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Television’s killer app

New HD TVs equipped with internet connection

Cable and broadcast networks are already facing eroding viewership, partly due to auds surfing the web on their laptops and netbooks. Now the World Wide Web is extending its tendrils into the nets’ home turf: The TV screen itself.

A new wave of HD TVs — some already in stores — let the viewer connect the Internet directly to the TV set. Beyond serving as normal TVs, these sets are built to stream a host of Internet sites, including YouTube and Picasa, as well as video-on-demand services from Netflix, Blockbuster and Amazon.

So new is this feature that some electronics stores aren’t even aware of it yet. (A random check of stores around the country found retailers in New York and Los Angeles to be the least informed.) Yet Internet-enabled HDTVs are expected to quickly add an Internet wave for couch-based channel surfers. Market researcher the Yankee Group predicts 50 million people will have such setsby 2013.

Another 30 million, it says, will have Web-connected Blu Ray players — and 11 million will have purchased media adaptors, giving nearly 100 million people Web video on their TVs without hooking up a PC.

The sets aren’t built for full-fledged Web browsing. “I think the direction we are heading is the transformation of the TV into ‘Internet lite,’ ” says Kurt Scherf, vice president and principal analyst for Parks Associates.

Big changes aren’t likely to happen immediately, but Mike McGuire, research VP and media analyst for Gartner, says this is bound to cause “serious disruption” in the way people consume TV.

“It won’t (happen) in the short term, but as companies see the opportunities and the experience becomes seamless, all of a sudden you might see more than a few consumers thinking to themselves, ‘Why am I paying so much for cable? Why am I paying so much for video on demand?’ ”

Still, one cable company insists it’s not worried. “I think it’s kind of apples and oranges,” says Kate Noel, senior manager of corporate communications for Comcast. “If you compare the programming, there’s a huge difference between the programming we’re offering and the kinds of programming that are coming from Internet sites. We don’t see evidence of cord-cutting in that fashion.”

The sets will come pre-installed with targeted applications for specific websites, somewhat like iPhone apps.

Indeed, apps are seen as the keys to success with Web-enabled TV. There are no plans for a central app store, but analysts say they wouldn’t be surprised to see one. For now manufacturers can “push” new apps onto TVs but viewers can’t add any themselves.

This puts manufacturers in the new position of deciding which sites gain access to their customers’ screens, and there is already talk that they are contemplating selling such access via revenue-sharing deals.

Web-based companies are the most likely to be the partners in such deals. Yahoo, for example, is working on an app that would allow viewers to have news, weather and other highlights scroll at the top or bottom of the screen as they watch a program.

Direct Web connections would make streaming sites like Hulu more serious competitors in the VOD space, as they’d go directly onto TV screens, not computer monitors. (Hulu has not yet signed with any set-makers, however.)

At least one existing network is also sanguine about the prospect of streaming on TVs.

“They’re not going to charge us to get our programming through their sets,” says David Poltrack, chief research officer and president of CBS Vision. “If, say, a Sony set cannot access CBS content and a Panasonic can, that’s going to be a big problem for them.”

Poltrack, who has been testing such sets for a number of years, believes the new technology actually could provide a tremendous boost for the ad-supported TV biz.

Currently, he says, 95% of a program’s audience watches it live. While those viewers might flip channels duringcommercials, they still typically watch some of the ads; the majority of viewers who watch with their DVRs fast-forward through ads.

Online audiences, though, are not able to fast-forward through commercials or flip back-and-forth with another channel. And while adding a TV remote to the mix would change that, Poltrack believes the viewing experience would be more like traditional TV than DVR.

“One thing we’re fairly certain of is if, instead of watching the online program on their computer, they were watching on their big high-definition television screen, there would be no difference between watching (the program) live on TV, in which case there would be no (added) resistance to watching it with all of the commercials.”

The new technology also could add power to an advertiser’s message, with consumers able to click a link and instantly learn more about a product — and with ads being better targeted based on a person’s viewing and browsing history.

And while, like Hulu, no network or production house has signed with a manufacturer to put an app on new TVsets, it may not be long before programmers line up to get their apps included.

“These Web enabled TV sets are going to significantly increase the rate of video streaming,” Poltrack says. “I think you’ll see people experimenting with this by the end of the year. And, barring a bad experience, you’ll see content in this form by 2010. Five years from now, I think it will be a significant contributor of revenue to both content providers and distributors.”

One thing is certain: These TVs are coming, and fast.

Panasonic and LG models are available now. Vizio will introduce some in the fourth quarter. Toshiba, Sony and Philips are hot on their trail, with still more expected early next year. Current models require a direct Ethernet connection, though Vizio says it will offer TVs with WiFi by the end of the year.

Scherf notes Vizio’s entry is especially intriguing, given the company’s history as a low-cost alternative to other manufacturers. If they are successful with Web apps, they could give their brand a major boost. They could also speed up the spread of Web-enabled sets and, depending on how fast networks launch their own streaming applications, could impact the use of DVRs.

“I look at this as a superior distribution product to the DVR,” Poltrack notes. “I don’t have to remember to record things. I don’t have to coordinate my recording. I can record multiple shows at the same time. From the consumer point of view, this is clearly a better alternative, so I think they’re going to adopt them and start using them fairly soon, particularly the younger people, who we already see are using their PCs as TVs.”

Web-enabled TVs on the market:

LG 47LH50 LCD HDTV (47-inch)

LG 50PS80 plasma TV (50-inch)

Panasonic TC-P54Z1 (54-inch)

Panasonic TC-P54V10 (54-inch)

Panasonic TC-P50V10 (50-inch)

Panasonic TC-P54G10 (54-inch)

Panasonic TC-P50G10 (50″)

Panasonic TC-P46G10 (46″)

Panasonic TC-P42G10 (42″)

Coming soon:

Vizio SV422XVT (47″ – Oct.)

Vizio SV422XVT (42″ – Nov.)

Vizio VF552XVT (55″ – Dec.)

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