How to Sell Connected TVs this Holiday Season

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.

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It’s Berlin, Circa 1989, and the Media Industries Are East Germany

Allow me to add my voice to the chorus of those applauding the fall of the Berlin wall twenty years ago this month. It was this event that taught me firsthand why revolution is simultaneously impossible as well as inevitable. In 1986 I sat with other students from around the globe just blocks from the wall and debated whether it would ever come down. The naïve among us insisted freedom was imperative: It was inevitable. The others asked if we had stopped to think about the massive relocation of people, economic resources, and government structures that such a revolution would require: It was impossible.

Until it happened, just three years later.

 

Brandenburg tor eastside

The author, pictured left, photographed in front of the Brandenburg
Gate from what was then the East German side

 

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

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).

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New Roku boxes make the simple complex

Today Roku launched two new players to complement the original $99 Roku player. Perhaps somewhat obviously, the two new players come in at $79 and $129, allowing Roku to test whether there's price elasticity in this market. 

I'm not sure this was a necessary move. The cheaper box (called Roku SD), simply removes HD playback from the original Roku Player (now called Roku HD). The $129 version offers wireless-n wi-fi streaming to deliver dramatically better video quality. I don't personally need that since I hook up my Roku player -- which is in constant demand in my home -- via ethernet. (Yes, being a nerd has its advantages including a fully self-wired home that has over 24 ethernet ports in it.) So while I can see the value of the more expensive box for wi-fi users who have wireless-n routers (do you know if you do? betcha don't know), I think muddying the waters with 3 boxes instead of a maximum of 2 just feels like unnecessary complexity. A bit like Amazon announcing it would sell two versions of the Kindle in the US, one that's domestic only and one that can roam abroad, a decision doesn't appear likely to last very long.

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New Report: How media industries must rebuild to survive

We've been flogging the media industries for years at Forrester. So much so that we sometimes assume that people remember all the ways we've warned, cajoled, and exhorted for more than a decade. But based on the things we're seeing the pundits finally say, it's clear that "the end is near" is a pressingly recent recognition on the part of many. For examples, see Malcolm Gladwell's review of Chris Anderson's book Free; Mark Bowden's lament over the loss of journalism ethics in The Atlantic; or programmer/essayist Paul Graham's thoughtful reflection on Post-medium Publishing.

Don't get me wrong: we welcome these and more voices to a conversation we've been trying to start for some years now. (If you think I'm just posturing, I direct your attention to former Forrester VP Mary Modahl's July 1994 piece entitled Publications Get Wired where she first blew up the "print isn't going away" myth.) But there are some very fundamental things that are getting lost in most of the discussions we are hearing. Namely, people are stuck on processes, historical reinterpretation, future prognostications, and personal feelings at the passing of an era.

In the end, however, none of that will matter as the fundamental economics of digital media assert themselves. Basically, it's now cheaper to make, distribute, and consume media. That changes everything.

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And the winner of MTV's VMAs is...Twitter!

I recently wrote about Social TV -- what we call it when people use social media like Facebook and Twitter to augment the TV experience. There were some doubters (there always are).

If you need proof that people are using social media to make TV more engaging, then look no further than this week's MTV VMA awards. Though everyone seemed to be talking about Kanye West, the real trendsetter of the evening was Twitter.

From the show's start to the finish, 1.3 million Tweets related to the VMAs were posted. The traffic to Twitter tripled during this rush. More interesting, the Twitter phenomenon was almost exclusively real-time, meaning that although there were another 700k posts that evening and into the next morning, but most of the heat came during the event as people in attendance and people watching reacted in real-time to what they were experiencing and feeling. 

This is the boon linear TV has been waiting for: imagine, a way to get people to watch TV at the same time as everyone else -- because if they don't, they'll miss the whole Tweet-party! That's what my Forrester report on Social TV was about, and I thank the VMA viewers for proving my point.

Oh, and yes, Taylor Swift totally deserved the award, this video is awesome; so sit down, KW. 

Can the Apple TV reinvent itself?

I was in the middle of an ICTC (my new acronym for InterContinental Telepresence Conference) when I got an urgent message from Brian Chen at Wired News. Without any announcement, it seems, Apple had cut the price of its 160 GB Apple TV to $229, dropping the smaller model altogether. What did this mean? 

