This article first appeared in the St. Louis Beacon, June 12, 2012 - I am frequently asked, “What is the next great platform for innovation?” Technically it’s right under our noses and all of the big players are after it in a big way. It’s something we are all very familiar with, so much so the average American spends almost five hours of every day with it. It’s television.
All of the major players in technology are moving aggressively toward the living room with the captive audience and a host of other reasons in mind. Recently Microsoft announced it was adding Amazon Prime’s streaming video to its Xbox lineup. Last year, Google launched Google TV, which has been dubbed a commercial failure, but is starting to show signs of life. And you can’t read very far in any technical press without running across speculation that Apple is working to release a television or TV-like device of its own.
Advertising rules
Based on the five-hours-a-day of video consumption (a rate that has been growing by the way), the advent of digital convergence and the historically ad-centric nature of the surrounding business models, the next generation of televisions will be a continued prime target for advertising-based businesses of all kinds. From a pure numbers perspective, television, as it is currently constituted, is by far the largest advertising platform. It not only controls more than 40 percent of our overall media consumption, it supports an almost equal percentage of the domestic ad spending. Its overall take totals somewhere around $60 billion a year.
With this in mind, it becomes increasingly important to remember that all of the major tech players -- Apple. Google, Microsoft, Amazon, Facebook -- have at least some portion of their business model vested in advertising. Most of them have also made at least one major acquisition to support advertising based business models across at least one of the three (television, mobile or PC) screens.
If these companies are successful in blending these three screens into an interchangeable ecosystem, they will be able to participate fully in the giant established market for television ad spending. This would basically triple their addressable market size in one fell swoop, providing a ton of opportunity for supporting the revenue growth needs of these increasingly large companies.
The incumbent television networks and content providers have watched convergence slash music, newspapers and other traditional media markets. They have been much savvier in this landscape and are very much aware of the tech company desire to play in their sandbox. There will be a fight, and it will be a long one.
If it’s not already there, every one of the aforementioned technology players will have a major product focus of some type that attempts to consolidate its entrenched ecosystem across the traditional web and the rapidly expanding smartphone-based mobile arena. Missing the play here, would concede the game to competitors in this space.
None will do this. The stakes are too high. Not being in one space, invites competition back into their core markets. In its wake, this push will leave myriad new products, technology acquisitions and ample room for innovations in content, hardware, apps and infrastructure.
Trends highlight change
The television itself has been trending toward a more friendly relationship with Internet-style content for some time now. Most televisions in the home already have - inputs (USB and HDMI) that make them a simpler companion screen for Macs, PCs and other such devices. This is still too inconvenient for most folks, most of the time, to gain mass-market status however. With the goal of convenience in mind, the next generation is already upon us: “The Connected Television.” These devices basically transform your TV into an Internet-connected web-capable screen. This same capability will come to older televisions via connected Blu-Ray players, which are driven by the same technology engine. Still early and in an awkward adolescence of its own, this technology will only increase market penetration as refinements occur. In fact, the combination of connected televisions and their Blu-Ray brethren, more than doubled from 6.5 million homes in 2010 to just over 15 million in 2011.
While I believe it may be slightly optimistic, the recently launched Connected TV Marketing Association, claims that 90 percent of the televisions sold by 2014 will be of the connected variety. A slightly more impartial, but highly reliable source, Forrester Research calls for rapid growth as well, projecting at least one connected TV set in 37 percent of U.S. households by 2015. To find more on this, check out “Microsoft Xbox Is Winning The Living Room War. Here's Why.”
With overall online style consumer video usage forecasted to quadruple by 2016, the consumer audience will increasingly warm to these directions over time, particularly in the younger more tech-savvy generations. Supporting these forecasts, consumers’ average viewing time in this arena is growing and long-form content, previously the sole province of broadcast and cable network television, is increasingly part of the equation.
Ooyala, one of the leading consumer video service providers, produces a quarterly report of what it observes across its customer base, which covers streaming to all sorts of PCs, tablets, smartphones and connected style television devices across a sample size of 200 million unique viewers a month. According to their Q1 Global Video Index Report, Ooyala observed some interesting facts. Long-form content made up more than half of the video watched overall and accounted for 88 percent of what was watched on connected TVs and game consoles such as Microsoft Xbox. This same report for the prior quarter saw the Google TV platform, left for dead by most accounts, grow by 91 percent year on year.
Summing Up
The stage is set. New, tech-centric players with deep pockets are entering the fray. The field is tilting their way as the basic device itself is morphing, consumer behavior is maturing and the stakes are high enough for bold moves. This new technology hasn’t broken through completely yet, but the trending is strong, although it will take a long time to change a market this large and this entrenched. Conflict with incumbents is inevitable.
Television is going to change. The questions are, how much, how fast and who are the winners? We will keep an eye on this moving forward.
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