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Ernst%20&%20 Young,%20 Will%20widgets%20work,%202009%20(Sec)

  1. 1. Will widgets work? Web-enabled TV in search of a killer app Media & Entertainment
  2. 2. Whether it’s the traditional press and broadcast media, or the multitude of new media, audiences now have more choice than ever before. For media and entertainment companies, integration and adaptability are becoming critical success factors. Ernst & Young’s Global Media & Entertainment Center brings together a worldwide team of thousands of professionals with the industry knowledge to help you achieve your potential — a team with deep technical experience in providing assurance, tax, transaction and advisory services. Our global media and entertainment professionals work to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately, it enables us to help you meet your goals and compete more effectively. We’ll use this study and other reports as a means of sharing information with you. It’s one of the ways Ernst & Young makes a difference. 2
  3. 3. Contents Introduction 2 New technologies for a new age in television 4 iTV’s long and bumpy road 6 What’s a widget? 10 Web-enabled TV forecasts 14 Key questions for content owners 18 Critical success factors 20 Conclusion 22 Contacts 24 Will widgets work? 1
  4. 4. Introduction After years of missed attempts, web-enabled television Consumer Electronics Show that could prove game-changing. may finally have found its killer application. Much like The Channel provides a platform for the development of TV internet, mobile and iPhone widgets, TV widgets enrich the widgets which are internet-enabled applications that will reside entertainment experience through the delivery of information, on the television screen. The functionalities of widgets can range entertainment and social networking capabilities that sit right from a small icon showing basic information (such as a weather on the viewers’ TV screens — similar to computer desktop icons. forecast) to a full-screen, content-on-demand experience. When viewers click on a downloaded widget, however, they Ernst & Young believes TV widgets could be the catalyst to wide- enter into an alternate media world that could be as simple as a spread adoption of web-enabled TV. The reasons are threefold: partial-screen local weather report or as deep as a full-screen movie VOD archive. Content companies from television to movie 1. Consumer familiarity: Many consumers are well retailers are seizing the opportunity to build new distribution acquainted with widgets from their internet and mobile channels, galvanize consumers’ growing TV/online multitasking devices. Apple’s App Store alone is forecast to earn habits, extend their consumer relationships and forge new $1.2billion in sales by 2009, with a significant portion of revenue streams. To capitalize on this opportunity, content these sales coming from widgets.1 In addition, consumers owners, media distributors and device manufacturers alike will are interested in introducing more active behaviors into need to develop new provisioning capabilities across platforms, their television viewing experiences, as demonstrated by forge new channel partnerships and package content and their growing propensity to multitask across online and advertising in innovative and engaging new ways — and that’s television mediums. This content category is both familiar just for starters. to consumers and aligns well with their evolving television consumption habits, all of which may help fuel the use of TV widgets. Recent increased usage of internet TV “It’s frankly way beyond just passively offerings, such as Hulu, has also accustomed consumers to interactive video experiences. watching broadcasts and is no doubt the 2. Content company adoption: Television companies are future of TV.” seeking ways to enhance their brands and extend their relationships with consumers. Likewise, video rental - Boo-Keun Yoon, Executive Vice President retailers are searching for new ways to monetize their of the Visual Display Division, Samsung licensed content. TV widgets provide content owners with Electronics, as quoted in “TVs Tune to an additional platform by which to enhance consumer engagement and extend their brands. Many content the Internet; Web-connected Television companies have already announced the development Sets Take the Show Floor at CES,” and scheduled release of TV widgets, including CBS and Multichannel News, 12 January 2009, Showtime, who have announced they will be developing and releasing widgets over the next 12-18 months.2 via DowJones Factiva. 3. Application-focused technology: Intel has partnered with Yahoo! to develop a technology that is easily Video-on-demand (VOD), digital video recorders (DVRs) and leveraged by content owners. Furthermore, they have a start-over technologies have made interactive television (iTV) multidevice hardware distribution strategy that fosters a capabilities commonplace in today’s home. However, the success rapid market adoption. They are also actively promoting of web-enabled television (web-enabled TV) has proven far more their technology to all the critical value-chain players, elusive. For over a decade, web-enabled TV applications have including content, cable and consumer electronic been released with little success. However, Yahoo! and Intel, in companies. This strategy should result in a quick and partnership, displayed the Widget Channel platform at the 2009 scalable US market penetration. 1 “Apple’s App Store could emerge as $1.2b business by 2009.” AppleInsider, 11 June 2008. 2 “Yahoo! brings the cinematic internet™ to life and revolutionizes web-connected television,” Business Wire, 7 January 2009, via Dow Jones Factiva. 2 Global Media & Entertainment Center
  5. 5. Despite these powerful drivers of technology adoption, TV Through a series of interviews with many of the major widgets are not without their challenges for content companies. players across the TV widget value chain, consumer TV widgets are a consumer-controlled medium, in which the research led by The Diffusion Group, interviews with viewer can pull down a variety of widgets from an application Ernst & Young industry experts and original data analyses, gallery, thereby allowing transparency and one-click access this report provides insights into these questions, and to competitors’ programming. In addition to the competitive outlines the key areas that must be addressed in order for challenges, there are also operational challenges. For instance, TV widgets to gain widespread adoption. a TV widget and full-screen show might be running simultaneous conflicting advertising messages. Lastly, consumers have become accustomed to highly interactive, full-keyboard media consumption on their computers that will not easily transfer to the remote-controlled TV widget experience. The technology, therefore, raises a number of questions: • Can the appropriate interactive capabilities of the internet port to the television set provide a compelling offering to consumers? • Will consumers exchange less rich interactive capabilities for a 52” high-resolution television experience in the living room? • If so, are TV widgets the “killer app” for the previously elusive web-enabled TV and what are the key success factors for consumer adoption? Will widgets work? 3
