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Why you’ll buy a new TV in the next 5 years

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A few weeks ago, I wrote a post entitled “The incredible shrinking TV replacement cycle,” which used some data to illustrate how TV buyers have started bucking the longtime trend of upgrading their TV screens every seven to eight years, and theorized that TV purchasing will continue to accelerate over time. After seeing the best that CE manufacturers had in store at CES, I’m even more convinced. But not for the reasons you might think.

Where we are now

The combination of low price, increased functionality and the HD upgrade cycle have spurred consumers to adopt HDTVs en masse. According to recent research from Leichtman Research Group, about 70 percent of Americans now have at least one HDTV — up from 17 percent five years ago. Moreover, a number of those consumers already have multiple HDTVs, with about half of all HDTV households owning two or more.

I personally think that’s a trend set to continue, but not everyone agreed. In fact, I received a fair amount of criticism in the comments on the original post, as well as on Twitter and on other sites. (Check out Alexis Madrigal’s “The New Laws of TV Upgrading” for a pretty complete counter to that original post.)

The key argument against seems to go like this: Consumers bought a bunch of HDTVs over the past five years to take advantage of a noticeable difference between SD and HD feeds of their favorite content. But now that they’ve got the right-sized pane of glass for their living rooms capable of displaying HD video, there’s little reason for them to go out and buy a new TV. In other words, the HD revolution is nearly over.

The dumb smart TVs of CES

The counter-argument is that there will soon be a new revolution of smart TVs to pick up after the HDTV craze has worn off. And after attending the Consumer Electronics Show last week and seeing all the hot new HDTVs, 3-D TVs and Smart TVs available, I’m even more convinced consumers will soon be buying new TVs in increasingly shorter periods of time. But it’s not because I believe this year’s TVs are such a huge step above last year’s TVs that consumers will want to run out and get them.

In fact, just the opposite is true. This was illustrated in a dinner I was having with a few other journalists and executives Wednesday night when one of them asked what TV I would buy, of everything I saw on the show floor and in demos. The answer was easy. “None of them,” I said.

The reason is this: there are better things to come. There’s a huge opportunity for real innovation on the TV that’s gone completely untapped. But I have a feeling that’s going to change, and that change is going to come sooner than most think. Until it does, I’m sitting on the sidelines.

Where are the killer apps?

The killer app for most smart TVs today is Netflix. (s NFLX) Pretty soon, pay TV operators like Comcast (s CMCSA) and Time Warner Cable (s TWC) and Verizon (s VZ) will make their services available as well. And HBO has some pretty ambitious plans to bring its authenticated on-demand service to connected devices.

But in each case, what we’re really talking about is making more TV available on your smart TV, but delivering it over the Internet. Think about that for a second: The main reason for most consumers to buy a smart TV today is to gain access to more of the same stuff that they already watch through cable.

And that gets to the heart of why I believe we’re on the cusp of another huge upgrade cycle. Today’s TVs are not much smarter than they were a year ago, or even two or three years ago. And that’s why everyone who already bought a shiny new HDTV set or even a first-generation “smart” TV will soon be in the market for a TV with some actual smarts built-in.

Real innovation is yet to come

Think about all the things that you could do with a truly smart TV that haven’t been enabled yet:

  • HDTVs with cameras built-in could enable viewers to video chat with friends while watching a TV show together on the big screen. You know, real social viewing.
  • Smart TVs could provide personalization of content and easier discovery of your favorite shows. As creepy as it may seem, facial recognition — like that enabled by Microsoft Kinect (s MSFT) and shown off by Samsung at CES — could finally break down household usage and target TV programming based on who’s watching the box at any given time.
  • Sports broadcasters could overlay real-time stats on a sidebar that runs alongside a football matchup, or provide a synchronized experience with a second-screen tablet or mobile app. Viewers could get fantasy updates or manage their teams in real-time from those apps.
  • Networks could provide additional features — director commentary, behind-the-scenes footage, additional information about actors and scenes, etc. — into apps and make them available on TVs and other screens. (I’m thinking of extending HBO Go’s Game of Thrones interactive features, which had only been available when streaming in the web browser, and bringing them directly to the TV.)
  • TV apps could provide real-time polling for competitive reality shows, replacing text messaging and Twitter counts. How many Google TVs do you think would sell if you could vote for your favorite American Idol directly from an app while watching the show live?
  • For the enterprise, connected TV apps could provide new levels of collaboration and video conferencing tools, without the need to hook into expensive proprietary systems.

