The television is probably one of the greatest technological innovations of all time, at least in the consumer space. It brought entertainment to numerous generations worldwide, and continues to do so today. However, the TV set we once knew is changing with the times to become more than an end-point for content delivery. The TV is getting smarter, which has lead to the rise of the moniker “Smart TV,” and this is opening up new possibilities for vendors and consumers alike.
Old habits
The big selling point of Smart TVs is their connectivity, enabling a wide variety of dynamic content to be streamed to them via the Internet much in the same way as on smartphones and tablets. LG is a vendor that has been quick to get on the Smart TV bandwagon and has been releasing connected models in key markets such as Australia. It is a push that LG marketing general manager, Lambro Skropidis, says is paying off for the company. “Smart TV and IP-enabled TVs are growing very strongly and form close to 40 per cent of LG’s overall TV sales,” he said.
While the online connectivity of Smart TV seems like an exciting prospect for a technology standpoint, industry pundits have often wondered exactly how many people are actually connecting their TVs to the Internet after getting them home. Skropidis says that LG’s activation rates would be contrary to any of those question marks. “From our perspective at least, we are connecting at a higher rate than the industry,” he said. “This is at well over 50 per cent, and much of this is driven by the very success of our 2012 models.”
Acccording to IDC ConsumerScape 360 and consumer primary research director, Michael DeHart, it turns out that people are currently using Smart TVs in a similar manner to standard HDTVs. “There are of course exceptional users, but many Smart TV owners don't yet understand the value proposition of connected TV deeply enough yet to spend the time learning connected TV functionalities,” he said.
Since it is still early days for Smart TV, it has prompted some people to wonder if there are a lot of consumers that still just buy a set because they are the best ones in the shop, rather than specifically because they are Internet capable. With the vast majority of TVs produced and sold in the US being connected TVs, DeHart says that the best TVs currently on the market will be connected TVs by default. “Much like the fact that the best smartphones offer Skype and Skype-like applications, it doesn't mean consumers buy the TV set for this reason,” he said.
To find out what consumers really had to say on the topic, IDC studied this question directly by asking people what are their purchase drivers were for connected TVs. What IDC found from its ConsumerScape 360 program, which surveyed consumers in 24 countries, was that internet capability came a distant seventh (over 50 per cent), compared to the leading decision factors of picture (over 90) and audio quality (85). “What these results tell us is that having internet capability is actually the least umportant purchase driver amongst the drivers studied,” DeHart said.
Skropidis admits that a large contingent of consumers buying sets because of picture quality, size and they look slick likely exist. “However, going back to the fact that over 50 per cent of our owners are connecting to the Internet, we can assume that a large majority are also buying as a connectivity device,” he said.
It’s all about the content
While it is all well and good to make devices such as TVs online enabled, what will ultimately draw people to use them is the available content. In terms of the apps, Skropidis says that LG sets a solid foundation though a “very easy to use user interface,” which has been designed to be structured and presents content within easily identifiable zones. “One of our key zones spans premium content gathered from local and overseas sources,” he said. “It offers value through catch-up TV, movies, news, sport, YouTube, Facebook, and so on.”
Following the boom started by James Cameron’s Avatar in 2009, vendors such as LG have also worked hard on building up this area of the TV business. “We offer a dedicated 3D content zone with content from our partnership with Disney, plus other documentaries and special interest areas,” Skropidis said. In addition to a dedicated gaming zone, called Game World, LG’s own Smart World app store comes with a variety of apps covering games, special interest and other areas of interest.
Just because the apps and services are there, it does not automatically mean people are actually using them or whether they get forgotten after the novelty wears off. DeHart says it ultimately depends on how tech-savvy the consumer is. “The current list of offerings is still nascent, and usage will grow much higher when more and better offerings exist,” he said. “As our results showed, what Smart TV owners care about the most is not connectivity, but picture and audio quality.”
From what LG has seen from its customers, the apps and services are being used by Smart TV owners. “Usage is growing month to month very strongly across all zones,” he said. In particular, LG has found unique search activity has grown to over 330,000 a month. “Our premium contents has grown strongly with 30 per cent growth over the past three months, and access to our app store is strongly growing by 15 per cent per month,” Skropidis said.
While the popularity of smartphone apps on iPhone and Android has been well documented, it seems to have taken a while for manufacturers to understand what people actually want from apps on TV. Skropidis attributes this to the app-enabled TV space being relatively new. “It is very much in discovery mode for both manufacturing and consumers,” he said. “Though, the solid increase in search activity, catch-up TV and on demand movies is encouraging.”
Future perfect
As a platform holder, companies such as LG are in the position where it is likely talking to app developers and partners all the time. When asked about the conversations the vendor is having with developers about their experiences trying to monetise apps on connected TVs, Skropidis says it depends on the content partner’s strategy, such as whether they want to be on all platforms such as mobile, tablet, and TV etc, or whether they have a first mover approach. “We work with our content partners by creating models that create various revenue streams, such as pay-per-view service, selling content or selling advertising space within their content or app,” he said.
When it comes to delivery of entertainment content, some people have suggested that Smart TV could be the next big platform for video gaming. While Skropidis admits that Smart TVs are being used increasingly for gaming, he does not see them at the point where they will replace gaming consoles. “This is mainly due to the hardware requirements of serious gamers,” he said. Memory capability and processing speed are key factors for the best gaming experience, and dedicated consoles will continue to deliver this.”
From an analyst perspective, DeHart says this topic is currently a “big maybe.” “It certainly does open a very compelling new platform for interactivity,” he said. “So it has the potential to become a big platform for gaming, such as for massively multiplayer online games.” At the same time, Cloud-based services such as OnLive in the US are now delivering console standard games over remote servers without the need for powerful local hardware, leading one to wonder whether the Smart TV platform will also handle these services in the future.
DeHart sees this as a strong possibility. However, since Smart TVs are still in their nascency, he says more functionality, particularly in the area of content delivery, is a must to realise “anything close to potential return on investment” from TV connectivity. “Remember when you bought your first laptop and it was a big deal, but didn’t do everything your desktop PC did?” he asked. “A direct analogy plays out here.”
Skropidis also admits to this being possible, but it is still some time off from being realised. “We would need better processors and large memory capabilities within the Smart TVs,” he said. As such, the key development that he is currently keeping an eye on in relation to Smart TV is Australia’s own burgeoning Internet imitative. “The NBN, with high speed internet to broader Australia, will be a game changer,” Skropidis said.
The future of Smart TV according to DeHart will essentially be decided by user interfaces and experiences, as he says device usage is always governed by these two areas. “Simply put, most consumers are not interested in working hard to use their devices in advanced ways,” he said. “We've already seen connectivity on Smart TVs increase somewhat with better remote devices, but this is one small step in the process.”
Patrick Budmar covers consumer and enterprise technology breaking news for ARN at IDG Communications. Follow Patrick on Twitter at @patrick_budmar.