Parks Associates Blog

Tuesday, July 14, 2009

Blockbuster is now in the Connected TV Game

Blockbuster and Samsung have announced that Blockbuster OnDemand will be available on select connected HDTVs, Blu-ray players, and home theater systems starting this fall. I talked to a Los Angeles Times reporter yesterday about the deal, and was told that Samsung does plan to offer connected Blu-ray players and home theater systems with both the Netflix and the Blockbuster online services. However, today's release from Blockbuster indicates that Blockbuster OnDemand will have "preferred positioning" on the Blu-ray devices.

My quote in the LA Times article compared the novelty of a connected TVs to that of a kid's Christmas present. My concern for the industry is that - lacking really compelling lineups of content (day-and-date availability, high-definition, ad-supported current television episodes, etc.) - consumers may play around with a Widget feature or download a movie in the first couple of weeks of use, but quickly grow tired of the device. It's happened to me. I get a new device, unwrap it, get it to work (sometimes), and play with it for a couple of weeks before its novelty wears off. Will the same thing happen to connected devices?

Now, if you're one of the ten million avid Netflix subscribers out there, then a connected device that streams older titles to the TV may be a nice complement to your Blu-ray and DVD rentals. However, given Netflix, Redbox, and your cable operator's growing collections of timely and high-definition content, how will connected devices provide a real utility and not just fade as short-lived novelties?

Are Current Titles Available? I'd like to better understand the title availability for both Blockbuster and Amazon's online content. How well do the rental and download options match those of the most-current DVD or Blu-ray releases that I can find at Blockbuster or Redbox? If there is a relatively close match, then there's definitely a convenience factor in not waiting for the Netflix envelope or trekking to the rental store or the kiosk. And, I know that the kiosks are everywhere, but c'mon...it's 105 degrees today in Dallas, and I don't care how close the Walgreens or the McDonald's is. It's too hot to go anywhere! So, title availability and convenience may be a factor, but...

Is High-Definition Content Convenient to Access? I'd argue no, based on my experience with the VUDU box. Even with a very high-speed FiOS broadband service, a download of an HDX movie takes several hours. At that rate, it's more convenient to make the drive (even in the Texas heat) to the video store or rental kiosk.

When will We See Highly-Desired TV Episodes Available? Your cable, satellite, and IPTV provider aren't going to sit still and let their bread-and-butter TV revenues get lost to online sources. So, the game today is to leverage a big catalog of free on-demand content to complement their many cable offerings. They're also ramping up their offerings of on-demand primetime shows to provide even more access to this programming. The connected CE folks are at a disadvantage here, because there is no model yet for streamed and ad-supported current television programming to the TV. They can certainly go the download route (although this is not going to be a big market at all ... why download to the TV when 80%+ of U.S. homes have pay TV and have more access to DVR and VoD primetime programming? They can also provide a great deal of older content, which is nothing to sneeze at. Look at Veoh Network's lineup of classic TV programs. Hey, even if it's not high-definition, The A-Team is pretty cool!

I challenged the panelists on the Connected TV Strategies session at the June CONNECTIONS 2009 event with the question of what it will take to get agreements in place to allow connected TVs and other devices to receive streams of current ad-supported television programming. I think we're all in agreement that providing consistent measurement and analytics to programmers will be an important step to convincing content owners to release more of their content in an ad-supported format to the television. Without this data, there are still plenty of questions about the true audience size for any given episode, which has implications for how ad dollars are then allocated. The panelists (representing AnySource, IBM, VIZIO, Yahoo!) all acknowledged that this is a difficult problem to solve, and we're still some time away from seeing consistent measurement applied to online video usage. So, the connected TV folks are still largely relegated to transactional downloads, older streams, and not-so-current TV offerings, all of which give them a disadvantage to the current options of disc sales and rentals, and whatever you can get from your cable provider.

As I'm watching the connected TV market take shape, these three areas - content availability, high-definition support, and metrics and reporting - will be among the most-important factors I'll be watching to determine success or failure. With Blockbuster in the game, we at least have some more data points to be tracking.

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