Of course, there are a number of technology companies looking to enable these types of features, but very few implementations have actually come to market, and none of them are mainstream. The important thing here is that the software is becoming more capable and powerful much more quickly than the hardware is changing. That means that the next wave of TV buying won’t be driven by screen resolution, refresh rate, screen size or the like, but by the power of the apps available on the TV platform.

Looking to mobile for clues

It wasn’t too long ago that the killer app on mobile handsets was email. A user might have upgraded when his two-year contract was up to get a phone with a camera, or maybe not. Mobile web was a joke.

And then the iPhone (s AAPL) came along and people realized the opportunity that was available through an open apps ecosystem that allowed developers to create new experiences that were previously unheard of on the TV.

Anyone who’s looked at connected TVs today and decided that there’ll be no reason to upgrade in three years hasn’t considered the possibility of future apps or what sort of change is in store. The next generation of connected TVs won’t just be panes of glass that you watch Netflix on. They’ll be smart devices will full-on interactive components that will fundamentally change the way we engage with TV programming and with each other. And when that happens over the next few years, CE makers will be giving consumers a real reason to buy another new TV.

Photo courtesy of Flickr user Sugar Pond.

25 Responses to “Why you’ll buy a new TV in the next 5 years”

  1. Well written and there are some good points. One that is totally missing the mark, for the time being, is a notion that content providers would be happy to have more viewers if they could vote for their favorite ****Idol for free. That is not happening anytime soon. SMS voting is a huge repeated revenue stream and they would be crazy to let this go away.

  2. Alex Sirota

    Take your HDTV with 1 HDMI input, get AppleTV for $99 and excellent atv Flash, setup a NAS from Synology and Showrss for a TV show stream. Enjoy.

    I don’t believe smart TVs that are not easily upgradeable, hackable will catch the imagination of the consumer. What will is saving $70 per month on cable. The first company or partnership of companies that allows the average non hacker to cut the cord on cable, effectively and legally will win this battle for smart tv. That means live news and sports available at a reasonable alacarte cost or advertiser supported. The rest of the content available in a netflix like fashion.

  3. Sorry, I don’t see any of those bullet points attractive to me, nor do I see a ‘killer app’ akin to email/web on mobile. Nearly everything on that list can be done by hooking up a PC to a TV. Nor do I see people clamoring for these ‘interactive’ features which could be done just as easily with a box that meets the customer’s preferred feature list.

    I don’t see anything in the article that resolves the balkinazation found among TV manufacturers, developers and Big Content.

    One other thing, I suspect that it wasn’t just the HD content that spurred large set purchases. I’m sure the cutoff of analog broadcasts had more to do with it. Take a look at all the places that have a HDTV that either had the aspect ratio off or were simply displaying SD content. If HDTV alone was a driver of those sales, one would think that more than half of the HDTVs I saw in 2009/2010 would have been properly displaying HD content. Finally let’s look at one of the articles linked above.

    “And as time goes on, there might be another reason for consumers to begin replacing their TV sets — or at least, the TV sets in their living rooms: They might soon become obsolete. As more and more “smart” TVs enter the market, the applications and app development frameworks available on the first generation of Internet-ready televisions will find themselves eclipsed by more powerful and attractive options.”

    This is actually a reason for me to not believe the hype of a shortened upgrade cycle. I bought a TV in 2008 that the manufacturer said would be upgradeable. The ethernet and USB ports convinced me that was true. How many updates did I get? One. Did it make any of the apps better? No. This experience has convinced me it is much better for my expenses and the environment to buy a smaller, much cheaper box that can more easily be updated and moved around to any TV/monitor I own now or in the future (assuming HDMI remains the main digital input standard). I don’t want to see large numbers of perfectly fine TVs sitting in land fills.

  4. It won’t ever be a smart TV w/o a better UI and the equivalent of a browser under the hood. All the rest is just tart’n things up (like makeup) to see what might be useful to close the sale.

  5. MaybeImParanoid?

    I dont want any more smart anythings controlling and filtering my content. Today’s technology is the panopticon gone mad. Every choice and selection is monitored and noted and used to streamline ways for more products to be sold to me, products which I wouldnt have otherwise ever have cared for. The internet does this already. Now every old technology is being replaced by this new system that has a whole different set of motives underpinning it. Libraries will be eclipsed by the marketing power and convenience of businesses like, Barnes & Nobles etc., the same way that telephone communication was replaced by Apple and Google, the same way tha the convenience of credit cards and the gains businesses got from being able to trade our purchasing info replaced more private and secure lo-tech methods like paper currency and checks, and now TV’s too? Cant we just have great quality TV displays and opt out of having our every move registered by watching businesses? I’m no luddite, I just am a little sick of it.

