Internet connected TV screens have been with us since 2009, when the first ones launched with Yahoo Widgets. Since then connectivity in TV screens has gone from being a ‘top of the range’ functionality to a standard feature of most TV screens sold. At the same time, connectivity rates have improved from the early, low 20% mark to around 80% of all units sold. This has happened because the manufacturers have simplified the connection process and made it a much more worthwhile thing to do. A huge part of this increased usefulness has come from the inclusion of high quality apps like BBC iPlayer, Netflix and Lovefilm apps on the devices.
The arrival of Smart TVs created a wave of speculation about competition at the front of the TV value chain – the bit that actually sells something to customers. Could Smart screens cut TV services like Sky and Virgin out of the equation, and make their dependence on set top boxes seem out of date? Most importantly could the arrival of the Smart interfaces, with web apps and functions, allow broadcasters to have direct contact with their viewers once more? All of this seemed possible at the time.
This year at CES the question seemed fanciful and the market stats of the last few years seems to bear this out. In the UK, around 80% of smart screen owners have a set top box (STB) plugged into them, so the ‘smart’ function is secondary at best, to the total TV experience. This can be explained by a number of factors.
First of all, is the PVR factor. Up till this year’s screens, Smart TVs haven’t had any built in memory. If you wanted to create a PVR function you had to plug in an external memory and use the ‘Windows style’ folders to find and play recorded programme files. The interfaces on these devices are clunky and their usefulness is limited by the fact that most Smart TVs have a single tuner (meaning you can’t watch something and record another).This has played into the hands of the set top box based service providers.
Also, it is important to flag up the relative failure of on-demand compared to PVR. After 6 years of trying, on-demand has generally failed to shake the UK viewers’ love of their PVR. On-demand only offers a fraction of the programmes on telly, as only a minority of broadcasters offer on-demand. On the other hand PVR functionality in a STB works with every broadcaster. Even those broadcasters that do offer it have messed up the market with the OD scheduling on their players. Consumers can never work out when a show will or won’t appear, and how long it will stay in the on-demand menus. On tablets and laptops this hasn’t mattered, but on TV it is still easier to PVR something than rely on on-demand. This is borne out by the numbers. Even the BBC (who claim iPlayer as the main gateway into BBC content) admit that only 2% of their total TV consumption is on-demand, while 7-8% is PVR content. Again, this has played into the hands of the set top box based service providers.
However, the biggest problem facing the Smart TV providers 
is their inability (so far) to create a consistent development landscape for their prospective business partners to play on. The fragmented landscape of operating systems and interfaces have made it almost impossible for any content provider outside of the big international players and the BBC, to fully engage. In the UK, while the BBC is on almost every device, the distribution of the rest of the broadcast players is patchy. ITV is still only on one of the 8 major Smart TV brands. No one seems to explain to the poor consumer why their new screen has only partial coverage.
For those of us concerned with the evolution of television advertising in particular, it has been daunting that after 6 years, there is still no agreement on the size, location or functionality of ad units in these new interfaces. This would be bad enough if it was just a problem of disagreement between manufacturers. But even within a single brand, we have seen the formats change year on year. Every CES one of the big TV brands announces its ‘revolutionary’ new approach to groans of dismay from the media industry. Last year it was Samsung who threw out a nicely evolving interface design with a consistent ad model for a poorly designed ‘revolutionary new OS’. This year it was LG’s turn to do the same. The manufacturers don’t seem to realise that the advertising industry needs the ‘evolution’ of a stable format not consistent waves of ‘revolution’.
There are some companies valiantly trying to cut through the crap and to give a single point of clarity. In the content world, the BBC have attempted to launch an application mechanism that allows for a single point of publishing to many apps and interfaces – called The Application Layer (TAP). In advertising, Rovi have been attempting the same with their unified ad services and Rovi Remote Access Services t. These have given agencies the welcome chance to experiment with connected TV advertising across devices and formats. Using this system a growing number of brands are able to experiment with the emerging display formats for the connected TV environments.
However, we would argue that these pioneer companies are being let down by the very device manufacturers they are seeking to support. With each radical new interface launch, you can count the hours of wasted activity around the previous interfaces. The most difficult aspect of this is that nobody in the market believes that the device manufacturers have the commercial or intellectual capability to solve this themselves. Just about everybody believes that within 10 years, all smart TVs will be running Android , iOS or Windows operating systems.
So what of the next few years? Smart TVs will continue to sell and to be connected within our homes. They are increasingly becoming a component of a connected screen ecosystem. But it would appear that the companies best poised to exploit this are the very STB based service companies that they hoped to disintermediate. At CES we saw Dish and Comcast demonstrating their connected home apps, sitting on a Smart TV, and connecting to a PVR somewhere else in the building. Increasingly these platform apps – like SkyGo or Virgin TV Anywhere on an iPad – contain the on-demand and streamed channels of all the major broadcasters. Its logical for these apps to move onto Smart TV.
So the pay platforms are best positioned to deal with the distribution complexity the screen manufacturers have created. The great strength of this is that a single platform company can link consumers and broadcasters across a network of legacy devices, saving broadcasters from massive cost – if they allow the platforms to take control
What is clear is that Smart TVs will continue to sell, to be connected and to be used for some content. But they are a long way from realising their initial promise.
Nigel Walley
@nwalley
@DecipherOffAir