CONNECTIONS™ on the Web TV Market

CONNECTIONS™ sessions are always rich in data – and include expert analysis on the strategic implications for each market. For example, HDTV is a rapidly maturing market. The challenge for manufacturers now is to differentiate and add value to their displays. So the next stage of competition in this area will focus on connectivity and value-added applications.

At recent CES shows, there have been a wide variety of connected TVs on display. Panasonic is working with Google to bring some of its applications – including photos and YouTube – to the television. Samsung has developed an RSS “widget” offering, focusing on personalized information from USA TODAY. Sharp’s benefits include remote customer support. Sony has Internet television offerings that provide not only video but access to music via Slacker.

Every major manufacturer will likely implement at least some basic connectivity and provide some sort of Web or PC-linked application (such as photo viewing). In turn, aggregators like Netflix, CinemaNow, and Amazon will provide (or already do) CE manufacturers – including the display companies – with turnkey content services. There will be more announcements like the Intel and Yahoo Widget announcement, which will come to define the Web-enabled TV market. More new TVs will be capable of receiving third-party Web/widget applications, much like the iPhone, and consumers will be able to customize their TV experience for just the type of information they want – weather, traffic, sports scores, etc. Television providers (cable, satellite, IPTV) will follow suit, using their electronic program guides and advanced set-top boxes to provide a more customizable television experience.

If you build them, will consumers come?
Parks Associates’ Digital Media Evolution asked consumers to rate their interest in a number of home network and Web-enabled applications on a variety of consumer electronics devices, including digital cameras, televisions, portable multimedia players, mobile phones, digital photo frames, and Blu-ray players.

For “Connected TVs,” we asked consumers about their interest in various features, including watching Internet video on the television, watching stored video on a home PC, renting programs directly through the TV, and receiving customized information on the TV screen.

Consumers showed strong interest in some Web-connected features, particularly those that expand video-on-demand offerings for TV shows and movies. Consumer electronics companies – including manufacturers of displays, Blu-ray players, etc. – should aggressively pursue deals to provide streaming and downloadable content, which matches with the consumer desire to have access to a wide array of content, both user-paid and ad-supported, while not having to buy an additional black box.

This practice could steer consumer electronics companies away from a pure “sell-it-and-forget-it” practice and build new business models that center on recurring revenues, subscriptions, and value-added content and services applications. While this new business model will likely not create huge revenues for the device manufacturers, it is a compelling long-term business opportunity and a key point of differentiation in the short term.

Sizing the MarketManufacturers and their partners, in positioning for premium services, expect to generate only 200,000-300,000 unit sales in 2008 but anticipate millions of unit sales in future years. A Parks Associates forecast for Web-enabled TVs, focusing specifically on applications for watching Web video (CinemaNow, YouTube, etc.), is pretty conservative. Looking at total projected sales for HDTVs for the next few years (with sales at around 26-28 million units in the U.S. through 2012), the Web-enabled portion will remain relatively small – from 2% of total sales in 2009 to about 20% in 2013. Sessions at CONNECTIONS™ will address in detail the rationale for these forecasts plus the implications of these new business opportunities in Web TV.