TiVo: It's a UI, not an OS

Some clarification on the blog post yesterday. TiVo is supplying Best Buy (Insignia brand products) with its UI that will provide access to online content services such as Amazon Video On Demand. I would say that this then puts the TiVo offering more on par with DivX TV. The choices for heavy lifting for connected TVs (at least for embedded solutions) is more IBM, Google, and Yahoo!

Google TV - Searching for Success

For at least a year or so, I've been doing my best to categorize all of the different solutions that are specially designed to bring Web content and applications to a "connected TV." I'm putting the term in quotes because there will be different ways to experience connectivity between the Internet and the display other than an embedded solution. For example:

• Connected game consoles: In the U.S., penetration of Internet-connected game consoles jumped 38% between 2008 and 2009, and are now at about 30 million households. We know that the console is being heavily implemented as a set-top box, as more than one-third of Microsoft Xbox 360 users are watching video on at least a monthly basis. We believe that online video revenues at the game console alone brought Microsoft and Sony north of $500 million in 2009.
• Connected TVs: Penetration is quite limited to date, but we expect that unit sales worldwide will exceed 130 million by 2014. In short, Web connectivity will soon become a built-in ubiquity in most televisions.
• Connected Blu-ray Players: Just bought a flat-panel TV and don't feel like replacing it for a Web-connected set? For a smaller investment, many Blu-ray Disc players come equipped with many of the same content services as what you'll find on the high-definition displays.
• Networked Digital Media Players: These are the devices such as Apple TV, the Roku player, and others that provide a relatively lower-cost option to connect a TV to online video services. Although we're projecting a pretty quick peak of sales in the U.S. followed by a decline as online video access becomes embedded into consumer electronics products, alternative set-top box platforms may have more significance in international markets, where they may actually be branded by broadband and pay-TV operators.

The market potential for Web-connected consumer electronics is significant, with annual worldwide shipments nearing 300 million units by 2014.

In light of this opportunity, 30+ technology companies are all aimed at bringing Web services to consumer electronics. Among them are companies in the "Connected Television OS" area that are working to build in applications and Web services directly into the TV itself. Among them are:

• Accenture;
• DivX;
• Google;
• IBM; and
• Yahoo!

Of course, while there are companies advocating an embedded solution, companies such as ActiveVideo Networks and Clearleap argue that Web services and interactivity can be delivered with transcoding done in the headend. Further, companies like Vuze indicate that the PC in the home is capable of transcoding and serving as an intermediary between the home computer and the television. So, there's plenty of room for debate.

Google is entering the market at a time where there is much indecision about what will be the ideal technology solution that will benefit the TV manufacturer, content owners, and advertisers. Certainly, Google's presence in Web advertising, including delivery and analytics, provide it with a huge potential for scale. One problem that has been troubling to the television manufacturers is how big their share of any potential revenue for online content might be. To date, the business models between television manufacturers and content providers or aggregators have been revenue sharing based on online video orders. So, the TV manufacturer may get a few pennies per VoD order. In a time when online video revenues on connected CE devices other than the game console are forecast to be around $180 million in 2010 and growing to perhaps $800 million by 2014, it won't be a a huge revenue stream. So, a deal with Google that can add advertising revenue to transactional monies would be a gain for the manufacturers.

Is Search Really a Problem?

So, while Google comes armed with the business model, I do wonder if Google has developed a solution for a problem that I'm not convinced is as dire as they indicate. After all, they lead their explanation video about Google TV discussing why it's difficult for consumers to find the content that they want on TV. Really? We might quibble about the benefits or detriments of the various electronic program guides that are in use today, but I think that the EPG is doing an increasingly effective job of allowing for search and discovery. And, if the Google TV use model means I literally have a Logitech keyboard positioned on my knees to manually type in search entries, I'm not convinced that this use case is going to attract many folks. Granted, the keyboard in the living room is going to be unecessary for most folks, as smartphones, tablet computers, and other interfaces allow for more text entry, but I'm just not sold on search (as Google presents it) as the killer app here. The television service providers are innovating every day with their own program guides, search, discovery, and recommendations. I don't think anyone will be lacking with decent search options for their TV.

Where are the Content Partners?

Another issue with Google is how much high quality content they'll bring to the table. Google's main content partner today is Sony. They will need to bring a number of major content players into the fold to have a successful solution. I'm sure that Best Buy will probably offer up Roxio CinemaNow content, but they'll have to expand beyond that. What's driving the demand for connected TVs is premium content, as the results from our recently completed Digital Media Evolution II study indicates.

