How to Sell Connected TVs this Holiday Season

by James McQuivey, Ph.D.
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The signs of the holidays are all around us: my teenagers have started listening to the local holiday music station, people are bundling up in anticipation of the snow that will soon be upon us, and the Wall Street Journal is reporting on the expected sales of TVs at WalMart this Black Friday. 

Aside from the economy, I'm following holiday shopping results because of the humble little devices we call connected TVs. CES 2009 featured many a promise from major TV makers – they assured us that connected TVs were finally ready to rock. Based on that, we estimated that a million of these TVs would be in US homes by the end of the year. In fact, if all the promises were kept, these million would be an easy sell because they would have fancy widget experiences just like the iPhone. Plus, we were assured the technology would get better every day so that accessing Internet content on the TV would feel as natural as switching from Dancing with the Stars to House (an activity I encourage).

This is not the time to go into my disappointment at the failure of some of those TVs to even arrive, much less the less-than-iPhone-like widget experiences they have delivered so far. Instead, in the spirit of technology denial, I’d rather focus on the fact that even if these TVs could do everything we hoped, somebody still has to sell them at retail. No, I'm not concerned we won't hit the million mark. Instead, I'm concerned that we'll have a million or more out there, but that fewer than 40% of them will actually connect to the Internet.

So how to sell a connected TV in such a way that consumers want to connect them when they get home? Walk the aisles of any store hawking TVs and you’ll be hard pressed to find a connected TV. Even if you ask Victor at your local Walmart Impact store as I did, chances are good he won’t know if his showroom TVs connect and what they would do if they did connect. From Sony Style, to Best Buy, to Sears, finding one of these TVs is a challenge, much less getting a demo. I recently asked a Sony Style store employee what was meant by the ubiquitous Netflix and Slacker logos around the TVs and he proceeded to pull out a remote control and truly wow me with what his floor model TV could do. But had I not asked, I would never have seen this demo because the stylish store, the lovely displays, and the busy employee did not offer it to me.

I recently walked into a Best Buy and saw a promising sign: a little blue sticker that raised the Internet Connected flag. It was prominently attached to anything that could connect to the Internet – a TV, a TiVo, a multi-room audio player. Finally, someone was volunteering the fact that the TV I was looking at could offer me the latest and greatest features.

I haven’t seen this elsewhere yet, but I need to. The industry needs to find a way to let the world know that things connect. This is made harder by the fact that so many of these connectable devices are sold in different parts of the store so I can’t even be tempted to consider how the iPhone might configure my Netflix Watch Instantly queue or how the DLNA-compliant TV might pull photos straight off my Windows 7 PC, because none of those devices are located even remotely close to one another. So here’s my connected TV wish list for this holiday season, hoping for some connected TV love:

• More blue stickers. I want to see stickers boasting of connectivity on every piece of Internet-enabled hardware in the store. Let me know that this thing connects. You don’t need to provide a four-page description of what it does, just raise the issue and let my curiosity lead me to figure out the benefit.
• Show me the brands. To give credit where it’s due, Samsung has done a solid job of letting people know its Blu-ray players and connected TVs offer Netflix and Pandora right out of the box because it features the logos prominently on packaging and even on some devices. These reassuring content brands offer a promise that supersedes any widgets, network protocols, or technology acronyms I don’t want to bother with.
• More co-located devices. Go ahead, put a laptop next to that TV, even drag a digital camera over to show how photos can get to the TV screen. Make me aware that these things are supposed to work together now. You’re not just selling me a TV, after all, you’re selling me a connected experience that implicates many other devices and services I could buy. Who knows, you just might sell me even more stuff once I understand how it all fits together.

That's it, industry. Go ahead, make my holiday.

Oprah abandons broadcast TV for a life in cable: Oprah, we need to talk...

by James McQuivey, Ph.D.
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Just this Monday Sarah Palin told Oprah she was "the queen of talk shows." Which might mean there's no better time to abdicate the throne than when you're clearly on top (and when the #2 talk show, Dr. Phil is produced by you). 

But Oprah didn't just announce that when she wraps her 25th season in 2011 she will wrap the show for good. No, she announced that she would also begin the next chapter in her mega-successful life: she's going to move to cable. Her cable network, titled OWN, for Oprah Winfrey Network, was actually announced some time ago, so while that's not news, the fact that Ms. Winfrey is moving away from daytime television's most-watched show to build a fledgling cable network is an eyebrow-raiser. 

