User Interfaces, App Value Among Questions in Future of Connected TV, DisplaySearch Says

With connected TV penetration now topping 20 percent worldwide, according to Q4 2011 market data, next-gen issues facing TV makers include how users control the connected TV experience, emerging business models for services and how TV owners connect to the Internet, according to a report from NPD DisplaySearch. Many of the technical hurdles of connected TV have been solved, and next phases will focus on consumer behavior -- including how people want to interact with their TVs -- the value of apps and whether consumers are willing to pay for services, DisplaySearch said.

Connected TV has “broken out of the high-end” and is becoming a mainstream feature across all regions, but usage and connectivity models vary widely from region to region, DisplaySearch said. The U.S., at 40 percent penetration, trails Western Europe at almost 50 percent and China at just over 45 percent, according to DisplaySearch. “Penetration has been low in North America, despite the success of internet-based entertainment,” DisplaySearch said. North American consumers want “large but minimally featured sets,” a pattern that followed U.S. adoption of 3D and LED backlight TVs as well, it said. Western Europe and China, by contrast, are established markets for connected TV, due to a “unified approach by both broadcasters and TV set makers to create and market open service platforms,” it said.

The report segments connected TVs, or the generic “smart TVs,” by service type: basic connected TVs that can access structured services such as Hulu and Netflix that are common and identical across brands; proprietary set-maker controlled sets that operate portals that can be cloud-based or not and can access broadcaster platforms; and consumer-controlled sets such as those from Samsung and LG that aren’t constrained by a portal and give consumers unrestricted access to the Internet, typically through a browser. Challenges with the latter type are the diversity of Web pages and video codecs that can cause some sites not to display correctly, it said.

The most valued connected functions for TVs are video-related and offer “lean-back entertainment very much like TV viewing,” DisplaySearch said. Those apps need to be different from those for mobile devices and need to focus on viewing from a distance instead of location-based applications, it said. The most popular apps either directly access content to watch, or they complement viewing by providing context or more depth to TV content, it said. Connected TVs will also require adapted user interfaces to “interact with a screen on the other side of the room” that doesn’t have a touch screen, DisplaySearch said. It could lead to an “arms race” of new interface solutions, or the need might be filled by tablet or smartphone apps, it said.

Connected TV penetration is outstripping the adoption of broadband Internet in some regions, which means some consumers will let the connectivity capability go untapped, while other consumers may consider the feature a form of future-proofing, DisplaySearch said. Countries including Indonesia, Poland, and Saudi Arabia have a far higher adoption of mobile broadband than fixed and appear to be moving directly to mobile Internet rather than fixed lines in the way that many African countries bypassed landlines and moved directly to mobile voice communications, it said. As a result, these markets will employ connected TVs differently, it said, and might stream Wi-Fi directly between a TV and mobile broadband connection, rather than using a home network and gateway.