HOW CONNECTED TELEVISION TRANSFORMS THE BUSINESS OF TV

A white paper based on the Futurescape strategy report Social TV

............. 8 Twitter and Facebook facilitate social interaction around TV shows ........ 2 The race to provide connected TV .............1 How Connected Television Transforms the Business of TV Contents CONNECTED TELEVISION: A NEW MEDIUM AND A NEW BUSINESS ............. 13 Next-generation EPGs need social graph data ................................................................................ 8 Tweeting during the MTV Video Music Awards: a visualization for Web users .................................................................................................tv Research and Reports on the Future of Television ............... 14 Screenshots Screenshot 1: MTV visualization of tweets during Video Music Awards – note timeline at bottom ............................ 11 HOW DOES SOCIAL TV AFFECT PAY-TV? .............. 7 UK population: social networking use by age ................... 11 Socially-targeted advertising challenges conventional TV commercials ............................... 7 Social networking is a heavily used Web service ................................. 9 Social TV gives Facebook and Twitter even more power in the TV industry ...................................futurescape..... 10 Facebook and Twitter are partners and competitors for the TV industry ......... 6 CONNECTED TELEVISION CREATES SOCIAL TV ... 2 Competing platforms for connecting TVs to the Internet ........................................ 11 Screenshot 3: NDS “Oona” concept user interface with social interaction for TV ....... 13 Pay-TV must enable subscribers to recommend content to friends ..................................................... 6 Google TV: consumer proposition and content ............... 4 Competitive dimensions in connected television ........................ with Like buttons ....................... 5 Connected TV content and services .............................................................. 9 Connected TV integrates Twitter and Facebook into the television set ......................................... 3 Connected television via multiple devices ....................................................... 10 HOW DOES SOCIAL TV AFFECT TELEVISION ADVERTISING? .......................................................................................... 9 Screenshot 2: Adidas World Cup HD video ad on Facebook.............................................................................................. 5 Closed vs open systems .................................................................................. 13 © Futurescape Ltd 2011 www.............................................. 7 People already discuss TV online while viewing it ......................................... 4 WHAT DO CONNECTED TELEVISION SYSTEMS OFFER THE CONSUMER? ............................................................................ 9 How social networks affect broadcasters............................................................................................................ 2 New TV sets and devices offer Internet access and services .......................... 5 Apple TV: consumer proposition and content ....................................................................................................... 3 Connected TVs and devices: sales and penetration forecasts to 2015 ...... 13 ABOUT FUTURESCAPE ................ 11 A social context for TV advertising and sponsorship .................... 7 Facebook’s high penetration in major TV markets .......

Other companies are similarly pursuing a video and services strategy. Microsoft and Sony want to expand the consoles’ role from dedicated gaming devices to entertainment centres. The Microsoft Xbox Live and Sony PlayStation PS3 game consoles and their online services are capable of delivering video and some interactivity. Seven major CE companies are incorporating Yahoo Connected TV software into their sets. Apple. Their greatest fear is “cord-cutting” – that subscribers will cancel their subscriptions because video via connected TV is a good enough and often cheaper alternative. One response in the USA is the TV © Futurescape Ltd 2011 www. 2. Countries with more than 60% home broadband penetration include the majority of Western Europe. the USA and Canada. penetration is 100%.2 How Connected Television Transforms the Business of TV CONNECTED TELEVISION: A NEW MEDIUM AND A NEW BUSINESS New TV sets and devices offer Internet access and services Home broadband connectivity is ubiquitous in developed nations. Sony is using Intel chips and the Google TV platform for a range of televisions and Blu-ray players. Each has powerful commercial imperatives for doing so. such as social networking. South Korea and Singapore. in some cases.tv Research and Reports on the Future of Television . This includes a series of international competitions for developing innovative apps: the US competition had a $500. They hope to establish a new and continuing relationship with customers by offering them online services. Many watch TV and simultaneously use Internet services. These include video-on-demand and iPhone-style interactive apps (applications) that blend information and social networking with the television experience. combined with new interactive services. In Asian countries. Major tech companies are partnering with manufacturers to supply the necessary hardware. 1. TV manufacturers see two major opportunities. Internet connectivity is itself a feature that can differentiate more expensive flat-screen sets from cheaper rivals and so maintain margins.) Incumbent cable and satellite pay-TV operators face increasing competition from both IPTV operators. such as Japan. and all the other new entrants into the market. tech companies and pay-TV operators are competing to connect home TV sets to the Internet. Australia and New Zealand.futurescape. Boxee and Roku are selling set-top boxes that provide video content and. TiVo. many consumers are already viewing Internet video at home via PCs. Oxford University for Cisco. apps. They are beginning to succeed.000 prize fund. such as Verizon FiOS.) Through broadband. The race to provide connected TV Consumer electronics manufacturers. (Source: Saïd Business School. game console firms. Manufacturers also aim to transform their business model from sales to services. The time has now come for the television set too to go online and bring home audiences increased video choice. The importance of connected TVs to manufacturers is exemplified by Korean TV maker Samsung spending $70m on marketing its Internet TV apps in 2010. An estimated 11% of US consumers ages 13-31 view streamed or downloaded video via a console at least once a month (Source: Knowledge Networks’ Home Technology Monitor tracking studies. software and user interfaces. laptops and smartphones.