Because cable TV is no safe haven away from the woes of broadcasters.

Audiences are fragmenting, cable TV is having a harder and harder time maintaining viewers in the face of the DVR and Hulu one-two punch. In fact, OWN was supposed to be up and running this winter but was postponed because of the challenging advertiser climate. It's a climate that's not going to get dramatically better even if our economy continues to improve. That's because advertisers have many alternatives for their advertising dollars, including the Internet, where more and more spending is shifting every day, reaching nearly $26 billion this year (see our July 2009 Interactive Marketing Forecast report for more detail).

Does that mean we're waving Air Oprah off the cable runway? No, we think cable is a great place for the Oprah empire. Beyond 500-channel programming lineups that are under threat, cable does have some serious advantages going into the next decade including high-speed broadband connections and control of the home network. Then take one look at O magazine and you'll see a smorgasbord topics that can easily feed a cable network and satisfy Oprah's devoted followers using those technologies better than they're used today.

That's why we offer Oprah our free advice, as if we had her here on the couch in our very own studio. Here's what we would say:

• Insist on Internet delivery of your content. Existing cable networks -- including Discovery Communications, your 50-50 partner in OWN -- are stuck in contracts they negotiated under analog assumptions. They involve separate licenses and all kinds of exclusive restrictions for linear feeds, VOD content, and online content -- which is why there's precious little of the latter coming out from cable nets. Tell your new cable MSO partners that you understand their need to make money from subscribers and from advertising -- offer to help by leading them to the future, insisting on a single license to your shows that they can use online, over mobile, and in VOD. But require that they invest in reaching your audience with those platforms with the threat that you will if they don't. Which leads to...
• Charge for access to your experience. If you can help it, don't roll yourself up in tier 1 of the cable lineup -- while it is tempting to make a grab for a large audience, you want people to pay for you like they do for Disney. You're not just charging for content, however, you're charging for access: your customers will pay for convenient access to OWN on multiple platforms so they can get their fix in the living room, kitchen, bedroom, or even when applying the mascara you recommended in the bathroom. On whatever device they happen to be near. Even if you do go tier 1, you can always make multiplatform access a premium experience -- tie it to the magazine subscription if you must, but do it. Help us prove that people will pay for what they value: easy access, on any device, to content they believe in.

You get the picture: cable can be good, as long as it's a different cable than the one we all currently experience. So while these points are a bit technical and Oprah probably has people that take care of these things, that's what we would tell her if we could have a face-to-face. (Yes, we might also blather on about our favorite Oprah moments, including the Flashmob with the Black Eyed Peas and 20,000 fans in downtown Chicago, but if we could stay focused on business, that's what we'd say.)

Will Apple soon also partner with TV service providers?

[posted by Laurence Meyer]

The time may soon come when TV service providers are also going to compete for the rights for exclusive distribution to the Apple Tablet...

There are long running rumors that Apple will soon launch a new device that will look like the iPhone but with a much bigger screen and with great capacity: the so called Apple Tablet. Whether Apple launches such a device or not, there appears to be a market opportunity for a mid sized touch screen, media focused device.  It seems that there are also lively debates around where consumers would actually fit such a new device into their daily life.

  

Well, it seems to me that an Apple Tablet-like device could constitute a very nice device for “portable TV” consumption.

Of course, one could argue that this tablet is also the perfect fit for e-book or e-news reading, as the rumor that popular brands of newspapers, magazines and book edition have been recently approached by Apple suggests.

But I can’t help myself thinking that it could be in Apple’s interest to develop partnerships with TV service providers in order to kick-off the Apple Tablet market. On their side TV service providers, and especially non-telco TV service providers, would be offered a nice alternative to DVB-H or 2.5G or 3G Mobile TV, as they could be in full control of it.  By positioning Apple Tablet as the perfect device for a completely renewed and personalized portable TV and video experience, Apple and TV service providers would for sure give pay-TV subscribers a good reason to buy the afore named tablet.

The partnership would have to be a little bit different from what it has been with mobile phone operators, as, for such partnership to produce results, a specific portable TV offering would have to be developed and associated with the Apple Tablet. The key attributes of this portable TV proposition, that would complement the fixed TV proposition of TV service providers, would consist in the device convenience and design, as well as  “editorialized video podcasting”, that would enable viewers to watch TV content while "on the move" and that would also deliver content based on the users' profiles.

