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Connections google tv-whitepaper
1.
Google TV – Searching
for Success a CONNECTIONS™ white paper
2.
Google TV –
Searching for Success © 2010 Parks Associates Attribution Authored by Kurt Scherf Published by Parks Associates © June 2010 Parks Associates Dallas, Texas 75230 All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher. Printed in the United States of America. Disclaimer Parks Associates has made every reasonable effort to ensure that all information in this report is correct. We assume no responsibility for any inadvertent errors. Attribution and Disclaimer i
3.
Google TV –
Searching for Success © 2010 Parks Associates Table of Contents 1.0 Categorizing Connectivity ................................................................................................... 1 2.0 Is Search Really a Problem? ................................................................................................ 2 3.0 Where are the Content Partners? ...................................................................................... 3 4.0 Is the Walled Garden Really the Evil Empire? ..................................................................... 4 5.0 Will Service Providers Care? ............................................................................................... 4 6.0 Multiplatform Measurement .............................................................................................. 5 List of Figures Figure 1 – Incentives for TV-Internet Connectivity ......................................................................... 3 Figure 2 – VOD and Advertising Revenues ..................................................................................... 5 Table of Contents and List of Figures ii
4.
Google TV –
Searching for Success © 2010 Parks Associates 1.0 Categorizing Connectivity For over a year now, Parks Associates has been categorizing all of the different solutions that are specially designed to bring Web content and applications to a “connected TV.” We put the term in quotes in this context because there will be different ways to experience connectivity between the Internet and the display other than an embedded solution. For example: Connected game consoles: In the U.S., penetration of Internet-connected game consoles jumped 38% between 2008 and 2009. These devices are now in about 30 million households, and usage of the console as a set-top box is prevalent, with more than one- third of Microsoft Xbox 360 users watching video on at least a monthly basis. We believe that online video revenues at the game console alone brought Microsoft and Sony more than $500 million in 2009. Connected TVs: Penetration is quite limited to date, but we expect that unit sales worldwide will exceed 130 million by 2014. In short, built-in Web connectivity will soon be standard in most televisions. Connected Blu-ray Players: Just bought a flat-panel TV and don't feel like replacing it for a Web-connected set? For a smaller investment, many Blu-ray Disc players come equipped with many of the same content services as found on the high-definition displays. Networked Digital Media Players: These are the devices such as Apple TV, the Roku player, and others that provide a relatively lower-cost option to connect a TV to online video services. Parks Associates is projecting a quick sales peak in the U.S., followed by a steady decline, as manufacturers embed online video access into consumer electronics products, thus closing the gap in this market. However, alternative set-top box platforms may have a more lasting presence in international markets, where they may be branded by broadband and pay-TV operators. The market potential for Web-connected consumer electronics is significant, with annual worldwide shipments nearing 300 million units by 2014. Categorizing Connectivity 1
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Searching for Success © 2010 Parks Associates In light of this opportunity, 30+ technology companies are all aimed at bringing Web services to consumer electronics. Among them are companies in the "Connected Television OS" area that are working to build in applications and Web services directly into the TV itself. Companies in this area include Accenture, DivX, Google, IBM, and Yahoo!. Of course, while there are companies advocating an embedded solution, companies such as ActiveVideo Networks and Clearleap argue that Web services and interactivity can be delivered with transcoding done in the headend. Further, companies like Vuze indicate that the PC in the home is capable of transcoding and serving as an intermediary to the television. So there's plenty of room for debate on which are the right solutions. Google is entering the market at a time where there is much indecision about the ideal technology solution, one that will benefit the TV manufacturer, content owners, and advertisers. Google's presence in Web advertising, including delivery and analytics, provides it with a huge potential for scale. One problem that has been troubling to the television manufacturers is how big their share of any potential revenue for online content might be. To date, the business models between television manufacturers and content providers or aggregators have been revenue sharing based on online video orders. As a result, the TV manufacturer may get a few pennies per VoD order. Online video revenues on connected CE devices other than the game console will be around $180 million in 2010, reaching $800 million by 2014, so it won't be a huge revenue stream. Therefore, a deal with Google that can add advertising revenue to transactional monies would be a gain for the manufacturers. 2.0 Is Search Really a Problem? While Google comes armed with the business model, has Google developed a solution for a problem that is not as dire as they indicate? After all, they lead their explanation video about Google TV by discussing why it is difficult for consumers to find the content that they want on TV. Really? We might quibble about the benefits or detriments of the various electronic program guides (EPG) in use today, but overall the EPG is doing an increasingly effective job of allowing for search and discovery. And if the Google TV use model means users need a Logitech Is Search Really a Problem? 2
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Searching for Success © 2010 Parks Associates keyboard to type in search entries, that use case may not be attractive to many folks. Granted, the keyboard in the living room is going to be unnecessary for most folks, as smartphones, tablet computers, and other interfaces allow for more text entry, but I'm just not sold on search (as Google presents it) as the killer app here. The television service providers are innovating every day with their own program guides that have search, discovery, and recommendation features. I don't think anyone will be lacking for decent search options for their TV. 3.0 Where are the Content Partners? Another issue with Google is how much high-quality content they'll bring to the table. Google's main content partner today is Sony. They will need to bring a number of major content players into the fold to have a successful solution. Best Buy will probably offer up Roxio CinemaNow content, but offerings will have to expand beyond that to attract large numbers of consumers. Premium content is driving the demand for connected TVs, as the results from our recently completed Digital Media Evolution II study indicate. Incentives for Connecting TV to the Internet "Which of the following features would provide the most incentive for you to connect your TV to the Internet?" (Among U.S. broadband households interested in one or more connected TV features) Films TV programs Weather Music Check traffic View online photos Display news Computer games Check sports scores Watch short video clips Social networking updates Stocks & financial info Calendar features 0% 60% Source: Digital Media Evolution II, Q2 2010 © 2010 Parks Associates Figure 1 – Incentives for TV-Internet Connectivity Where are the Content Partners? 3
