Friday, 12 April 2013

The TV Battle of the Future: SMART Suppliers vs Connected Kings



Much development and preparation is going into creating the “connected homes” of the future, with TV (debatably) at the center of this.  However in the journey towards the creation of this digital utopia, most are currently overlooking the current Connected-SMART TV stand-off that could prove pivotal in the realisation of this future.  But what’s the issue, and what are the potential outcomes?

The Problem

With over 50% of their 46m Live users’ time now being outside games, Xbox (and others) have successfully developed and grown their gaming community. Conversely, whilst SMART TV ownership is gradually rising, the high price point currently outweighs the functionality of the devices and stands as a barrier to a mass uptake of the product.  This means that  whilst the likes of LG and Samsung are dominant in the TV world, at the moment they’re second best in the Connected one.

However this will change.

As part of the global emigration into the cloud, eventually the Xbox as we know it will not exist.  Instead, it is predicted that it will ultimately be nothing more than an app on your TV, accessing games etc via the web. 
The possibility of such circumstances arising naturally has enormous ramifications on how Sony, Microsoft and Nintendo choose to develop their brands over the coming years.  The implicit requirement for some form of integration with their competitors could both strip away their power over the SMART world, and remove a key source of revenue (the console itself)[1]

So what are the options, and what’s each manufacturer likely to do?

The Solutions

There are 2 ways that they will be able to resolve this issue:

1.       Enter the TV market
2.       Put “Xbox app” exclusive rights up to tender

Whilst on the face of it going into the TV market seems like a mammoth task, for some it’s not as farfetched as you’d think. 

Firstly, despite a reduced their market share resulting from more (and increasingly powerful) competition, Sony still has a decent foothold in the TV market.  Integrating Play Station into their TVs of the future would be a fairly straightforward and logical move, and one that could improve both their gaming and TV offering, with both departments currently struggling to win against their respective competition. 
The ease and benefits of this first option make the second less likely.  However, so as to not be outdone by Microsoft they could seek to partner across all TV manufacturers. 

On the other hand we have Xbox, with owners Microsoft not currently directly connected to television.  However their recent foray into mobile and tablet with the Windows 8 OS and Surface – as well as their historic computing power and commitment to the connected future (see future video) -  shows that they have the resources and drive to enter a new market.  Whilst entering new spaces has ended disastrously in the past - think Zune - having just stated their focus on further building up their entertainment offering to create XBox TV (see article here) they're going about positioning themselves to create a uniquely appealing TV in the right way.
That said, as they’ve done with Nokia for the launch of their mobile OS it may be simpler for them to stick to what they can do well, applying competitive pressure by simply partnering stronger players.  With deeper pockets than Sony they could initially seek to simply outspend in an effort to own the market.

Nintendo on the other hand is a different matter.  The family friendly gaming giant hasn’t outwardly ridden the innovation wave, and doesn’t seem to be in any rush to do so.  Not having fingers in as many pies as their competitors, it’s more likely that they would seek to partner with someone else than enter a new market.  Having no real credibility outside their specialism this would probably be the best move for them, but may have to improve their offering of the Wii to become a more attractive proposition to draw people into buying.

How Far Away is This Movement?

In some form, all these companies have inflicted and been afflicted with highs and lows resulting from innovation, and with large R&D budgets I’m certain thoughts like those above have been considered, acted on or thrown out long ago.  Whatever the current state of affairs however, consumers aren’t yet ready for them.

In terms of causing an uplift in purchase the main factor that the SMART and connected progressions have over what HD and 3D had is primarily providing use to the consumer.  Though HD and 3D undoubtedly enhance the viewing experience, compared to a standard experience the benefit is minimal[2]
With most current SMART TV owners advocating their benefits, when more budget and mid-range options become available, we can expect to see a growth more akin to the tablet market[3] (though due to the extended ownership cycle of TVs it will undoubtedly be substantially elongated). 


SMART TV penetration hasn’t yet reached a critical enough mass to warrant any major moves from the connected kings, however as the market becomes more affordable we can expect the functionality of these products to be influential enough to move an increasingly digital population there quicker than perhaps believed.  The gaming industry will have to respond in order to keep up, but with a variety of options available to all players within the market they’ll need to start arming themselves, as the connected battle could easily become an all out war.

[1] Though they could monetise an app, consumers inherently wanting something for their money aren’t likely to be willing to pay £300 for it, especially as it will at least appear that its then the TV that will be providing the gaming/interaction experience.
[2] The fact that few channels broadcast in 3D or HD, as well as needing to purchase additional sets of glasses for 3D makes them inhibiting as well as excluding the sharing of benefits with others.
[3] With just over 20% of UK adults now owning a tablet device.