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From Boob Tube to Youtube
1. From Boob Tube to YouTube: Consumers and TV a Parks Associates white paper February 2009
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates Attribution Authored by Kurt Scherf Published by Parks Associates © February 2009 Parks Associates Dallas, Texas 75230 All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher. Printed in the United States of America. Disclaimer Parks Associates has made every reasonable effort to ensure that all information in this report is correct. We assume no responsibility for any inadvertent errors. Quality Review Author KES 2/24/09 Editor SBS 2/24/09 Attribution and Disclaimer i
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates Table of Contents 1.0 What’s on TV? ..................................................................................................................1 2.0 From Where will the TV Access Content? ........................................................................1 2.1 Connected TVs and the Media Server ..........................................................................3 2.2 Connected TVs and Cloud Media..................................................................................6 3.0 Consumer Demand for Connected TVs ............................................................................8 4.0 Bringing Order to the Media Chaos.................................................................................11 List of Figures Figure 1 Media Server Concept for Connected CE .....................................................................2 Figure 2 Cloud Media Concept for Connected CE.......................................................................3 Figure 3 Portable Media Device Penetration ...............................................................................4 Figure 4 DVR Penetration and Downloading Online Video..........................................................5 Figure 5 Gigabytes Needed for Household Digital Media ............................................................6 Figure 6 Watching VoD Movie and Streaming Online Video .......................................................7 Figure 7 Appeal of Networked Set-top Boxes and Willingness to Pay.........................................8 Figure 8 What Do Consumers Want from STB-to-PC/Internet Convergence? ............................9 Figure 9 Appeal of Television Features .....................................................................................10 Figure 10 Appeal of Social Networking/Search Features and Willingness to Pay .....................11 Figure 11 Appeal of a Multi-channel Mosaic EPG and Willingness to Pay ................................12 Table of Contents & List of Figures i
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates 1.0 What’s on TV? For about 70 years, the television has established a firm role as the “entertainment hearth.” Although the distribution and consumption of TV has changed – first with the addition of more broadcast and then cable and satellite channels, and then with the introduction of features such as video-on-demand – the TV was reserved for … well, TV! Television shows were television shows, and movies were movies, and that was about all the TV had to worry about. However, TV will not be the only type of media for which the television will be expected to play a more direct role in accessing. The television’s role as the centerpiece for entertainment is changing significantly, thanks to at least two major catalysts: • Growing collections of all types of digital media content – including linear and on-demand television programming, optical and digital movies, user-generated content, and music – that consumers will want to access from multiple sources; and • The desire by both television service providers and consumer electronics manufacturers to create value out of their services and products by building in connectivity and the ability by devices to easily find and display content. The paper looks at the changing role of the television as a multipurpose content receiver, examining the consumer need for new media centralization and access features and their desire for new connected TV experiences. The consumer data for this paper was drawn from three Parks Associates consumer studies: • TV 2.0: The Consumer Perspective – An online survey 3,881 respondents in North American broadband households in Q3/2008; 2,720 respondents in the U.S. and 1,161 respondents in Canada. • Global Digital Living: Entertainment 2.0 in Europe – An online survey of more than 5,000 respondents in Western European broadband households in Q3/2008; respondents • Digital Media Evolution – An online survey of 3,789 respondents in North American broadband households in Q4/2008; 2,447 respondents in the U.S. and 1,342 respondents in Canada. For purposes of this paper, we will examine consumer drivers for a connected TV experience in both the U.S. and the U.K. 2.0 From Where will the TV Access Content? Propelling the vision for a TV-centric media access environment are two types of media use cases that are driving the larger digital home/connected home concept. The television will grow in value as a media A Parks Associates White Paper 1
