Tremor Media executive chairman Jason Glickman is working on a new company called Connected Sports Ventures. While still in stealth, the startup looks poised to change the way people watch sports by connecting their social activity on second-screen devices with what’s happening on the big screen.
Just a year or two ago, the world of TV manufacturers was focused on transitioning from the tired horse of HD to the fresh legs of 3D. Then TV OEMs realized they weren’t on the cusp of a huge upgrade cycle, and the allure of 3D faded. At the same time, an entirely new business model — one with potentially recurring revenues — became available: the smart-TV market.
But while many consumers today are buying new smart TVs, many aren’t connecting them. Much like with past technologies, the smart-TV market has some significant challenges if it is to reach the promise that many believe it holds.
One of the biggest problems with new connected-device categories is that they require too much knowledge on the part of the end user when it comes to actually connecting the device. Media Center PCs and digital media adapters are just two examples of connected devices that largely failed because setup experiences were too difficult and ultimately didn’t provide the perceived value to consumers.
To avoid this pitfall, TV OEMs need to make connecting the box to the network both easy and a necessity. That means making setup very simple and also rewarding the consumer. OEMs could accomplish the latter by offering free rentals, pre-installing popular apps like Netflix or Hulu and giving actual rewards.
Price subsidies also incentivize a connection. For example, offer a 5 percent or 10 percent discount on the price of the smart TV if the consumer connects and registers it online. While this may seem like a steep cost, TV OEMs need to realize that the return horizon on these devices is years; ensuring that consumers get connected dramatically raises the likelihood of monetizing them through connected services.
Two screens are better than one
Just having a TV on the network isn’t enough, particularly since tablets and other mobile devices are becoming central controllers for the connected lifestyle. TV OEMs must work on developing well-executed controller apps for their devices that leverage all the popular tablets, either by promoting Google TV or other “platform” apps or creating their own remote-controller apps that drive engagement through interaction with TV shows and TV apps.
However, simply relying on Google or others to develop a second-screen app isn’t enough. TV OEMs need to provide their own second-screen apps that offer unique ways to leverage the built-in functionality of their smart-TV device. Samsung has started to do this with its Smart View app, allowing users to stream TV content to a phone or tablet and browse apps and show info.
Continuous upgrades, continuous experience
One of the biggest failures of connected devices is atrophy of the device, where new functionality and continuous enhancements are not offered on a regular basis. Most TV OEMs rely on third parties for software like Google TV; the world of interactive software is not their “home turf.” With connected devices, continuous upgrades to the user experience are a requirement for success.
Smart-TV OEMs must view their devices as continuous investments rather than one-year product SKUs. This is a completely different mindset, one more aligned with products like game consoles and smartphones than TVs. But it is necessary if they expect to transition to a model that derives significant revenue streams for the life of the device (the goal, in many ways, of moving to smart TVs).
This means investing more heavily in software development than in the past. It also means pushing new “generations” of the software with regularity, whether through the underlying platform (be it Google TV or another platform) or the TV OEM’s native software.
All these suggestions clearly drive home one point: If TV OEMs are going to embrace smart TVs, they need a business model that fits this new paradigm. Up-front, one-burst revenue models are being replaced by longer-term, services-oriented relationships. The key to success in this new world is ensuring that new smart-TV owners are connected and engaged, and that they stay engaged for the life of the device.
Question of the week
The big news this week in the tech world has been Google+, where Google surprised those lucky enough to get an invite with ambitious new social network packed with some compelling features. While no one’s really talking about it, one of the most interesting possibilities with Google+ would be an integration with Google TV. Though it’s likely that nothing would happen for the second generation of Google TV, the possibilities of Google+ in the living room are too big to ignore.
The clear winner of the home networking wars of the last few years has undoubtedly been Wi-Fi. The sheer number of Wi-Fi embedded devices, from laptops to smartphones, is being increasingly joined by pack of new consumer electronics device categories with Wi-Fi, such as Smart TVs and OTT set tops, which means the technology isn’t going anywhere soon. But it’s not without its limitations, and a pack of new technologies could serve as more capable replacements.
This week’s rumors about a possible Facebook hookup with Spotify and Zuckerberg’s recent comments at e-G8 illustrate that Facebook is a company thinking hard about its role in the world of entertainment. The company, which is already a recommendation and curation force (it already drives a significant number of pageviews for video content both inside and outside its own walls), is likely to see its entertainment strategy evolve significantly this year and next; music is only one part of it.
