The Connected TV Reality

In March of last year, I canceled my service with DISH Network to embark on a simple experiment. The question was, did I need my television service provider, and the experiment was to see if streaming shows from the Internet could satisfy my television habits. I connected one of my more powerful notebooks as elegantly as possible to my TV via HDMI and the experiment began.

The TV shows they are a-streaming…

In the first few weeks of this experiment, I came to find out that 90% of the TV shows my wife and I watched on a regular basis were available online from either the networks’ websites themselves or from Hulu. What suffered however was live sports and shows for our kids, which wasn’t necessarily a bad thing as kids probably get enough TV as it is.

Since I am a die-hard San Francisco Giants fan, though, it was very difficult for me to not be able to watch a single game the entire season from the comfort of my own home. I tried connecting to hacked streams; I tried watching them through my dad’s SlingBox; I even tried MLB.TV, but since I am in the Giants local market the games were blocked out. Nothing came close to watching the game in HD on my big screen. Which leads to a conclusion with live events being that they still have a long way to go when it comes to an equally or more compelling offering through the Internet.

For most other shows that were not available online I found that iTunes had season and individual episodes for sale. For example, things like Discovery channel episodes are not streamed, but were available in iTunes.

One other observation was how cumbersome the process was to find the show we wanted to watch. Bookmarking each show’s portal was the most efficient way to quickly watch each show. What is really missing in the world of online streaming is something akin to the guide or EPG provided by network service providers. Boxee made an attempt but I still found their user interface awkward and unintuitive, allthough it has improved. In both the online world of TV as well as the service provider world a more efficient way to quickly find what you want watch or discover something to watch is yet to be solved. Another frustration was that each new episode would appear online generally 24 hours after it aired and in some cases 48 hours — which made talking about the latest episodes with my friends a little awkward since I wouldn’t be able to chime in on the conversation until several days after it aired. It seems as though the trend in connected TV shown at CES this year may take steps in addressing some of this weaknesses.

Connected TV and Streaming Services

One of the big trends we see coming to new TVs in 2010 is the integration of streaming services. We see momentum by TV manufacturers to integrate services like Netflix, Amazon “Unbox”, Hulu, and more directly to the TV or set top box. If you have seen the VIZIO commercials for their connected TV you get the picture. Research from The Diffusion Group anticipates that by 2014 there will be 360 million connected TV’s or Set Top boxes worldwide. The broadband services delivered to these connected devices may come in the way of applications or simply a “walled garden” portal with each service, but consumers will decide which services if any they choose to “install.” This is of course extremely valuable to the content providers providing streaming services, but also to consumers who may already subscribe or pay for those services and want to enjoy that content on their TV as well as their PC or mobile device.

Another element of connectivity coming to the PC is by way of “web apps” for lack of a better term. Things like Yahoo’s Widget channel and even TV applications being developed by service providers like DirecTV are demonstrating what a simple application connected to the Internet for quick information can do for consumers. Quick access on your TV to things like sports scores, weather or stock information, as well as integration with applications like Flickr and Facebook can offer consumers “information snacking” with the services they are interested in without ever having to open a web browser or check them on a mobile device.

TV manufacturers are showing increased interest in adding more intelligence to their TV sets so that they can capitalize on connectivity and streaming services. We are seeing more and more very powerful CPU’s getting integrated into these next generation TV sets and set top boxes that inevitably will move the TV from a simple dumb display into an intelligent screen in your home that can now be a platform to develop new and innovative services or applications.

The Challenge Ahead

One of my key takeaways in exploring the world of Internet TV and streaming services was that the mainstream TV networks are at a major crossroads. Down one road they have their traditional distribution methods through the cable and satellite service providers who pay them large up-front sums of money for their network content. Down the other road is the world of Internet distribution through their own sites and in collaboration through Hulu.com. This road offers them a more direct relationship with their customers and the ability to benefit directly from the advertising spends, but has steep up-front costs associated with it. This is why there is speculation that Hulu.com will offer a paid service or a subscription model so that the networks can benefit from this model in a way similar to the service provider model where money changes hands up-front. This road, however, poses a challenge to their deeply vested service provider model and the networks are extremely cautious not to do anything that aggravates their service provider partners since they represent such a large chunk of their business.

Balancing this world of broadband vs. broadcast content will be one of the more interesting things to keep your eye on. Whether or not a service like Hulu.com and the network content on that service can benefit from a freemium model is yet to be determined. However an interesting model presented by Epix HD could prove to be worth paying attention to. In essence, Epix HD is a premium cable channel that will offer its subscribers free access to epixhd.com, where consumers can stream on-demand movies and other content offered by the service from any PC web browser. This model works because the online streaming service is a perk for being a subscriber to their premium channel. HBO as also announced something similar. This model makes the likes of Comcast happy because they are getting revenue from their broadcast infrastructure as well as creating more demand for their broadband infrastructure. Bringing the value of their broadband to more then the PC is a major initiative for many service providers.

Another key challenge is around the debate about where this intelligence I speak of should end up. Should it be in the TV or does it make more sense for all the horsepower to move into the set top box either provided by the service provider or bought at retail with the ability to connect to a service providers service.

We believe that we are at the very beginning of some shifting consumer behavior where the three screen, TV-PC-Mobile device, experience begin to blend and offer seamless entertainment experiences. Each major screen in consumers lives represents a different consumption experience and each have a role in this ecosystem. Content owners and service providers are going to have to begin to experiment with what it means to offer both broadcast and broadband content and wrestle with how that content may be complimentary, provide elements of convenience to consumers to discover and enable consumers to consume their content in ways they could not before on whatever screen they happen to desire to view it with.

Where did I land?

My grand conclusion is that for the foreseeable future the standalone “Internet tv” offering is truncated and isolated at best. It is not, by itself, an all encompassing experience and is instead a fraction of the overall experience to come. Because of things like the lack of a guide, effective discovery tools, and live programming all led me back to “selling out” and signing up with a service provider again. Besides, many of my friends and family were getting tired of me inviting myself over to watch college and NFL football games. Luckily I got all hooked up just before the San Francisco Giants season starts. After much research I choose DirecTV for three Reasons:

1. Out of all the service offerings I liked their remote access / programming remotely features. They have an iPhone app as well as a very good online UI to remotely program my DVRs, both of which will evolve and include many interesting features. I also know they have enough technology in the hardware in their latest box to make remote viewing and access to my recorded content, similar to SlingBox, possible.

2. They offer free software to connect any PC in my home remotely to my main DVR and stream recorded shows in SD or HD to any computer in my house. Since I have a computer elegantly connected to one of my TV’s, it now acts as a second set top box allowing anyone to watch a recorded or recording program even as the DVR is currently viewing or recording something else. I am also doing this wirelessly and am having very good success streaming my DVR content in HD wirelessly to my PCs.

3. The DirecTV latest generation DVR’s are software upgradeable to HDMI 1.4 making them 3D-capable when they are updated. DirecTV has one of the only boxes on the market capable of this whereas customers of Comcast, DISH and others will need to upgrade their hardware if they want 3D