  6. 6. New technologies for a new age in television Mass adoption of iTV has only recently shown modest gains. At the 2009 Consumer Electronics Show, television companies There is a formidable history of missed attempts to capture were talking about the Yahoo!-Intel Widget Channel platform. audience and make money with a compelling iTV offering. Some ABC, CBS, Showtime and others have announced their intention argue that one of the earlier attempts, the pay-TV channel to release TV widget offerings over the coming year.6 Interactive “Premiere” in Germany, led to the downfall of one of the great marketing agencies, such as Schematic, have developed television empires – the Kirch Group.3 the capabilities to assist media companies in creating and programming these widgets.7 These companies are betting that But the last decade has witnessed a flowering of iTV interactive media applications on internet and mobile devices applications, with both VOD and DVR usage now somewhat have accustomed consumers to a wide variety of interactive commonplace.4 While these iTV applications are gaining experiences, which include accessing, sharing, discussing and currency, neither is yet web-enabled. The few web-enabled iTV manipulating media, which can be ported to the TV. applications which have launched, such as WebTV, have failed to achieve wide-spread adoption.5 ”TV is becoming more like the Internet. It is experiencing a content explosion that . . . requires search capabilities.” - Keval Desai, Product Management Director, Google 3 “German MHP now in doubt,” Inside Digital TV, 5 February 2003, via Dow Jones Factiva, © 2003 Phillips Business Information, Inc. Some might argue that it was the pay-aspect of the channel that led to its failure, as Germany is primarily a free-to-air market and pay channels have historically struggled. However, it was the large investment in the interactive technology for Premiere which contributed to the challenges the Kirch Group faced. 4 In 2008, US VOD household penetration was 41m and DVR was 30m. “US Video-on-Demand (VOD) Households,” eMarketer, 5 December 2008 and “US DVR Households, by Subscription Type,” eMarketer, 5 December 2008, both citing data from MAGNA. 5 “ Microsoft’s MSN TV2 easy to use, a bit pricey,” The Baltimore Sun, 17 November 2005, via Dow Jones Factiva. 6 “Yahoo! brings the cinematic internet™ to life and revolutionizes web-connected television,” Business Wire, 7 January 2009, via Dow Jones Factiva; “CES notebook,” CABLEFAX, 12 January 2009, via Dow Jones Factiva, © 2009 Access Intelligence, LLC. 7 “We also liked,” Advertising Age, 30 March 2009, via Dow Jones Factiva; © 2009 Crain Communications, Inc. 4 Global Media & Entertainment Center
  7. 7. Will widgets work? 5
  8. 8. iTV’s long and bumpy road One of the first iTV technologies was introduced in 1996 In 1999, British Sky Broadcasting (BSkyB) introduced a simple with the launch of the WebTV service (see Figure 1).8 WebTV form of iTV through its Red Button service. With the push allowed viewers to browse the internet and send email via their of a red button located on the consumer’s television remote television screen. The service achieved 150,000 subscribers control, consumers are able to request additional information within a year of its launch and an estimated one million on programming or advertisements, send text messages subscribers by 2004.9 However, WebTV never gained wide- directly to the network, replay footage or participate in polls spread consumer acceptance, due to its cost (which included posted through their television program. Over 90% of BSkyB’s a $200 keyboard purchase, plus a $9.95 to $21.95 monthly subscribers have utilized the Red Button iTV functionality since subscription fee),10 its lower-screen resolution, its relatively its introduction.11 limited user interface and the prevalence of affordable personal computers. Figure 1. History of iTV RespondTV and Premiere Netflix Time CommerceTV World Roku HP Warner MediaSmart TV Cable BSkyB “Red AOLTV Xbox Widgets Button” Live Apple WebTV TV (UK) 1994 1996 1999 2000 2001 2002 2003 2006 2007 2008 2009e • Time Warner • Set-top box • Set-top box • Set-top box • Pure-play • Gaming • Premiere • Media • Media adapter • Provider - • Internet- launches iTV between TV button between TV iTV console with withdraws its adapter specific enabled • Allows content service in and internet and Internet infrastructure internet support for set-top applications • Provides a • Allows from PC to be Orlando providers connectivity the box that run on • Enabled limited form • Provided content from viewed over cease multimedia TV set • Penetrated internet of access to the • Subscription- PC to be TV set or • Enables operations home 4,000 homes browsing on interactivity internet, email based viewed over streamed online • To be platform iTV one year TV including and AOL’s IM service TV set directly from streaming introduced specification later in-program service along enables internet of Netflix in 2009 • Failed due to due to • Still voting with TV users to videos on • System was poor financial commercially • Less than one programming download TV set expensive; functionality • Still difficulties available, million units games as cost of a set- and screen operational • Failed due to however, have been well as non - top box was resolution, monthly penetration is sold in the two gaming $3,000 subscription subscription still low due to years it has content such fee, and the cost; reduced cost (>$300) been available as videos eventual email and the due, in part, introduction of functionality technical to the Apple low-cost PCs (could not open savvy iTunes walled attachments) required to garden and poor user set-up a interface home network via PC 8 “Firm will launch TV web browser,” Los Angeles Daily News, 10 July 1996, via Dow Jones Factiva. 9 “The Microsoft connection has kept WebTV relevant,” The Richmond Times-Dispatch, 8 October 2007, via Dow Jones Factiva; “Microsoft’s MSN TV2 easy to use, a bit pricey,” The Baltimore Sun, 17 November 2005, via Dow Jones Factiva. 10 “The Microsoft Connection has kept WebTV relevant,” The Richmond times-Dispatch, 8 October 2007, via Dow Jones Factiva. 11 “The red button debate,” B & T Weekly, 28 September 2007, via Dow Jones Factiva, © 2007 Reed Business Information Limited. Additional insights were yielded through Ernst & Young market-expert interviews. 6 Global Media & Entertainment Center