I think that providing premium video-on-demand content is going to continue to be an area where the pay-TV providers excel. A couple of weeks ago, I had some time to try to catch up on video-on-demand. With credits available on my VUDU account, I tried that platform first. What I quickly found is that my Verizon FiOS service had the same movies, and the high-definition versions were available a whole lot quicker than the download for VUDU's HDX format. Now, The Wall Street Journal is reporting that the studios and the operators are in discussions to signficantly reduce the window between the theater and pay-TV availability. This makes sense. Interactive digital TV services are already in more than 40% of U.S. households. By 2014, it'll be more than 60%. That's a huge scale that the pay-TV operators have as an advantage. So, what are the online services going to offer that's any better?

Is the Walled Garden Really the Evil Empire?

Related to this point, Google's foray into a very open Internet approach is being much ballyhooed as a way of throwing off the shackles of the walled gardens provided by TV service providers and today's connected CE offerings. I'd argue that this latest round of consumer research would indicate that demand for open Internet access isn't what's driving consumers to a connected TV. They want good content, and they want it easy to find. Take a second look at the chart. I'm just not convinced that consumers want an open Internet experience for calendaring, music, photos, and commerce. I'm much more convinced that tailored applications - including tru2way, EBIF, LUA-based interactive features (available today from more and more pay-TV operators) are going to bring the Interactivity of the Web without the "Wild West" component of many fits and starts with searching, text entry, the back button, etc. If the walled garden approaches can deliver this in a controlled environment that doesn't overwhelm the average user and helps a provider deliver the highest-quality content available, then I don't see why everyone would necessarily want a browser-based approach in their connected TV.

Will Service Providers Care?

DISH Network is a partner here, but will Google find additional service providers to join? One question is what's in it for the providers? For DISH, a current lack of good interactive applications would be a reason for joining the fold. But, will you see the cable industry or AT&T or Verizon knocking on Google's door anytime soon? I doubt it. These companies are already developing their own interactive applications and services. In fact, if you compare the revenue potential between the online and pay-TV worlds, it's clear operators will still control the lion's share of revenues for services such as premium VoD and for interactive advertising. The revenues in the online world are certainly nothing to sneeze at, but the operators don't have to cede control to Google in order to pocket some serious revenues in the next few years.

Multi-platform Measurement

I do think that Google's entrance will now start to help refine how providers of online assets will work with consumer electronics companies to implement more multi-platform content and multi-screen audience measurement. The measurement and reporting is a particular area where some work is needed. The more that content providers, online companies, and CE manufacturers can work together to build consistent reporting and feedback mechanisms into their products, the more effective they will be in monetizing their Web services and attract more premium partners.

See You in a Few Weeks

This announcement certainly comes at an intriguing time, and we've got all kinds of speakers and sessions at the CONNECTIONS™ 2010 event that will speak directly to the rise of connected consumer electronics, digital content, and evolving business cases. We have keynotes, presentations, and discussions with many of today's leading vendors of connected TV and digital media solutions - among them 2Wire, Actiontec, ActiveVideo Networks, Alcatel-Lucent, Allegro Software, Alticast, Arxan Technologies, AT&T, BigBand Networks, BridgeCo, Cisco Systems, Comcast Interactive Media, Comcast Spotlight, comScore Inc., DivX Networks, Epix, ExtendMedia, Gigle Networks, IBM, Intel, Intertrust (representing Marlin), Latens, MEC (WPP’s Group M), MOD Systems, Motorola, Navic at Microsoft, NDS, Nielsen Online, Opera, Orange/France Telecom, PacketVideo, RedMere, Rovi, Roxio CinemaNow, Samsung, Sony, Technicolor, thePlatform, Verimatrix, Verizon, Vuze, XSpanD, Yahoo!, and Zenverge Check out our lineup, and we hope that you can make it to Santa Clara in a few weeks!