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates receiver based on its ability to discover, aggregate, access, and display media that is obtained in two scenarios: • The Media Server Concept: As personal media collections grow in size, consumers will first seek ways to easily backup and protect this content. However, as media collections grow, as home networks become more prevalent, as broadband connections improve in both downstream and upstream capacities, we expect consumers to seek ways to share that content across devices inside and outside of the home. Figure 1 Media Server Concept for Connected CE • The Cloud Media Concept: Drawing off the concept of cloud computing, where virtualized services become the compelling applications on computers, this vision extends to consumer electronics devices that feed off of premium content and application services coming into them from access networks. These services can include entertainment, communications, and media from both closed networks (cable, satellite, IPTV) as well as the so-called “over-the-top” services riding on top of the open Internet. A Parks Associates White Paper 2
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates Figure 2 Cloud Media Concept for Connected CE 2.1 Connected TVs and the Media Server Consumers have rapidly embraced digital media, primarily for the capture and playback of content such as music, photos, and video. They generate their own content on digital devices, transfer their analog data to digital formats, and download media from the Internet. As Figure 3 indicates, the percentage of households with platforms for image and video capture, as well as music playback, is quite high both in the U.S. and the U.K. With the increased adoption and usage of these devices, consumers are employing them for a variety of purposes. In short, single-function devices do not exist anymore; consumer electronics products perform ever more media-centric functions. A Parks Associates White Paper 3
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates Portable Media Device Penetration (Percentage of Broadband Households) 100% U.S. (n=2,720, ±2%) Percentage of Broadband HHs (%) U.K. (n=1,062, ±3%) 0% Digital Camera Digital Camcorder Portable MP3 Player Sources : TV 2.0: The Consumer Perspective; GDL: Entertainment 2.0 in Europe © 2009 Parks Associates Figure 3 Portable Media Device Penetration Media creation and personalization is only one component driving the need for media organization. With DVRs in high percentages of households and online video downloading much more than just a niche market in both the U.S. and the U.K., consumers are filling up hard drives with a growing collection of premium content. The online video phenomenon is one to watch carefully in Europe. Although much has been written about the development of the iTunes service, Xbox LIVE, the Amazon Video On Demand service, and others that are mainly U.S.-centric, our research indicates that Western Europe actually has more active online video participants than the U.S. – 44% more, to be exact. Although much of the online video acquisition may be peer-to-peer downloads from non-studio sanctioned Websites, the habit is already is place. The European consumer is already well-trained to use the Internet as a source for video content. A Parks Associates White Paper 4
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates DVR Penetration and Downloading Online Video (Percentage of Broadband Households) 50% U.S. (n=2,720, ±2%) U.K. (n=1,062, ±3%) Percentage of Broadband HHs (%) 0% DVR Penetration Downloading Video from the Internet Sources : TV 2.0: The Consumer Perspective; GDL: Entertainment 2.0 in Europe © 2009 Parks Associates Figure 4 DVR Penetration and Downloading Online Video Among music, video, and photos, the average households’ storage needs are forecast to grow more than ten times between 2009 and 2013. We estimate that the average digital media storage requirements will exceed a terabyte by 2013. Allowing dedicated non-PC platforms to aggregate and manage this content – and allow consumers to expand the range of products from which this content can be accessed – is a significant driver for the growth of home servers. A Parks Associates White Paper 5