  9. 9. “People don’t want complexity… they don’t want the Internet dumped on their TV. They don’t want URLs and browsers either.” - Michael Greeson, The Diffusion Group Will widgets work? 7
  10. 10. iTV’s long and bumpy road (continued) Media adapters are a more recent development in the history of Figure 2. iTV technology matrix iTV. These devices, such as Apple TV and the HP MediaSmart, enable consumers to stream content (including photos, video Challengers Leaders and music) from their computers to their television sets. Mass • Game consoles adoption of these devices has been stymied by their retail price • TV widgets ($200 or more) and the technical expertise required to configure a home network so that their computer and media devices can communicate with each other. Inter- • WebTV iTV technologies are highly variable, depending upon the activity Niche players Visionaries maturity of the technology and the level of interactivity they • BSkyB’s Red Button provide. More mature iTV technologies tend to have less • Media interactive capabilities — both quantitatively and qualitatively — adapters • DVRs with game consoles having the highest levels of both • Roku • Video on demand characteristics. Of all these technologies, web-enabled TV applications, such as TV widgets, are the least mature, yet provide the greatest amount of interactivity (see Figure 2). Maturity of technology History has shown that the presence of certain functional requirements can make an iTV technology (and new media applications in general) more successful than others. 8 Global Media & Entertainment Center
  11. 11. What works? What doesn’t work? • Ease of use – Consumers will be more likely to utilize an iTV • Using the TV as a PC – Most consumers are not interested in application if it has a simple and elegant user interface and replicating the full functionality of a PC (e.g., word processing, does not require in-depth knowledge of networking. financial management, sending and receiving emails, etc.) on their television set. Utilizing a keyboard on a PC is a • Advertising-based services – Consumers prefer “free” to fee. “lean forward” experience, as opposed to the “lean back/ Content that is funded by an advertising-based model may laid back” experience of television viewing. Other barriers have a much higher adoption rate than services requiring an to PC-on-a-TV include the difficulty in replicating the 24” PC out-of-pocket expenditure on the part of consumers. monitor experience on a 52” television set (font size, etc.) and • Premium content – While advertising-subsidized experiences translating keyboard capabilities to a remote control.12 iTV are more readily acceptable, consumers have demonstrated a must be its own experience and avoid simply translating the willingness to pay for content which they perceive as having a consumer PC experience to the television. high value. Media available on a transactional basis (e.g., paid • Limited content choices – Fragmented, or “walled garden” movie downloads), is still a viable model, provided that the offerings, which restrict and limit consumer access to a transaction price for the content is perceived by the consumer specific set of applications, limit consumer choice and, as being “reasonable” and the content is perceived as having a consequently, adoption.13 It is imperative that new iTV premium value, such as movies or a highly rated series. solutions provide consumers with the breadth of opportunities that the internet itself provides, not prescribe what types of content are delivered or by whom it can be accessed. • Multiple subscription-based services – Consumers already pay a monthly fee for their internet connectivity and their television programming; they do not want to pay an additional monthly fee in order to replicate their existing internet service on their television set. While past WebTV attempts can provide insights into what doesn’t work, they provide little insight into untested technologies, of which TV widgets are a prime contender. 12 “Yahoo!’s Next Frontier: Internet TV; The Web pioneer is working with Intel and television makers to inaugurate TV widgets that will add some Internet content to home viewing,”, 12 January 2009, via Dow Jones Factiva, © 2009 McGraw-Hill, Inc.; “Web-TV integration remotely possible,” ZDNet News from ZDWire, 1 March 1999, via Dow Jones Factiva, © 1999 ZD Inc. 13 “Walled gardens come tumbling down; Web 2.0 forces telcos to rethink strategy,” Telecommunications International, 21 August 2007, via Dow Jones Factiva, © 2007 Telecommunications Magazine. Will widgets work? 9
  12. 12. What’s a widget? TV widgets are mini-applications with a wide range of potential provide fully programmed television channels that fill the full offerings. TV widgets, selected by the consumer, will sit, like television screen with streamed movies or television shows. While computer icons, at the bottom or side of their television screen. leveraging this technology to develop fully programmed channels In their simplest form, TV widgets enable consumers to view key raises a number of issues — ranging from regulatory to audience information, such as news, weather or sports, via a tool bar. Once cannibalization — the variety and potential of these services and enabled, the tool bar can be docked at the bottom or side of the applications are extensive. television screen. They might also include a “Now Playing” button TV widgets will be powered by the Intel Media Processor CE 3100© that can alert viewers to programs on their favorite channel. A system-on-a-chip (SoC), which incorporates a central processing more interactive application might include Web 2.0 features, unit, audio and video processors, and a graphics engine — all such as sending instant messages to friends, posting on message in a single device.14 This new internet-enabled SoC is built into boards and participating in social networking exchanges about Consumer Electronic (CE) devices such as HDTVs, DVD players the events or characters on the show they are viewing. Such and set-top boxes. The CE 3100© chipset and design framework an application could allow viewers to debate opinions in “real will be released in the US in 2009, with subsequent releases in time” as they watch the performances of their favorite singers Europe and Asia Pacific. on American Idol. In the most advanced offering, TV widgets can Figure 3. TV widget screen shot 14 “Intel® Media Processor CE 3100: Product Brief,” Intel Corporation website,, accessed 17 February 2009. 10 Global Media & Entertainment Center
