Next TV

Holiday Tech-Trend: Keeping Connected

TVs, Streaming Devices Take Center Stage 11/30/2015 8:00 AM Eastern
The Roku 4 supports Ultra HD video.

Holiday consumer electronics trends are being watched particularly closely this year by programmers, thanks in part to the growing importance of connected TVs for delivering both TV everywhere apps and new direct-to-consumer subscription services.

 

Black Friday sales figures were not available at presstime, but the Consumer Technology Association was predicting that 65% of all Americans—some 160 million people—would be buying tech products this holiday season, boosting tech spending between Thanksgiving and the end of the year to a record $34.2 billion, a bump of about 2.3% over 2014.

 

The CTA survey predicts that a record number—about 33% of all consumers in the U.S.—will purchase a new “emerging technology,” with 15% planning to buy a smart home device, 12% eying smart watches, 7% planning to gift an action camera and 7% adding drones to their shopping lists.

 

But most analysts, researchers and tech executives at TV companies interviewed by Next TV are paying much more attention to TV sets and the devices that are being used to connect those sets to the Internet.

 

“The No. 1 transition we’ve seen this year, and we expect to become even more important next year, is getting the TV connected to the Internet and bringing TV back to TV over the Internet,” said Marc DeBevoise, executive VP/GM of CBS Digital Media at CBS Interactive, who believes that platform will see a great deal of both usage and app innovation in 2016. “This has been going on for a while. But if you look at what Apple did with their new device, with voice search and universal search, these devices are getting a lot smarter and are going to be a source of real innovation [by app designers] in 2016.”

 

Those improvements come at a time when a number of programmers have been launching apps on these platforms and viewers are streaming much more video to their connected TV sets. Nielsen reports that weekly time spent viewing video with multimedia devices such as Roku hit one hour, four minutes in the second quarter of 2015, nearly double the 33 minutes spent a year earlier.

 

“The shift to mobile and OTT devices has occurred faster than anyone would have anticipated,” said John Frelinghuysen, executive VP of digital media, strategy and business development at the Disney-ABC Television Group, who highlights mobile and connected TVs as his two biggest tech trends to watch. “Everyone is well aware of the mobile growth, but the connected TV is going into a really accelerated growth mode.”

 

PREPPING FOR 8K

Much of this is based on the growing penetration of devices such as Roku, Apple TV, Google’s Chromecast or the Amazon Fire TV stick. “We are seeing faster uptake of streaming media devices—Roku, Apple TV—and streaming media players are one of the fastest-growing consumer electronics categories in terms of volume and percentage growth,” said Brett L. Sappington, director of research at Parks Associates, which reports that 20% of all U.S. broadband homes already have one of these devices and that global sales will hit 19 million by 2019.

 

In contrast, Paul Gagnon, director of TV research at IHS Technology, said that North American TV sales “will see slight decline this year,” to nearly 42.3 million in 2015, and drop to about 41.7 million in 2016.

 

But trends within the TV set market this holiday season will also have a big impact on digital strategies over the next year.

 

Two bright spots are sales of 4K or UHD sets, which are expected to nearly double to 11.6 million in 2016, and larger sets. “With the availability of high-quality mobile devices with broadband access, people aren’t buying smaller 32-inch sets for the bedroom and they are upgrading to bigger and better sets for their primary viewing,” Gagnon noted. That will push the average size of a new set from under 43 inches today to 45 inches next year.

 

While 4K sets still provide nice profits, much of the market remains an low-margin business, with manufacturers being lucky to get a 4%-5% profit margin on regular HD sets. Not surprisingly, that fi nancial dynamic has led to a greater emphasis on higher-end features.

 

“You are going to see a lot of hoopla about 8K at CES,” along with emphasis on 4K sets with higher dynamic range and wider color gamut, Gagnon said.

 

That has also prompted some notable changes in the streaming media market. While the new Apple TV does not currently support 4K streams, Lloyd Klarke, director of product management at Roku, noted that their newest Roku 4 box is designed to handle UHD and that they are working with TV companies on using the Roku platform for their 4K TV. Roku is also planning support for high-dynamic range once the industry settles on a standardized approach.

 

“You’re seeing 4K TVs under $1,000 for 50-inch or 60-inch sets on Black Friday flyers,” Klarke said. “With the cost of sets going down, distribution will grow rapidly.”

 

FASTER, CHEAPER, BETTER

These new streaming devices are also playing a larger role in the over-the-top business because only 45% of new TVs being sold come with a built-in Internet connection, Gagnon noted. “That really has to do with the plethora of options like Roku, Apple TV, Chromecast, Fire TV and game consoles” that can be used to connect TVs for the fraction of the cost of a new TV, Gagnon added.

 

Rising adoption is going hand in hand with expanded content offerings. Klarke said Roku has been adding five to 10 new channels each week.

 

While much of the press attention has been on newer direct-to-consumer subscription services such as HBO Now, there is also strong interest in the area of authenticated apps. “In addition to content providers, the operators are also seeing the benefits” as a way to reduce the cost of set-top boxes and technician trips to customers’ homes, Klarke said.

 

Matthew Evans, senior VP of digital at Viacom’s Kids and Family Group, added that after launching the Nickelodeon app on Roku earlier this year, they are now launching Nick Jr. on Roku and preparing to make Nickelodeon, Nick Jr. and Noggin available on Apple TV. “The connected TV will be a very important focus for us over the next year,” both for Viacom’s TV networks and for some of their games, Evans said.

 

Companies that have already pushed onto those platforms are reporting growing usage and increasing ad revenue, a trend they expect to continue into 2016.

 

Adam Symson, chief digital officer at E.W. Scripps Co., said that the growing importance of OTT video led the company to recently launch millennial news brand Newsy on Apple TV, Xumo, Watchable and other OTT platforms.

 

“When we launched on Roku early on, we saw that people were watching an average of about 20 minutes,” Symson said. “But as we’ve expanded our presence on more platforms, we are now at almost 28 minutes of viewing and the demo is solidly 18-34. We think there is an incredible opportunity for Newsy in the OTT space.”

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