Smart TV Makers To Lose On Ad Revenue Opps From Over-The-Top, Report Says

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About 159 million homes will have smart TVs by the end of this year, but gaming consoles and set-top boxes are more likely to win the long-term connected TV battle than smart TVs themselves. That’s the finding of a new report from The Diffusion Group predicting that TV set makers who eagerly showcased their new connected capabilities at the CES show won’t be the ones to benefit from the money that’s expected to flow through broadband connections to the TV.

Smart TVs won’t be able to support new services and apps as easily as other products, like Rokus and Apple TVs, said TDG. The firm said that net-enabled game consoles, Blu-ray players and interactive set-top boxes are poised to benefit more than TV sets. "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- to-10-year life cycle -- than they are to spend $100 on a new sidecar device with a 2- to-3-year life cycle and add it to their TV system,” said TDG’s Colin Dixon, who authored the report.

Consumers will likely buy smart TVs as they replace aging sets, but they may not connect them to the Web, opting instead to use over-the-top services with their quicker pace to integrate new apps. The upshot is that smart TV makers may not realize the additional transactional revenue from connected services, such as app sales, on-demand buys and ad dollars.

This potential fragmentation could prove frustrating for advertisers as they begin to include connected TVs in their media buys, especially on the heels of studies like the one YuMe conducted, which found that connected TV users are a highly engaged audience for ads.

Revenue from over-the-top delivery of content could hit $1.8 billion this year and $5.9 billion in 2012, said IMS Research.

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4 comments on "Smart TV Makers To Lose On Ad Revenue Opps From Over-The-Top, Report Says".

1. Jeff Martin from Touchstorm
   

   commented on: August 24, 2012 at 1:22 p.m.
   What exactly don't TV OEMs support? OTT devices have their plethora of SDKs. Smart TV OEMs do as well, however LG, Philips and Sharp created a joint SDK (and those OEM SDKs get you onto their TVs and Blu-ray players). What are the odds of Roku, Boxee and the rest of the gang doing that? Smart TVs can be bought for less than $400 which is a far cry from the $2000 figure used here. It's going to be hard to not buy a TV without Internet capabilities and let's not forget that there are multiple TVs in homes on avg. Once I get a smart TV in the house I'm much less likely to be need other devices and maybe less likely to keep other devices (and their remotes) around which clutter my entertainment center. I use an OTT device now, however when I upgrade my TV I don't plan on keeping the device or using an existing Blu-ray player that has Internet capabilities now either. You should really only need one for the job.
2. The digital Hobo from TheDigitalHobo.com
   

   commented on: August 24, 2012 at 2:47 p.m.
   Jeff - The TV hardware manufacturers need to do a much better job at building their apps and/or having enough ooomph to support it. I'm not being critical, but it sounds like you haven't had any experience with the a Samsung SmartTV. Its AWFUL. Compared to the snappy UI of a Boxee or AppleTV, it feels like waiting for AOL on a dial-up modem. Sure they can over come it, but a $99 AppleTV is a near impulse buy. I'd also like to know what SmartTV is less than $400. I haven't seen any that would be worth buying. The BluRay experience is also painfully slow. Honestly, the Samsung SmartTV ecosystem experience is a disaster. True that once you have a smartTV you might not need one of those boxes, but you don't need to make your TV purchasing decision based around its streaming capabilities either.
3. Jeff Martin from Touchstorm
   

   commented on: August 30, 2012 at 11:24 a.m.
   Samsung, not yet, other OEMs yes.The experience and UI will get better as the OEMs I've talked to are taking their connected platforms seriously, are investing more and are getting smarter. OTT devices have had a head start. As I mentioned, I own a popular device myself that I looked forward to replacing. In their current state, these devices seem to be more of a bridge for non-smart TVs than a permanent addition to your home entertainment center as time goes by. There are smart TVs at the $400 price range. "Worth buying" is in the eye of the consumer. I see many people buying lower-end sets I wouldn't buy, yet you see them in cart after cart at Best Buy and Walmart. From what I'm seeing OEMs are going to work hard to get lower-end connected TVs into the home as they then have a platform for marketing and advertising in the home. More revenue possibilities for them and more entertainment options for the consumer. In my mind, the more this occurs, connected capability will become less an "upgrade" option and more of an expectation.
4. Ram Srinivasan from Rainbox
   

   commented on: August 31, 2012 at 1:08 a.m.
   Very interesting. Consumers have two Internet connections, one through smart TV and another through OTT, but prefer to watch through OTT device. It is true that smart TV apps need work. These manufacturers need to be more open and encourage a wider app development. Every month that goes by, OTT devices are gaining an edge over these smart TVs.

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