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A major industry survey by Informa Telecoms & Media (publisher of IPTV News) has found that despite making strong early progress, connected TV services still face a number of challenges, and there is little consensus amongst the different players on who will be the eventual winner.

The survey (conducted in March and April of this year with respondents from around the globe and across the value chain) found that over three-quarters of participants cited keeping pace with competitors as a "very important" factor in the launch of a connected TV device - leading Informa to describe connected TV as remaining "one big bandwagon".

The next three most popular motivations for the launch of a connected TV device were to sell more devices (63%), to sell devices to new users (57%) and to earn new revenues from content sales (56%). Further down the score sheet, 44% claimed that reducing churn from another product was very important.

For service providers, gaining new users seems to be the most important first step: 75% of service provider respondents claimed that they were offering content via connected devices in order to attract new users, while 63% wanted to increase the usage of existing services. Once they are "through the door" however, service providers appear keen to grow usage, according to Informa.




There were found to be interesting variations in the types of video considered by respondents to be most important to connected TV services: 60% believed that "free premium" services (predominantly catch-up TV) are very important to the development of connected devices, while 51% believed the same to be true of subscription services such as Netflix.

À la carte rental services such as offered by Apple's iTunes store tied for third place with operator-managed VOD services such as BT Vision, at 44%. Just below that with 43% were user-generated content services such as YouTube and live pay-TV services such as Sky Go. Bottom of this list were à la carte retail services such as CinemaNow, with just 35% of respondents stating that they are very important to the development of connected devices.

As a result, Informa believes that a Netflix-style service which charges only a few dollars a month is a much more revolutionary proposition than a pay-TV service on a connected device, and one that users cannot get via a standard set-top box. The fact that the respondents placed a greater emphasis on operator VOD services than a full pay-TV service also suggests that operators should be looking more along the lines of aping the Netflix model on connected devices, rather than simply using a connected device as another set-top box.

Attitudes to connected TV applications have softened considerably, according to the results of the survey: despite being routinely panned not so long ago, only 1% of respondents now believe that they are "completely irrelevant" to the TV experience, while almost half considered them to be an important addition to connected TVs.

There was almost zero consensus on what the most important types of application will be on connected devices: of the options Informa included in its survey, the three most popular were social networking, Web browsing and gaming, although only social networking was considered "very important" by more than 30% of respondents.

As a result, Informa suggests that the most popular app for TV has not yet been created - we are currently only seeng the tip of the iceberg of what is likely to be created in the future, particularly when such elements as motion controllers are added to the mix.




Regarding the set-top box, the "overwhelming" message from respondents was that it will continue to prosper: a whopping 78% claimed that viewing online video via the operator set-top box will be a mainstream activity within two years, a prediction which Informa believes to be on solid ground, as operators add more and more online and catch-up services to their offerings.

Connected TVs meanwhile are expected to take longer to become mainstream viewing devices, with the overall consensus of respondents being that they will take at least three to five years to achieve this. Blu-ray devices however may never achieve this, as some believe that disc-based media will have died out (or at least be on its last legs) by then, although connection rates for Blu-ray players are believed to be far greater than TVs.




The scale of the challenges the connected TV industry faces is "formidable" according to Informa, with respondents claiming that all of the 13 potential hindrances suggested in the survey will have at least some impact in slowing down growth.

Out of those hindrances suggested, 56% of respondents believed that lack of content in general is a major hurdle facing the growth of connected devices, while 46% of those polled perceive poor Quality of Service (QoS) as a major issue, and 42% believe that fragmentation will be a major hindrance to growth. Further down the chart, 36% thought lack of bandwidth is now a major issue.

The issues deemed least problematic were consumer unwillingness to change behaviour, poor marketing from device manufacturers, and poor user-input devices - this latter becoming less of an issue as it become ever clearer that the smartphone will be the input device of choice in the future for many users, according to Informa.

The big winners from the rise of connected devices are expected to be TV manufacturers, content providers and Web service providers such as Hulu and YouTube: while device manufacturers can certainly become content aggregators and providers, they are believed to be unlikely to enjoy the same stranglehold over content that mobile operators did circa 2003, due to a number of reasons, including the development of common standards, and the likelihood of service providers being able to offer native HTML5 apps via the TV in the future.

Content providers will still wield the same considerable power in the world of connected devices as they did in the world of TV, predicts Informa, although the debate continues to rage on whether content providers will commonly take their wares to consumers via connected devices, bypassing broadcasters or even operators, in a process known as "disintermediation". Out of those quizzed, 38% think this will be commonplace in the next 1-2 years, while 41% predicted it will be within 3-5 years. Only 7% believe that disintermediation will never occur, and that the content provider - operator - broadcaster value chain will remain intact in the connected device era.

There was very little consensus regarding pay-TV operators' role in the future of connected TV: those respondents who genuinely believe that connected TVs will not change things were in the absolute minority. Most operators are believed to be grappling with the difficult question of whether to attempt to become a platform in their own right, aggregating lots of different third parties themselves, or whether they should simply become one service of many on someone else's platform, and use that service to upsell their own core services.

Although some observers claim that OTT and connected devices are more of an opportunity than a threat for operators, most of the survey respondents disagree: this may be true for some new entrants, and there are opportunities for operators of all sizes, but to claim that they outweigh the threats for big incumbent operators is described by Informa as being "hubristic at best and naive at worst".




Based on the survey responses, much of the industry still has faith in the ability of common standards - although given the amount of time and effort put into both common and proprietary standards, it now seems "inconceivable" that both will not coexist in the future, according to Informa.

Although the survey indicated that many within the industry believe that device manufacturers will replace operators as the new TV gatekeepers, this is not a view shared by Informa: whilst in the short term device manufacturers control (for the most part) the user interface, and therefore wield much power, they are thought unlikely to be able to maintain this dynamic to the extent they would like. The TV is believed more likely to go the way of the smartphone, where a walled-garden lives side by side with the open Internet.

The role of the aggregator is still expected to be "vital", with content aggregation, search, discovery and recommendations playing a key role even if the TV were to evolve more along the lines of the PC than the smartphone, but the key difference is that the companies playing those roles may be very different from those doing so in the pay-TV world.

For the complete results of the survey, please contact denise.duffy@informa.com

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