|TV apps – effects on the ecosystem
Michael Lantz is the CEO of Accedo,the global leader of apps and app store solutions for Connected TV and IPTV, which he jointly founded in 2004. He has extensive experience in the converging telecom and media industries. Since founding Accedo, he has been driving development of innovative content offerings and applications for IPTV service providers and CE (Content Engine) companies.
Prior to setting up the company, Mr Lantz held roles at a Nordic management consultancy company, Digiscope and the medical IT company, CellaVision.
Michael Lantz holds a Master of Science in Engineering Physics and a Bachelor of Science in Business Administration.
TV apps satisfy the need for ‘campfire behaviour’, sharing viewing experience with family and friends,for mainstream TV or for the ‘long-tail’ online video consumption. Internet connectivity enhances the social aspect of TV and makes on-demand distribution possible. However, changewill not come at ‘Internet speed’ – the TV industry is more conservative than the mobile industry, with longer device replacement cycles. TV apps potential is high: they are associated with longer user engagement than mobile apps and with the willingness to spend on content. TV appsmay be standalone or providing feedback, but their real appeal is in providing differentiation in the increasingly competitive TV market.
The world of TV is rapidly evolving and over the past two years, we have seen introductions of the concept of TV apps, both from TV manufacturers and pay-TV operators. New technological possibilities emerge regularly and every generation of devices offers more advanced opportunities. Will there be a true shift of consumer behaviour going forward and how will the ecosystem evolve?
Previous paradigm shifts of television
TV went mass market in the 40s and 50s and from then we have not looked back. From the initial scepticism of the ’radio with pictures‘, consumer demand quickly proved the attraction of the new media consumption device. Of course, TV has evolved significantly from these humble beginnings to today’s immersive living room experience.
Today, I believe that we are seeing a paradigm shift of TV, which I think is similar in importance to the two major paradigm shifts of the TV industry we have seen over the years. The first one was the introduction of commercial TV, which has transformed the TV experience from public service to an industry worth hundreds of billions of dollars globally. The second one was the introduction of multi-channel TV, with the digital distribution technologies first introduced in the 90s.
The first shift defined the TV value chain as we know it today, whereas the second changed consumer’s perception of TV from a clearly defined media outlet with maybe between five and ten channels, to something with apparent endless choice and hundreds of channels. With multi-channel TV, came the program guide with a search-and-discovery behaviour, which is key for driving consumer interest in the current paradigm shift.
What makes us love TV?
Some people have long talked about the coming demise of the current TV industry with its clearly defined roles of aggregators (TV channels) and distributors (TV operators). However, the TV ecosystem has proven extremely resilient and TV viewership is higher today than it has ever been before. Globally, pay-TV is still a growing market and new TV channels are launched regularly. Why do consumers love TV? What are the fundamental features of TV, which makes the industry tick?
My personal belief is that it’s all about the consumer experience. It is due to the simplicity, convenience and structured experience of content available in the family’s social context, in the living room. This is not going to change anytime soon and is very important to remember for any future TV services and apps. In addition, TV is a social medium, where the ’campfire behaviour‘ of family and sports entertainment is still very important today, despite the rise of long-tail online video consumption. People love sharing and discussing TV experiences with friends and family, regardless of whether they watch the second season of Game of Thrones, the final of American Idol or maybe the latest Champions League football game.
Internet connectivity is the real innovation
TV apps have been around in TV for at least 15 years. The electronic program guide is the best example of a clear TV app, which solves a clear consumer use case and is launched with a remote control button or by finding the app through a menu system.
The real change over the past couple of years is the addition of Internet connectivity to TV STBs (Set Top Box), and to OTT (Over The Top) TV devices such as Smart TVs and Blu-rays. With Internet connectivity, distribution of apps becamesuddenly several orders of magnitude cheaper. Usage of web development technologies has made the deployment costs of TV apps a fraction of the previous costs. Additionally, the declining cost of processing power and the increased quality of the TV screen have made it possible to deploy very attractive consumer experiences.