  13. 13. “Widget applications help organize content and enable search and discovering relevant content easier.” - Michael Greeson, The Diffusion Group Will widgets work? 11
  14. 14. What’s a widget? (continued) The wonderful world of widgets The TV widget landscape consists of content owners, media distributors and device manufacturers, who together provide the services to support the end-to-end TV widget capabilities (see Figure 4). Figure 4. Widget landscape Access/interactivity Product Service Content Content Interactivity access access search navigation Create Distribute Aggregate Report Content Access/ Sales/ Installation/ Payment Content Programming Marketing Reporting security delivery consumption network processing Create Create Product Subscription Software Invoice Planning Format Self-service content widget bundling contracts download management Acquire Content Consumer Advertising Service Payment User Security Delivery content bundling targeting consumption access processing profile Advertising Personalized Sponsor - Product Account Account Scheduling Storage Monitoring product advertising ships access updates management placement Royalty Product Availability eCommerce processing support Distribution Advertising Event Service sales players driven support Content players Device players Intel and Yahoo! have enabled the creation of widgets via the design of the chipset and the availability of the application framework development kit. To promote their technology, they have fostered relationships with the key players in the TV widget landscape including: • Content players — CBS, Showtime and others are developing applications that enable users to interact with displayed programming, request content on demand, respond to polls or send their comments and opinions to the broadcaster. Initial content on widgets will range widely from “information push” applications (news, weather, sports and stock updates) and extra programming footage, to the full streaming of VOD movie services offered by Blockbuster and Netflix.15 Content companies are also partnering with interactive marketing firms, such as Schematic, to assist in the design of TV widgets, enabling their development and entrance into the market.16 12 Global Media & Entertainment Center
  15. 15. • Distribution players — Device manufacturers, cable operators Open framework will spur development and online service providers such as Yahoo! are developing widget “galleries” to provide consumers with access to TV widget applications can be built using the Intel-Yahoo! libraries of diverse applications. Intel and Yahoo! are driving development framework, enabling developers to design an openness principle for gallery owners, requesting that customized widgets for specific TV content providers and gallery owners include all widgets; however, preferred audiences. Much like the Apple iPhone Developer Program, placement within the galleries will be highly valuable to widget which spurred the development of over 15,000 applications producers.17 In theory, the more visible the application, the for the wireless device and which will generate an estimated higher the likelihood of its selection by consumers (as is the $1.2 billion in revenue for Apple by 2009,21 the Intel-Yahoo! case with Electronic Program Guides). Content owners will application framework will enable developers to create myriad likely sign deals with these distribution players in order to mini-applications for internet/television interaction. Content optimize the placement of their branded widget. No doubt owners, distributors and internet developers will be able negotiating a prime spot in preloaded galleries will be a critical to create widgets utilizing standard internet programming success factor for individual widgets. technologies, such as JAVASCRIPT®, XML, HTML and Adobe Flash®, thus lowering barriers for application development.22 • Device players — Arguably the key to rapid adoption of TV widgets, device manufacturers will work with companies such Consumers will be able to select, or “pull,” the desired as Intel to embed widget support in set-top boxes, DVRs, application into their device’s Widget Gallery either by activating DVD players and television sets in order to ensure a fast and a widget that has been preloaded on their CE device or selecting comprehensive route to market for this technology. Several CE one from the Yahoo! Widget Gallery. However, as widget manufacturers, including Samsung, Sony and LG Electronics, technology becomes more sophisticated, content providers have announced their intent to ship widget-enabled high- will synchronize the availability of widgets based upon the definition (HD) television sets in 2009.18 Internet connectivity programming being broadcast and “push” them to consumers to enable widget selection will be made possible by ethernet for selection. These pushed widgets will relate directly to the ports or wireless USB devices installed in the television programming on the screen and will enable users to interact sets. Consumers will be able to access the widget-based more fully with the content being displayed. applications via a short-cut button on their remotes.19 Figure 5. Web-enabled TV sales TV widget application technology sits in a walled garden on the internet, meaning that it is fully web-enabled. This Web-enabled televisions, annual unit sales, US platform structure allows the technology to leverage many (millions) internet functions and capabilities, potentially including advertising-serving, performance-monitoring and content- 7 6.0 serving infrastructure.20 6 5 4.0 4 3 2.2 2 1.0 1 0.2 0.4 0 2008 2009e 2010e 2011e 2012e 2013e Source: Park Associates, “Internet video: Direct-to-consumer services,” (2nd edition), 2008. 15 “Yahoo!, TV makers unveil deals to webify the tube,” Penton Insight, 9 January 2009, via Dow Jones Factiva. 16 “We also liked,” Advertising Age, 30 March 2009, via Dow Jones Factiva, © 2009 Crain Communications, Inc. 17 The Mossberg Solution: Yahoo Widgets lend brains to boob tube,” The Wall Street Journal, 25 March 2009, via Dow Jones Factiva, © Dow Jones & Company, Inc. 18 Ibid. 19 Ibid. 20 Interview with Lance Koenders, Technical Assistant to the SVP & GM, Digital Home Group, Intel Corporation, 3 March 2009. 21 “Apple’s App Store could emerge as $1.2B business by 2009.” AppleInsider, 11 June 2008. 22 “Widget Channel: Technology Brief,” Intel Corporation website,, accessed 17 February 2009. Will widgets work? 13
