With technology and service strategies already in place, possibly the biggest factor in moving the market will be the low price tags attached to TV sets coming out this fall and beyond. For example, in September U.S. HDTV flat-screen market leader Vizio will introduce fully featured Web TV-capable sets with 55-inch screens for under $800, according to Stephen White, the company’s director of business development.
There will online HDTV sets priced even lower than that from other manufacturers by this fall, says Mike Harris, CEO and co-founder of AnySource, a provider of aggregation and user interface support for the Web-to-TV market. “Later this year we’ll see sets priced at $399, even as low as $349,” Harris says. “To make money on advertising, you need a lot of units out there.”
Which is why manufacturers are willing to roll the dice with steep discounts on feature-rich HD sets that have typically been priced well above $1,000. The prospects for a recurring revenue model based on an ad sales split with aggregators and programmers are large enough to inspire what’s turning into a major juggernaut across the CE ecosystem.
“We predict the number of U.S. broadband households viewing Web-to-TV content will triple, growing from eight million to 24 million within five years,” says Keith Nissen, principal analyst at In-Stat. Of course, the lion’s share of the eight million viewers worldwide who have access to the Web on TV are using specially designed set-tops such as those provided by Roku, Apple, Vudu and many others to access content. But that future growth curve depends much more heavily on the sale of online-enabled sets.
“We’re going to eat the costs of a lot of features to get [TV sets] connected,” White says.
“The connected TV is a steamroller that will take four to five years to shake out. There’s a lot of money being spent on this. It’s just a matter of time.”
From Vizio’s perspective one of the more important features that will be included in the base price for new models is built-in support for high-speed Wi-Fi (802.11n) home-network links to address the fact that most homes don’t have wireline Ethernet. “Only five percent of households have Ethernet networks,” White says. “With a dual-band radio built into the set, we can put our connection settings widget on the [user interface] and drive people to the new services.”
Players in this space are optimistic that once market penetration of connected TVs gets above one million the momentum will quickly build, leading to a scale of addressable eyeballs that can begin drawing a significant share of TV ad spending. The strategy isn’t about waiting for the relatively miniscule Web video advertising market, now pegged at around $600 million, to grow; it’s about tapping into the $70-billion TV advertising market, says Russ Schafer, senior director of product marketing for connected TV and desktop applications at Yahoo!
“There’s enough money for everyone,” Schafer says. “If we take just a small portion of that, we’ll be garnering enough to start creating a viable market.”
That moment is just around the corner, he, White and others assert. “We’ll see penetration in North America in the six to seven figures by the end of this year, and we’ll certainly hit seven digits in 2010,” White says.
Schafer agrees. “Samsung has been shipping Web-enabled TVs in 13 countries since March,” he says. “Sony and LG [Electronics] are now in the market. And Vizio will be there with low-cost sets by fall.”
So far, Yahoo! is doing a credible job of providing the content environment that is vital to consumers’ perception of the Web-to-TV value proposition. “The key part of what we’ve done in the TV space is to take our widget engine with 6,000 widgets and 1,000 publishers and make it all accessible through the remote control,” Schafer says. “We’re transferring the Web experience directly to the TV with no refinements by making it possible to navigate with simple up, down, left, right and activate buttons on the remote.”
Yahoo!’s Widget Channel has distribution deals with several top manufacturers, including LG, Toshiba, Samsung and Vizio. “We’ve created a scale of distribution that encourages anybody to create widgets and bring them onto the platform,” Schafer says.
The Widget Channel concept is drawing interest from major studios as well as Web entities, including development activities centered on Blu-ray player platforms that come with broadband access capabilities and trans-formatting and other functionalities provided by processors such as Intel’s CE 3100. For example, Universal Pictures has developed a widget-based enhancement for its film The Mummy: Tomb of the Dragon Emperor that gives viewers access to cast and crew information, parent guides, bonus features and more.
