Content streaming is now a standard part of household entertainment. Parks Associates, a consumer electronics research firm in Dallas, finds that more than two-thirds of U.S. broadband households connect an entertainment device—a smart TV, gaming console, streaming media player, or smart Blu-ray player—to the Internet, and connection rates have been steadily increasing. Between 2013 and 2014, the percentage of U.S. broadband households with a smart TV connected to the Internet increased by 50%, while the percentage of households with a streaming media device increased by 100%. In general, the smart TV is the most common connected device, with the exception of the connected game console.
Service providers and consumer electronics manufacturers are looking to leverage this connectivity for new revenue streams. Manufacturers in particular hope to offset low per-unit margins and declining unit sales. For example, there were 3.6 million fewer flat-panel TV purchases in 2013 than there were in 2012, and gross revenue declined by $1.6 billion.
The TV is a good target for new monetization strategies as it remains the cornerstone of entertainment in the home. Despite having access to new mobile platforms capable of streaming content, consumers still have a preference for the big TV screen. Television accounts for 65% of all time spent per week watching video, even as non-linear content accounts for the majority of the type of content consumed.
Content will always be the fundamental driver in choice of video services and subscriptions, but in influencing the choice of platforms and realizing new revenues, delivering a superior user experience is an important factor. If the experience of using a particular electronics device is unsatisfactory, consumers will migrate to another device, assuming the device has the desired content. For example, consumer usage patterns indicate that smart TVs are delivering a better connected experience than connected Blu-ray players. Adoption rates for connected smart TVs and connected Blu-ray players are comparable, but smart TVs are twice as likely to be the primary connected device in the home. Similarly, households that primarily use a connected Blu-ray player are less likely to use content apps and less likely to make a la carte content purchases through the device.
Short-form and user-generated video sources represent popular content options as well—and potential drivers not just for smart TV usage but 4K UHD upgrades. Almost 80% of broadband households that own a smart TV use the device to view user-generated video, which includes self-created videos and apps such as YouTube and blip.com. Currently one-third of smart TV owners watch up to four hours of YouTube on their TVs each week, and 15% watch five or more hours. As more mobile devices come with 4K UHD screens and cameras, the amount of user-generated 4K UHD video will increase. This trend will raise consumer awareness of the technology and could create a compelling reason for a household to purchase a 4K UHD TV. Smart TV consumers are already more likely to purchase a large screen size. Over 80% of smart TV owners have a primary TV set that is 40 inches or larger, compared to 72% of all flat-panel TV owners. Companies can leverage expansion of 4K user-generated content alongside this desire for premium features to promote an upgrade to 4K UHD among smart TV shoppers.
However, for the smart TV (or any living room entertainment device) to capture consumer usage and drive future purchases, it must provide a strong content streaming experience. Streaming is the new standard in the connected home entertainment experience, and if users can’t easily navigate or find content, usage will be negatively impacted and opportunities to generate alternate revenue will be reduced. EH
Barbara Kraus, director of research at Parks Associates, studies the connected consumer electronics field. Her expertise is delivering and monetizing consumer insights through the provision of compelling product and service technologies and experiences.