I've been following the Apple TV since its announcement 2.5 years ago. I bought one of the first, and I spent hundreds of dollars on TV shows testing it (I have all the episodes of Battlestar Galactica, seasons 1, 2, 3; and you don't). That said, I haven't used the Apple TV in months, even after I hacked it using Boxee. It's because the Apple TV doesn't make watching top shows easy enough to compete with cable, Hulu, and Netflix. 

Brian wrote a very solid piece in Wired News yesterday, click here to see the article. He managed to get in a lot of the big picture points I raised, which is always hard to do since I go there so quickly and barely pause to breathe. The point is this: The Apple TV is on its way out.

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Apple's Nano video camera further erodes the camcorder market

You've got to be hating life if you're a videocamera maker like Sony or Kodak and you've just been bested yet again. First, it was the immensely successful Flip video cameras that sold more than 2 million devices without a significant brand name simply because the camera was so darn easy to use. (
Personal anecdote, I recently spent a day at a major CE maker with a group of industry analysts -- they let us try their new Flip camera competitor and one of the smartest guys in the room couldn't figure out how to turn it on. Said a nearby analyst: "Hmmm, no wonder Flip beat them to this market.")

Now the game just got more complicated because Apple has decided to add video camera capability not to the iPod Touch line, but to its Nano iPods. Pause for reverential awe. This was a brilliant move. (see Wired's take on it here).

Not only because it hits Flip in a sensitive spot -- right in the high school and college market where Flip was such a hit -- but because it further disrupts the videocamera market, opening it to more innovation and rapid change. You no longer have the three tiers of videocameras (disc or tape storage, digital decent, and then your lousy phone camera), instead, you have a fourth competitor. A personal media device that is now capable of actual personal media. Oh, and did I mention it's made by Apple? Right, just checking.

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VUDU makes a play to become the VOD service of tomorrow

Video on Demand (VOD) has been a disappointment. As offered by most cable systems, video on demand should have made it easier for you to rent movies for home viewing than Blockbuster or Hollywood ever could because you never have to leave the house to get a VOD movie. But most VOD systems have failed to delight customers for reasons I won't get into right now other than to say that even if the movie selection is decent, the interface to find the movies is terrible. So most people don't use VOD.

Apple saw this opportunity and assumed its iTunes music business could easily extend into video, first with a pay-per-download model (one I first wrote about in 2007, explaining why it would not work -- I was right), and eventually with a VOD model, once the content owners could see their way to taking that plunge. But the iTunes VOD business relies on people buying Apple devices -- something millions of people do -- and people wanting to watch movies on those devices -- sadly, something far fewer people do.

This has caused me to encourage Apple to port its iTunes video service to non-Apple devices that are connected to the TV. I wrote about this a few times recently, explaining that video services need to connect to the TV to have a chance and that LG and Samsung Blu-ray players (and more recenlty, connected TVs) were doing that quite well. It would be a natural fit for iTunes to deliver content to those devices. But, alas, that's not how Apple rolls, as the Cupertino company prefers to make its money from high-margin devices.

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Do you want to follow Facebook and Twitter on your TV?

It's discussion time, folks. I want to hear what you think about the potential for Facebook and Twitter on the TV screen. No, stop laughing, I'm serious. 

I ask because I published a report for Forrester earlier this month called Five Things We Want From Social TV (click here to read). It was partly in response to Verizon FiOS's new Facebook and Twitter TV widgets which were released in early July. (Look at a demo on YouTube here). Here's the summary so you know what I wrote about:

 

Thanks to Verizon, the first meaningful Facebook widget in the US has come to the TV. Some question whether the active Social Computing experience has any place in the so-called "lean back" living room experience. Those people are wrong. Once Facebook, Twitter, and other Social Computing platforms are properly ported to the TV screen, a new explosion of media and technology convergence will occur, affecting the product strategies of device makers, content providers, and pay TV providers. In this report, we propose the five things that Social TV providers should prioritize — steps that will lead to a converged future of Social Computing and TV viewing.

 

All my cards are on the table: I obviously believe in this because I said it would be a new explosion of media and technology convergence and them's fightin words.

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