I'm not bullish on Apple TV

by | Apr. 29, 2009

For the past couple of years, there has been much emphasis placed on the "connected CE" market, where TVs, Blu-ray players, video game consoles, media adapters, media servers, and alternative set-top boxes like VUDU and Apple TV receive content from online sources. Having followed this space for some time, I've been particularly interested in how the technology requirements for connected devices have changed rapidly. In the white paper From Boob Tube to YouTube, I talked about the evolution of connectivity software to include not only device-to-device media sharing capabilities (such as what DLNA or Silicon Image's LiquidHD™ bring to the table), but also how they must take into account ways to "grab" online content and build user interfaces that allow consumers easy access to content, whether it's photos, video, music, games, etc.

I provided more coverage to the connected consumer electronics space in the recent report Home Networks for Consumer Electronics, which is now available. In this report, I again visited the technology, and included a great deal of primary consumer data (from four of our recent studies, including the Global Digital Living: Entertainment 2.0 in Europe survey of about 5,000 broadband households in Western Europe). For the report, I talked to more than 80 companies and included forecasts for seven product categories:

* Connected TVs
* "Cloud Media" set-top boxes (like Apple TV)
* Connected game consoles
* Connected Blu-ray players
* Network-attached storage
* Multi-room DVR
* Digital media adapters

I really struggled with forecasting the cloud media set-top box market, as there is still widespread consumer unfamiliarity with this type of product (in our recent study Consumer Decision Process 2009 Annual Survey), we're still finding that fewer than 15% of respondents in U.S. broadband households are highly familiar with the Apple TV or even the Digital Media Player by Roku. Also, when it comes down to it, consumers who desire video-on-demand are still going to look to their pay TV operator to provide it. In the report, I included data from the November 2008 study Digital Media Evolution that shows an overwhelming percentage of likely VoD users prefer to receive it from a service provider rather than a "device purchased at retail."

I'm just not convinced that we'll see consumers flock to stores to get these altnerative VoD devices, at least not in the U.S. One key part of the analysis was looking at how both broadband and digital cable and telco/IPTV households are expected to grow here and internationally. I think that in areas where a significant gap exists between broadband penetration and the penetration of households capable of receiving VoD content, you will see more of a demand for the cloud media set-top boxes. In briefings with companies like Syabas, which offers the Popcorn Hour product, this is exactly what's happening. The product, we're told, is quite popular in the European and Asia-Pacific markets. But it's probably not a mass-market product here in the States.

Pay TV operators are not standing still in delivering vastly-increased amounts of VoD programming, and I'd fully expect this to include online offerings. The folks at Comcast Interactive Media indicate that their plans to include a "bookmarking" feature to allow Fancast online video to be viewed at the TV are on track. Virgin Media in the U.K. already allows users to access content from the popular BBC iPlayer service. A little upstart called Verismo Networks won the award for "best new product idea" at a recent CableLabs show.

We've firmly established that consumers want their primetime TV anytime, and are increasingly turning to the Web and to their video-on-demand services to get it. I've been increasingly impressed with the primetime VoD offerings we get from Verizon's FiOS TV service. It's such an easy way to catch up on a lot of our favorite shows without having to set the DVR. In the end, I think that this is the mindset that will keep us paying our cable provider for the foreseeable future (that, and the sports and high-definition offerings that the online world just can't match). It's the convenience of not having to go and buy another box, hook it up, and pay some additional fees that will keep consumers faithful to their television service providers.

Of course, the whole technology question is still out there, as in what will be the optimal ways in which television service providers deliver Internet-like experiences to their customers in the most cost-effective manner and with the highest quality? I profiled 30 companies in the "Web on TV" space, and was left with more questions than answers at this point about the finer points of the technology. So, it's a continuing mission to better understand how the pieces come together and how content and service providers monetize these on-demand experiences. Of course, this will be a significant theme at the upcoming CONNECTIONS™ conference in Santa Clara in early June. We've lined up a number of "connected TV" and interactive TV panels that will focus on this subject, so it should be a really insightful few days.

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