  16. 16. Web-enabled TV forecasts Intel has adopted an aggressive multipronged device strategy Multitasking has become commonplace to get chip-enabled equipment devices into the marketplace. The first device to ship with the Intel chip will be HD television The ability to watch television while also keeping updated with sets. Parks Associates has forecasted that sales of web-enabled news or engaging in social networking and email activities is televisions in the US will grow from 400,000 units in 2009 to already an established practice among consumers in the US and 6 million units in 2013, a 97% compound annual growth rate Europe. A Yankee Group study found that 56% of all US consumers (see Figure 5). IDC has forecast the number of network-enabled browsed the internet/used email while also watching TV.25 video devices (including TVs, media adapters, DVD players and In addition, a survey of 14,193 European online consumers DVRs) in the US to grow from 12.6 million in 2009 to almost 66 by Forrester Research found similar results with over 50% of million by 2012.23 However, the sale of web-enabled TV-enabled European consumers aged 19 through 29 reporting watching CE devices is not the only variable to be considered to determine television while using the internet (see Figure 6).26 future consumer adoption. These studies show that consumers, especially the younger Consumer uptake is difficult to forecast, especially given the generations, will be more likely to adapt to integrated television wide variability in interactive technology adoption rates. For and internet offerings, which cater to and combine both activities, example, it has taken 10 years for US households to achieve while maintaining the consumers’ focus on the television screen. a 25% penetration rate for DVRs; eight years to reach a 25% penetration rate for VOD; yet only seven years for 25% of Figure 6. Multitasking consumers console and handheld gamers to connect their devices online.24 Percentage of EU consumers who watch The lack of previous wide scale web-enabled TV adoption adds television while emailing/using the Internet an additional element of uncertainty to the widget uptake rate. However, there are several key consumer behaviors that suggest All 43% they will embrace this technology. 12 to 15 45% 16 to 18 47% 19 to 20 51% 21 to 24 58% 25 to 29 53% 30 to 34 47% 35 to 39 44% 40 to 44 42% 45 to 49 41% 50 to 54 36% 55 to 59 31% 60 to 64 27% 65+ 24% 0% 10% 20% 30% 40% 50% 60% Source: Forrester Research, Inc., “European Multitasking Consumers Present Both Challenges And Opportunities,” October 2008. 23 “Worldwide and US Home Network–Enabled Video Devices 2008–2012 Forecast,” IDC, September 2008, document # 214155. 24 “US Video-on-Demand (VOD) Households,” eMarketer, 5 December 2008 and “US DVR Households, by Subscription Type,” eMarketer, 5 December 2008, both citing data from MAGNA; “Videogames,” Warren’s Consumer Electronics Daily, 11 March 2009, via Dow Jones Factiva; US Census Bureau, “Households, Families, Subfamilies, and Married Couples.” 25 Yankee Group Research, Inc., “Anywhere Consumer: 2008 U.S. Entertainment Survey,” 24 December 2008. 26 Forrester Research, Inc., “European Multitasking Consumers Present Both Challenges And Opportunities,” October 2008. 14 Global Media & Entertainment Center
  17. 17. TV widgets fulfill “a lot of pent-up demand for the interactive TV market.” - Allen Weiner, Gartner analyst, as quoted in “Yahoo! weds Web with TV,” The San Francisco Chronicle, 19 January 2009, via DowJones Factiva, © 2009 Hearst Communications, Inc. Will widgets work? 15
  18. 18. Web-enabled TV forecasts (continued) Consumers know widgets And the survey says... • Computer widgets: Consumers have already embraced the According to primary research, consumers are very interested in use of targeted, mini-applications on their computers, as widget-based TV applications. A Parks Associates’ report found evidenced by the popularity of desktop widgets (applications that over 30% of US consumers consider the idea of news and parked on the desktop such as calendars or clocks), browser information widgets on their television to be “appealing,”28 while widgets (applications used to customize a user’s browser approximately 61% of consumers surveyed say they would like home page such as those found on the Google Gadget their TV to connect to the internet.29 A study from The Diffusion directory) and social widgets (such as those installed by Group found that 76% of consumers believe having a widget Facebook users). These widgets provide consumers with toolbar on their primary TV would be valuable.30 direct access to targeted applications and features, similar to While it is inherently problematic to forecast consumer adoption TV widgets. According to a study published by Razorfish, an of a nascent technology, the prior insights and research suggest interactive marketing agency, 55% of “connected consumers” that there is the appetite, familiarity and history to indicate (those people with broadband internet access who use social that consumers could embrace TV widgets. That being said, it networks and digital media) use computer widgets on their was the findings of The Diffusion Group’s consumer research desktops with some frequency and 62% use them on sites concerning the most highly valued applications which provide such as Facebook and iGoogle.27 some surprising insights into the areas of consumer demand.31 When 26 applications were tested, it was the Search/Discovery and Find/Watch functions that proved the most desirable. “[The TV] content explosion has When asked to rank the widget-based applications in order of preference, the following appeared as the top-listed implications: Consumers need search applications with 75% or more of respondents regarding them capabilities and advertisers want to as valuable: know that they are reaching the 1. Ability to immediately find and watch episodes of current right consumers.” season TV shows - Keval Desai, Google 2. Ability to immediately find and watch online TV programs from a major network 3. Up-to-the-minute weather information customized for • Mobile widgets: Mobile widgets are another means by which your location consumers are personalizing their device experience with 4. Ability to immediately find and watch TV programs no targeted applications. Mobile widgets enable consumers to longer on the air quickly access information without having to navigate the internet via their device browser, saving time and effort for 5. Up-to-the-minute breaking news headlines the user. As discussed earlier, iPhone widgets have been particularly successful. This is great news for television companies! The majority of consumer interest still revolves around premium television 16 Global Media & Entertainment Center
