The next TV revolution will be mobilized.
This fall, a cascade of handheld tablets — with vibrant, interactive touchscreens optimized for watching HD video — will stream into the hands of millions of consumers.
Apple, the most powerful tech company in the world, last week introduced the smaller (and lower-priced) iPad mini, looking to shore up its No. 1 position in the category. Microsoft countered with the Oct. 26 debut of its sleek, Windows-based Surface tablets. Amazon.com’s revamped Kindle Fire HD is set to ship next month and new models of Google’s Nexus tablets are expected to hit the street as well.
For cable operators and programmers, the rise of tablets is bound to increase tensions. The personal devices, as the point of the spear on the shift to multiscreen video, will heighten the battle over who “owns” the customer experience.
“Since time immemorial, cable operators owned the customer,” Forrester Research principal analyst James McQuivey said. “But when you watch The Colbert Report on your iPad, are you a customer of the show, of Comedy Central or Time Warner Cable?”
Indeed, Netflix CEO Reed Hastings — perhaps seeking to drive a wedge between HBO and its affiliates — last week said his company’s “operating assumption” is that the premium programmer’s TV Everywhere service, HBO Go, will eventually cut out the middleman.
“We think it will make strategic sense eventually for HBO to go direct-to-consumer in the U.S., and become more of a competitor to Netflix,” he told investors. HBO has repeatedly denied it has plans to do that.
Netflix, itself a beneficiary of over-the-top, multiscreen TV viewing, posted disappointing subscriber-growth numbers for the third quarter, adding 1.16 million domestic streaming customers to stand at 25.1 million at the end of the period, and lowered expectations for the full year. That prompted a 12% slide in the company’s share price on Oct. 24.
Tablets and other video devices also complicate negotiations between TV networks and their traditional distribution partners over the value of content in a multiscreen world.
“Keeping up with tablets is just a cost of doing business for pay TV operators,” McQuivey said. However, “their programming partners still don’t want to accept that, hoping that they can charge extra for the right to stream content to these devices.”
In any case, the pay TV industry will have to adapt to the onslaught of tablets, which have become mainstream accessories — frequently used for watching video — at an astounding pace.
Less than three years after Apple sold the first iPad, tablet penetration in the U.S. is expected to reach 47% by early 2013, to an estimated 117.4 million Internet users, according to an Online Publishers Association study. Apple alone has sold more than 100 million iPads since April 2010.
As of March 2012, about 74.1 million people, or 31% of the population, were tablet users, according to the OPA-commissioned survey of 2,540 Internet users aged 8-64 conducted by Frank M. Magid Associates. That was up from 11% in 2011.
Adding yet another choice in the ever-expanding line of tablets, Apple introduced the slimmed-down iPad mini tablet — with a 7.9-inch screen, it can be held in one hand — starting at $329 with 16 Gigabytes of storage. Analysts said the new model will eat into sales of its higher-priced, 9.7-inch brethren but give Apple a more competitive off ering against rivals even though it’s priced well above the $199 tablets from Amazon.com and Google.
By the fall of 2013, Apple likely will cut the price of the first-generation iPad mini to $200, which would force some tablet competitors to exit the market, according to Julien Blin, directing analyst for consumer electronics and mobile broadband at Infonetics Research.
“Amazon and Google could be the last ones standing against Apple in the tablet market in the coming years, based on their ability to offset a loss on the hardware through content sales and advertising revenue, respectively,” Blin said.
Apple currently dominates the tablet market with its worldwide share of the market rising to nearly 70% in the second quarter of 2012, according to research firm IHS iSuppli.
The iPad mini, to ship starting Nov. 2, is 23% thinner (at 7.2 millimeters) and 53% lighter (0.68 pounds) than the third-generation iPad. The smaller version provides up to 10 hours of battery life and features dual-band 802.11n Wi-Fi support for speeds up to 150 Mbps, double the Wi-Fi performance of previous iPad models.
Microsoft, in an effort to not get left behind, trained marketing firepower into the space with the launch last week of its Surface tablets, starting at $499 for 32 GB of memory. Initial reviews of the software giant’s tablets praised the hardware design but lamented the lack of apps for Windows RT, the operating system designed for tablet devices.
Unique among tablet combatants, Microsoft has tried to embrace the pay TV industry, leveraging its worldwide based of 67 million Xbox consoles that are hooked up to big-screen HDTVs. Microsoft now has more than 62 TV and entertainment partners for the Xbox 360, including Comcast’s Xfinity VOD and Verizon’s FiOS live TV.
Now the company is extending Xbox video content to PCs, tablets and smartphones with SmartGlass, designed to provide secondscreen interaction with the game console. The company last week introduced Xbox Smart- Glass apps for Windows 8 and Windows RT, and will make versions available for Windows Phone 8, iOS and Android devices as well.
“Only Microsoft has been open to making a home for cable companies and programmers, as it tries to capitalize on the dominance of its Xbox 360 platform, now using SmartGlass to compensate for the fact that its tablets are far behind the rest,” McQuivey said.
Initial partners for Xbox SmartGlass include HBO, which plans to introduce a secondscreen experience for the next season of Game of Thrones, as well as MSN, NBC News, NOW TV, Slacker Radio, NBC’s Today and Univision. Sports content partners include NBA Game Time, ESPN and UFC, which expect to launch SmartGlass experiences to follow real-time stats, player bios, news and highlights.
“Our collaboration with Microsoft has always been driven by offering a unique and interactive sports viewing experience,” ESPN vice president of games and partnerships Raphael Poplock said.
But while tablets represent valuable new real estate for video consumption, personalization and interactivity, it’s worth noting that most television content will still be viewed on TVs.
Even among “borderless consumers” — those who own tablets or smartphones, PCs and always have an Internet-connected device on hand — 89% said they prefer watching shows on their TVs, according to a Verizon survey of 2,292 adults conducted Sept. 7-11 by Harris Interactive.
Meanwhile, cable operators and telcos will face a separate operational hurdle with the flood of tablets: providing tech support to customers who need to connect their new iPad minis, Microsoft Surfaces or other devices to the Internet.
Though service providers are better prepared than in the past, “the sharp spike in product launches this autumn could be a further catalyst for operators to automate device support and take advantage of the healthy consumer appetite for smarter self-care options,” Yossi Zohar, head of product marketing for Amdocs’ customer-management division, said.
Video, including full-length TV episodes and movies, is the most common type of content tablet users access on a weekly basis:
Get weather information
Get local news
Get national news
Access entertainment content
Get sports information
Read newspaper content
Read magazine content
SOURCE: Online Publishers Association survey conducted by Frank M. Magid Associates, March 2012