Lots Of Buzz Over Broadband Enabled TVs, But Impact Not Felt For Many Years

As the CES show in Vegas kicks off this week, the buzz and announcements around broadband enabled TVs is starting to heat up. Netflix and LG announced that come later this spring, a new line of broadband enabled LCD and plasma TVs will be capable of streaming content from Netflix without the need for any type of external box. While this is not the first broadband enabled TV that will be capable of streaming content, both Panasonic and Sony already have models, it is the first TV manufacturer deal for Netflix.

The CES show also brought announcements from Adobe and Intel who are looking to bring Flash to Intel's Media Processor CE 3100, which Intel hopes will be used to bring web content to digital TVs before mid-2009. In addition, Intel plans to announce with Yahoo! support from TV manufacturers to sell sets that come with widgets that allow you to watch web content on your TV using the TV's remote control.

While the idea of broadband enabled TVs sounds like a great idea and catalyst for helping to bring more IP video directly to the TV set, the reality is that these devices won't have any major impact on the industry for many years to come. The poor economy has killed the sales growth of new TV sets, let alone new LCD and plasma displays like LG's where the broadband enabled versions cost an estimated $300 more than ones without the functionality.

But of course, that's not stopping the companies building these sets and analysts to say things like, "I think this will be a big, growing sub category in TV" or "Streaming video from the Internet and other means of direct digital delivery are going to put optical formats out of business entirely over the next few years.” It all sounds nice, but it's wishful thinking on their part, especially the idea that broadband enabled TVs and streaming will make the DVD obsolete in a few years time. The real question is how quickly will these new sets be adopted when Netflix says that most research data shows that the average consumer holds onto their TV set for at least a decade?

Parks Associates predicts that by 2012, about 3.6 million broadband enabled sets will be sold in the U.S., or about 14% of total new TV sales. If those numbers are accurate, three and half million sets in three years is not a very big impact on the market considering devices like the Xbox 360 and PS3 sell that many devices in one or two quarters alone.

Broadband enabled TVs could be the future, but the impact they have on the market will not be felt in any major way in the next three years. And while most in the industry are talking hardware, the real question in my mind is what the user interface is going to look like that allows viewers to find and control how they get web content to their TV set? The software layer is going to be the most important factor in the success of broadband enabled TVs and not the actual hardware itself. Building added hardware functionality into a TV set it the easy part, providing the software overlay that will control and operate the new user experience is where the real challenge comes in.

  • Doug C.

    I’d recommend anyone download and check out Boxee (http://www.boxee.tv). It’s a free download based upon XBMC, which integrates a social network into media center functionality; you can watch Hulu, CBS, Netflix, and more via this software. Rumor has it there’s a LOT more functionality coming. I have it installed on my AppleTV which took a previously fun toy into a must have unit.
    I’ll agree this “convergence” that everyone dreams about is a few years away, Boxee is the first I’ve seen where things are really coming together. In fact, why integrate this functionality directly into the TV? It sounds good on paper, but the modularity offered by a box is a better bet, IMO.
    My .02.

  • Doug, I tried Boxee which I recommend too and it offers viewing of online and offline local content. It will be in an open alpha on Jan. 8th for Mac and Ubuntu but not for Windows.
    Dan, I agree with you too about the adoption rate on the broadband enabled TVs. It’s true that most people look at a TV as more of a long-term purchase. Set-top boxes and peripherals change more often and that’s why Roku, Apple TV and other media centers may have a wider acceptance rate in the near future due to their price, scale and size.

  • Rob Green

    Just a little perspective, Microsoft and Pioneer built and showcased some of these over 5 years ago at NAB.
    Maybe the market has finally arrived.

  • Dan,
    I agree completely. I’ve been saying similar things in several of my posts recently, about Intel’s “widgets”, the death of DVDs, lack of a compelling UI for the TV, etc.
    People continue to confuse an engineer’s sense of “cool” (what *can* be done) with the market’s sense of viability (what *should* be done). As a technophile I’ve fallen into that trap myself. But I suspect I’ll have direct internet connectivity in my TV at about the same time as I get it in my refrigerator.
    Always nice to see someone applying common sense to the gusher of CES promotional announcement hype.

  • David

    Agree we all sometimes confuse what’s great in the lab with what a market really needs.(When it’s good it’s called creative tension, when done badly it’s a dead duck) but as regards broadband enabled TV, I believe we are closer. I do not know how LG have implemented their solution, leading to the price-up, but look at what the latest silicon solutions for TV sets are providing; Multi-codec capability, ethernet connection, all on board. No expensive add-in modules will be required (unless you include some on-TV storage capability), the gap between advanced STB silicon solutions and those for TV’s has closed due to both technical convergence and economy of scale in chip R&D, coupled with smaller geometry solutions. What this concept needs are viable service / content / delivery solutions and these are appearing. Penetration rates for sure will depend on flat-panel TV growth and churn as commented on above.

  • I’ve been keeping the concept of web-enabled TVs on my radar for awhile now. I just signed a content agreement with Anysource, which I think is one of the leading, if not the leader in the space, you mentioned above – the software that brings organization and discovery to the video content being viewed on your HDTV.
    There is some validity to the “can be done” vs. “should be done”, but if most of the major manufacturers are building in the required chip now, I think that says something about the time frame they have in mind. It isn’t “immediate”, but it’s not years away either. From a niche content provider pov, a web-enabled TV with a good software search tool gets content completely away from the network gatekeepers and allows the individual in the living room to discover and make up their own mind. Revenue is still an issue though. Free VOD on the TV in the living room is a big step up from YT on the computer screen, but it is still doomed for ultimate failure if a revenue model does not come attached. fingers crossed.