Developers of Widget Channel applications include Accedo, Associated Press, CBS, CinemaNow, eBay, Joost, MySpace, TF1 and many other entities. Yahoo!’s contributions include Yahoo! News, Yahoo! Weather, Yahoo! Finance and Flickr services. Adding to the attraction of devices employing the CE 3100, Intel has developed the MyMedia Widget, which incorporates personal media like music, photos and videos into a widget for display on the TV.
Some of these content suppliers, including Yahoo! itself, are transferring content in the original Web page presentation style to the TV, while others, like CBS, are using the Web as a staging ground for time-shifted programming and movies where the presentation has a traditional TV look, Schafer notes. “In our testing our people doing it from both sides,” he says. “CBS will have a ‘catch up’ application on our platform that allows people to see old programs. You’ll see them go live with this probably later this year.”
Service providers who once viewed the whole Web-to-TV phenomenon largely as a threat are now embracing the idea in hopes of preventing the TV set manufacturers and content suppliers from stealing subscribers and potential addressable ad revenues. Comcast, for example, has been working with the Yahoo! group over the past year as it formulates a strategy that encompasses delivering Web content to the TV as well as delivering TV content to the PC.
“Comcast is looking to bring the linear TV and Web content together,” Schafer notes. “Our platform allows them to do things quickly in a Web-based approach that cable hasn’t been able to do with tru2way.”
As previously reported, Verizon will likely be the first major TV service provider out of the gate with Web-to-TV service, with a commercial launch coming soon in the wake of extensive beta testing over the past year. Such activity has been a driver to wide-scale ramp-up for Web-to-TV capabilities among suppliers of chipsets for set-top boxes. As with processors targeted to TV sets, these functionalities start with reformatting and extend to running software modules for bumping video quality to acceptable TV viewing levels, enabling user interfaces that conform to simple remote control commands and satisfying advanced advertising requirements.
For example, Intel’s CE 3100, along with anchoring a wide range of new TV sets, is also at the core of Samsung’s new set-top, which supports both IP and cable middleware platforms and comes with an embedded DOCSIS 3.0 cable modem. “We believe that with this set-top box, cable operators can provide various kinds of Web-based, customer-centric services,” says Geesung Choi, president of Samsung Electronics Telecommunications Network Business.
Broadcom, a leading supplier of set-top chipsets, is well down this path, having already introduced its BCM 7420 platform at the start of this year, a key feature of which is connectivity to IP-based home networking over MoCA (Multimedia over Coax Alliance) via interfaces embodied in DLNA (Digital Living Network Alliance) specifications. The 7420 is designed to do much else as well. “We’ve developed an architecture for set-tops that enables delivery of Web content to the TV,” says John Gleiter, senior director of marketing for cable set-top products at Broadcom.
Along with the requisite graphic presentation engine and the new DLNA client/server capabilities, this architecture is designed to facilitate use of a wide range of software modules for other dedicated functions, such as running made-for-TV Web browsers, adding new formats such as Flash, supporting various types of advanced middleware and enhancing Web video quality. “With this architecture, service providers can plug in different software modules to support enhancements to the consumer experience as they see new opportunities to differentiate their services,” Gleiter says.
“Cable operators want to deliver IP video services to the TV, whether it’s something like a Netflix movie service or a broader range of services along the lines of what the consumer electronics companies are doing,” he adds. “Ultimately they believe IP is going to be a primary delivery mechanism for a lot of content.”
There’s much more to come beyond the 7420 as Broadcom pushes development of new capabilities such as new techniques aimed at greatly improving the quality of Web video for HD displays. But, at this point, Broadcom believes it has delivered the chipset the set-top manufacturers need to support emerging service provider strategies.
“We have a number of [set-top manufacturer] customers for the 7420, but we don’t want to pre-announce who they are,” Gleiter says. “You’ll see new models based on the 7420 entering the market toward the end of this year or the first part of next year.”