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After Mobile: Smarter TVs

This article is more than 10 years old.

Smart TV are the next big thing. Who will win? (Photo credit: vernieman)

This week, Microsoft took a $900 million charge against its Surface effort, showing that the idea of merging PCs and tablets has not resonated with consumers. At the same time, growth in mobile phones and tablets is still increasing while PC sales are dwindling. The PC has now moved to a work tool; tablets are the home device, and smartphones are there for everything in between.

With Samsung dominating the Android ecosystem, and Apple having staked out its own ground, Winkia (Nokia + Microsoft) and Blackberry are fighting for third place in a market where devices are looking to feature similar offerings. However, as market penetration from all the top players increase, it is normal that we will see a slowdown in adoption, with fewer and fewer new devices being sold. This has already started leading to a slowdown in devices from Apple, Samsung and others, as smartphone penetration in existing markets reach a saturation point and growth comes from emerging markets, which have less disposable income.

So what comes next? What are the next potential areas for growth for these companies?

The trend towards internet connectivity is one that has been consistent for the last 20 years, with computers getting connected via increasingly speedy phone lines, then phones getting connected in the same way and TVs starting to move down that path. We can thus assume that everything that can be connected will be.

So what does everything mean? I'd warrant that it means three spaces: TV screens, the human body, and other objects. This week, we will look at TV screens.

The screens

The first set of candidates for what comes next seems to be the one that is already partly there: the space where information is displayed on screens. For most people, this means the TV sets and there has been an on-going battle raging to connect specific applications to TV sets for a few years now. To date, the most successful players in that space have been software apps like Netflix, Hulu, Amazon Video, and YouTube and hardware makers like Microsoft (with the Xbox) and Sony (with the PS4). Apple, Roku, and others have shown to get some basic traction in the space and TV manufacturers like Vizio, Samsung, and Panasonic have been embedding software in their sets but few consumers, to date, have gone beyond using a limited set of default apps.

Microsoft

The most hungry player in this space is probably Microsoft. Its domination of the PC world is no longer as powerful an asset as it once was and its positioning in the living room is ahead of many potential players. The company has sold over 70 million X-box stations, with only Sony (and its PS3 station) being able to match it in size. For Microsoft, the upcoming battle for the living room is a chance to redeem itself and turn its fortune around as the company has mostly missed the mobile era. The TV space is one that the company has spent a lot of time in, dating back to the 1990s when it was making investments in cable companies, building TV set-top boxes, acquiring internet TV startups, and even going as far as co-creating a TV channel.

The introduction of the Xbox One, the Redmond giant's next entry in the gaming station world, was heavy on TV integration and light on gaming (the intro was skewered by gamers through a quick-cut video on YouTube). While traditional gamers looked to this as betrayal, the company's positioning may have more to do with its hope to lead this next generation. By comparison, Sony appears to continue its focus on core gaming with the PS4, with little new offering relating to TV announced for the PS4.

So Microsoft's strategy is to integrate the different screens in your life, with connectivity both within their own ecosystem (eg. Xbox smartglass) and beyond. They want to become connective tissue between different screens and leverage its existing position in the living room to regain some footing everywhere else.

Samsung

But while Microsoft's and Sony's positions in the living room are strong, other players are moving pretty quickly. As of the end of 2012, Samsung had already sold almost as many smart TVs as there are Xbox 360s available. As the South Korean electronics manufacturer continues to grow its market share in the TV world, expect it to become

more active in its smart TV offerings. The recent acquisition of Boxee, one of the startups looking at that space, indicates that Samsung has plans to increase its capabilities in that space. The company is also sponsoring contests in Europe to encourage developers to create apps for its new platform. Put those pieces together, along with the fact that Samsung is the dominant player in the Android ecosystem, and it starts becoming clearer that the company is looking to do something big in the space.

Note, however, that Samsung's position in mobile is increasingly focusing on developing a software experience that move away from the core Android one (the Galaxy S4 includes Samsung's competitors to many Google products including chat, email, media player, photo gallery, and even app store) so a TV-powered experience could be the beginning of a new Samsung-powered operating system which, in the long run, could make its way back onto Samsung mobile phones.

Apple

Meanwhile, rumors have consistently popped up about Apple getting into the TV space (frequent TNL.net readers will remember that I ran the numbers on what it could mean for the company last fall). With 13 million Apple TV streaming boxes now shipped, they are one of the strongest player on the small end of the market. But Apple's ambition are never about small markets and it is clear that any effort they make will have to involve a much larger screen.

With rumors this week that Apple was kicking the tires around PrimeSense, the company that built the technology behind Microsoft's Kinect, it seems that Apple has some new devices in mind. Add the continuing rumors of partnerships with cable TV companies and the signal is clear that the Cupertino maker has designs on this next set of screens. Based on past track record, one can expect a device that will integrate tightly with other iOS device but not allow for anything outside of that ecosystem to attach to it.

One can assume that Apple's offering will go beyond mere streaming and offer the ability to install apps, through the existing app-store, integrating interaction between mobile devices via an enhanced version of Airplay, the company's own position in the multi-screen space.

Google

Of course, listing all these players, some may inquire about Google? To date, the company's efforts in the TV world have been surprisingly disjointed. While Google acquired one of the top set-top box makers in the world (Motorola), it immediately turned around and sold it. Meanwhile, it appears that rifts are starting to form in the partnership between the company's YouTube division and its consumer electronics partners. That Google would be trying to strong-arm partners into using Google TV related technology seems to represent an interesting contrast from the "kumbaya-let iOS and Android work together" approach the company appeared to be taking at its most recent mobile developer conference, presenting many pieces of software that ran not only on Android devices but also on iOS.

The company also seems to take a path formerly taken by Microsoft by going after the infrastructure of content delivery through its Google Fiber initiative. And rumors that Google is talking to TV companies about live streaming have the potential of putting it on a collision course with Apple, the only other large player to look at direct streaming.

Other players

Among the largest other players, Intel has been rumored to get into the TV space as a way to come back after it ceded ground to ARM in the mobile space. Intel's new CEO, however, is playing down expectation of such efforts, highlighting that content is a very different space than silicon. The recent acquisition of Omek technology, a developer of 3D recognition technology, seems to fit within the pattern of motion recognition being a part of something that would appear in an Intel box. So Intel is another company to keep an eye on as this space continues to heat up.

On the hardware side, companies like Roku, Tivo, and Western Digital could end up becoming prime targets for takeover as they have a foothold. With the recent acquisition of Boxee, expect some M&A activity on the lower end of the spectrum. If we were to play matching game purely based on speculations, one could see Tivo as a prime target as it not only has software and hardware but also holds several patents in the space; meanwhile, Roku may be small enough that it could be folded into another company relatively easily. And Western Digital could be scooped up by either Samsung or Apple, with its streaming offering being an added bonus but its real prize still being in the storage space (Samsung already has a storage division and Apple is always trying to bring more capabilities in-house).

On the software side, the most intriguing startup may be Aereo. This week, the company won another victory against the networks and it seems that it has the potential of being extremely disruptive. It seems that getting exclusivity on its technology could be another way in which hardware manufacturers could easily scope up a number of broadcast channels in one quick swoop.

Either way, it appears that we are heading for a lot of interesting activity in that arena and that our living rooms are about to change forever.

Next week, we will look at how your body becomes another area that will attach to the internet. Stay tuned!