Has the 'connected TV revolution' really begun, or is it still a skirmish?

editor's corner

Jim O'NeilMore evidence that connected TVs are having a big impact on entertainment viewing and the marketplace: New research says some 42 million homes in the U.S. and Europe report using the Internet to watch television shows and movies on their TVs.

The Strategy Analytics report, from David Mercer, principal analyst in the firm's Connected Home Devices service, said connecting to the Internet and watching on TV isn't yet a daily occurrence, but it's headed that way.

"We are in the early days of the connected TV revolution, but the momentum shows no sign of decline," wrote Mercer in a blog post. "As Ultraviolet launches and Apple considers its own streaming movie service, this market is set to get a lot more interesting over the next few months."

Strategy Analytics polled 4,800 people across the U.S. and Europe for its study, Multiscreen Connected TV: Assessing Device Usage and Ownership, and found that users in the U.S. were twice as likely as Europeans to connect their TV through the Internet; 20 percent of U.S. respondents said they had watched internet content on their TV screens in the past month, compared to only 10 percent of Europeans.

That, Mercer said, is likely because both Hulu and Netflix (Nasdaq: NFLX) have seen strong uptake in the U.S., despite Netflix's recent stumbles.

"Digital service providers such as Netflix and Hulu have seen tremendous progress in the States in the last couple of years as they become available on multiple connected TV devices," Mercer said. "Europe has yet to find its own equivalent, although each market can name examples of localized services."

And, he said, the growth of the segment has some major implications for both device manufacturers and network operators.

"Television viewers are prepared to go to significant lengths to watch their preferred television shows or movies on the big screen," he said. "In spite of the technical challenges, many people want to be freed from the constraints of traditional, managed television services if their choice of content is not available when they want, where they want and at a price they are willing to pay."

The Strategy Analytics report said that only a portion of users currently connect TVs directly to the Internet; the most popular portals in the U.S. are gaming consoles like Microsoft's (Nasdaq: MSFT) Xbox, while streaming over a home network and Internet-connected Blu-ray disc player also played significant roles. In fact, wrote Mercer, the majority of connected TV users said they used more than one device to access content. That could be because different content can be available across different devices, or, just as likely, because they're connecting to multiple TV sets in the home.

Either way, it's clear that consumers are continuing to trend toward their own form of à la carte entertainment. There's a draw, for many consumers, to that content on the Internet.  And, cord-cutting arguments not withstanding (whether in the form of anecdotal or quasi-research), there's little doubt consumers are spending more time watching online video.

How do operators turn that trend in their favor? Is it OK to be a dumb pipe and just collect a toll? Or are there better ways?

I suspect that discussion will be a major component of this year's TelcoTV event in New Orleans next week. See you there.--Jim