We've Been Left to Our Own Devices

Smartphones, tablets and gadgets now outnumber people in the U.S.; new gear from CES will rock TV 1/14/2013 12:01:00 AM Eastern

Consumer electronics (CE) devices connected
to the Internet—more than 425 million—
now outnumber people in America,
NPD Group reports. With about 20,000 new electronic
gadgets rolled out last week during the 2013 International
CES show, CE has potentially historic implications
for the TV industry.

So far, much of the impact has been positive. Better,
smarter, larger HDTV sets have encouraged more TV
viewing, while the growing popularity of smartphones
and tablets has opened up new opportunities for consumers
to watch programming.

But consumer electronics manufacturers’ expansion
into the mainstream of video consumption also
raises a number of competitive issues. As the major
CE companies become an important video pipeline
to consumers, they are also looking to get a bigger
piece of the $130 billion television advertising and
subscription pie.

Some of these technologies also raise thorny legal and
regulatory issues. Broadcasters, for example, have been
suing Aereo to block its subscription-TV service that
delivers broadcast signals to Internet-connected devices
without paying networks and stations. During the CES
show, Aereo CEO Chet Kanojia said the company has
raised an additional $38 million to expand into another
22 markets in the first half of 2013. A nationwide rollout
of Aereo is likely by the end of this year.

Here’s a look at some of the big trends from last
week’s 2013 International CES that TV executives need
to be watching.


Biggest Changes: Smartphones have moved firmly
into the mainstream, with 55% penetration in the U.S.;
globally, they are now the best-selling consumer electronics

Faster processors, higher-quality HD
screens, tighter integration with other devices for sharing
content, 4G capabilities and better cameras continue
to boost smartphones’ popularity.

The Players: Apple faces increased competition from
Samsung, which market researcher Strategy Analytics expects
will be 2013’s biggest smartphone producer, while
Sony and Microsoft are battling for a bigger slice of the pie.

How They Will Change Things for TV: As smartphones
get more intelligent and powerful, they are becoming
a hub for many other activities, acting as the remote
control for TV sets or a platform for second-screen apps.

Manufacturers are also rolling out more 4G-capable
smartphones with larger, better screens, like the Samsung
Galaxy and Sony’s new 4G Xperia Z, which has a five-inch 1080p HD screen. This will likely boost viewing
of TV programming and
movies on these devices.

Mobile app analytics
company Flurry reported
that in December 2012,
U.S. users spent about
127 minutes a day on mobile
apps, versus about 168
minutes watching TV.

“The buying public is not
making a gradual shift to mobile
entertainment,” Dish president and
CEO Joseph P. Clayton said during
CES. “It is a full-blown sprint.”

And those numbers will likely
grow as more consumers get faster
4G phones, noted Jack Perry, CEO of
Syncbac, which is working with 112 stations
(reaching about 35 million homes) to
stream live broadcasts over cellular networks.

CES also saw the introduction of more new devices
that can receive the mobile DTV signals many broadcasters
have launched using a portion of their over-theair

But those efforts face some potential tough competition
from mobile carriers. During a CES keynote, Lowell
McAdam, Verizon chairman and CEO, said the company
might begin broadcasting video over 4G LTE networks as
early as 2014 using technologies he believes could even
handle the traffic generated by the Super Bowl.

0114 CES Chart


Biggest Changes: Less than three years after Apple
introduced the first iPad, the tablet’s shipments are expected
to hit $37 billion in the U.S. in 2013; eMarketer
is predicting more than half of all Internet users in the
U.S. will have a tablet by 2015.

Improvements: Better screens, faster processors and
lower costs are making tablets a potential replacement
for PCs, laptops, small TVs and even game consoles.

The Players: Apple will continue to dominate the category,
but it is facing stiffer competition from Amazon, Samsung
and others that have launched less-expensive 7-inch tablets,
which will account for about one-third of the global market
in 2013, noted market researcher IHS iSuppli.

How They Will Change Things for TV: With the
number of tablet users expected to approach the
100-million mark by the end of 2013, lower-priced
7-inch tablets will continue to push these devices into
the mainstream. That’s good news for broadcasters, who
will be able to reach larger audiences on these videofriendly
devices. But it puts more pressure on programmers
to find ways to boost their paltry mobile revenue;
it creates more competition for Apple; and it is bad news
for TV set manufacturers and computer makers.

Just as tablets have cut into PC sales, “We have seen
tablets cannibalize small-screen TV sets, which are
down 20% year-over-year,” Shawn Dubravac, Consumer
Electronics Association chief economist and senior
director of research, said during the show.

Like smartphones, tablets are increasingly becoming
a hub for wider video and media usage, with a number
of CE makers touting the ability to easily share
content among their tablets, smartphones, TVs and
gaming consoles, and how they can work together in
a variety of second-screen activities. “One screen isn’t
enough for consumers,” said Yoon Boo-keun, president
of Samsung Electronics. “They want all their devices
connected and to be able to
move their content freely
between devices.”


