Market Insight

Smart TV developments at CES

January 15, 2013

Merrick Kingston Merrick Kingston Associate Director, Research & Analysis, Digital Media & Video Technology

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CES 2013 has ushered in a wealth of smart-TV-related announcements, most notably from The Smart TV Alliance and Roku. The Alliance - founded by LG, TP Vision and Toshiba, in the hopes of developing a single, cross-manufacturer IETV application framework - has brought Panasonic and Technisat into its ranks. Roku - makers of the Roku OTT set-top box - has announced that Coby Electronics, Hisense, TCL and Westinghouse Digital have joined its Roku Ready program.

Considering the difficulty of competing via hardware alone, manufacturers continue to face two principal barriers to positioning their TV sets as software platforms in their own right. First, severe discontinuities exist in the market, and platform interoperability across manufacturers is largely a fiction; as a result, the cost to content providers of developing applications for and supporting multiple platforms can be prohibitive. Second, even in an environment characterised by technical interoperability - where, for example, content applications from a Netlix or a Vudu might comply with a single platform specification supported by multiple manufacturers - individual manufacturers would still have to secure agreements with individual providers in order to carry their applications and content.

The Smart TV Alliance aims to alleviate the first issue by fostering the development of a single development environment and software-development kit (SDK) that multiple manufacturers may adopt. With Panasonic's joining, the Smart TV Alliance now contains four of the largest five manufacturers in Europe in terms of TV shipments, and in 2011 was collectively responsible for 36 per cent of all Smart TV shipments. Aside from Samsung - responsible for 23 per cent of Smart TV shipments in 2011 - and Sony - itself responsible for 14 per cent of all shipments in 2011 and a larger percentage in 2012 - no other global development platform or SDK has comparable scale. It now seems highly plausible that amongst the Tier 1 manufacturers, the likes of Sharp and Sony will be potential candidates to join the Smart TV Alliance, in order to encourage application development on their own platforms.

Beyond the Tier 1 segment however, there is a move towards greater uniformity in the Smart TV market - at least on a regional basis - as Tier 2 and Tier 3 manufacturers look to third party solutions to expand their Smart TV presence.  Whilst offering Smart TV functionality is an almost expected feature for TVs larger than 40 inches, running and maintaining a platform is expensive both in terms of development cost and customer-support operating expenses. In a low-margin business like the TV segment, it makes sense for many smaller brands to outsource these elements to a specialist; several companies are fighting for this position.

In the US, Roku has a very strong brand, and after a raft of January 2013 announcements, can now count 6 brands within its Roku-Ready TV program: Coby, Insignia (Best Buy store brand), Hitachi, HiSense, TCL and Westinghouse. Indeed, with its range of newly announced Roku-Ready partners, and the tight integration that exists between Roku-Ready TVs and the Streaming Stick product, Roku is no longer simply a seller of standalone OTT, content-in-a-box products; Roku has managed to turn itself into a veritable Smart TV software platform. For those attaching the diminutive Streaming Stick to their Roku-Ready TVs, users will find a content and navigation experience that is deeply incorporated into the TV's own UI, and that is controlled directly by the TV set's native remote control.

Across Europe and Latin America, NetRange has secured a host of deals, including clients with large market shares such as Sharp and Vestel, while in China, the Changhong-and-TCL-backed venture Huan TV creates Smart TV technology for both companies. Meanwhile, from a global perspective, Google showed Google-TV-running sets with LG and HiSense at CES 2013, while TCL and Vizio exhibited sets running Yahoo!'s Connected TV framework.

On balance, these developments in the Smart TV segment are positive for the industry, and the shift to a common, HTML5-backed environment for the Smart TV Alliance platform in particular will enable application developers to reach a wider audience in far less time - and perhaps more importantly, incentivize operators to experiment with their own Smart TV applications, and advertisers to experiment with Smart TV ad insertion. Yet even the development of a single, technical specification for application runtimes does not solve all the issues facing the larger Smart TV manufacturers.

Curating a proprietary application store, and developing a platform that is compliant with a broad, pan-industry specification does little to alleviate ongoing operating expenses, and the difficulty of securing content agreements by geography. As such, amongst even some of the larger manufacturers, the proliferation of the Smart TV Alliance does not preclude further movement towards some of the white-label, branded platforms that many Tier 2 and 3 manufacturers have leaned on.

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