  19. 19. programs, with widgets simply providing the ease of access relevant to their two main constituents: consumers and and depth of content similar to the click-and-search functionality advertisers. TV widgets provide a potential answer. of the web that has previously been unavailable on the TV.32 In addition to simply galvanizing this consumer interest, content • Achieve a “first mover” advantage: A content player companies have several additional incentives to develop that is among the first to develop a TV widget and place it TV widgets: within the Yahoo! widget Gallery could achieve several first mover advantages: • Increased engagement: Research has shown that consumers 1. Individually branded widgets will have a much higher become more engaged with brands and programs through visibility at launch, as the overall number will be limited. increased exposure across multiple platforms. In early 2008, The higher the visibility of the widget, the greater its MTV conducted a study of consumers called the Multi-Screen chances to be downloaded onto the consumer device Engagement (MSE) Case Study, 33 using its show The Hills as a gallery and, once downloaded, inertia sets in and it has a focus of research. The results provided “clear evidence” that higher likelihood of staying. consumer engagement with programs and brands increases dramatically with each additional digital platform to which a 2. Placement of a branded content-owner’s widget on viewer is exposed. The MSE Case Study also found that the the gallery, whether due to a preferred placement value of television advertising grows as viewers connect with agreement or through search results, will be key to marketing messages across screens and that an advertiser’s adoption. Content companies which release widgets positive brand image increased dramatically among fans early can negotiate premiere gallery placement. who browsed The Hills content online.34 The study also found 3. Early downloads from a limited widget offering will that multiplatform offerings deliver a stronger impact on provide greater brand exposure. consumers, thus enabling higher advertising rates across all However, in order to develop and launch an application platforms. effectively, content companies must ask themselves if they have the strategic, operational, process and technological • Brand enhancement: Making video content deeper and capabilities to effectively monitor, measure and monetize a richer has been an increasingly important component of widget investment. brand enhancement as digital media has matured. Television companies are seeking ways to enhance their content brands and extend their relationships with consumers. • Need to stay relevant: Content owners can utilize TV widgets to deliver a twenty-first century, iTV experience to consumers without a large investment in technology. Television advertising is down and companies are seeking ways to stay 27 eMarketer, “The Widgetized Web,” 17 November 2008, citing data from Razorfish LLC. 28 “Television 2.0: The Industry Perspective,” Parks Associates website,, accessed 20 February 2009. 29 “Widget Channel,” Intel Corporation website,, accessed 20 February 2009, citing data from Forrester Research, Inc. 30 “How widgets will revolutionize TV,” Penton Insight, 20 March 2009, via Dow Jones Factiva. 31 Ibid. 32 Ibid. 33 “MTV Networks Upfront Presentation: ‘The Ultimate ROI: Return on Innovation ,’” Wireless News, 10 May 2008, via Dow Jones Factiva, © 2008 M2 Communications, Ltd. 34 “ The next wave in media measurement and engagement,” Business Wire, 25 June 2008, via Dow Jones Factiva; “‘The Hills’ is alive: MTV research links cross-platform marketing to brand affinity among web users,” Adweek, 5 May 2008, via Dow Jones Factiva, © 2008 Nielsen Business Media. Will widgets work? 17
  20. 20. Key questions for content owners From an expense perspective, the costs to develop a TV • Audience aggregation: Are we able to support broadcast widget are estimated to be relatively small ($50k-$150k) per commitments across platforms in a synchronized way? Do our application. However, the delivery and ongoing costs could current sales processes, data structures and systems support be far more considerable, depending on the complexity of the monetizing interactive TV capabilities, gallery placement application. Content owners must take into consideration the and optimization, and any other new competencies that costs to refresh widget content frequently enough to encourage will be required? repeat use of the application, the impact on their Multiple • Reporting, measurement and analysis: Do our data capture, System Operator (MSO) affiliate agreements, the requirements engagement, measurement and reporting processes and to schedule and deliver advertisements within the widgets and systems adequately support interactive TV applications? the impact on their core advertising and program viewership Do our analytical tools support new demands for features, (see Figure 7). functionality, usage or advertising performance analyses? Some of the key questions that will have to be addressed include: Are our billing, third party or transactional, and advertising- based revenue recognition and collection systems able • Content creation: Do we have the right content to support a to support new interactive capabilities? Are our current widget offering? Do we have the ability to modify the content systems capable of accurately invoicing and collecting on a for widget delivery? Do we have the necessary data, processes multiplatform basis? and tools to support an interactive application? • Distribution and delivery: Do we have the right skill sets in-house to develop, program and deliver engaging widgets? Will our network and other infrastructure adequately support anticipated volume, capacity management addressability and authentication? Figure 7. TV widget considerations Content Distribution Audience Reporting, creation and delivery aggregation measurement and analysis • Do we have the content to • What partnerships, if any, do • Can we insert • Are we meeting our clients’ support a widget offering? we need to develop, deliver advertisements into our changing reporting Strategic • Is our programming conducive and sell interactive TV? widgets? demands? to interactive applications? • How can we best monetize • Can we align our • Can we report