Who Will Own the Connected Living Room?

I have purposely been cautious about sharing any subjective opinions when it comes to who will win the connected living room game. I think it’s important to understand the ecosystem and the rapid pace by which this industry has evolved and will continue to evolve for years to come. Some of you will read this and find it redundant, others may want a ‘high-five’ next time they see me and some may not like what I have to say. In any event I maintain respect for everyone in the space and look forward to many surprises and unexpected successes.

As Silicon Valley celebrated over-the-top (OTT) platforms as the self-proclaimed ‘Hollywood North’ there were lots of Steve Jobs-ish promises that suggested that these emerging products and technologies would cause consumers to cancel their cable or satellite services as they raced out to buy the latest ‘connected’ set-top box. At the same time, Pay TV operators and service providers were quiet about their plans to adopt IP technologies which only proliferated the hype around OTT. In addition, there has been attrition in Pay TV subscribers and wide adoption of low-cost services like Netflix, while the term ‘cord-cutter’ is nearing cliché status.

Sometimes we forget that the U.S. is in the worst economic crisis since the Great Depression, unemployment rates are near all time highs, sweeping layoffs at State and local Governments, Federal bailouts, large company layoffs and a decline across all other sectors of consumer products and services. Could it be that the churn in Pay TV services is due to the fact that people are re-prioritizing their living expenses and maybe they simply can’t afford a Pay TV service? I remember when Pay TV was as important as food and electricity, I believe it has gone from being a ‘utility’ bill to a real entertainment expense and in some cases a quasi-luxury. I don’t believe that the decline in Pay TV services is entirely caused by the OTT revolution, I think it’s just good old fashioned economic downturn.

There is key convergence of operators and OTT IP platforms happening on devices like Samsung, Apple and Motorola who are enabling operators like Comcast, Time Warner and Dish Network to deliver video to their subscribers on mobile devices and TV-centric devices as they sit side-by-side with OTT champions like Netflix and Hulu Plus. If the OTT category stood a chance of ‘cutting the cord’ on operators, it would have been a revolution lead by major device manufacturers like Samsung and given the fact that Samsung was smart enough to allow operators access to their devices (which I believe will only result in more TV sales) my contention is that everyone will need to find a way to play together in the connected living room, devices will sell based on their core features and operators will continue to dominate the ‘Video 1’ port on consumer’s TVs. Made-for-web content, interactive media and home networking is and/or will soon be available on Pay TV as operators integrate IP content delivery in their primary TV services, just like DVRs and TiVo.

OTT devices like game consoles, connected TVs and Blu-ray players will continue to sell based on their core functions and as a content supplement to Pay TV. In fact, consumers desire the higher levels of interactivity and expect a ‘web-like’ experience as they interact with TV apps, widgets and games. The OTT devices will be first to market with social integration, interactive advertising, home networking and true T-commerce. OTT champions like Netflix with 20 million subscribers, may likely be viewed as a bonafide Pay TV service in the not so distant future and may even fall into ‘MFN’ clause-land with the major studios and networks.

The TV is not just another screen, it is THE most important screen in the home. TVs and Blu-ray players will be replaced by connected TVs and Blu-ray players, most game consoles are already Internet-enabled and home-media set-top boxes are providing added home networking capabilities while all of these devices will enable users access to IP-delivered content, social integration, interactivity and T-commerce as a very important and expected service in the modern connected living room. Think of OTT devices as an enhancement to the TV experience, not a surrogate to Pay TV.

The same way mobile phones evolved from making phone calls to text messages, email, web browsers, cameras and apps largely driven by the devices, not service providers, consumers now expect this functionality on mobile screens and the source of the content is largely irrelevant. Consumers will continue to rapidly adopt Internet-enabled TV, they will continue to buy connected devices and will expect these experiences in their living rooms and on their TV screens. Will everyone become ‘cord-cutters’ as a result of this? I think not, in fact, at the risk of sounding incredibly passé, I believe consumers are the real owners of the connected living room. They will ultimately decide which devices to buy and which services they will pay for and which content they will share with their social networks. Modern consumers expect the universe at their fingertips and will accept nothing less, connected devices are very important and will continue to rapidly make their ways into consumer’s living rooms as product awareness increases and diverse and alternative content offerings continue to develop.