International cable and satellite operator Liberty Global is rolling out an “all-IP multimedia home gateway” including Internet content and apps. other video content and some interactive services Living room media centre PCs. (In-Stat) More than 43m US homes will have at least one connected TV by 2015. Chile.3m units) in 2014 will have Internet connectivity and services. (CE research company iSuppli) Samsung says that 17% of its TVs shipped in 2010 have an Internet connection and that this figure will jump to 70% by 2014.tv Research and Reports on the Future of Television .2m subscribers in USA): integrates Facebook and Twitter apps with television viewing Microsoft Xbox Live and Sony PS3 deliver movies. Some pay-TV operators are going further. This aims to provide an improved service to subscribers by offering television and VOD via the whole range of viewing devices: not only TV.9m TV households. This represents 37. 2011 rollout starts with Netherlands. USA 2014   2015 57m US broadband households will be viewing full-length online video on TV. such as the Dell Inspiron Zino HD desktop Retail set-top box     Game console PC-to-TV link Source: Futurescape Connected TVs and devices: sales and penetration forecasts to 2015 Global  2014  54% of flat-panel TVs shipped globally (148. smartphone and iPad. (Forrester Research) © Futurescape Ltd 2011 www. satellite and IPTV pay-TV Companies Sony: partnering with Google TV for Web-on-TV service Toshiba: using Yahoo Connected TV (which has deals with seven of the top 10 TV manufacturers) for TV apps Apple TV: streaming media player for Apple iTunes store Liberty Global cable and satellite TV (18m subscribers in Europe. Germany and Austria DISH Network satellite TV (14m subscribers in USA): offering discounted set-top box for subscribers to access Google TV services Verizon FiOS IPTV (3.1% of the USA’s current 115. Blu-ray player     Cable. Competing platforms for connecting TVs to the Internet Platforms TV set. but also PC.3 How Connected Television Transforms the Business of TV Everywhere initiative. proactively partnering with the newcomers or pre-empting them by launching online services.futurescape. US satellite operator DISH Network is selling its customers a Google TV set-top box at a subsidised price. Australia): next-generation set-top box will access Web content and incorporate social networking.

    What will the viewer see first when they switch on their television? An interface and content from the manufacturer? Or a pay-TV operator? Or a new entrant. (Solon Management Consultancy) 61% of German households will have a connected TV. such as students taking a TV to college and viewers in the den or kitchen. This reaches out to specific audiences. (Parks Associates) Germany 2010 2015   36% of TV sets sold in Germany in the first half of 2010 were connected TVs. such as Apple TV or Google TV? Can any of the competing companies offer exclusive and appealing content. (Gold Media) 2010-2014 Source: Futurescape Connected television via multiple devices The connected TV ecosystem is expanding to embrace all sizes and forms of consumer video screens. not just the main living room set. subscriptions or ad revenue? Which company will take the lead role in recommending to the viewer what they will want to watch next? Which will own the billing relationship with the customer? © Futurescape Ltd 2011 www.4 How Connected Television Transforms the Business of TV Europe 2009-2014   European households with a connected TV will grow from less than 4m in 2009 to 47m in 2014. Competitive dimensions in connected television The connected TV rivals are fighting to secure several key advantages in their relationships with consumers. services or features capable of driving sales. (Parks Associates) The number of households with a connected Blu-ray player will jump from 5m in 2010 to 66m in 2014. The iPad and competitor tablet PCs will enable TV and Web video viewing and social networking on a single portable screen. Connected viewing will soon become widespread via multiple devices.tv Research and Reports on the Future of Television . US flat screen manufacturer Vizio is making its VIA apps available in sets as small as 22 inches.futurescape.

