May 4, 2010 – The rapidly building ecosystem of devices, content and applications surrounding Yahoo!'s connected TV agenda is morphing into a seedbed for vastly greater disruption than may be readily apparent to many stakeholders in today's TV services market.
Up to now, the market's focus on how consumer electronics manufacturers, service providers, programmers and others are putting the Yahoo! Widget Engine to use has been all about specialized applications designed to enhance user experience through navigational aids, social media connectivity, interactive access to information, samplings of premium content and other functions. With limited reach into the consumer market and a wide variation in approaches taken by various entities, it all adds up to what appears to be just another center of activity in the TV market's evolution to more interactivity and personalization in content and advertising.
But as described by Ronald Jacoby, senior director and chief architect for Yahoo! Connected TV, there's much more to what's taking shape than meets the eye. In truth, he says, the company is building a business infrastructure that is meant to give content owners the tools they need to leverage a mass market of connected devices to their advantage in whatever ways they see fit.
"We've built a foundation that puts the control over how content and applications are distributed to TVs and other devices in the hands of the content owners," Jacoby says. "We enable all sorts of strategies around advertising and various forms of bundling, redistribution and pay-for-use."
The platform opens a way for content owners to set usage policies for each content segment, offering them freedom from linear scheduling restrictions without having to go through VOD or portal aggregators. "In the past programmers had to do on-demand deals with service providers," Jacoby says. "Now they can make content available on the basis of when viewers want to see it."
Of course, he quickly, adds there needs to be a user-friendly navigation system that makes such options known. As previously reported (see, for example, January, p. 1, and January 2009, p. 10), this is one of the key benefits the connected TV manufacturers are including in their content initiatives, where programming and movie options from content suppliers and aggregators they affiliate with are on display as an alternative to the set-top-based programming guides that show the lineups from cable and other service providers.
But, as NBC has shown in its initial application of the Yahoo! Widget Engine, content providers operating in the linear environment independently of any specific EPG providers can offer their own mini programming guides as an interactive option on a broadband-connected device that is capable of playing Yahoo! widgets. NBC's application pertains to linear programming only, where, along with showing program schedules, it offers full-screen photo galleries, text recaps of shows, cast bios and more. But, obviously, the mini-guide application would apply were the programmer to offer shows on a time-shifted basis, which, of course, it does already through its affiliation with Hulu and VOD providers.
Connected TV content navigation is evolving rapidly, with as-yet-unannounced capabilities extending beyond current user interfaces embedded in new HDTV sets. For example, sources at Rovi report that new chipsets from Intel and STMicroelectronics devoted to running Rovi's new TotalGuide (see February, p. 14) will be implemented in new lines of unnamed manufacturers' connected TVs later this year to enable comprehensive navigation across all content accessible from the TV, including cable programming, broadcast and Web.
Support for entirely new business models through the Yahoo! platform comes in the context of an open-market strategy that allows content suppliers to apply the digital rights, payment, advertising and other policies associated with those models within any environment that's compatible with Yahoo! Widgets. "By creating an open ecosystem that is common to all players across a variety of platforms we're putting control over business models in the hands of content providers while giving them the broadest possible reach as they add applications and new approaches to serving end users," Jacoby says.
This is where the disruptive potential comes in, because the hardware-based functionalities that are essential to executing on the full range of capabilities attending a new approach to the programming business are being embedded in TV sets and devices of every description. Indeed, the company says, Yahoo! TV Widgets now work on all major consumer electronics device chip architectures worldwide.
Publicly named suppliers include Intel, the initial chip partner in the Yahoo! Connected TV initiative, Sigma Design and MIPS Technologies. Manufacturers committed to running the platform on new TVs, Blu-ray players and other devices include Sony, Samsung, LG Electronics, Vizio, Hisense International Co, Ltd. (TV sets), ViewSonic (media players) and TiVO.
MIPS Technologies, claiming top market share in the digital TV receiver processor space, says it is developing an optimized Yahoo! Widget Engine reference platform that will allow manufacturers of TV sets and set-tops to quickly develop Yahoo! Widget-capable products.