Biggest Changes: The old boob tube keeps getting
more intelligent.

Improvements: Faster chips, better apps, bigger
screens, voice and motion controls, and higherresolution
4K video are designed to strengthen the TV’s
position as the center of the living room.

The Players: Samsung continues to lead the pack in
this extremely low-margin business, but it faces tough
competition from Panasonic, Sony, LG and others that
are also pushing smarter sets into the market.

How They Will Change Things for TV: Consumers
are rapidly embracing the idea of smarter, betterconnected
TVs. A recent survey from Frank N. Magid
Associates and YuMe found that 45% of consumers
expect to purchase a new TV in the next year, a much
higher rate than usual, noted Ed Haslam, YuMe senior
VP of marketing. And eMarketer projects that the share
of all homes with an Internet-connected TV set will rise
to more than 43% by 2016, up from 22.5% in 2012.

More notable developments include faster processing
power and improved apps that are making these
sets much more intelligent, with better features for
interactivity, search, social TV, content-sharing among
devices, and user interfaces, noted Ashwin Navin, CEO
at Flingo, a major publisher of connected-TV apps.

Increasingly, these TVs also enable users to view all
of their content—linear broadcast and cable channels,
DVR recordings, video-on-demand, subscription overthe-
top services, and personal photos and videos—on
one screen, searchable with voice or motion controls.

That is good news for viewers, but it also means programmers
will have to acclimate themselves to a world
where their content appears side-by-side with subscription
video providers such as Netflix.

Screen technologies have also continued to improve.
At CES, about 10 manufacturers were offering around
50 models of higher-quality 4K or Ultra HD screens;
the latter feature four times the resolution of current
HD screens. The CEA is predicting sales of only 23,000
Ultra HD units in 2013, but it expects unit sales to rise
to around 1.4 million in 2016.


Biggest Changes:
Gaming consoles have evolved into
alternative entertainment platforms that connect TVs to
a wide array of media and video.

More apps and content deals continue
to expand usage.

The Players: Microsoft and Sony are battling to build
large content ecosystems for their consoles.

How They Will Change Things for TV:
Game consoles
have been widely used to connect TVs to the Internet
and are now by far the most popular way to access
over-the-top content
on TV screens, making
console manufacturers
key content partners for
digital distribution.

This is particularly evident
at Microsoft, which
has a global installed
base of more than 70 million,
with more than 40
million Xbox Live subscribers
worldwide who
can access content from
90-plus companies. Currently,
42% of Xbox Live
subscribers in the U.S. are
watching an hour of TV
or movies on the Xbox
every day and are spending
an average of 84 hours
a month on the Xbox Live

“We have made a fundamental
shift from being
a game console to being
an alternative entertainment
platform and service,” said Ross Honey, general
manager of entertainment and advertising at Microsoft.
“Our users are now spending more time consuming
video than playing multiplayer games.”

Microsoft has cut content deals with many of the
largest U.S. programmers and launched a studio for the
creation of original Web content. The company also has
been working closely with multichannel operators on
apps that allow subscribers to find and access content
with Xbox’s voice and motion commands or via its new
Windows 8 operating system.

“As [operators] offer more and more content, we offer a
unique value proposition of helping them make it easier
to " nd and interact with that content,” Honey added.


Biggest Changes: Standard set-top boxes are increasingly
being replaced by larger media hubs, whole-home
DVRs or CE devices.

Improvements: More storage, faster processors and
improved apps promise to transform the way subscribers
access and interact with content.

The Players: A growing number of CE manufacturers,
from Samsung to Microsoft, are working with operators
to hook up their TVs, game consoles and other devices
directly to multichannel providers.

How They Will Change Things for TV: The move
to Internet-connected devices and IP infrastructures for
delivering video has enormous implications for multichannel
providers and the way they deliver video into
the home. Increasingly, operators are deploying wholehome
DVRs, which work like video servers to deliver
content to multiple devices, or are directly connecting
their networks to smart TVs or game consoles so subscribers
can watch programming without a set-top box.

Those trends were particularly evident during CES,
when Dish unveiled its Hopper with Sling whole-home
DVR and several new apps.

Vivek Khemka, VP of product management at Dish,
said the new Hopper will allow subscribers to access
live TV programming, DVR recordings and on-demand
content on any Internet-connected device—inside or
outside the home. Khemka showcased a new feature
called Hopper Transfer that will permit subscribers to
move DVR recordings to an iPad so they can be accessed
outside the home even when users don’t have the
WiFi connection needed for the Sling features. “It completely
transforms the viewing experience,” Khemka
said. “They will have access to everything they have on
their TV on every other device.”

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