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The Stupidity of Smart TV

TV manufacturers are blowing a huge built-in advantage in a big, difficult market

Warning: Deciphering the latest intelligence on Smart TV will make your head hurt.

First, what seems like good news: TDG Research reported last week that the penetration of TV sets that connect to the Internet doubled over the past year in U.S. households with broadband access, to 25%. That would seem to suggest TV manufacturers are getting a return on the substantial investments they’ve made in creating on-screen environments that house apps streaming from over-the-top content providers like Netflix.

But before popping the champagne corks, consider a few more numbers. TDG also found that 69% of Smart TVs are connected to the Internet. Now that might seem odd; why would 30% of the people buy these TVs choose not to use the feature that makes their TVs a few hundred dollars more expensive than the products that can’t go online?

Then there’s a separate study from NPD Group that also came out last week that found only 47% of all home-entertainment devices–which also includes Blu-ray players, video game consoles and streaming media devices–are connected to the Internet in U.S. And which kind of hardware from that subset finished last on the connectivity scale? Smart TVs.

It’s ridiculously counterintuitive when you think about it, but Samsung, LG, Sony and many other companies are blowing a huge built-in advantage in a big, difficult market. The functionality they’ve embedded into their sets should be getting exponentially more marketplace traction than offerings that require consumers to find space in their living rooms for separate devices that essentially do the same thing.

And what’s tragic is TV manufacturers are failing at a time when no tech giant has truly put their stamp on this market yet, though Google TV has tried mightily and we may yet see the same effort from Apple.

But wait, it gets worse. The aforementioned stats are measuring “connectivity,” which is only just that: a device that has been connected to the Internet. That tells us nothing about how much viewers are actually using that connection to stream video, even if just once. Add to that the fact that manufacturers of set-tops from XBox and Roku can’t stop talking about usage but you never hear a peep out of TV makers. That silence says plenty about their usage levels.

Come to think of it, the only time TV manufacturers seem to talk at all about what they’re doing to make smart TV compelling is four days in January. Contrary to the other 361 days of the year, the Consumer Electronics Show is always replete with press releases about what the industry is doing with content companies and distributors to make consumers check out what’s available via their sets’ other HDMI ports.

There’s many reasons smart TVs are tanking, but a big one has to be the meager content supply. The CE-Hollywood union seems more like a four-night stand than true commitment; what happens in Vegas can’t stay in Vegas anymore if this relationship is going to go anywhere.

Truth be told, programmers don’t have much incentive to do much with TV manufacturers, who don’t really control the video passing through their own products; pay-TV companies retain the real power in the U.S.

That’s why connected TVs are actually much more popular in Europe and Asia where there’s less concentration of power among distributors. NPD DisplaySearch found last year that smart TV’s market share in North America remained flat at around 20 percent year over year despite having the highest levels of online video consumption. Contrast that with Japan, where smart TV has 55% penetration.

Smart TV is not some fringe fraction of the overall TV universe. The 66 million units shipped worldwide in 2012 comprised 27% of the total market, and that number was up 27% from the previous year. That market share will break 50% by 2015.

But if consumers are buying these devices and just not using them, what’s really going on here? It’s not that TV manufacturers aren’t marketing smart TV; walking through the right aisle at Best Buy will disabuse that notion.

The problem is more inherent in the product itself. Though the user experience in smart-TV environments has improved over the years, they’re still not as intuitive as the traditional multichannel world.

The very fact that smart TV is segregated from that world is also problematic; there’s got to be ways to build bridges between linear channels and VOD-based smart TV that make sense and remind users that part of their TV exists.

But the biggest difficulty may be the coexistence of smart TV with the smartphones and tablets that are video screens in their own right, and without the 10-foot distance that makes interactivity a challenge. What’s more, these devices are getting increasing control over the TV, either as companion second-screen experiences or as the very source of the video being “thrown” from a handheld to the TV through migratory technology like Samsung’s AllShare.

Perhaps the smart TV isn’t going to the hub of a multi-device ecosystem some thought it would be. The meaning of Internet connectivity may mean nothing more than ability to obey commands from other devices. Like the Scarecrow from “The Wizard of Oz,” smart TV could do more–if it only had a brain.

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