across clients, • Can we program content our interactive capabilities? advertisements across our sales, properties, etc. to effectively across channels? linear and widget offerings? provide transparency into • Do our advertisers want to sales patterns? • Which content creates the greatest opportunity? pay for widget placement? • Do we have the right creative • Can we effectively and accurately • Can we schedule • Do our analytical tools support team to develop a multiplatform monitor and report developing advertisements in a our clients’ demands for Operational offering? media applications (e.g., coordinated fashion across performance analyses? • Do we have the correct content gaming, mobile)? our linear and widget • Are we invoicing and collecting service providers? • - Are we able to support broad- platforms? the accurate amounts • Are we able to modify our core - cast commitments across • How will we manage the across all our platforms? content for a widget offering? platforms in a synchronized way? potential for conflicting • Do our current and historical • How do we best work with our widget advertisements when content agreements allow technology team to align content consumers access a rival the integration of interactive with technology capabilities? widget? elements? • Do we have the necessary data, • Can our data, processes and • Can our data, processes and • Will our sales and reporting and technology processes and tools to price our systems handle delivering systems handle delivering systems be able to support Data, process inventory across platforms? iTV offerings? iTV offerings? iTV revenues? • Do our systems and processes support • Can our current sales • Can our current sales • Can our data, systems and creating content across multiple processes, data structures and processes, data structures and processes support new deal platforms with a compelling systems support monetizing systems support monetizing structures (e.g., new interactive component? iTV capabilities? iTV capabilities? platforms, performance metrics)? • Do we have effective program management and communication processes for preparing and delivering an interactive application? 18 Global Media & Entertainment Center
  21. 21. Will widgets work? 19
  22. 22. Critical success factors TV widgets will not simply be a “create it and they will come” 4. Mitigate impact on core ad sales: There are several phenomenon. As applications develop and launch over the next concerns that will need to be managed in order to protect 18-24 months, Ernst & Young has identified ten critical success core ad sales. First, ratings must be protected on the factors that the landscape players will need to address in channel in order to guard against the erosion of advertising order for TV widgets to enter and achieve widespread adoption rates when viewers migrate their attention to widget in the marketplace: applications. This concern can be addressed via the use of side- or bottom-placed widget toolbars that will protect 1. Develop a viable business model: Advertising and Pay-for- viewership ratings on the primary screen. A second concern Premium content are the most likely initial revenue models, is that conflicting advertising (e.g., Ford versus Toyota) with television commerce (t-commerce) being a later but could appear simultaneously on the widget and core TV highly desirable subsequent monetization model. As we screens. To manage this issue, television programming have seen in other nascent digital media, it takes time to providers (including cable, telecommunications and satellite reach enough critical mass to yield significant revenues. operators) can integrate widgets into their set-top boxes to Critical mass most often results from an acceleration of provide a platform for managing these channel conflicts.36 adoption rates and market consolidation. Therefore, it may Lastly, there is a concern that consumers will migrate to be several years before TV widget-based sales revenues nonrelated (read “competitive”) content rather than staying support a viable business model. within the company’s content experience, which could 2. Manage channel conflicts: Television companies’ affiliate reduce rather than enhance consumer engagement levels agreements generally restrict the window and markets and therefore erode, rather than increase, advertising within which first-run content can be broadcast. In addition, rates. On the flip side, a consumer engaging with a widget content available on premium services can only be accessed application that is docked in the taskbar may be more by subscribers of those services. These contractual apt to stay on a particular channel through commercial restrictions must be managed across widget offerings. breaks, rather than channel surf, thus increasing the overall Cable operators have been working for several years on amount of commercials to which they are exposed and developing an Authorization Engine to provide “cloud potentially increasing advertising rates. While the content authorization” to ensure content can be viewed by each company should have a mitigation strategy, the ultimate household regardless of the distribution channel (traditional impact on ad sales is yet to be determined. TV, online or mobile).35 Until these capabilities are in place, 5. Acceptance by the television programming operators: the majority of the television programming widgets will As discussed previously, the television programming likely be restricted to marketing trailers and extra footage providers are critical to the application’s success. They hold which would not have affiliate or subscriber restrictions, the key to the set-top boxes, as well as the consumers. which begs the next issue. More importantly, their technologies are required to 3. Provide a compelling consumer experience: TV widgets enable several aspects of next generation advertising must provide users with a compelling experience, for which capabilities. Operators will therefore need to embrace this there are two key components: developing an engaging technology and its role within the value chain, which would consumer experience and offering compelling content. relinquish some of their controlled access to the consumer. Leveraging user-centric design can help developers to Furthermore, MSOs have their own initiative to provide optimize the consumer’s widget experience by designing interactive advertising and content, Canoe Ventures. Given the experience according to the use and needs of the the early stage of widget discussions, it is still unclear consumer. However, as The Diffusion Group’s study has whether the MSOs will choose to embrace their role within shown, premium television content is the primary area this nascent widget ecosystem or chose to go another way. of consumer interest. Determining how this content can be made available for early releases is critical to the application’s success. As such, balancing between channel conflicts and the consumer’s demand for premium long-form content will need to be managed early in the development process. 35 “Members Only; Cable Operators, Programmers Try to Build An Exclusive Online-TV Service for Subs,” Multichannel News, 6 April 2009, via Dow Jones Factiva. 36 Interview with Lance Koenders, Technical Assistant to the SVP & GM, Digital Home Group, Intel Corporation, 3 March 2009 20 Global Media & Entertainment Center