LG, the South Korean makers of phones televisions, household appliances and a variety of other consumer devices has licensed the ARM-based chip cores that can be found in devices from handsets to set-top-boxes. Once again, a vendor has forgotten to invite Intel to the party.
This week, In-Stat (see disclosure) predicted the market for residential gateways — devices combining a home networking router and broadband access modem — would reach 50 million by 2015. But doesn’t mean the digital home has stopped evolving.
The rise of gateways should be of surprise to no one today, even though just a decade ago most consumers were lucky to have a basic Linksys router. The broadband market, however, is mature now, and retail consumer networking providers like Netgear and Belkin have seen the core home networking business slow dramatically. This is in part due to the penetration of home networking reaching 70 percent of U.S. households, but also due to the growing importance of the service provider channel, where low-cost, private-labeled hardware from Taiwanese or Chinese ODMs are increasingly the order of the day.
In short, we’ve finally achieved the past decade’s home network holy grail: a digital home centered around the entertainment network and the consumer’s desire for anywhere and everywhere media. And that’s driving the following three trends:
Forget NAS: Content Will Live in the Cloud
Over the last decade, technology companies have envisioned a world where networked storage would become a consumer technology as more people looked to store media centrally on Networked Attached Storage, or NAS, to play anywhere in the home. Some networked media drives have entered the home, mostly in the form of DVRs, but consumers today are largely streaming content from the cloud.
Why the shift? In part because faster broadband and the wide adoption of home networking has enabled the use of services such as Pandora and Netflix on a variety of devices, but also because consumers simply prefer ease-of-use, low-cost and the big content libraries available from consumer web services. This shift has given rise to the thin clients for entertainment such as Roku and Apple TV-like devices, which are tailored for web streaming.
Beyond Wi-Fi: The Rise of High-Speed Interfaces
No doubt about it, Wi-Fi is the engine that powered the home networking market over the past decade. Faster and faster speeds, pervasive connectivity and the rise of mobile computing has made Wi-Fi a must-have for any modern connected consumer.
But as the demand for rich-media streaming around the entire home grows by the day, Wi-Fi is having trouble as a one-size-fits-all technology. New use-cases, such as distributed entertainment and connected TVs, have resulted in more momentum for powerline networking, and this has in turn resulted in a spate of acquisitions by the big broadband chip makers in the last year as they round out their portfolios.
But wireless technology is still evolving, too. This includes Wi-Fi, whose next evolutionary progression, 802.11ac, will bump speeds to 1 Gbps. Perhaps more interesting is the continued jockeying for ultra-high-speed wireless, including HDMI replacement technologies such as WHDI, WireslessHD and 802.11ad, which is the IEEE’s answer to 60 GHz networking.
It’s About the Software
In the digital home, as with most consumer technologies, value is shifting from the hardware to software. Consumers care less about speeds and feeds today, while the rise of apps in the mobile computing space has resulted in consumers expecting the same choice and simplicity they get on their phones on their primary viewing screen, the TV.
Look for new players like Samsung, Google and Apple to increasingly control the central command console for the home network, due to their software agility. And the entrance into the space by these players is putting pressure on the more traditional players to keep up or adopt similar platforms. At the same time, existing players like Cisco and Netgear have been investing heavily in user-experience and software, to mixed results, but no doubt expect this trend to continue.
Disclosure: Michael Wolf is a former employee of In-Stat. He does not own any shares in the company.
Question of the week
When it comes to looking at Microsoft’s long journey to become a key player in the digital home, most of the digerati remain skeptics. But recently the company has been swinging a hot bat, with its Xbox 360 and a legitimate holiday hit in the Kinect.
Google may have grabbed headlines this week with its TV offering, but a more intriguing nugget to ponder is whether or not Facebook would ever pursue the path to the living room. The answer could just be yes, as the TV screen seems too big a honeypot to ignore for a company that lives on advertising dollars.
With all the talk about Apple TV and the coming Google-ization of the living room, I can’t help but think of another tech giant whose name is missing from these conversations: Cisco. To join in the race to the living room, the company needs to bring some signficant software development in-house by offering a services and application platform. In other words, if Cisco builds it, the MSOs will come.