|Issue:||Asia-Pacific II 2015|
|Topic:||The failed promise of Smart TV|
|Title:||CEO & Founder|
Michael Lantz is the CEO of Accedo, which he jointly founded in 2004. He has extensive experience in the converging telecom and media industries. Since founding Accedo, Michael has been driving development of innovative content offerings and applications for IPTV service providers and CE companies.
Prior to setting up the company, Michael held roles at a Nordic management consultancy company, Digiscope and the medical IT company, CellaVision.
Michael holds a Master of Science in Engineering Physics and a Bachelor of Science in Business Administration.
Smart TVs have evolved from the first beginnings in 2009 to being almost ubiquitous in most homes in the developed world. At the same time, consumers have more and more possibilities of accessing their favourite video content. However, with adoption so far less than anticipated, what future role will Smart TV play?
A truly premium video experience is one which is consumed via the best screen in the home, the TV. It is a natural and logical analysis that if online connectivity were available in the TV, this would be a great opportunity for consumers to reach modern video services directly on the TV, removing all needs for STBs or other peripheral devices. Fewer cables, better services and a fully integrated experience were promises that were touted by the vendors five-six years ago.
Here we are now, in 2015, with a fragmented Smart TV industry, more and more video services, an increase in connected devices competing directly with Smart TVs and slower usage growth of Smart TV than expected. In fact, we’re seeing a decline in usage for older Smart TVs, leading to the assumption that consumers who have had Smart TV for a while move to other devices. So, what went wrong and what will the future hold?
Smart TV vendors have misunderstood the consumers
Fundamentally, Smart TV’s failure is driven from a desire to be everything to everyone. Once you add some computing power and online connectivity into the TV, you can do very many things. At all of the TV manufacturers, the product managers were looking for additional features to differentiate them from their competitors and to be chosen by the retailers, rather than thinking about the consumer experience, and how it could be improved. Consequently, the Smart TVs became bloated with a challenging user experience and features, which looked good on paper, but in reality didn’t add to the overall consumer satisfaction.
At the same time, consumers’ patience in front of the TV is limited. The user experience with a remote control is clunky at best, and with a complex user experience, it’s been increasingly difficult to find the functions you’re actually looking for. All this leads to a user experience that is difficult to navigate for consumers, and requires a significant learning curve for the mass market TV audience
The lifecycle for a connected device is important
A major challenge for TV manufacturers is that they get all revenues up front at the time of purchase, while a connected device needs to be managed and maintained over time. Naturally, consumers expect to get access to the latest software releases for their device, ongoing updates and new applications. TV manufacturers generally only spend time on maintenance during the first 12-15 months after initial market introduction. After this time, all focus is on the next product launch and there is no business case for continuing to add features or functions.
However, a consumer who suddenly discovers that the expensive TV they bought last year will no longer be updated, or may not support the latest applications will understandably be disillusioned, and may choose to move to other devices and abandon the Smart TV as the main video platform. Some of the Smart TV vendors have been better at this than others, but the general focus on the ongoing lifecycle of products already in the market is low. This has led to a significant decrease in usage among older Smart TV models, and may also make those with older models replace with other non-smart devices in the future.
Complexity is increasing even further
The final major mistake that the Smart TV manufacturers have made is that in the arms race of TV product development, they have all rushed to embrace new features and functions, leading to increased requirements on app providers and content providers. These additional requirements lead to further fragmentation and added development costs for the application and content provisioning. The complexity to sign agreements, launch applications and get them approved is huge, effectively removing the possibility for market tests and requiring significant investments to reach a large target audience on Smart TV.
Samsung is, by far, the leading Smart TV manufacturer in the world, but even within Samsung’s range of TVs, there are multiple generations of Smart TV platforms and different performance and functionality between models.
The short term focus is on 4K messaging
While connectivity is still a feature of more or less every larger TV sold in the world, innovation has moved to new features. TV manufacturers are always looking for the next reason for consumers to upgrade their TVs, and 4K video content provides such an opportunity. Clearly, such a feature is not backwards compatible and will require an upgrade of the hardware.
However, 4K is a one time innovation where connectivity is an area of endless innovation possibilities. The industry is betting that a move to 4K will lead to another cycle of upgrades of TVs, which may be a driver of the market for the coming 2-3 years. It remains to be seen if 4K proves more attractive for consumers than 3D content, but it’s clear that consumer marketing and positioning have evolved towards other areas than Smart TV features.
Opportunities for Smart TV vendors to reinvent the Smart TV
However, all is not lost, as in essence the fundamental reasons for the attraction of Smart TV are still there. The screens are increasingly better and to get the content you like directly on the TV screen is a great consumer value add. The failure has been in the execution, where a focus on the traditional business model for TV has been the key problem.
That said, there are two main opportunities for the Smart TV vendors to reclaim the potential of Smart TV.
Firstly, there is a great opportunity to partner with pay-TV operators. These companies are already spending billions on finding ways to distribute content to consumers. If Smart TV manufacturers can provide a way for them to reach consumers cost-efficiently, there is clearly a business case to provide an ongoing managed experience over time. To truly make the most of this opportunity, Smart TV vendors may need to sacrifice their control over the user experience in exchange for some funding and better content.
Secondly, Smart TV manufacturers should simplify the user experience. Consumers want to find a selection of great apps, curated by the platform, at the click of a button. Smart TV vendors need to reduce focus on their own services and packaging and trust their content provider partners to create a simplified, easy-to-navigate user experience.
The future of Smart TV
If we look ten years in the future, the market will continue to evolve. Clearly, one of the megatrends for connected devices is the availability of powerful mobile devices. Whilst the TV screen will remain the best to view premium content, every content provider and operator will engage with consumers on a mobile device in addition to the big screen. Naturally, in this world of multiple devices, consumers will expect an integrated experience across multiple screens. Some use cases will require a remote control but an increasing amount of use cases that consumers expect will be centred around replacing that functionality with a mobile device. “Smart TV” as we know it today will be a multi-device experience, where an integrated experience will be key to driving consumer usage and revenues.
Of course, this doesn’t mean the end of the Smart TV, but it will add additional pressure on the Smart TV vendors to evolve. It will be vital to deploy a second screen strategy either on your own or together with partners. At the same time, a Smart TV, which is just reduced to a dumb screen, will quickly become a commodity. The winners will be the vendors who can define a user experience to best adapt to the change in consumers’ tastes.