Broadcasters Must Wise Up About Smart TV

LG’s cracker-thin 55-inch OLED screen was gorgeous. So was Samsung’s super-sharp 4K Ultra High Def set. But the consensus at the 2012 International Consumer Electronics Show was “no breakthrough video products.” You could almost hear broadcasters breathe a sigh of relief.

Not so fast. While no single Next Big Thing was poised to threaten traditional television, three technologies showed significant progress: connected TV, smart TV and TV Everywhere. What’s more, it’s likely the three will converge. If so, they’ll arrive in one massive wave that could completely disrupt the way people watch TV — and threaten the way broadcasters do business.

Connected TVs are sets that you connect via broadband to the Internet, specifically to sites that aggregate or sell streaming video. The sets feature launch screens populated by colorful branded icons and apps that jump directly to third-party “channels” for gaming, shopping, movie rentals and specialized videos.

LG, Samsung, Sony and Vizio showed sets with the the GoogleTV interface, which drives viewers to an assortment of content partners, including Google’s own YouTube subsidiary, now aggressively promoting “channels” programmed by Vin Di Bona, CSI-creator Anthony Zuiker, Amy Pohler, Ashton Kutcher and many others made wealthy by broadcasting. Just this week, Bruce Seidel, the executive behind such Food Network hits as Iron Chef America announced his departure to head a new YouTube food channel for Electus.

Right now, the colorful launch screens are laid out like a stamp album. Confusing at first, but better than the typical schedule grid, especially once consumers can arrange the icons. Check out GoogleTV’s demos here. Then imagine looking for your own station or network.

It’s a preview of a future where you’re on equal footing with channels devoted to fashion, chocolate or America’s Funniest Videos. How can such narrow topics achieve promotional parity with your station? They’ll buy featured positions by cutting deals with set manufacturers and interface service providers.

Smart TV is any search tool that lets viewers choose content by title or topic. Typically today, this requires clicking one-letter-at-a-time onscreen or on a tiny keyboard. “The user interface on these things is still horrible,” says tech guru Tim Bajarin. “The fact that you still have to type stuff in is absurd. We should be way beyond that already.”

Indeed, some high-end 2012 models allow you to speak selections out loud, or make onscreen choices using hand gestures — but the response time lags and the results are sketchy. Perhaps these features were rushed into production in response to persistent rumors that later this year, Apple will bring out its own game-changing TV, powered by Siri, the voice driven “assistant” built into every iPhone 4S.

Today’s smart TVs are precocious toddlers, little more than key word matches within a single program guide. But they’ll soon skip a grade and display much more sophisticated selections. “Your television will be able to combine multiple databases into one electronic guide,” says Bajarin. “Rovi is already doing this.”

According to Google’s new company-wide privacy policy, GoogleTV will almost certainly use customer preferences to promote partner-generated video. So will Netflix, Amazon and every other streaming video supplier. Ultimately, broadcasters may have to pay dearly for a place among the top search results.

This doesn’t just threaten station ratings and revenue. It endangers the source of primetime content itself. “Studios need healthy networks for our shows to succeed,” Warner Bros. TV President Bruce Rosenblum told a CES audience. “They attract viewers with promos,”

The broadcast network program development cycle is hardly a science, but no other model is nearly as efficient for nurturing, replicating, and cross-promoting hit shows. Even with short seasons, Mad Men is a loss leader for AMC. Netflix is gambling more than $100 million on House of Cards — 26 original episodes starring Kevin Spacey. That’s not sustainable, especially considering that over 60% of Netflix’s OTT business comes from streaming off-network shows.

TV Everywhere is a term popularized by Comcast and Time Warner to describe their plans to use broadband mobile apps to let “authenticated” customers access the same video content they enjoy at home. At CES, Echostar and Dish promoted similar services tied to Slingbox and/or multi-room DVRs. Broadcast veteran Jack Perry hopes his Syncbak devices will do the same for stations and networks. All of these companies claim they are “close” to completing deals for the necessary digital rights, but that remains to be seen.

There should be money to pay for the rights. TV Everywhere will generate $5.6 billion in additional ad dollars, based on skyrocketing projections for out-of-home viewing. That’s according to Needham & Co.’s Laura Martin, and that’s her low estimate. (Read a synopsis of her reasoning here.) The beneficiaries would be broadcast networks that own a substantial share of their primetime fare.

For consumers and content owners, TV Everywhere sounds like a terrific arrangement, that is, until it catches on. If it’s popular enough, it fulfills the worst FCC forecasts about broadband scarcity. Here’s where broadcasters’ over-the-air mobile DTV could ride to the rescue. Too bad that technology is still at the starting gate.

Tucked away in a far-flung corner of the CES exhibit floor were the promising product demonstrations of both the Mobile Content Venture (Dyle) and the Mobile500, broadcasting’s two mobile DTV ventures. The devices provided rock-solid reception. The Mobile500 software even delivers basic DVR functions. Unfortunately “promising” is damning with faint praise, especially at this late date. Last week at NATPE, I opened a panel on “Making Money in Mobile” by polling the audience about mobile DTV. Not a single attendee had ever heard of it. Yikes.

To matter in the marketplace, mobile DTV must offer a package of programming at least as compelling as any of the TV Everywhere lineups. If they do, then broadcasters may have the advantage since theirs will be the only one that is free, just as conventional broadcasting has always been.

Free access to local news, and top primetime and syndicated shows could prove very appealing — especially with DVR functionality that let viewers control program start times. It might also prove appealing to carriers if it simultaneously unclogs their broadband networks. On the other hand, for 85%-90% of American home already paying for cable or satellite, the concept of “free” may prove less compelling, since they may well receive TV Everywhere at no extra charge.

Either way, broadcasters need a much bolder presence and strategy in the digital domain. Stations need to buy and try the latest digital devices to stay current with consumer trends. They need to stake a claim to premier positions in smart TV search and graphic displays. They need to promote more aggressively the existence and benefits of mobile DTV. And as soon as possible, they must merge the MCV and Mobile 500 and use their combined clout to negotiate win-win contracts with the carriers to make mobile DTV receivers in phones as common as cameras.

All of which amounts to the final takeaway from the 2012 CES: gradual change is not an option. The connected TV-smart TV-TV Everywhere wave is coming, and broadcasters must catch it. If they do, the inherent strengths of network and local programs will keep them ahead for decades to come.