January 10, 2012
For the past several years, television manufacturers have been trying to sell Internet-connected television sets. For the most part, consumers yawned. It turns out that not very many people really cared about having Facebook or Twitter on a big screen 10 feet away. But now that the emphasis is switching to Internet-delivered entertainment content on TVs, the prospects are getting a lot more interesting.
At the Consumer Electronics Show in Las Vegas this week, every television set-maker is showing off connected TVs of impressive abilities. LG, for example, is showcasing sets with built-in Google TV capability.
It is clear that with reasonably fast Internet connections to homes and PC-grade electronics being built into displays, the technical problems of delivering quality, high-definition TV content have been solved. Market-research company NPD Display Search estimates that North American sales of connected TVs were a relatively modest 9 million last year, but will rise to 24.7 million by 2014.
The challenge delivering high-quality content over the Internet is that distribution today is tightly controlled by the combination of content producers , such as Hollywood studios and sports leagues; channels, including broadcast networks and cable distributors such as Disney’s ESPN and Time-Warner’s HBO; and cable operators, a group loosely defined to include Verizon FiOS, AT&T U-verse, and satellite operators DirecTV and Dish Networks. The existing arrangement is very profitable for all the players, creating a strong incentive to fight disruption.
The incumbents have been willing to make significant amounts of content available for streaming to computers, tablets, and phones, but they have been mostly successful in preventing that same content from reaching big-screen TVs. For example, Hulu.com, whose owners include Disney, Fox, and NBC Universal, does not work on Google TV or other connected TV solutions.
There are some signs of loosening. Time Warner Cable, Comcast, and Verizon, are working with TV makers to deliver content over the Internet to smart sets. The catch is that the service is only available within households that already subscribe to the service, limiting its utility to letting customers add TVs without renting additional set top boxes.
The question looming over any discussion of the future of TV is, “What is Apple going to do?” Apple, as always, has no presence at CES but the late Steve Jobs’ comment to biographer Walter Isaacson that he had “cracked” the problem of television and persistent rumors of an Apple-branded TV, were a specter hanging over the Las Vegas Convention Center.
No one outside Apple, of course, knows either what Jobs meant or what the company plans. One possibility is that Apple has figured out dramatic improvement in how users can find, select, and control content on a TV. That would be an important step, but would not address the key issue of content. So far, Apple has actually lagged behind competitors such as Microsoft and Roku in securing content deals for its Apple TV set-top box.
All Things Digital’s Peter Kafka speculates that when the Internet TV of the future arrives, it will actually look a lot like the cable of today, with services selling bundles of channels and only the means of delivery changing: “One interesting variant you’re hearing more about right now involves keeping bundles intact, but buying less of them. If you don’t pay for ESPN, then you’re not going to get anything from Disney, including ABC Family and the Disney Channel. But if you can live [without] sports or kids stuff, you could save an awful lot — or put the money into other programming you do care about.”
That’s not the future that the “cord-cutters” and Internet utopians dream of—but their dreams of seem based on the dubious notion that expensive content is going to somehow be delivered free. That, of course, is the outcome that today’s incumbents fear most, and the one that they seem to have the weapons to keep from happening.