  23. 23. 6. Be usable and useful: Widget applications must feature a user-friendly interface as well as address an inherent need or interest of the consumer. A desire for a deeper, richer content experience could provide this requisite “usefulness.” However, content owners have been driving consumers to the web for this richer interactive experience, so TV-based widgets must be a distinct experience that addresses an as-yet unfulfilled interest in the integration of internet and television. 7. Avoid TV-as-monitor: Another question arises as to whether the television will become an interactive device in itself, or whether the computer will simply morph with the television screen, which, in effect, becomes a large monitor connected to the internet. TV widgets must complement the television’s independent identity within the home by offering an integrated TV experience and not try to mimic the experience of the computer. 8. Avoid potential regulation issues: Full-screen broadcasts could permit companies to launch fully programmed channels without regulatory licenses. However, there is a risk that legislators, particularly in highly regulated markets, will force such offerings to cease to broadcast. As a result, content companies will need to manage their offering carefully. 9. Develop operational capabilities: As outlined above, there are many operational challenges that will be required to program, schedule, broadcast and report on the performance of TV widgets. These challenges will need to be addressed in order to maximize the return on investment of these investments. 10. Create a “killer app”: The two main drivers of “killer apps” historically have been facilitating consumers getting “what they want when they want it” and improving their ease and immediacy of communication. If consumers do, in fact, want deeper, richer content while viewing TV, then widgets might likely fall into the former category. But demand must be tested as each application is developed. As demonstrated by both internet, mobile and iTV applications, some content (e.g., news, weather, movies) lends itself far more readily to the “on-demand” content than others. In addition, ease of use could be a big pull for content owners — for example, a one-click icon to access web-stored warehouses of deep premium content (imagine Netflix’s entire inventory available via a click of the remote). Each content owner must evaluate the viability of its own available content and widget design with a focus on these defining “killer app” criteria. Will widgets work? 21
  24. 24. Conclusion TV widgets represent another digital media platform content companies can leverage to strengthen their relationships with consumers through the innovative delivery of content. In the short term, widgets will likely remain a means by which companies can reinforce their brands and strengthen their relationship with consumers. However, as consumer adoption ramps up, advertising and pay-for-play could prove significant, as long as the critical success factors are appropriately addressed. When this happens, content companies may have found the killer app that yields mass adoption of web-enabled TV. 22 Global Media & Entertainment Center
  25. 25. Will widgets work? 23
  26. 26. Contacts Telephone Email Global Media & Entertainment Center John Nendick, Global Sector Leader (Los Angeles, US) + 1 213 977 3188 Sylvia Ahi Vosloo, Associate Director, Marketing (Los Angeles, US) + 1 213 977 4371 Karen Angel, Global Implementation Director (Los Angeles, US) + 1 213 977 5809 Yooli Ryoo, Knowledge Manager (Los Angeles, US) + 1 213 977 4218 Peri Shamsai, M&E Senior Manager (New York, US) + 1 212 773 9172 Pam Walker, Events Coordinator (Los Angeles, US) + 1 213 977 3046 Global area leaders and advisory panel members Farokh T. Balsara (Mumbai, India) + 91 22 4035 6550 Mark Besca (New York, US) + 1 212 773 3423 Neal Clarance (Vancouver, Canada) + 1 604 648 3601 Noriharu Fujita (Tokyo, Japan) + 813 3503 1355 David McGregor (Melbourne, Australia) + 613 9288 8491 Gerhard Mueller (Munich, Germany) + 49 891 4331 13108 Bruno Perrin (Paris, France) + 33 1 46 93 6543 Michael Rudberg (London, England) + 44 207 951 2370 Global service line leaders and advisory panel members Thomas J. Connolly, Global M&E Transaction Advisory Services Leader + 1 212 773 7146 Alan Luchs, Global M&E Tax Leader + 1 212 773 4380 alan.luchs Paul Macaluso, Global M&E Transaction Advisory Services Leader + 1 213 240 7040 Chris Pimlott, Global M&E Tax Leader + 1 213 977 7721 Gregg Sutherland, Global M&E Business Advisory Services Leader + 1 720 931 4435 Advisory panel members Howard Bass + 1 212 773 4841 Glenn Burr + 1 213 977 3378 Vincent de La Bachelerie, Global Telecommunications Leader + 33 1 46 93 6205 Rick Fezell, Global Technology Leader + 1 408 947 6568 Bud McDonald + 1 203 674 3510 Tim Teagle + 1 213 977 3216 Ken Walker + 1 805 778 7018 24 Global Media & Entertainment Center
  27. 27. Ernst & Young Assurance | Tax | Transactions | Advisory About Ernst & Young Ernst & Young is a global leader in assurance,tax, transaction and advisory services. Worldwide, our 135,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. For more information, please visit Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. About Ernst & Young’s Global Media & Entertainment Center Whether it’s the traditional press and broadcast media, or the multitude of new media, audiences now have more choice than ever before. For media and entertainment companies, integration and adaptability are becoming critical success factors. Ernst & Young’s Global Media & Entertainment Center brings together a worldwide team of professionals to help you achieve your potential — a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately it enables us to help you meet your goals and compete more effectively. It’s how Ernst & Young makes a difference. © 2009 EYGM Limited. All Rights Reserved. EYG no. EA0031 0904-1050235