The other incorporates not only apps. typically presented on screen via iPhone-style apps Apps that blend services such as Twitter and Facebook with the TV viewing experience Skype video calling via Panasonic and Samsung TV sets (with additional Web cams) Google TV. typically from major broadcasters and studios Programming via aggregators (eg YouTube) Content from independent producers. often for niche audiences Pandora online radio iTunes music store Content such as news and weather. offering viewers enhanced video search and access to Web sites Web video Audio Information services Interactive services Video communications Web-on-TV Source: Futurescape © Futurescape Ltd 2011 www. A specific connected TV set or device may have all or only some of these. The first presents viewers with only pre-selected content and services via apps.5 How Connected Television Transforms the Business of TV WHAT DO CONNECTED TELEVISION SYSTEMS OFFER THE CONSUMER? Closed vs open systems Connected television offerings tend to fall into two camps: closed and apps-based vs open and browser-based. but denies viewers access to the Internet generally. However. the much wider range of content and services arguably comes at the expense of usability. Content and services Video-on-demand libraries          Examples TV shows and movies. Apple TV and Yahoo Connected TV favour this approach (sometimes called a “walled garden”). It makes for ease-ofuse. Connected TV content and services Both closed and open systems vary widely in the content and services they offer.futurescape. but also a Web browser which gives viewers full Internet access. Google TV typifies this open alternative.tv Research and Reports on the Future of Television .

Content type TV shows and movies on demand    Partners Amazon video-on-demand HBO Netflix Web sites and services optimized for Google TV viewing  CNBC Real-Time stock tracker  The New York Times News  USA Today  VEVO Music  Pandora  Napster  YouTube Online video  blip. TNT. via a dedicated app Sports  NBA Game Time live scores app  Turner Broadcasting: TBS. TV Cartoon Network and Adult Swim sites Information Source: Futurescape © Futurescape Ltd 2011 www.futurescape. CNN.tv Research and Reports on the Future of Television . iPhone and iPad) can act as a remote control for Apple TV. Source  iTunes library   Netflix YouTube Flickr Source: Futurescape Content High definition movies from major studios. TV shows via monthly subscription Video from some major content owners. Mobile phones using the Google Android operating system and iPhones can act as remote controls. This approach led Google to sign up a range of major content partners. All content is delivered by streaming rather than downloading. Other Apple devices (iPod. many available the same day as DVD TV shows. together with access to specific-function apps and Web sites via the TV set. Movies and TV shows that consumers bought from iTunes for PC viewing can also be viewed on Apple TV. Few partners were required to launch. Apps such as Twitter can be accessed while viewing television.tv  Flickr Photos  Picasa Social networking  Twitter. as Apple provides a great deal of content from its existing iTunes service. plus independent and user-generated video Online photo album service    Google TV: consumer proposition and content The Google TV consumer proposition is offering enhanced search for Web content and video. many episodes available the day after they air on television Titles are rented individually Movies.6 How Connected Television Transforms the Business of TV Apple TV: consumer proposition and content Apple focused its launch strategy on an easy-to-use device with TV show and movie rental as the main consumer proposition. including content from pay-TV partners such as US satellite operator DISH Network.