We laid out in more details why and how this kind of new portable TV offerings could appeal to consumers in a report which was published in April this year and which title is“Portable TV, Not Mobile TV: Service Providers Should Brand And Sell Their Own Portable TV Devices”. Clients can access it here.

 

 

How To Survive The Media Meltdown

  
[Posted by Nick Thomas]

Follow me at Analystnick

The lead story on UK news bulletins this morning was the latest results from commercial broadcaster ITV. Two observations, even before we get into the detail of the story: big media companies, due to their prominent role in our lives, have a deep resonance with the public in ways that, say, a ball-bearing company, would never have; and the media meltdown— where traditional media business models based on scarcity and control are fundamentally challenged by the new realities of digital media consumption — is now high on the mainstream news agenda.

 The focus of today’s news is on ITV’s losses and the sale, at a knock-down price, of its social network Friends Reunited.  The broadcaster’s business model, heavily reliant on advertising revenues, leaves it exposed to this shift, whereas rival broadcaster (and major ITV shareholder) BSkyB has succeeded as a platform business, offering telephony and broadband alongside Pay TV. ITV has made the right noises about focusing now on its online video proposition and acquiring more of its own content to exploit. Neither will be easy, however, and successful execution will be the key here. ITV’s track record, looking at its failure to develop Friends Reunited (by no means a bad purchase at the time), is not great.

 Surviving the media meltdown will require a reinvention of some business models, some hard decisions and some bold product innovation. I’ve been writing extensively about this topic in a series of documents, and today we publish my latest take, How To Survive The Media Meltdown: Identifying Successful Content Strategies. I’d love to hear your thoughts on this.

Just What Should Be Done With Online Piracy?

[Posted by Mark Mulligan]

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The UK creative industries have pulled together to lobby the government on the issue of online piracy.  A coalition of TV bosses and senior music and movie executives are pushing for tighter enforcement of illegal downloading and for the creation of a body that would oversee enforcement, owned by the creative industries but overseen by the regulator Ofcom.  The coalition comprises heavyweights such as Universal Music and Sony Pictures and  UK broadcasters Channel 4 and Virgin Media.

 

Unsurprisingly the proposals have been subject to a fair amount of flak in the tech press. but there are some ideas worthy of serious consideration.  Regular readers will know that my position on digital piracy encompasses the perspectives on both sides of the argument.  This doesn’t mean that I sit in the middle, indeed I am in the often uncomfortable position of being able to annoy both sides!  But that caveat aside, here are what I think are the four key dynamics that underpin this issue:

 

1. Illegal downloading of content is a bigger problem now than it ever was.  We’re nearly ten years after the launch of Napster.  That decade has seen tens of millions spent globally on legal action, enforcement and lobbying.  But more  consumers are downloading more content across more platforms and applications than ever before. Current enforcement may be restricting the size of the growth but it’s not doing enough.
2. The first generation of file sharers (Digital Natives if you like) are hitting the age at which they stop being time rich / cash poor and become cash rich / time poor.  This is the stage at which they should start becoming core media buyers.  Nothing suggests this is about to happen.  Their ‘free’ habits are too deeply ingrained.
3. Most legal paid services online and on mobile are niche at best (e.g. iTunes) and failures in the main. 
4. Physical media sales are declining in many sectors in may regions.  Piracy is far from the only contributing factor but it is a key one.

 

So doing nothing simply isn’t an option, even if most media execs recognize that enforcement in itself will not eliminate digital piracy.  Indeed it will never disappear entirely but a realistic aim is to push it to the margins in the same way that shoplifting is in the high street equation.   High profile industry led action, coupled with robust legislation and effective partnerships between content owners and telcos are all key ingredients that will help combat the problem effectively. 

But the secret sauce is a comprehensive landscape of compelling legal alternatives that cater for all consumer segments.  This inherently means fighting free with free itself in order to engage younger, typically file sharing, consumers.  The music industry is already on this path (cf Spotify, We7) as are TV broadcasters (cf Hulu, iPlayer) and so too many games providers.  But there is a lot more to be done, not least in ensuring that the business models are sustainable, particularly during the economic downturn.

 

The bottom line is that it doesn’t matter how big your stick is unless you’ve got a nice fat juicy carrot dangling in front of the horse’s nose.