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates Gigabytes of Storage Needed for Household Digital Media (Average Across All U.S. Households) 1,600 Photos (GB) Music (GB) Total GB Needed Video (GB) 0 2008 2009 2010 2011 2012 2013 Source: Home Networks for Consumer Electronics © 2009 Parks Associates Figure 5 Gigabytes Needed for Household Digital Media 2.2 Connected TVs and Cloud Media Both U.S. and U.K. consumers show strong predilections to on-demand video, both in the traditional sense (from a cable provider, for example), as well as online sources. Today, the traditional video-on- demand use case is relatively straightforward; an order is placed, and the movie or program appears immediately on the TV screen. For online video, the use case is dominated by viewing on a home computer, and the percentage of consumers who have a TV connected to a PC to view Web video is small in both countries. However, Web video is coming to a TV screen in a variety of fashions. A Parks Associates White Paper 6
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates Watching VoD Movies and Streaming Online Video (Percentage of Broadband Households) 30% U.S. (n=2,720, ±2%) U.K. (n=1,062, ±3%) Percentage of Broadband HHs (%) 0% VoD Movies, Monthly Streaming Video from the Internet Sources : TV 2.0: The Consumer Perspective; GDL: Entertainment 2.0 in Europe © 2009 Parks Associates Figure 6 Watching VoD Movie and Streaming Online Video One of the biggest trends in the consumer electronics industry for the past two years has been the concept of Internet-connected consumer electronics that bring the Web video experience to the TV screen. This concept was initiated with a number of stand-alone boxes. In the U.S., consumer electronics devices such as the Apple TV, the Xbox 360, broadband-connected TiVo boxes, the Netflix Player by Roku, the VuNow product from Verismo Networks, Popcorn Hour from Syabas, the ZvBox, and some digital media adapter devices that offer online video content provide that direct-to-TV Web video experience. However, a bigger trend is the embedding of Web video collection capabilities in consumer electronics devices including televisions, Blu-ray players, additional game consoles, and even photo frames. All of these devices seek to take advantage of the huge collections of professional and user-generated (and Web-hosted) content services. It’s not just consumer electronics manufacturers, however, who seek to create new value from Web- connected platforms. We are already seeing television service providers such as Comcast (Fancast) and Time Warner Cable offer Web video content to their subscribers, and Comcast has discussed bringing this content to the set-top box by allowing subscribers to bookmark Web video and then access it from their on-screen guide on any set-top box. In the U.K., the best examples for a streaming premium Web video experience are the BBC iPlayer (which is available to Virgin Media cable subscribers) and the A Parks Associates White Paper 7
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates BSkyB Sky Player. After several years of mulling the potential that incumbent operators might actually embrace Web video, early trends indicate that this is exactly what is happening. 3.0 Consumer Demand for Connected TVs Consumers show strong interest in the concept of connected consumer electronics, including set-top boxes that link not only to the television offerings from their service provider, but content hosted on home computers and streaming from the Internet. From our two Q3 2008 consumer studies – TV 2.0: The Consumer Perspective and Global Digital Living: Entertainment 2.0 in Europe – we see strong demand for the concept of a set-top box that can pull in content from a variety of sources (Figure 7). Perhaps more interesting – at least from a service provider’s desire to create new revenue streams – are the percentage of consumers willing to pay additionally each month for this kind of feature. The percentage of consumers expressing a willingness to pay up to $5.99/£4 per month for such a feature is quite comparable to the known take rate for Verizon’s Home Media DVR feature, a multi-room DVR and networked set-top box feature that allows users to pull in content from home computers – a feature for which Verizon charges FiOS TV subscribers an additional $7 per month. Appeal of Networked Set-top Boxes and Willingness to Pay for Feature (Q3/08) quot;How appealing would you find set-tops connected to PCs/the Internet; Would you be willing to pay per month for the feature?quot; 50% (Among BB HHs surveyed) Percentage rating appeal as 5-7 (%) Percentage willing to pay $5.99/£4 or $2.99/£2 per month (%) % of Respondents 0% U.S. (n=2,720, ±2%) U.K. (n=529, ±4%) Sources : TV 2.0: The Consumer Perspective, GDL: Entertainment 2.0 in Europe © 2009 Parks Associates Figure 7 Appeal of Networked Set-top Boxes and Willingness to Pay When asked what features they would find valuable from a connected set-top box, it’s interesting to see that the ability to view photos is a top-ranked application (Figure 8). Not too far behind this feature are A Parks Associates White Paper 8
