• This Holiday Season, Smart TV Deals Abound, But Competition Increases From Connected TV Devices [CHART]

    As online video adoption and longer-form viewing have grown, consumers have become increasingly interested in moving the experience to their TVs. This trend has certainly helped to drive interest in connected TV devices (e.g. Apple TV, Roku, Chromecast, etc.). But even as these devices have proliferated, TV manufacturers have promoted Smart TVs, which connect to the Internet and generally offer a handful of pre-integrated apps, most prominently Netflix, Hulu Plus, YouTube, Pandora and others.

    Since connected TV devices are relatively cheap (Chromecast set a new low in 2013 at $35) and are easy to install, no longer must consumers be required to buy a whole new TV simply because they want to stream Netflix, for example. No doubt, this dynamic - combined with the saturation of HDTVs and the adoption of mobile devices for viewing video - all contribute to global TV sales being down in 2013 for the second year in a row, the first time this has ever happened.

    For TV manufacturers, it must be troubling that inexpensive connected TV devices directly undermine the key value prop of their Smart TVs used to justify their incremental cost. This is at least part of the reason TV manufacturers are already shifting their attention to 4K, hoping better picture quality can change the game. However, the recent failure of 3D to catch on, despite the industry's massive push, is a reminder the industry cannot will itself to success.

    In the meantime, this holiday season, retailers are offering aggressive deals on selected Smart TVs, which will no doubt cause some consumers to pause and consider their options. To get a better handle on Smart TV vs. conventional TV pricing, I did some random sampling of prices online for Samsung and LG models at the 32-inch, 46/47-inch and 60-inch sizes. As the chart below shows, prices are all over the board, with some interesting deals to be found.

    For example, a consumer interested in a 32-inch model can now get a Samsung Smart TV for $350, just $20 more than the comparable conventional TV would run. Moving up to 47 or 60-inch sizes, there are aggressive LG Smart TV offers that narrow the incremental cost to just $82 and $50 respectively. At these prices, it seems all but inevitable that the consumer will end up choosing the Smart TV option if they're inclined toward buying a TV in the first place.

    Even though prices for Smart TVs and conventional TVs are converging, the big new challenge from connected TV devices is that the range of content choices they offer is growing considerably. For example, Roku is now offering 1,000+ channels. And Chromecast's integrated apps list is also expanding, plus it offers the ability to "tab-cast" any video on the web. So as we move into 2014, while Smart TV pricing may become more competitive, consumers looking for online video choices will be drawn back to connected TV devices. Yet another challenge is that, despite their name, Smart TVs tend not to integrate well with other devices (this has created an opening for Apple as I wrote earlier this year).

    There will always be a segment of people just looking to stream Netflix on their TV and who don't want to bother with understanding device options or their installation. But I think that for the majority of consumers, connected TV devices are going to become even more appealing, notwithstanding their own challenges of varying content. That means there's a tougher road ahead for Smart TV manufacturers.