Source: flickr user ETC@USC
In January of 2010, TV manufacturers worldwide decided it was time to enter another dimension. It was CES once again, and they were planning a coming-out party for 3-D that would ignite another television upgrade cycle just as the last big transformative TV tech, high definition, was reaching market saturation.
Fast-forward to CES 2011 and it’s as if 3-D is already TV’s forgotten stepchild, while the new golden child is smart TV.
So what happened? The TV OEM interest in smart TV is both about 3-D’s false promise and the much bigger significance of smart, connected TVs.
3-D’s False Promise
Like many markets, the consumer electronics industry is always looking for transformative technologies that can drive entirely new product generations. We saw it with smartphones (4G, touchscreens, etc.), gaming (motion-sensing controllers) and computing (netbooks, tablets). With TVs, high definition (HD-ready, LCD, plasma, LED, Blu-ray) has been the technology freight train pulling the CE industry for the last decade.
But as the HD market saturates, CE manufacturers needed a new hope, something to drive an entirely new cycle of product upgrades. Last year it pinned that hope on 3-D, encouraged by relatively strong theatrical performance of 3-D and a belief that consumers would naturally want to view that same 3-D content in their homes.
The reality, however, is that most consumers are not sold on 3-D. Do a random poll of your friends, family, coworkers, and you’ll hear the same refrains over and over:
- I don’t want to wear glasses.
- 3-D hurts my eyes/makes me dizzy/motion sick, etc.
- Did I mention glasses?
But the issue with 3-D goes beyond consumer reticence. Lack of a single 3-D standard, the cost of building out delivery networks for 3-D, the lack of 3-D content and much more has contributed to the realization that adding another dimension to TV will take many years to build out. All the while, the payout of all this investment is still uncertain. And while smart TV is still in its early stages, the ultimate promise of the transforming the TV to a service platform holds much more promise long-term than 3-D.
Why Smart TV is Smarter
While the 3-D value proposition is still an open question, smartphones have already clearly shown how adding extensible and open software platforms to hardware can completely alter an industry’s fundamental business model. And while most consumers will likely embrace connected TVs, TV OEMs are just now waking up to the large strategic shift that smart TV represents for the business.
So how is smart TV a larger strategic play for TV OEMs than 3-D? Here are just a few reasons:
- Disintermediation. Smart TV is a big-time disintermediation play, as TV OEMs can negotiate directly with pay-TV operators. Samsung, for instance, has already figured this out, as evidenced deals with Time Warner and Comcast.
- Recurring Revenue. By integrating extensible software and connectivity, the TV OEM finally can become more than just a hardware sell. Some estimates OEMs are already asking for 50 percent of all content and app revenue sold through their smart-TV platforms. Add in advertising revenue and you can see the business model potential for TV OEMs relative to 3-D.
- Rapid Refresh. Gaming consoles have shown that automatic software refreshes can give a hardware platform legs. TV OEMs have heretofore marketed only on screen specs to date, but as TVs increasingly differentiate on software, refreshing the device (UI, services, etc.) will become much easier.
So while many TVs in the future will come with 3-D capabilities, TV manufacturers realized in 2010 that the smart money is on smart TV.