.

A form of ‘Android TV’ already exists today, the report points out, with the majority of Smart TVs sold in China being based on a version of Android, while TP vision’s Philips branded premium series will feature an Android based OS with access to Google Play apps. It also highlights Android stick PCs that can turn any HDTV or HDMI-capable monitor into a full featured Android computer.

“However, for a full-on assault on the living room, Google would have to develop a fully integrated entertainment platform complete with premium content partners and an intuitive user interface. Whether this will be in the form of a licensed platform to hardware vendors or a dedicated set-top box in the mould of Amazon’s Fire TV remains to be seen.”

Strategy Analytics says the hardware partner that Google probably courts more than any other is Samsung, but the CE giant may feel it has enough market share to ‘go it alone’ with Smart TV (and that it can leverage its multi-platform presence to continue to attract software developers to its platform). Strategy Analytics notes that Samsung is taking steps to adopt Tizen, a new OS spearheaded by Samsung and Intel, as its TV platform in addition to rolling out Tizen across its wearable and mobile devices. “Clearly such a move would be a huge blow to Google and the aspirations it has for its Android platform,” the report declares.

The report also predicts the relative decline of games consoles in the Connected TV market, the rise of Smart TVs and the increasing importance of Pay TV operator controlled connected STBs.