Accenture joins the list of connected TV technology vendors

At the NAB show this week, Accenture announced its Over-the-Top TV solution. Key features of the Accenture solution include:

• Broadcast TV with Video on Demand and interactive application, which enables viewers to see any movie or TV series episode they may have missed. The interactive application enables operators to gather real-time audience data.
• Personal TV experience, which enables individual household viewers to create a personal profile, customize TV needs, create categories, and share contents with friends, schedule programming, and purchase and record content, over their PC or mobile phone.
• Targeted personalized advertising, which enables providers to tailor advertising to each user, according to favorite content, most-viewed content, and community profile. Users can also choose to receive the advertising that meets their interests, which can help reduce “channel surfing.”
• Interactive advertising which enables viewers to express their interest in a product shown on a TV commercial, via a “wish list” application that the user can access later through a web portal.

Accenture is joining a growing list of companies that are working to supply TV manufacturers with solutions to bring Web content to high-definition displays. The Accenture effort looks like it would compare with efforts from the likes of DivX, Google, IBM, and Yahoo!

Google TV

The New York Times is reporting that Google, Intel, and Sony are at work together on a Web television for both set-top boxes and connected TVs. Whether it's true or not, the three companies would appear to be good partners:

• Google has an interest in extending its search and advertising placement expertise to the TV screen, as evidenced by its tests with DISH Network;
• Intel faces challenges in convincing consumer electronics companies to use their Atom processors instead of existing suppliers; and
• Sony is trying to revive its brand.

What is very interesting about Google's play here is what impact this might bring to television and online video advertising. To date, we haven't seen much success with online video advertising, and the model for consumer electronics companies in delivering Web-connected products is to work with content agregators (Netflix, Amazon, CinemaNow) and get a small share of the revenue generated from transactional-based VoD orders. So far, the advertising slice of the pie has been so small that it really isn't even a discussion point for revenue sharing. With Google involved, I wonder if they're going to sweeten the pot for CE manufacturers to entice them to leave Yahoo!, DivX, Rovi, IBM, or any of the other Web-on-TV solutions providers.

CONNECTIONS Europe features Technicolor keynote & executives from ADB, HbbTV, IBM, NDS, Omniphone, OpenTV and more

The speakers for CONNECTIONS™ Europe Summit: Monetizing Connectivity and User Experiences, announced today by Parks Associates, offer unique executive insight into business strategies for digital content, value-added services, connected CE, and advanced video devices and services. International research firm Parks Associates will host the Summit on April 27, 2010, at the Mövenpick Hotel in Amsterdam.

Benoit Joly, Vice-President, Home Network & Applications, Technicolor, will present the opening keynote. Other speakers:

-- Jonathan Beavon, Director, Segment Marketing, NDS

-- Paul Bristow, VP Strategy, Middleware & Consumer Experience, ADB (Advanced Digital Broadcast)
-- Ronald Brockmann, Managing Director, Europe, ActiveVideo Networks
-- Rob van den Dam, Global Telecom Sector leader IBV, IBM
-- Klaus Illgner-Fehns, Managing Director, HbbTV
-- Trond Neergaard, Founder and Managing Partner, Cloudberry Associates
-- Steve Oetegenn, Chief Sales and Marketing Officer, Verimatrix
-- Rolf Uwe Placzek, CEO, Acetrax
-- Kurt Scherf, VP, Principal Analyst, Parks Associates
-- Stuart Sikes, President, Parks Associates
-- Andrew Wajs, CTO, Irdeto
-- Olivier Wellmann, VP, Product Management, OpenTV
-- Speaker TBA, Omnifone

For information or to register, visit http://www.connectionseurope.com.

Parks Associates hosts the CONNECTIONS SUMMIT

Parks Associates hosts the CONNECTIONS™ SUMMIT on January 7, 2010 in Las Vegas, NV.

CONNECTIONS™ SUMMIT features multiple sessions, held January 7, 2010, the first day of CES. Moderated by Parks Associates analysts, these sessions provide an interactive environment for networking and discussion.

http://www.parksassociates.com/events/connections/summit/2010/agenda/agenda.html

Speakers include:

- Bruce Anderson, General Manager, IBM
- Arlo Rose, Senior Dir., Product Design, Connected TV, Yahoo!
- Joly Benoit, Dir., Connected Home Applications, Thomson
- Lauren Thorpe, Senior Dir., Developer Relations, Qualcomm
- Scott Rosenberg, VP of Advanced Advertising, Rovi
- Susan Cashen, VP, Control4 Energy Systems, a division of Control4
- Steve Cashman, CSO, Exceptional Innovation
- Hope Fulgham, CEO/CMO, Piazza Advertising
- Peter Lude, SVP of Engineering, Sony

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.