Sigma Designs says it will offer support for Yahoo! Widgets to manufacturers of Blu-ray players, network players, AV receivers and cable/IPTV set-top boxes. "Sigma Designs and Yahoo! share a common vision of enabling consumers easy, seamless, and personalized access to online content through their HDTVs," says David Lynch, senior vice president of marketing and sales at Sigma.
A wide range of content suppliers and Web entities is now affiliated with the Yahoo! Widget Engine platform, including Facebook, Blockbuster, Amazon, YouTube, Flickr, Twitter, CBS, Showtime, eBay, TV Guide (Rovi), CNBC, The Weather Channel, Brightcove and many others. With its release of the Widget Developer Kit for general availability, Yahoo! has engaged thousands of developers on the platform, affording them reach across multiple players and the device ecosystem, Jacoby notes.
The inclusion of support for digital rights management systems is vital to the business model flexibility Yahoo! is seeking to promote. At this point the platform has integrated with Widevine and Windows Media DRMs, Jacoby says.
"We're enabling content providers to use plug-ins from these DRM suppliers knowing that they'll be able to secure their assets on devices that are running the Yahoo! Widget Engine," he adds. The company is also supporting standardized protective measures, such as Secure Socket Layer and DTCP (Digital Transmission Content Protection). DTCP, as part of the DLNA (Digital Living Network Alliance) home networking standard is an especially important common ground for safely extending content from one device to another in the home.
But, when it comes to DRMs, there is no standard, which means Yahoo! needs to integrate with as many DRM suppliers as possible to expand the options available for reaching DRM-specific devices. "Unfortunately we're seeing new devices coming in all the time that are specific to one type of DRM or another, so we don't want that to be a barrier to market reach," Jacoby says. "We're working with many other DRM providers so we can match with devices wherever they emerge."
As content owners gain control over their destinies through use of advanced DRM technologies to orchestrate their offerings across multiple devices, the open market extension of IP-based enhancements in all directions will make it hard for platform-specific environments to thrive, he asserts. "Cable, for example, wants to aggregate providers of content and manufacturers into its own platform, requiring deals and investments to be focused in that one area," he says. "In the long run, it's not doable."
As Yahoo! lays the foundation for big changes it's positioning itself to support the incremental changes that will allow people to experiment, which is what the current generation of widgets is all about. "To change business models people need the capability to have a deep understanding of consumer usage of widgets, which is an important part of what we provide," Jacoby says. "We're able to leverage Web analytics to generate results with usage and to foster understanding of how this usage reflects differences with traditional approaches in the market."
Different players have different attitudes about how far they want to rock the boat, but, overall, pitching the IP-based approach to enhancing the TV experience via connected TVs and other devices is not nearly as hard a sell as it used to be, he says. "As devices number in the millions globally, there's a real footprint for people to target," he notes. "Content owners and applications developers recognize this represents a real business opportunity, so they're getting involved now with what fits into their existing business models."
Presently, there are about 10 million directly connected TVs in the market worldwide, with unit sales likely to reach 80 million by 2013, according to Parks Associates. But as a senior consultant to the cable industry notes, speaking on background, there's much more to the picture with many brands of specialized set-tops and PC-to-TV devices in play.
"Based on the research I'm seeing there are almost 10 million U.S. households with PCs connected to TVs plus another 20 million connected game consoles, which are being used by about 8 million people to deliver Web content to TV sets," this executive says. "Combine the growth around these devices with the growth in connected TV sales in the U.S. alone, and we're probably talking about 60 million U.S. households that within three years will have a button to push to bring up Hulu, Netflix or whatever on their TV sets."
As broadband-connected TVs, set-tops and other devices proliferate, the freedom to experiment beyond existing business models will grow. "Progressive content providers see that future," Jacoby says. "They're ready to augment what they do rather than be fearful about change. The people who are actively enhancing their opportunities in this new environment today will be the ones that shape the business models in the future."