Finally, an online connection provides the possibility of truly on-demand distribution of content instead of the traditional broadcast experience. Technically, consumers can access any content at any time, which is a fundamental shift of power from the broadcaster to the consumer. Of course, broadcasters are still needed to package and present the content in attractive ways, but they can establish a direct relationship with their customers, which should enable clever companies to create truly innovative program formats.
An online connection to all consumers enables a personalised TV experience. Consumers can share their personal preference or behaviour, to allow for an improved content and application discovery as well as participation TV. Remember, the TV experience, which is about simplicity, convenience, structure and functionality, mustimprove the consumer experience and should build an easier path to acceptance.
The rise of apps
It is hard to even remember a world withoutapps. From the humble beginnings in 2008, the rise of the mobile app market over the past 4 years, have been truly amazing with hundreds of thousands of apps in all possible categories. It is easy to forget that mobile apps existed already 15 years ago, when Nokia introduced games and ring tones for their mobile phones, taking the first baby steps on the road towards today’s vibrant industry.
It is my firm belief that the TV app industry will thrive, but also that we are about ten years behind the mobile industry. Fundamentally, the TV industry is more conservative than the mobile industry, with longer device replacement cycles, and long content agreements and relationships between companies. This will probably make the industry develop at a more measured pace than the mobile app industry, which exploded from nothing to a billion dollar industry in just a few years.
However, the TV is also the place where consumers spend more time every day than any other consumer technology. In addition, TV is content-driven and not communications-driven like the mobile devices. Finally, consumer willingness to pay for content is traditionally higher on the TV than on PC and mobile. All this should give great opportunities for a thriving TV app market.
Apps in a TV context
So, how will TV apps differ from mobile apps? This will of course be different between apps, but the underlying TV guidelines of simplicity, convenience, and structure still apply. TV apps should follow the same guidelines, and apps, which accept the consumer’s mind-set in the TV living room, will without a doubt be more successful than the ones that don’t.
Firstly, the main app category that will be of interest to consumers is the on-demand application. A stand-alone application, which includes an attractive consumer interface and content discovery is easy for consumers to accept and understand. These apps will be available both in premium, paid format and in free versions.
Secondly, we see stand-alone applications in other categories. Everything from sports results, games and horoscope to e-commerce, weather and social media will provide value to the market. These apps are easily deployed and will provide value to consumers, but will not be as popular as the pure video-centric apps.
Thirdly, integrated applications, which connect to the broadcast experience, are attractive. Integrated apps will add value to consumers that watch a certain program. These apps can be executed either on the big screen or on a second screen, depending on the specific use case. The key is to provide contextual information at exactly the right time and improve the content experience instead of substituting it.
The winners in TV apps
It is clear that TV apps are here to stay. Usage growth is high and the speed of innovation is high. TV apps haven’t yet been accepted by the mass consumer market, but the wide spread roll-out of devices with TV app capabilities will create a critical mass of consumers which will drive further app launches.
In my opinion, broadcasters will have the greatest opportunity to create value with TV apps. With strong brand names, and access to TV-centric content, they have a better possibility of creating unique applications. A broadcaster will create bundles of apps centred on their most important program formats and will use applications to drive viewership and additional revenues.
Pay-TV operators will also benefit from TV apps. Apps can be used aseithera revenue generator or a loyalty tool. Most of them are currently using applications as a differentiator in an increasingly competitive TV market, but some see new revenue opportunities from apps as the market matures.
Consumer electronics companies have a head start in TV apps compared to broadcasters and operators, which has resulted in more apps in more markets. However, CE (Content Engine) companies are hampered with the lack of clear monetisation possibilities. They need to improve their application ecosystems in order to compete.
Independent developers will provide a lot of innovation in this market. There are still very few developers of TV apps, but this will grow quickly as the technologies become more wide spread.