special report the connected world supplement


though his research identified the fact that connected TV was in 40% of US households, David Tice, vice president and group account director at Knowledge Networks, cautioned that there was a difference between possession of connected TV technology and usage of it. "Connected TVs are now clearly a mainstream technology if defined by presence in the home - but actual usage is a different story," said Tice. "Finding ways to 'turn on' the installed-but-inactive population may be the key to growth in every area. One potential approach: tap into the unmet needs of pay-TV consumers, such as the ability to access web-like search tools and social media through their TV set." But in looking at the needs of the


consumer is the problem that the industry is not speaking its language. That is to say, is the whole phrase connected TV just marketing-speak, meaningless to the TV viewing population as a whole? Neil Gaydon, CEO of STB and pay-TV service provider Pace, believes that the conversation gets into marketing jingo when talking about the so-called smart TVs that many believe will be the hub of the connected TV environment in the home. Bluntly addressing what the business


proposition, or lack of one, means to potential smart TV consumers, he said: “There is no spec for the smart TV: it just means a connected TV. It is a specific TV, with specific software to make it work. And how [will] people feel about paying additional money for that in their TV, both buying it outright and secondly as part of an ongoing subscription package? We’re going to have to see if consumers think that is a good idea not.” An over the top service, such as the


iPlayer, is undoubtedly a good idea, and fits in totally with the idea of people’s demand for having what they want when they want. But how much will people pay for such a privilege? Despite its manifest qualities and its place at the heart of the BBC’s online strategy, the iPlayer is essentially a freebie for BBC licence fee payers. Looking at the leading pay OTT services, an indication of where connected TV business may be, is instructive. Audience figures don’t necessarily translate into big business. Netflix probably has as many customers now as leading US MSO Comcast but even though it takes in about $11 per customer per month, Comcast commands on average


somewhere around $87. The conclusion to be drawn is that


even though there is increased demand for non-traditional services, OTT, and by extension connected TV, is so far merely replacing the corner video store and not pay-TV: Knowledge Networks found that even though connected TV technology can now be found in almost two in five TV households, viewers of all age groups still prefer live TV programmes shown at their regular time over all other options. Some say that there is actually no


incentive for pay-TV operators to make sure that connected TV takes off. Pace’s Gaydon suggests that one has to look at why the CE giants are trying to break into pay-TV and urges the pay-TV operators to be cautious of such moves: “I don’t understand some of the pay-TV operators who are trying to work with some of the [CE] companies who are trying to create their own pay- TV services...and who are promoting their own movie channels though their portal on the TV. I don’t understand why pay-TV operators would share their three-year roadmaps with somebody who’s trying to take their business. Apple is the only company who for years has made loads of money in the CE space. If you look at the last 10 years for those in the CE space, at the end of the day they hardly made any money and anything like the returns that Apple have been making. Why? Because [Apple] is connected to a service. The successful companies are the ones who make hardware and software that is connected to a service. Sony is trying to creating a service, and Microsoft is trying to push everything into the X- box to try to create a service from where it can get ongoing revenues and because the writing is on the wall.” If not on the screen. iTunes is indeed a formidable


business service. Of that there can be no doubt. But Apples are not the only fruit and there are alternatives out there looking to enable a business model for connected TV with, their providers say, more flexibility and more business scope. For Stephen Petheram, marketing


director of payment firm PayWizard, the big screen will offer a big opportunity for connected TV but that it all involves letting content companies set their own agendas. He said: “Social viewing was something that we only saw on the TV and it now isn’t. People will happily sit down in front of an iPad and the other


The fact is that despite the plethora of connected TV technology and devices out there, the business of connected TV is in its infancy. The industry had better start learning to walk and then run rather quickly: the traditional pay-TV players are not going to surrender their business any time soon.


tablets. The problem with CTV at the moment is that take-up will be driven by how we get apps through the app stores through these devices. iTunes is the easy street route to market for big content owners...However they had no concept as to who their customer was. If you are an iTunes customer you can’t cross-market, or you certainly can’t do cross-device or cross platform [marketing]....We believe that data should belong to the merchant and we pass it back in real time. All of it. They know what devices people are using and at what price points.” Another potential worry for


connected TV consumers surrounds service because, in the real world, things go wrong. They just do, even for the biggest and the best with the latest and most popular technology. And when things go wrong, faulty goods go back to the shop and get fixed. As long as you know where the shop is. This may not be the case with connected TV where the operators’ responsibility has in many cases devolved to the CE industry. There’s a big difference here. A service provider’s product can potentially still function for many years after initial installation because operators perform constant background upgrades that the vast majority of consumers have no idea take place. The question is will the CE industry have such knowledge? Will connected TVs just stop connecting because the essential upgrade wasn’t carried out? Who do you call? The equipment supplier? The fact is that despite the plethora


of connected TV technology and devices out there, the business of connected TV is in its infancy. The industry had better start learning to walk and then run rather quickly: the traditional pay-TV players are not going to surrender their business any time soon.


www.ibeweb.com l the connected world supplement september/october 2011 l ibe l S17


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