Connected TVs: What to Watch for

Content-rights issues are among major questions raised by the rising popularity of smart TV sets 5/23/2011 12:01:00 AM Eastern

ON MAY 24, B&C, Multichannel News and Twice
are hosting a major event in New York City:
“Connected TV and 3D—Supplying the Demand.”
In advance of the conference, B&C spoke with a
number of executives on the impact of connected TVs.
Here are four key questions they say broadcasters and
operators need to keep in mind.

How fast will consumers get connected?

There is little doubt that TVs connected to the Internet
are one of the fastest-growing consumer electronics
categories, and that broadcasters are taking notice. “Tablets
are already established as a game-changer, and now
people are looking at connected TV as the next big thing,”
says Mark Hyland, QuickPlay Media VP of marketing.

The Consumer Electronics Association expects that
manufacturers will ship 5.2 million connected TV sets
in the U.S. in 2011, up from just under 1.3 million in
2009. Forrester, the independent research company, is
predicting that 43 million homes will have connected
TVs by 2015.

Companies like Broadcom are deploying faster chips
at lower prices, which is pushing down the prices of
sets and other consumer devices while making them
easier to connect and use, notes Dan Marotta, executive
VP and general manager for Broadcom’s Broadband
Communications Group.

But companies will have to watch how fast viewers
get connected. Research from Forrester in summer 2010
suggested that more than one-third of all smart TV owners
were not using the connected TV features.

How do smart TVs change competition for viewers?

Over time, the growing popularity of connected TVs
promises to open the industry up to new competition
in a way not seen since the advent of multichannel TV.
“Cable operators had been in complete control of the
interface presented to the consumer, but with connected
TV, the CE manufacturer now controls an input” where
users of a connected TV can access apps for Netflix and
other over-the-top providers, notes Ian Blaine, CEO
of thePlatform. “It is a very thorny issue for operators
thinking about connected TVs.”

That is making alliances with consumer electronics
manufacturers more important, but it also opens up
more competition for eyeballs from over-the-top providers—
which have an increasingly easy path into the living
room—and even among cable operators themselves,
who might use these TVs to expand into new territories.

Who owns the rights?

While Comcast, Cablevision and others argue their
existing carriage agreements allow them to stream content
to other devices in the home, Time Warner Cable
and Viacom are already suing each other over the MSO’s
iPad app. And it isn’t clear how existing carriage agreements
might apply to connected TVs.

“It is a blurry line, and everyone is going to be closely
watching the first few carriage agreements that come up
for renewal” to see if operators will have to pay extra for
TV everywhere or connected TV rights, says Mark Jeffery,
senior director of video and multi-screen, Americas
Cable Solutions at Alcatel-Lucent.

Over time, cable operators might also negotiate national
deals and then use connected TV to offer video
outside the current footprint. “It allows a cable operator
to go from a regional provider to a national operator, a
huge change” in the structure of the industry, says Jeffery.

What’s in and what’s out in the connected home?

One potential casualty in the home entertainment
makeover being created by connected TVs and other
networked devices is the set-top box. Comcast and TWC
have already announced plans to deliver their products
into the home without set-top boxes over connected
TVs, and a number of operators are looking at using
broadband connections to expand the content they offer.
DirecTV, for example, is planning to connect at least 40
percent of its HD DVRs to the Internet by end of 2013.

The connected TVs and these other networked devices
will also make it easier to add more interactive
elements, deploy more targeted advertising and dramatically
improve the current TV guides, which do a
very poor job of searching through hundreds of linear
channels and tens of thousands of VOD titles.

Rovi, for example, recently introduced a TotalGuide
xD search and recommendation product that would allow
viewers to use an iPad or other devices to easily
search through all the available content from a home’s
linear TV channels, VOD titles, DVR recordings and
over-the-top content, notes Sharon Metz, vice president
of vertical markets at Rovi. “It’s a tremendous opportunity
to expand the depth and breadth of the viewing
experience,” Rovi says.

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