Premium Content Drives Connected Device Adoption

The online video revolution will be televised, meaning that it will soon show up on TVs, Blu-ray players and other connected devices, a panel of execs agreed at the Future of Television event in New York on Thursday. But the content that’s available on those devices could affect how much consumers think they’re worth. As Shawn DuBravac, chief economist for the Consumer Electronics Association, put it, “Consumers will pay more money for a connected TV if it has premium video content.”

At the same time, there are some limitations to connected devices. In the short term, most of them carry the same content — Netflix (s NFLX), Amazon (s AMZN) video-on-demand, YouTube (s GOOG), Pandora, etc. Zach Klein, chief creative officer for Boxee, said that’s because only so many content partners are willing to work with companies like his to distribute online video to devices.

Another issue is that there’s no good way to navigate through that content. “The second [consumers] connect their TVs to the Internet, they’re overwhelmed by choice,” CEA’s DuBravac said. “The next bit of innovation will be in how to organize that information.”

Even so, the availability of content on connected devices should drive more consumers to adopt services, panelists said. According to Kurt Scherf, vice president and principal analyst at Parks Associates, the consumer electronics industry is expected to ship about 200 million connected devices worldwide by 2013. For a market that’s still in its infancy, that might seem like a drastic jump in just a few years — but Scherf said the consumer electronics manufacturers he talks to actually believe that estimate is too conservative.

DuBravac said those numbers jibe with his organization’s research. The CEA, which tracks shipments of CE devices, estimates that about 60 percent of all televisions sold in 2013 will have a broadband connection.

All those connected devices will drive some serious transactional revenues for over-the-top media, to the tune of about $3.4 billion by 2013, Scherf said. But in the grand scheme of things, the amount of money to be made off of IP video is still just a fraction of traditional pay-TV services. To put things in context, Scherf said that together, pay-TV and video-on-demand sales will total between $11 billion and $12 billion by that time.