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates premium video and music capabilities. Watching YouTube videos makes the list as a relatively popular application, but it will be well-organized and easily accessible premium content services that give service provider a key differentiator. What Do Consumers Want from a Connected STB? (Percentage of respondents finding STB-to-PC/Internet feature appealing) View Photos Premium Web Video Streamed music Web Surfing E-mail Customized Weather Customized News U.K. (n=406, ±5%) YouTube U.S. (n=897, ±3%) Customized Traffic Customized Stock Quotes 0% 80% Percentage of Respondents (%) Sources : TV 2.0: The Consumer Perspective; GDL: Entertainment 2.0 in Europe © 2009 Parks Associates Figure 8 What Do Consumers Want from STB-to-PC/Internet Convergence? Just as service providers have the ability to provide new content experiences via the set-top box, so too do consumer electronics manufacturers via connected devices like TVs. From our Digital Media Evolution survey in Q4 2008, we find that significant percentages of consumers are interested in new premium content capabilities on connected televisions, with large VoD libraries made accessible. Also, the ability to customize news, weather, traffic, and other information via widgets is also highly desired. What is heartening to television manufacturers is not only the strong demand for such features, but the willingness by consumers to place a premium on such offerings. The Digital Media Evolution study finds that consumers are willing to pay more than $50 extra for a TV offering such features. A Parks Associates White Paper 9
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates Appeal of Television Features (Q4/08) quot;Q403. How appealing are the following capabilities for your television?quot; (Among broadband HHs, n=796; +/-4%) VoD Library Electronic movie rental via TV TV Widgets 0% 50% Source : Digital Media Evolution % Finding Feature Highly Appealing Sample: n=2,447 broadband HHs in the U.S. ; ±2% (i.e. 6-7 on a 1-7 scale) © 2008 Parks Associates Figure 9 Appeal of Television Features So, the demand for both user-generated and premium content services made accessible from both home servers and Cloud Media services will be important to the connected TV experience. However, as Figure 9 indicates, additional Web-like experiences – including widgets – will also play a defining role in the connected TV experience. In particular, new search and discovery capabilities, as well as social networking features, will find their way to television screens and other consumer electronics devices (like mobile phones). As Figure 10 indicates, we’re in early-stage demand for features that bring new recommendation, search, content personalization, and chat features to the television screen. Specifically, we asked about the following features: • Widgets: A way to customize news, weather, sports, and traffic information that can be displayed as a non-intrusive scroll or overlay on the TV screen. • Most-watched Lists: The ability to see “Most Watched” lists of the top television programs being watched. This information can be organized by a specific time of day or channel. • Chat: A feature that would allow you to chat with others watching the same TV program. • Personalized Recommendations: The ability to recommend your favorite shows to friends and family (or receive recommendations). U.S. respondents are most receptive to most-watched lists, whereas U.K. respondents are highly receptive to widget features. As in the case of the connected set-top box features, small percentages of consumers in both countries are likely to pay additionally for these features. However, as value-added services are A Parks Associates White Paper 10
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates offered by service providers, the sum of smaller segments of consumers can add up to potential ARPU growth in the longer-term, but certainly create stickier services in the short-term. If service providers can enable such features while at the same time managing their CAPEX, these could very well be the next compelling value-added services. Appeal of Social Networking/Search Features; Willingness to Pay for Feature (Q3/08) quot;How appealing would you find set-tops connected to PCs/the Internet; Would you be willing to pay per month for the feature?quot; 50% (Among BB HHs surveyed) Percentage rating appeal as 5-7 (%) % of Respondents Percentage willing to pay $5.99/£4 or $2.99/£2 per month (%) 0% U.S. U.K. U.S. U.K. U.S. U.K. U.S. U.K. (n=2,720, (n=1,062, (n=2,720, (n=1,062, (n=2,720, (n=1,062, (n=2,720, (n=1,062, ±2% ) ±3% ) ±2% ) ±3% ) ±2% ) ±3% ) ±2% ) ±3% ) Widgets Most-watched Lists Chat Personalized Recommendations Sources : TV 2.0: The Consumer Perspective, GDL: Entertainment 2.0 in Europe © 2009 Parks Associates Figure 10 Appeal of Social Networking/Search Features and Willingness to Pay 4.0 Bringing Order to the Media Chaos We’ve seen that consumers are receptive to mixed-media environments, where set-top boxes and televisions connect to services and content outside of the traditional realm of entertainment. Bringing such features to the TV screen can be a significant benefit to both manufacturers and service providers. However, we must caution that both OEMs and service providers must carefully plan for exactly how this content will be accessed. If these services are difficult for consumers to discover and actually use, the investment in connected experiences may be lost early in the game. This cautionary tale is appropriate, as consumers – who are building their personalized content libraries with hundreds and thousands of songs, photos, video, and data files – acknowledge that it can be overwhelming. The data from our yet-to-be- released survey Customer Support in the Digital Home is telling, as significant percentages of consumers (about 20%) already report that: • They find it hard to share the documents and digital content stored on home computers; A Parks Associates White Paper 11