24. The last of these. whose reach rose by 31% to reach a unique monthly audience of nearly 25m in the year to May 2010.94% 12.23m 65.futurescape. but is still widely used in the 35-54 year-old age range. Web video and new online services. “Social networking now accounts for nearly a quarter (23%) of all time spent online in the UK.49m 26.00m 15. from UK media regulator Ofcom.07m 62. ZenithOptimedia Social networking is a heavily used Web service Research by UK media regulator Ofcom reveals how very important social networking has become in online activity generally.37% 45.17% Selected countries.” “In April 2010.54m 9.8m unique individuals visited Facebook. via BusinessWeek and Nick Burcher.52% 28.tv Research and Reports on the Future of Television .1m for MySpace.44m 81. This has been driven by the growth of Facebook.04m 22.94m 9.00m 18.48% 42.1m for Twitter and 3. has radical implications for the future of television viewing and the business of TV.94m Total population 309. compared to 4. with population over 20m Source: Futurescape. Country USA Canada UK Australia France Germany Facebook users 165. August 2010 © Futurescape Ltd 2011 www. Age range 15-34s 35-54s 55-64s Using social networks from home 61% 48% 20% Source: Futurescape.7 How Connected Television Transforms the Business of TV CONNECTED TELEVISION CREATES SOCIAL TV Internet connectivity fundamentally changes the nature of television by giving viewers access to video-on-demand. Global Head of Social Media.” UK population: social networking use by age Ofcom also found that social networking is more prevalent amongst younger age groups. such as social networking. using Facebook and Twitter with TV.11m 34. Facebook’s high penetration in major TV markets Facebook in particular is so large that it has a user base in some countries equal to or even larger than the audience for the most popular broadcast TV programming.75m Percentage using Facebook 53.78% 40.

The 2010 VMA attracted its highest viewing figures since 2002.8 How Connected Television Transforms the Business of TV People already discuss TV online while viewing it Significant numbers of TV viewers are simultaneously online while watching television. as they can actively engage with each other.futurescape. particularly around live event programming. by MTV’s first Twitter Jockey. a desktop computer (23%) and an Internet-enabled smart phone (19%). The Twitter-TV integration comprised three elements:    Tweets appearing on stage during the show.tv Research and Reports on the Future of Television . This has enormous significance for broadcasters. Twitter and Facebook facilitate social interaction around TV shows Real-time discussions. A September 2010 survey conducted in the UK for Intel found almost half (45%) of individuals use social networking services such as Twitter and Facebook to discuss a programme while it is being shown. via a screen 95 feet wide Tweets being narrated at the entrance to the awards venue. this two-screen activity means people are talking about TV shows at the same time as they are watching them. many of them using a laptop. Tweets about Lady Gaga peaked at 9. connected TV sets and devices will remedy that.4m people watching and simultaneously sending 2. The MTV Video Music Awards in September 2010 featured extensive Twitter integration so that music fans could respond to the live show in real time. Broadcasters such as MTV are embracing the potential for such audience participation. This interaction also enhances the whole TV experience for viewers. as viewers can discuss shows via the TV set and influence each other’s viewing. Gabi Gregg A visualization for Web users – a live Twitter scoreboard for people watching the VMAs at home © Futurescape Ltd 2011 www. PCs and smartphones. Second-screen devices used when viewing TV include a laptop (57%). whether via a second screen device or a connected TV set. create opportunities for people to become even more socially engaged with TV programming. Given the popularity of social networks. However. on the VMA white carpet.3m tweets during the broadcast.200 per minute. the television set has so far been the unconnected screen. with 11. Two thirds (63%) said they would like their TV to access the Internet to:  Find more information on the shows they are watching  Access social networking sites  Shop online Compared with laptops.

Viewers can also use social networks and apps on the TV to recommend shows or movies to family and friends. © Futurescape Ltd 2011 www. Facebook in particular has a highly-developed social graph of people’s relationship with entertainment content. Much of this data comes from the ubiquitous Like button and other social plug-ins that broadcasters have integrated into their Web sites. They can equally discover shows and movies from them. Both it and Twitter own considerable. such as discussing TV shows and sharing links to videos. This is an essential supplement to Nielsen-type viewing data. The social networks know in real time how people react to TV programming. Social network apps on the television itself enable viewers to interact about and with TV shows even more readily than via a second screen. Connected TV integrates Twitter and Facebook into the television set Many connected TV systems are either integrating Twitter and Facebook directly as apps or have browsers that can bring the social networks’ Web sites to the TV screen. while broadcasters that use the social networks for viewer engagement are effectively sharing their audiences with them.futurescape.9 How Connected Television Transforms the Business of TV Tweeting during the MTV Video Music Awards: a visualization for Web users Screenshot 1: MTV visualization of tweets during Video Music Awards – note timeline at bottom How social networks affect broadcasters Audience interaction with television via social networks has crucial implications for broadcasters. Facebook and Twitter buzz influences TV ratings.tv Research and Reports on the Future of Television . detailed information about people’s behaviour.

