TV is dead, long live TV

By Megan Hamilton

It’s a familiar scene: college roommates gathered round a screen to watch the latest hit TV show or movie rental. With bowls of popcorn close to hand and the couch arranged just so for maximum viewing comfort, it’s the perfect picture of convivial, domestic content consumption. But where it differs from previous such scenes – even from as recently as five years ago – is that the screen in question is just as likely to be a laptop, tablet or smartphone as it is a TV set. As Gil Scott Heron once prophetically predicted, the revolution will not – necessarily – be televised.

Certainly, the way in which we consume media has changed dramatically in the last few years; the advent of always-on broadband connectivity and a proliferation of new devices capable of storing, playing and streaming an increasingly varied array of entertainment has led to changing consumer expectations around where, how and when we watch our favorite shows, movies and other video. More importantly for the TV industry, it's also led to a fundamental questioning about the direction in which media delivery and consumption is headed.

Such soul-searching has been driven in large part by what has happened in the smartphone market. Recent statistics show the audience for apps is mushrooming at an exponential rate, and the daily audience for apps that run on Apple's iOS operating system alone - those available for the iPhone, iPod Touch and iPad - has now surpassed 19 million users, each of whom spend an average of 22 minutes per day using these apps. That means the audience for such iOS devices is now bigger than NBC's Sunday Night Football and is just shy of the audience for ABC's Dancing with the Stars. Only four million daily viewers separate the iOS audience from that of the nation's No. 1-ranked TV show, Fox's American Idol, according to data collected by analytics firm Flurry. Factor in Android apps as well, and that audience expands even further.

No wonder TV firms and hardware makers are spooked. Apps and the ability to view content over the internet offer new alternatives for consumers who feel constricted by traditional program guides and channel schedules. The answer, according to the experts, is internet connected TV. And while it's clearly a market that tech firms and content providers are keen to capture, thus far at least the approaches being taken by the different players have been as varied as the content they hope to push.

Clash of the titans

If you can gauge the potential in any given technology development by the size of the interested parties, then connected TV is set to be huge - pitting, as it does, the two biggest names in tech against each other. Indeed, despite the fact that consumers are going to have a huge number of options between Roku, Boxee, Xbox, Sony, Panasonic, Fujitsu, and others - all of which offer some level of connectivity - for many observers the battle for share of the connected TV market comes down to a straight shoot out between those old rivals, Apple and Google.

Indeed, it seems as though the Apple versus Android battle has gone beyond the world of cellphones and entered the arena of internet television. "They're definitely direct competitors, but they're also very different offerings," says Michael Bologna, Director of Emerging Communications for New York-based media specialists GroupM. "Apple TV is a device; Google TV is an ecosystem."

It's a key distinction. Apple is trying to complement the gadgets that are already in your living room and hooked up to your TV. It's an add-on, there to provide a few extra streaming features in addition to your cable box and videogame console. It doesn't have an app store, it doesn't have games and it doesn't have a web browser. It's slick but not complex. It's all about trying to ease people into the idea of using an internet device in their living room. It's pointedly not a computer. Google, on the other hand, wants to turn your TV into just that.

"It is no secret that Apple wants to be in control of your media consumption," says Mary Fastenau, Principal at Honolulu-based Anthology Marketing Group. "Apple TV provides a hub of sorts for your iTunes music, movies, TV shows, photos and podcasts, as well as YouTube videos and other internet favorites on your TV.  Because it is not tied to a subscription, there isn't much technical support required. And AirPlay will allow you to stream content from your iPhone, iPad and iPod touch to the Apple TV without needing to purchase it again. It will allow all of your screens to really be connected."

Jacob Cohen, Senior Strategist at global brand consultancy Wolff Olins, agrees. "Apple TV is really simple; it's easy," he says. "You plug this box into your TV, turn it on, and then you start watching the shows that you want to watch when you want to watch them. It's fast and it's easy to use, and Apple is banking on that being what people want from a TV experience, rather than anything more complicated."

