Despite accelerating global demand for smart TVs, a new report from TDG forecasts that TV manufacturers will be largely unsuccessful in generating new revenue from these net-connected platforms.
According to the Diffusion Group TV makers fail to cash in on smart TV adoption.?Portal fragmentation alone is set to result in $1 billion in lost ad revenue.
“Smart TVs appear to be the product category best positioned for connected in-home video entertainment,” finds Colin Dixon, senior partner and author of the study Smart TVs 2012-2017: Connections, Use, and Portal Revenue.
“Who needs an Internet set-top box like Roku or Apple TV if the functionality is integrated directly into your TV?”
Yet appearances can be deceiving. Although smart TVs will diffuse widely in the next five to 10 years, as deployed television sets age, new apps and services will emerge that cannot be supported by the smart TV’s embedded portal. In fact, this is already happening, to the dismay of early smart TV buyers.
This will inevitably drive consumers away from using their smart TV for net-to-TV purposes and toward less expensive devices like net-enabled game consoles, Blu-ray players, and iSTBs. According to Dixon, “Consumers in search of the latest OTT features are much less likely to replace their $2,000 big-screen HD smart TVs – platforms with an 8-10 year life cycle – than they are to spend $100 on a new sidecar device with a 2-3 year life cycle and add it to their TV system.”
Dixon also points to the dramatic consequences of platform fragmentation that today characterize the smart TV industry, and that frustrate advertisers struggling to decide which platforms to support and how to best integrate multiple outlets into their workflow.
This issue alone will cost TV OEMs more than $1 billion in unrealized advertising dollars. When combined with gaps in the product upgrade cycle and the speed at which competitive ancillary platforms are leapfrogging smart TVs, TV OEMs are set to face significant challenges even as platform sales experience rapid growth.