January 25, 2009

Internet TVs Broaden Viewer’s Entertainment Options

A new generation of Web-connected televisions may play a key role for the recording industry in reaching its ongoing goal of expanding digital music into household living rooms.

And if the buzz at this year's Consumer Electronics Show (CES) is any indication, Internet access may soon become as critical a feature to TV buyers as screen size and resolution.  Web-connected TVs from companies such as Sony, Vizio, Samsung and LG generated significant interest at the CES show in Las Vegas in early January.

While efforts to bring Internet connectivity to TVs are nothing new, this year electronics makers are pitching their ability to bring a wider range of entertainment options to consumers.  The largest draw is enhanced video programming, since connected TVs would not need a separate box to download movies or other videos.

However, music isn't far behind.  Rhapsody, whose service is already offered via TiVo DVRs, recently inked an agreement with TV maker Vizio to integrate its music subscription service into the manufacturer's new Connected HDTV models, which will be available this fall.  The agreement would enable owners of Irvine, Calif.-based Vizio TVs to access Rhapsody without a separate device.  

Intel and Yahoo have partnered to launch TV Widgets, which allows users to access Web sites and online services through their TV as they watch other traditional programming.  Access to Web sites like MySpace will come preloaded into the connected TVs this fall.

And providers of digital music are in discussions with cable operators to make their services as accessible as other premium channels, such as HBO.  However, such an agreement would require extensive negotiations between record labels and cable operators to ensure monthly costs are kept down. Until then, digital music services will likely be centered on TV hardware.

Until recently, initiatives to stream digital music into households required costly systems such as media bridges from Roku Soundbridge or Sonos' multiroom wireless system. Some gaming consoles, such as Microsoft's Xbox 360, also enable streaming of online music, along with a number of Internet-enabled radio receivers, some of which are already built in to Napster or Rhapsody.

However, none of these systems have found widespread market adoption. Indeed, Market research firm Parks Associates estimates there are only about a 500,000 digital media adapters installed throughout the entire country.

"It's a niche category, and the really good products are priced at a premium," Kurt Scherf, principal analyst with Parks Associates, told Reuters.

"You're looking at a very specific market segment that will adopt these."

In contrast, HDTVs have already reached the broader consumer market, and have remained one of the few bright spots in the consumer electronics industry's dismal sales outlook.

Sales of consumer electronics and appliances between November 1 and December 24 were down26 percent from the same period a year earlier, according to MasterCard estimates. And a recent report from Forrester Research says that roughly 50 percent of consumers expect to reduce their technology spending this year.  However, that same report predicts sales of HDTVs to outperform those of other consumer electronics this year.  And the Consumer Electronics Association (CEA) expects digital TVs to be the primary revenue driver for the entire industry, accounting for 15 percent of total sales.

The coming transition to digital-only TV broadcasts, which will make analog TVs without a cable set-top box obsolete, is also helping fuel demand. Indeed, the CEA expects shipments of digital TV to rise 6 percent this year to 35 million, of which 77 percent will be LCD-display flat screens.  However, Web-connected versions of these TVs are still a small subset of the total market, and most won't be available until the later part of the year.

Some digital music executives, such as Rhapsody's vice president of business management Neil Smith, are optimistic about the trend.  The company's Vizio agreement is just the first of what he hopes will be many TV-related partnerships in the coming months. Smith said that making Internet access an incorporated feature of a TV, rather than available only through an external device, is analogous to how PCs internalized modems during the mid-'90s.

Other music firm executives are also working to integrate their services into the new devices as part of a beachhead strategy.

"This will not be the year of the connected living room," Smith told Reuters.

"But this will be the year the push begins to get the needed equipment installed."

Image Courtesy UPI


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