In contrast, Google is taking the concept of connected TV a step further and bringing a more internet-like experience into the television set itself. "It has a line on its website that says, 'The last screen has been liberated', and it's a reflection of the company's approach: encouraging developers to build apps for different devices," says Fastenau. But why would Google want to get into television in the first place? "Because Google can now be the single data source for your media consumption habits," she continues. "With data comes the ability to offer a customized message. Sony has obviously bought into the concept with the introduction of Sony Internet TV powered by Google, so has Logitech, and more will follow. The response to the new products depends on the reviewer, but there is an acknowledgement that the concept of combining all into one screen is the future."

What the Google approach offers that Apple's does not is a browser that allows consumers to access the web. "Google TV really takes it to a whole other level," says Bologna. "It has multiple applications just like you see on a standard smartphone. It offers the ability to search, sort and navigate not just content coming from the internet, but stored content, DVR content, more linear content too."

Changing channels

The statistics around changing viewing habits are certainly compelling. By 2015 more than 12 billion devices will be capable of connecting to 500 billion hours of TV and video content, according to chip giant Intel. And while this presents challenges to technology firms, cable firms, content providers and advertisers alike, it also provides significant opportunities for greater personalization of the viewing experience. Indeed, Justin Rattner, the firm's Chief Technology Officer, believes the advent of connected TV means television will be more personal, social, ubiquitous and informative. "TV is out of the box and off the wall," he says. "It will remain at the center of our lives and you will be able to watch what you want, where you want."

He feels the continuing success of TV is due in large part to the growing number of ways to consume content - and today that includes everything from the traditional box in the corner of the living room to smartphones, laptops, netbooks, desktops and mobile internet devices. "We are talking about more than one TV-capable device for every man and woman on the planet," he says. "People are going to feel connected to the screen in ways they haven't in the past."

In this way, the approaches of both Apple and Google are geared to providing a more seamless viewing experience for consumers. But which will prove the more popular over the long-term? "Could I have predicted beta versus VHS? We have seen so many format wars that I can't actually predict what will happen," says Fastenau. "I think it will come down to accessibility for both consumers and the tech world. I think the successful format will be the one that will allow tech firms the most ability to innovate. If we use the mobile apps explosion as a reference point, it seems that the format that provides the greatest access to developers has an edge because it will more easily provide a platform for the ongoing innovation we crave as consumers."

In this sense, Fastenau is concerned that the controlling, dictatorial nature of the Apple vision could prove limiting in the long-term - particularly in a market that is billed as being all about personalization and freedom of choice. "As consumers, we have believed in Apple and been willing to attach our personal brand to the Apple image," she says. "However, I do worry that consumers will one day wake up and want to dictate their media consumption habits without feeling tied to one brand."

In the same way, however, the Google approach also has its limitations, as Fergal Kelly, VP of Media at interactive TV consultancy firm Ioko, is quick to point out. "I think any type of application you create for a television living room environment that lasts for more than a couple of minutes is going to be a bit of a disaster," he explains. "People want to get to content quickly; they don't necessarily want to watch someone else hogging the TV while they surf the web. Anything that takes more than five minutes, almost like an ATM machine, is going to make the rest of the consumers in that household pretty irate."

Embracing the wave of change

So what will it take for consumers to embrace the coming change? Cohen believes the big problem right now is content and accessibility for both Google and Apple. "They've got a lot of hype right now, but there are still quite a few networks that aren't involved in Apple TV, and there is only a limited number of products that are involved with Google TV," he explains. "However, I think over the next 12-18 months, you'll see more networks jumping into Apple TV because they're clearly going to see an opportunity for making money in a new way. As for Google, you're probably going to see more hardware partners sign up. That'll probably change things a lot for people just because it'll make it easier for them to get to the content they want to watch."

