What's Coming In 2012: Internet TVs Out-Box The Boxes

Television

This is the third in a series of posts this week that will highlight key people, companies and trends to watch in 2012 in the sectors we cover most, from publishing to legal, and from mobile to advertising.

2012 may be the year when internet TV’s promise becomes a mainstream reality – but operators must work hard to switch consumers on.

Next year, many TV sets sold by big-brand and other home electronics will come with built-in internet connectivity, boasting interfaces that put a new range of “apps” and services front and centre.

It will mean a tremendous new distribution opportunity for content providers, especially video and TV owners and operators. Just as online entertainment consumption is moving from the desktop to mobile and tablet, so it is also finally about to move to the big screen in the living room.

When consumers get these features integrated with TVs, it threatens to make dedicated internet video boxes like Roku, Boxee and Apple (NSDQ: AAPL) TV appealing only to refuseniks, until the TV upgrade cycle kicks in. In the UK and mainland Europe respectively, two new standards, YouView and HbbTV, will bake internet on-demand video and apps in to the television industry’s core electronics standards.

Google (NSDQ: GOOG) failed in its experimental Google TV launch in 2010 and underwhelmed in its 2011 relaunch but Eric Schmidt reckons it will ship on the majority of TV sets by mid-2012. That sounds like pie in the sky — but maybe Schmidt knows something we don’t.

At least until then, the dominant connected TV vendors will remain TV makers like Samsung, Sony (NYSE: SNE), Sharp, LG (SEO: 066570) and Panasonic. At the end of 2011, Samsung already has around 1,000 Smart TV apps for its TV sets. These hardware makers, long considered mere component assemblers, will become new power brokers in the industry — players with which content owners must deal to gain real estate on their new screens.

The new scale that IP-delivered video will achieve in 2012 will massively multiply the audiences exposed to online video advertising, lighting a fire under that industry. And it will finally support introduction of targeted advertising to viewers. YouTube, which has amassed the largest online video audience, will be amongst the best placed to benefit, but it must continue working hard to secure a role for itself as a distributor of premium content to these new TVs, in a year when that content’s owners can themselves go direct to viewers.

All this promise, however, must be tempered by cold facts. While eight percent of consumers own a connected TV today, only three percent actually connect it to the internet, according to a UK Ipsos Media CT survey. That chimes with industry talk I have heard that only five percent of Sony and LG smart TVs are ever connected.

According to Ipsos, only four percent of consumers intend to buy a connected TV in 2012, according to YouGov. Fifty-two percent say they definitely will not.

“There can be no burying of heads in the sand,” says YouGov’s media director Dan Brilot. “This uncertainty and confusion amongst consumers about the technology is clearly an obstacle for manufacturers who will have to raise awareness of their product’s capabilities if smart TV’s are to become as ubiquitous as smartphones.

This apparent lethargy, however, may be cured by better marketing, by a content tipping point and by natural upgrade-cycle momentum, which will eventually mean all TVs will be connected TVs. Right now, there is a chicken-and-egg scenario: Consumers don’t know they want connected TV because they don’t know what connected TV is.

Well the marketing, the content and peer recommendation kick in, that will change. And internet connectivity will become more an ordinary feature of TVs — more like HD than 3D — normalising the technology through upgrade cycles. “It will be even tougher if the games console industry starts educating consumers about their products’ internet capabilities,” Brilot warns.” After all, Xbox has a higher UK install base than Virgin Media, for example.

Even so, Xbox remains primarily a gaming device. Whilst games consoles are currently an excellent trojan horse to the world of TV, when consumers start buying, in their millions, TVs that eliminate the need for an internet video box, the scene will be set for online video’s great leap from the desktop to the living room.

Read the rest of the posts in our Coming in 2012 archives.

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