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Searching for Success © 2010 Parks Associates Providing premium video-on-demand content is an area where the pay-TV providers will continue to excel. A couple of weeks ago, I had some time to catch up on my video-on-demand. With credits available on my VUDU account, I tried that platform first. What I quickly found is that my Verizon FiOS service had the same movies, and the high-definition versions were available a whole lot quicker than the download for VUDU's HDX format. The Wall Street Journal is reporting that the studios and the operators are in discussions to reduce the window between the theater and pay-TV availability. This move makes sense. Interactive digital TV services are already in more than 40% of U.S. households. By 2014, they will be in more than 60% of U.S. households. That's a huge scale that the pay-TV operators have as an advantage. What are the online services going to offer that's any better? 4.0 Is the Walled Garden Really the Evil Empire? Related to this point, Google's foray into a very open Internet approach is promoted as a way of throwing off the shackles of the walled gardens set up by TV service providers and today's connected CE offerings. Parks Associates’ latest round of consumer research would indicate that desire for open Internet access isn't what's driving consumers to a connected TV. They want good content, and they want it easy to find. Based on Figure 1, consumer desire for an open Internet experience on the TV for calendaring, music, photos, and commerce is not that strong. Tailored applications, including tru2way, EBIF, and LUA-based interactive features (available today from more and more pay-TV operators), are going to bring the interactivity of the Web without the "Wild West" component of misguided searches, text entry, and reliance on the back button. If the walled-garden approaches can deliver services in a controlled environment that doesn't overwhelm the average user and helps a provider deliver the highest- quality content available, they could undercut consumer demand for a browser-based approach in connected TV. 5.0 Will Service Providers Care? DISH Network is a partner, but will Google find additional service providers to join? One question is – what's in it for the providers? For DISH, a current lack of good interactive Is the Walled Garden Really the Evil Empire? 4
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Searching for Success © 2010 Parks Associates applications would be a reason for joining the fold. But will you see the cable industry, AT&T, or Verizon knocking on Google's door anytime soon? These companies are already developing their own interactive applications and services. In fact, when comparing the revenue potential between the online and pay-TV worlds, it is clear operators will still control the lion's share of revenues for video services and interactive advertising. The revenues in the online world are certainly nothing to sneeze at, but the operators don't have to cede control to Google in order to pocket some serious revenues in the next few years. On-demand and Advertising Revenues: Video Services (Millions of Dollars Annually, U.S. Households) $30,000 Pay-TV Revenues (Premium VoD and Interactive Advertising) - $M Online Video Revenues (Premium VoD and Advertising) - $M $20,000 $10,000 $0 2010 2011 2012 2013 2014 Source: Parks Associates research © 2010 Parks Associates Figure 2 – VOD and Advertising Revenues 6.0 Multiplatform Measurement Google's entrance should help define how providers of online assets will work with consumer electronics companies to implement more multiplatform content and multiscreen audience measurement. Measurement and reporting are two important areas where some work is needed. The more that content providers, online companies, and CE manufacturers can work Multiplatform Measurement 5
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Searching for Success © 2010 Parks Associates together to build consistent reporting and feedback mechanisms into their products, the more effective they will be in monetizing their Web services and attract more premium partners. Multiplatform Measurement 6
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Searching for Success © 2010 Parks Associates About the Author Kurt Scherf studies developments in home networks, residential gateways, digital entertainment services, consumer electronics, and digital home technical support services. Kurt is the sole author or contributing author/analyst to more than 80 research reports and studies produced by Parks Associates since 1998. Kurt joined Parks Associates following a career in political research and multi-tenant dwelling management. He earned his BA from The University of Iowa. Industry Expertise: Home Networks & Residential Gateways, Home Networking Media (Wi-Fi, UWB, HomePlug, HomePNA, MoCA, etc.), Media Center PCs, Set-top Boxes, Networked Consumer Electronics, Consumer Storage, Media Server Hardware and Software, Consumers & Digital Entertainment, TV Services, Broadband Video, Digital Home Customer Support Issues. About CONNECTIONS™ CONNECTIONS™: The Digital Living Conference and Showcase, hosted by leading research firm Parks Associates with support from the Consumer Electronics Association (CEA)®, is the premier executive event focused on the market developments and growth factors for advanced digital lifestyle solutions. This unique research-driven executive conference and showcase delivers insight and recommendations for new business models and opportunities in digital media/content, connected consumer electronics, broadband and value-added services, and home systems. For information about CONNECTIONS™, contact sales@parksassociates.com, call 972-490-1113, or visit www.connectionsconference.com. About Parks Associates Parks Associates is an internationally recognized market research and consulting company specializing in emerging consumer technology products and services. Founded in 1986, Parks Associates creates research capital for companies ranging from Fortune 500 to small start-ups through market reports, primary studies, consumer research, custom research, workshops, executive conferences, and annual service subscriptions. The company's expertise includes new media, digital entertainment and gaming, home networks, Internet and television services, digital health, mobile applications and services, consumer electronics, energy management, and home control systems and security. Each year, Parks Associates hosts executive thought leadership conferences CONNECTIONS™, with support from the Consumer Electronics Association (CEA) ®, and CONNECTIONS™ Europe. In addition, Parks Associates produces the online publication Industry Insights in conjunction with the CONNECTIONS™ Conference series. http://www.parksassociates.com | http://www.connectionsconference.com | http://www.connectionseurope.com | http://www.connectionsindustryinsights.com About Parks Associates 7
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