By Mariko Hewer
These days, it's almost implicit that any TV on the market will have the ability to connect to the Internet via a companion set-top box. According to eMarketer, connected TV usage grew by 25 percent in 2012. The company says by the end of 2013, 35.1 million American homes will have at least one connected TV, and usage rates will continue to rise by double-digit rates through at least 2016. The future looks bright for this segment of the online video industry.
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Within this segment, however, is a subset that is also rising, albeit more slowly: smart TVs, or TVs with built-in Internet access. eMarketer estimates that 15.2 million U.S. homes had smart TVs last year and believes that number will rise to 40.2 million by 2016.
For consumers who believe they can get everything they want from online video or certain broadcasters that offer video on demand without a set-top box, being able to bypass such hardware in favor of direct-to-Internet TV access is a big advantage. In this special report, FierceOnlineVideo takes a look at some of the pros and cons of the newest trends at the intersection of consumer electronics (CE) and online video: smart TVs.
Fostering awareness of accessibility
Just because a TV has built-in Internet capabilities doesn't mean those capabilities are available to all consumers. Only a few cable providers have hopped on the smart TV wagon, and usually they pair with a specific CE company to do so. This means that not only must viewers have the right subscription service, but also the right hardware to match it.
Furthermore, says Dan Sahar, VP of product marketing and co-founder of online video solutions provider Qwilt, consumers want to be able to interact easily with their smart TVs.
"The issue today is that you're using a remote control to do stuff that is a little advanced… like how you search for a video," Sahar told FierceOnlineVideo. "You're very limited with a remote control."
Instead, Sahar suggests tablets are the future of smart TVs. "All of a sudden you look at your tablet and you can do pretty much anything with your finger," he says. He believes the trend will accelerate "if they [the CE manufacturers] are able to solve the UI [user interface] problem."
Pioneers: Time Warner Cable and Samsung, Rogers and LG
Samsung 55-inch LED 6400 series smart TV
Time Warner Cable (NYSE: TWC) is one cable distributor working with a CE company to solve the challenges of getting long-form content to its subscribers on smart TVs. The company announced in June that, starting this summer, subscribers of its service who also own a Samsung smart TV will be able to watch video on demand programming by downloading and logging in to the authenticated TWC TV app through their screens--no set-top box needed.
The app will feature about 5,000 on-demand shows from almost 100 networks, but--so far at least--the companies have not expressed any intention to offer live programming without a set-top box.
"Time Warner Cable is giving customers more flexibility in how they watch the content they love through our TWC TV application for Samsung Smart TVs," Mike Angus, SVP and GM of video for Time Warner Cable, said in a statement. "We're committed to giving customers the best television viewing experience as we expand the ways they already use TWC TV."
LG 47-inch class cinema 3D LED Google TV
Other countries are getting in on the smart TV action as well. Canadian MSO Rogers Communications (NYSE: RCI) announced in April that it would launch the newest version of its Anyplace TV app, which can stream VOD to LG's 2012 and 2013 Smart TVs. Rogers TV subscribers must set up credentials and log in to profiles at RogersAnyplaceTV.com to access their content without a set-top. The company said it would provide more than 1,000 hours of content for the app on LG smart TVs.
LG did not have a comment for this report.
Rogers Senior Vice President of Content David Purdy said in a statement that the innovative technology "makes next generation entertainment experiences possible."
The company exec also called the Internet "the anchor in the home," pinpointing an important reason for the increasing development of smart TVs with built-in Internet capabilities as well as the increase in authenticated TV everywhere apps.
Purdy told FierceOnlineVideo that he hopes to make Rogers content available across as many platforms and in as many environments as possible.
"I think the primary customer need that we're trying to meet with Rogers Anyplace TV is the desire for customers to both time shift and place shift… My intent would be, anyplace where there's IP connectivity and people consuming video and entertainment, I want Rogers to have both linear and on-demand offerings available."
The SVP added that his company's wireless business helped it build ties with CE companies.
"We have many more wireless subscribers [than cable subscribers], so as a result we have pretty strong relationships with CE manufacturers that are known for creating smartphones. That includes Samsung, Sony, LG, so it was really an extension of our wireless relationships," he said. He added the company would be interested in fostering similar partnerships with other CE manufacturers.
The challenge of consumer (un)awareness
Another obstacle cable distributors and their CE partners may face is consumers' unwillingness to use their smart TVs in a "smart" capacity, instead only relying on them for live or video on demand programming with a set-top box.
According to a study conducted by the NPD group in May, only 47 percent of home entertainment devices "are currently connected and being used for their online capabilities [and] Internet capable TVs and Blu-ray disc players are the least likely to actually be connected to the Internet and used for their online features."
This adds another facet to the problem of getting consumers enthusiastic about the idea of a TV experience without a set-top box. Viewers who are hesitant about using Internet capabilities of the connected TVs they already own are likely to be using the devices principally to watch programming from a cable company. Will they be willing to cut the cord, invest in a smart TV and take video on demand and online video services instead?
If cable companies start partnering with more CE companies to create connected and smart TVs, this market segment is likely to expand significantly, if not at the explosive rate of online video. The increase in the number of smart TVs is likely to drive prices down, and some consumers may be satisfied with the limited amount of programming offered through this medium. How many are willing to take the plunge into set-top-box-less waters remains to be seen.