Connected TV: an Ecosystem in Need of Convergence

In 1926, radio manufacturer Radio Corporation of America (RCA) created the very first American radio network – the National Broadcasting Corporation (NBC) – because they figured people would buy more radios if they had interesting things to listen to. Thirteen years later, in 1939, RCA president David Sarnoff introduced the first television broadcast on the NBC network, describing the event as “the birth of a new art bound to affect all society.”

That’s quite a statement. Putting aside the whole “art” component –  because, let’s face it, “art” is a word we rarely use to describe the industry we’ve come to consider basic entertainment, especially in the US – Sarnoff’s introduction was remarkably prescient. What we need to take away from this story is the role that electronics manufacturers played in the birth of new media, first radio and then television. They started out by marketing their devices and then came up with ways of making them interesting by getting directly involved in producing and broadcasting content.

Sixty years later, Apple launched iTunes and used it to control the content that would sell more iPods: music in MP3 format. Today, iTunes dominates digital music sales claiming close to two thirds of the US market. On top of being an important source of income, iTunes has enabled Apple to create a database of 400 million active users in 119 different countries who’ve entrusted them with valuable personal information, including their email address and credit card details.

Now in early 2013, rumours surrounding the imminent release of an “iTV” – a connected TV manufactured by Apple – have been getting increasingly stronger.

This product would arrive at a time when the union between the internet and television has been “consummated.” Connected TV has become the new global standard when it comes to television screens. And based on the US data available, some observers presume that more than half of Canadians own a set-top box or other similar terminal enabling them to connect their TV to the internet. Also, on-demand audiovisual content is migrating more and more to multiple sets and mobile screens.

As “The ABCs of Connected TV” study pointed out, connected TV gives viewers access to an ever-increasing supply of free and paid content offered by traditional, general and specialized  networks, websites (with YouTube in the lead), set-top box services such as Netflix, video game publishers and application developers.

But in a broader context, connected TV is your “typical” television experience enhanced by the new concepts of discovery, personalization and multi-screen interoperability using connected smartphones, tablets, personal computers or game consoles.

However, connected TV has yet to deliver on all its promises. And there are still some major obstacles in the way, starting with consumer indifference. Some people don’t even bother connecting their new smart TV to the internet. (As an example, the NPD Group claims that only 15% of smart TVs in the US are actually connected to the internet.)

But more importantly, interoperability problems between systems and proprietary standards are making it so that to access the connected TV ecosystem and reap the benefits of targeted advertising and interactivity, advertisers have to negotiate individual agreements with both manufacturers (Samsung, LG, Panasonic, Sony and the like) and broadcasting distributors, a complex and costly process.

Does Apple hold the key to convergence?

Experts say the future of television is online.

If the various links in the value chain don’t start trying to converge the ways to access content and charge for that content by creating a device that would combine ease of use with a winning differentiation factor, a global leader like Apple could very well leap to the head of the pack and market a new “disruptive innovation” that would revolutionize the television market worldwide.

As Robert D. Hof reports in his article in support of Apple getting into the TV game (Why Apple Needs to Get into the TV Business – MIT Technology Review), we can’t expect Apple to just market some kind of big-screen TV. We need to get ready for them to transform every last screen in our home into a television set.

If nothing else, this could help the California-based company strengthen the close relationship it already has with its active online service users (400 million on iTunes and 500 million In the App Store). It could also help them eventually trap these “iHeads” in a new and oh-so-welcoming ecosystem that they’ll never want to leave it.

Manufacturers already knew they had to market devices that offer compelling content in order to sell them way back in 1926. But in today’s new ecosystem of digital-content overabundance, it could be a company’s ability to increase the value of interactions created by content – rather than their ability to control them – that will make it stand out.

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