  6. ScaryPants

    I’ve had a computer connected to my HDTV for years. Along with an inexpensive wireless keyboard and integrated mouse and a web cam mounted to the top of my TV. I’ve had a “smart” tv for over half a decade. Such an easy and cheap thing to do and yet people seem to think that they need to buy appliances (ROKU etc) that only provide limited functionality or a smart TV for an experience that I’ve had for a very long time. What are you doing with that netbook you bought 2 years ago? just hook that sucker up and enjoy.

    • me too, mac mini and any dumb tv that fits in the room. buying ‘smart Tvs’ is the modern day equivalent of a tv with built in VCR or DVD it just doesn’t make sense to invest in one lump that does multiple jobs.

  7. I want my TV to show a picture. No speakers, no Netflix/facebook/hulu that may or may not work in Canada, that may or may not exist in 6 months leaving a button that doesn’t work, that may or may not be updated by the manufacturer. Just display the picture.

  8. Simon Bee

    The thing is, none of the points you made in the bulleted bit appeal to me as a consumer. The only thing in your whole article that i’m interested in is netflix and I can get a settop box with dvb-s, dvb-t, LAN & tivo all built in.
    The last thing I want when I’m watchin telly is to be connected ato a bunch of monkeys chittering about what we are watching. I get enough of that at home.

    • Ryan Lawler

      Agree. If the Apple iTV is real, it will instantly shake up the status quo. That’s a good thing. It’ll drive Apple sales, but more importantly will cause everyone else to innovate in a way they haven’t been quite yet.

      • If there is one reason to believe that TVs at the next CES could be SIGNIFICANTLY different from the last 2 CESs, it is Apple. But then again, the belief could be misplaced. All the other arguments in the article are suspect – apps, content, interaction, usability ..the entire gamut of USPs exist today in (so called) Smart TVs and a plethora of boxes at throw-away prices. So a further evolution in TVs is definitely on the cards, but unless someone takes a fresh look at TV, a revolution is unlikely.

        That said, people will buy new TVs every few years for much simpler reasons – the shiny new stuff is slimmer, looks sexy, is affordable, gives you bragging rights, and importantly, the process of buying offers you the opportunity to skip analyzing LV bags (or such other stuff) and instead “study” detailed tech specs of idiot boxes (Oops, I meant, Smart TVs). To each his/her vanity :-)

    • You barely mention content. Content is what will drive Apple TV. Currently most cable networks receive less than 50 cents wholesale from each cable operator per subscriber. Some of the lesser channels get as little as pennies. Now imagine they can eliminate the middleman somewhat and have their own app. Sell directly over a dumb pipe to the consumer. They can charge twice as much or more (probably 99 cents per month minimum) and even with Apple’s 30% haircut, they will still earn more. Maybe Apple servers host the content. It isn’t Hulu level but I can’t imagine many refusing the deal, ESPN and Disney and other high rollers excepted.

  9. No plans to buy a TV ever again. I have a 12-ft diagonal screen and HD projector for movies and the net (cut the cable, who needs television). Only way I’d buy a TV is if they came out with an under-$2K 144″ OLED monitor. I doubt that’s coming any time soon.

  10. Alexander Wood

    I agree with Honeybear, it can all be done with boxes, and those are much more easily upgradable, either through a unified software platform, or through a sub-$99 new piece of hardware.

  11. HoneyBear

    Even if you’re right about the unproven consumer demand for all these new smart TV apps, it seems that almost all could be delivered with add-on technologies not requiring a new set, yes? Think Roku-like.

    • Ryan Lawler

      It’s possible, but as the cost of TVs goes down, the price of add-on boxes will be squeezed. Already, connected TVs have reached a price point where they’re nearly disposable. And if connected TVs are sold as the same price as regular HDTVs, why buy a $99 box? Plus, the ability to add more functionality to the box gets limited as time goes on.

      • i think there is a logic problem happening here. You keep discounting the add-on box. If the price difference for smart vs. dumb shrinks, it will be because the cost of the components comes down so the price of the add-on box will also come down. Already you can turn any TV into a smart TV for $99. Mobile chips are improving at a frantic pace (Intel will go through 3 process technologies at 32nm, 22nm and 14nm in the next 2 years for mobile chips!). It doesn’t make sense to tie your ability to access the latest technology to your TV’s processor. In a CES interview, the head of google TV basically stated that connection through the TV is for the VERY low tech consumer who will just get it because it already comes with their new TV. More advanced users will probably get a add-on box that can be quickly upgraded to keep up with the advancement of the OS and apps. With HDTV, the underlying TV had to be changed to access the content. Maybe in 10 years when there is a standard for 3D and programming becomes as common as high def, there might be a new roll-over like we just had.