Fastenau feels the impact on consumers depends largely on the timeframe. "If we look at media adoption, it doesn't appear to be following the 'I have to have it today' pattern," she says. "The underlying trend we see is that consumers want to be in control of their own media consumption and connected TV allows them that luxury. The big question is when will the general public hit the tipping point of being willing to pay the additional fees that will give them that freedom of consumption."

She also feels that inertia remains the biggest hurdle to widespread adoption. "We want our content providers to be all things to all people. We want the content to have high production values, but cost almost nothing to create. Most consumers want it to be a superior product, but don't want to pay extra or be bothered with any advertising to support the product." She cites the example of DVRs as a case in point. In January 2006, only 1.2 percent of homes had DVR - but by July 2010, that number had jumped to 37.3 percent. "Adoption increased because cable companies started to include it in their boxes and as part of the subscription," she says, "and I think the situation will be similar for interactive TV. The adoption rates will increase once it is bundled into your current TV or internet package."

In addition, the next few years will see a host of new entrants come into play as the market expands, which will also help drive adoption rates. "We hear a lot about Google and Apple, but Sony has had interactive connected functionality in their television sets for three years now," says Bologna. "So has LG, so has Panasonic. Both the Blu-ray DVD player and the Sony PlayStation have had connectivity for several years, so has the Nintendo Wii. TIVO has been connected for several years. Companies like Boxee and Roku have also come to market over the past 18 months. So we're hearing a lot about Apple and Google because those are the guys with big PR budgets, but they are certainly not the only players in this space."

A bright future

The outlook for connected TV sets is bright. Research from Dallas-based analyst firm Parks Associates suggests that over 30 million connected TVs will be sold worldwide this year - equivalent to 18 percent of total TV sales - and that by 2014 this figure will rise to 130 million, or 60 percent of total sales. And although only 0.7 percent of the 90 million TV households in the US have so far cancelled their pay-TV subscriptions in favor of relying on receiving services over broadband, the trend is clearly growing. Kurt Scherf, VP and Principal Analyst for Parks Associates, believes that nine percent of US pay-TV consumers have a strong inclination to cancel their subscriptions in the next 12 months. What is more, he says, 10 million households in the US will be linking PCs to TVs to watch web video at the end of the year.

"Many households are working with devices they already have to get the connected TV experience, which shows strong future demand for connected TVs, web-enabled Blu-ray players and networked digital media players such as Apple TV and Roku," he says. Over three-quarters of US households with PC-to-TV connections and one-third of Xbox 360 owners are using these connections to stream online video. These households, as they extend online video and other web experiences to the TV screen, are laying the foundation for future behaviors with connected CE and entertainment services, says Scherf. "Connectivity is becoming standard in consumer electronics products," he says. "Manufacturers and service providers should examine these consumer behaviours closely, so they can match their current and future connected offerings with actual demand without pricing themselves out of the market."

"Consumers are becoming more accustomed to personalized experiences in many aspects of their lives, not just in consuming media," agrees Cary Songy, Interactive Director for Atlanta, Georgia-based advertising agency Ames Scullin O'Haire. "A more interactive experience with television is simply a natural evolution that is part of the greater experience of personalization happening everywhere on the internet."

And in terms of the looming battle royale between Google and Apple, Cohen for one feels we're still very much in the early stages of seeing what each has to offer. "They're trying to figure out what is the best case for their users, and I think you'll see them both clarifying their position in the next few years," he says. "Once they do that, both will probably grow in a big way, and you'll start seeing them converging and competing with each other much more fiercely."

The fusion of the web with the largest screen in the home is often called the Holy Grail for both the consumer and media owner - because the content and advertising options are endless. Is the age of TV over? No. It's just entering a new phase of its ever-upwards trajectory. "My feeling on it is that in less than 10 years time, all televisions will have an internet connection on them," concludes Kelly. "And I don't think that's a particularly bold statement. It'll be cheap enough to do so, so it'll happen."