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates • They find it hard to find the documents and digital content stored on home computers; and • They have documents and digital content on too many devices. There is no singular answer to how best to help consumers organize, manage, discover, and share this content, but well-designed and consistent user interfaces across devices such as the set-top box and the television will help to alleviate this issue. Consumers won’t want multiple steps and different interfaces on their devices that require more steps to manage their digital media. Furthermore, well-organized user interfaces that help consumers manage the media mess can be viewed as value-added features in their own right. One more data point from the TV 2.0: The Consumer Perspective and GDL: Entertainment 2.0 in Europe offers a hint at the value that consumers place on evolving user interface features (Figure 11). When asked about their interest in a “single channel that can provide video thumbnails of what is currently playing on 12-16 other channels,” respondents react quite favorably, and do show a willingness to pay additionally for such a feature if offered by their service provider. Appeal of a Multi-channel Mosaic EPG and Willingness to Pay for Feature (Q3/08) quot;How appealing would you find video thumbnails of what is playing; Would you be willing to pay per month for the feature?quot; 60% (Among BB HHs surveyed) Percentage rating appeal as 5-7 (%) Percentage willing to pay $5.99/£4 or $2.99/£2 per month (%) % of Respondents 0% U.S. (n=2,720, ±2%) U.K. (n=1,062, ±3%) Sources : TV 2.0: The Consumer Perspective, GDL: Entertainment 2.0 in Europe © 2009 Parks Associates Figure 11 Appeal of a Multi-channel Mosaic EPG and Willingness to Pay In the end, value-added features that deliver new content experiences, combined with guides and navigational tools that help consumers best manage and share these experiences, will be critical in delivering on the promise of the connected TV. A Parks Associates White Paper 12
From Boob Tube to YouTube: Consumers and TV © 2009 Parks Associates About the Author Kurt Scherf studies developments in home networks, residential gateways, digital entertainment, technology development in the housing market, and residential and building management and controls. Kurt is the sole author or contributing author/analyst to more than 60 research reports and studies produced by Parks Associates since 1998. Kurt is a frequent speaker at conferences and events around the world, and is frequently cited in the industry and general business press. Kurt is a certified Focus Group Director. Kurt joined Parks Associates following a career in political research and multi-tenant dwelling management. He earned his BA from The University of Iowa. Industry Expertise: Home Networks & Residential Gateways, Wireless LAN and PAN solutions, Home Networking Media, Media Center PCs, Set-top Boxes & Residential Gateways, Consumer Storage, Consumers and Digital Entertainment, IPTV, and Customer Support for the Digital Home. About Parks Associates Parks Associates is an internationally recognized market research and consulting company specializing in emerging consumer technology products and services. Founded in 1986, Parks Associates creates research capital for companies ranging from Fortune 500 to small start-ups through market reports, primary studies, consumer research, custom research, workshops, executive conferences, and annual service subscriptions. The company's expertise includes new media, digital entertainment and gaming, home networks, Internet and television services, digital health, mobile applications and services, consumer electronics, and home control systems and security. Each year, Parks Associates co-hosts executive thought leadership conferences CONNECTIONS™ and CONNECTIONS™ Europe in partnership with the Consumer Electronics Association (CEA®). In addition, Parks Associates produces the online publication Industry Insights in conjunction with the CONNECTIONS™ Conference series. http://www.parksassociates.com | http://www.connectionsconference.com | http://www.connectionseurope.com | http://www.connectionsindustryinsights.com A Parks Associates White Paper 13
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