Over-the-air broadcasters have nothing to fear from Smart TV, at least for now: Ovum

Analyst firm shares its insight into the Smart TV revolution, and what’s in store for the future

Streaming video killed the video star? Analyst firm Ovum says that the Smart TV revolution has the potential to drive interest away from over-the-air broadcasts, but not just yet.

Streaming video killed the video star? Analyst firm Ovum says that the Smart TV revolution has the potential to drive interest away from over-the-air broadcasts, but not just yet.

There has been a lot of talk about Smart TV in recent months, but what exactly is it all about?

Ask LG marketing general manager, Lambro Skropidis, and he narrows it down to multiple functionality.

“In simple terms, the TV has the ability to be connected to the Internet and allows you to access, view and interact with a broad range of web based content from a wide range of sources.”

But when it comes to defining what the advantages of Smart TV are for the consumer, then the discussion gets more complicated.

According to Ovum consumer telecoms principal analyst, Jonathan Duran, the immediate benefits for consumers is the ability to access on-demand video services, such as catch-up TV premium movie rentals without the need for a set top box.

“Besides the reduction of device-clutter in the living room, there’s also the important advantage of reduced reliance on pay-TV subscriptions,” he said.

Consumers are already able to choose between a la carte viewing options without being tied to a service provider, but Duran expects that this will become more prevalent as “more and better quality web-delivered video services become available through the TV set”.

Ovum consumer impact IT practice leader, Adrian Drury, sees Smart TV bringing the world of web video to a screen where many consumers still like to consume their video services, namely the television.

“As broadcasters and pay-TV service providers develop their catch-up and multi-screen on-demand services, Smart TV gives the consumer the means to access these services without the complexity of doing this through a games console or dedicated streaming device,” he said.

When one asks the same question to hardware vendor LG, the benefit of Smart TV is in its ability to offer more choice for consumers.

“You can seek out content aligned with one’s personal interests rather than what is served up by FTA [free-to-air],” Skropidis said.

“You can watch and interact with what you want to watch, when you want to watch it.

Long live the broadcast

With this heavy emphasis on connectivity in Smart TVs, it has caused some to speculate whether over-the-air broadcast TV will be completely phased out once Smart TVs become widely adopted.

The short answer, according to LG’ Skropidis, is that it probably will not happen in the foreseeable future in Australia due to the clout of FTA broadcasters.

“Instead, we see Smart TV and FTA broadcasting services co-existing,” he said.

As to why over-the-air broadcast will continue to exist, at least in the medium term, Duran says there will always be some demand for programming such as news, talent contest, reality shows, sports and other live events which need real-time transmission.

“We, at Ovum, don’t believe all linear broadcast will be supplanted by on-demand delivery,” he said.

There are also the costs associated with migrating to all-IP distribution.

“It will remain prohibitive, particularly given the data capacity requirements for multiple HD streams,” Duran said.

“The level investment made in legacy broadcast infrastructure and equipment is substantial and until migration to IP promises significant operational benefits, many stakeholders will take the view that ‘if it’s not broke, don’t fix it.’”

Drury said a growing percentage of daily audience viewing time will be of video distributed via the web.

However, he also says that the schedule will continue to be “critical,” and a shift towards online viewing “does not make live event programming any less important.”

“The reality is that broadcasters are increasingly understanding that the web is a means to create additional value around premium event programming and fundamentally a channel for low cost audience acquisition, as well as a valuable new source of audience data,” he said.

However, as traffic moves to web based delivery, Drury expects that existing dedicated digital terrestrial broadcast and satellite infrastructure will see an "erosion of value.”

“In the same way that FM radio continues to have a business case for linear audio delivery, particularly to remote regions, so over-the-air broadcast will also have a role, but its market opportunity will diminish,” he said.

Room for growth

On the surface it may seem like Smart TVs are packed with functionality and useful features, but Duran is not convinced.

“At present we don’t believe today’s connected TVs are particularly smart,” he said.

“They are essentially terminals for a very limited selection of service and applications via a TV-like UI, which runs alongside rather than being integrated with the regular TV experience.”

For him, a proper Smart TV consists of delivering and accessing content that gravitates away from today’s “all-you-can-eat” or bundled channel offerings, and towards a much more personalised environment.

“This will entail the growing use of mobile devices and dual-screen apps that provide flexibility and control of the viewing experience, as well as enabling deeper interactivity with TV content,” Duran said.

At this point in time, Drury sees Smart TV simply being at an “important juncture.”

This is due to channel programmers and pay-TV are at phase two of their multi-screen strategies, having already demonstrated that there is audience demand for services off the PC and onto the TV.

“However, all parties in the new broadcast ecosystem understand that ownership of what emerges as the dominant Smart TV platform will pay major dividends for that successful party,” Drury said.

“The scale of multi-screen growth is apparent in Ovum’s latest mapping of 453 Over-The-Top Content (OTT) [broadband delivery of content without ISP involvment in the control or distribution of the content itself] players worldwide, including their pricing strategies and what is in their content catalogues.”

This has meant that major broadcasters, such as the BBC in the United Kingdom and NHK in Japan, are essentially competing with pay-TV platform majors such as Sky in the United Kingdom and UPC in Ireland, not to mention mobile platform manufacturers such as Apple, Google, Samsung and Microsoft.

While this competition has resulted in significant innovation in various areas, Drury admits to seeing little change in collective TV viewer behaviour.

“Audiences still want to consumer TV on the TV through a linear episode guide,” he said.

“The market is still waiting for its gaming changing UI innovation that leads a mass change in viewer behaviour, although this is happening at an incremental level driven by tablet television viewing."

Area of importance

Regardless of current consumer behaviour, many TV manufacturers are viewing Smart TV as the next frontier for the traditional platform, much in the same way smartphones became a lucrative follow-up to the mobile phone.

Multinational technology manufacturers are big and consist of many divisions working on different types of products simultaneously, and for LG at least, it seems to be an important area.

“Smart TV is an area that is growing in importance as a focus for us,” Skropidis said.

He said it is because Smart TV’s are viewed by the vendor as a “central hub” to connecting other appliances within the home through services such as Smartshare, providing consumers with large format viewing of services outside the home.

In the process, these have the ability to turn into revenue generating streams through the extended services of pay-per-view services and advertising services, which Skropidis said is one of several things factored into LG’s roadmap in the field.

“We will continue to extend across our premium TV range and extend into a broader range of our TV offerings,” he said.

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