Welcome to the New Paradigm: TV Makers Rule

1Executive Summary

Consumer electronics manufacturers are, for the first time, gaining a great deal of control over which content is available on their products. Through a variety of TV apps and widgets, they will be able to choose what content viewers see when they turn on the TV. The shift, as we noted recently, has broad implications for the future of video, as cable companies and TV programmers could soon lose the ability to control audiences.

It’s an app world; cable companies just live in it.

Two significant announcements from cable companies served to highlight the shift in power that is occurring between consumer electronics manufacturers and traditional distributors of TV content. During this past January’s CES, Time Warner Cable announced it was developing applications for Sony Bravia TVs, as well as TVs, Blu-ray players and tablet devices from Samsung. Comcast jumped on the connected-device bandwagon as well, showing off its own Samsung TV app, while also announcing that subscribers will soon be able to watch live TV programming through an iPad app.

Mobile apps are nothing new, and many cable, satellite and IPTV providers have talked about their plans to build applications for the iPhone, iPad and Android mobile phones and tablets that enable viewers to search, browse and navigate content their TV program guides. By connecting those apps with their set-top boxes, pay-TV operators can also enable viewers to manage and set their DVRs.

Applications on TVs and other living room devices will help TV providers move beyond the typical program grid that users have been stuck with for the last decade or so. The Comcast app on Samsung TVs, for instance, allows users to search for TV shows and movies that they want to watch, rather than making them navigate the typical time-based programming guide. The TV app also features a better user experience for browsing video-on-demand titles than is available through the common set-top guide. In other words, by leveraging IP connectivity, cable providers are doing with apps what they couldn’t do with the traditional set-top box.

However, while it offers customized user interfaces and more flexibility to build new features, the Samsung app also highlights the possible loss of control that distributors are facing. In the old world of TV, cable ruled “Input 1” — that is, the cable programming guide was the first thing consumers saw when they turned on the TV. But in the brave new world of TV, your local cable operator will be just one of many apps that are available through the TV’s main menu.

TV makers are increasingly interested in providing more value to consumers with their connected TVs, and so they are busy adding a number of new content options through TV apps. Those apps include everything from games to streaming music services like Pandora to alternative video services like Netflix and Hulu Plus. The result is that viewers now have more choice through the TV menu than was previously available when the cable operator dictated what programming could be viewed.

Consumer electronics manufacturers building these devices now largely decide which apps are available through the main menu, so cable operators are no longer fully in control of the television viewing experience. It’s the TV maker, not the cable company, that is the gatekeeper to available content now. For an industry built on creating lineups of channels and programming, the lack of control could be troubling.

The lead-in is dead.

With viewers increasingly tuning in to shows on-demand, either online or by watching prerecorded shows on their DVRs, the idea of an audience lead-in becomes increasingly less important. If this trend continues, viewers of the future are not likely to tune in to a program in real-time, and even less likely to watch whatever show is programmed to come on after it.

Without show lead-ins or in-network promotion of TV programming, viewers may find themselves discovering new content through word-of-mouth or increasingly through social media outlets like Twitter and Facebook. Hoping to cash in on this phenomenon, a growing number of social TV applications like Miso, Tunerfish and GetGlue have sprung up, giving users the ability to share the content they’re consuming with friends on social networks. In return, users earn badges and get rewards of exclusive multimedia content for shows that partner with the app.

Another way that users can find new video content is through personalized recommendations, like those being offered by video search-and-discovery startup Clicker.com. Late last year, Clicker teamed up with Facebook to connect users, and to use their interests as a way to identify content that might be relevant to them. For now, that experience is limited to Clicker’s web presence, but we can imagine a similar experience being rolled out to users on connected devices, either through Clicker’s technology or that of another company.

By putting personalized recommendations front and center, consumer electronics manufacturers can deliver more relevant video results to viewers. As a result, viewers should be more engaged when watching that content. The same technology used for matching viewers to relevant content could be used for targeted ads, which could boost interest and boost CPMs.

At the same time, providing users with recommendations based on their previous viewing history and on viewing habits of their friends runs counter to today’s linear programming plans. Broadcasters create lineups that are designed to keep viewers watching, by running popular programs to “lead in” to less popular shows, hoping that some of those viewers stick around. But in the on-demand world, viewers aren’t choosing shows based on “what’s next,” but on what’s recommended to them. Without a way to suggest viewers stick around for another one of its shows, networks might find their ability to aggregate audiences slipping.

TV makers can fill in this gap and provide not just personalized recommendations but could possibly create new monetization possibilities through the introduction of sponsored recommendations. Like sponsored results that run along with search results, sponsored programming recommendations could be highlighted above personalized recommendations offered to video viewers.

The introduction of broadband-connected TVs and the availability of services that compete with traditional cable television on those devices is just one part of the story. What might be more important in the long term is not the availability of alternative content over-the-top, but the placement of that content, via apps on the TV, alongside cable apps. That, along with improved personalization, signals a paradigm shift not just in how content is displayed on the TV, but in how viewers find and discover new content.

Related Research: Why the TV World Stayed 2-D and Got Smart Instead

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  1. These TV makes have a lot of roadblocks to overcome before they really dominate the market. They are much like the PC market in the early days before any standardization on Windows. They are limited function totally proprietary devices that wont really take off until app developers can write cross-tv cloud-resident apps.

  2. You said “It’s the TV maker, not the cable company, that is the gatekeeper to available content now.” — I would suggest that you restate that as “it’s whomever gets gets app platform into the hands of enough independent software developers to gain momentum in the marketplace.”

    Moreover, the typical replacement cycle on TVs is 8+ years, and so there’s a huge opportunity for low-cost purpose built STBs that deliver these apps now — for the legacy TV installed base.

    It seems that Roku has a head start in this regard. Their STB api and sdk have been used for both on-demand and live TV streaming.

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