The winner will take a dominant strategic position in:  Socially-targeted TV advertising  Pay-TV content recommendation  TV show marketing  Next-generation EPGs  Interactive viewing The social TV future is one in which all the major television industry players – IPTV. studios and advertisers – must negotiate new relationships and resolve unanticipated challenges in order to seize major commercial opportunities. retail set-top boxes. The whole connected TV ecosystem (TV sets.10 How Connected Television Transforms the Business of TV The flood of online video available via connected TVs makes conventional EPGs irrelevant. cable and satellite operators. even redundant in the long term. influence viewing via people recommending TV shows. They can involve individuals in the production of programming. Facebook and Twitter have already assumed highly significant positions across the TV industry value chain. This means that platforms which facilitate recommendation and discovery will have an increasingly vital role for the television business. pay-TV platforms and middleware) greatly amplifies the social networks’ influence on and through television. Social TV gives Facebook and Twitter even more power in the TV industry Social television comprises much more than social apps on the TV screen. build fan bases and facilitate the viral sharing of video. middleware providers. broadcasters. consoles. The rise of social television particularly benefits Facebook and Twitter.tv Research and Reports on the Future of Television .futurescape. © Futurescape Ltd 2011 www. Facebook and Twitter are partners and competitors for the TV industry The Facebook-Twitter battle is radically re-shaping twenty-first century television and challenging the TV industry’s existing business models. The companies are now fighting for participation in multi-billion dollar segments of the international television market – particularly TV advertising and pay-TV. CE manufacturers.

Facebook overtly aims to tap the $180bn worldwide TV advertising spend. Its users see tweets sent by brands in the Trends section of the Twitter site.” The users can pass these tweets on to their own followers. with Like buttons Twitter focuses on brand communication via its promoted tweets (sponsored messages). Advertising is the main revenue source for Facebook and Twitter. sponsored Web shows and branded online video accessible via the connected TV set. clearly indicated with the label “Promoted. As well as status updates. while they are watching them. Its users can opt in to get commercial messages from companies by “Liking” a brand’s Facebook page. with product information and contests. Socially-targeted advertising challenges conventional TV commercials Social ads on television will disrupt the global TV ad market. © Futurescape Ltd 2011 www. Screenshot 2: Adidas World Cup HD video ad on Facebook. including advertiser-funded programming. Confronted with near-infinite choice. viewers will increasingly rely on each other to discover all forms of video. They then receive status updates from the brand. Facebook distributes HD video commercials for brands such as Adidas. now mainly based on broadcast commercials.futurescape. Content recommendation will be crucial for sponsors.tv Research and Reports on the Future of Television .11 How Connected Television Transforms the Business of TV HOW DOES SOCIAL TV AFFECT TELEVISION ADVERTISING? A social context for TV advertising and sponsorship On-screen apps have major implications for television advertising. They create a social context in which commercials will be discussed and appraised by consumers via the television.

television and online video will be vying for viewer attention. such as Google TV. will show Facebook users display ads that are personally targeted to them when they visit the Facebook site. Longer-term. Viewers will therefore see brand updates or promoted tweets on the TV screen – directly alongside television programming and commercials.12 How Connected Television Transforms the Business of TV Connected TV apps for Facebook or Twitter show a viewer the status updates or tweets that they are receiving.tv Research and Reports on the Future of Television .futurescape. Connected TVs with browsers. Again. these can lead to video. © Futurescape Ltd 2011 www. Broadcast commercials and sponsored programming will inevitably share screen space and have to compete for viewer attention with socially-targeted advertising. Twitter too can display video. In this case. The next logical development will be apps that display whole Facebook pages for TV shows and brands. likely incorporating video. display ads and online video on TV are just the forerunners of new forms of sociallytargeted television advertising that will transform the TV ad market.

also access to YouTube and IMDb (Internet Movie Database) © Futurescape Ltd 2011 www. Facebook and Twitter have crucial B2B roles via the social systems and personal data that can make connected TV a commercial success. Pay-TV must enable subscribers to recommend content to friends The global pay-TV market. estimated at $250bn in 2014.futurescape.    How can a pay-TV operator provide the optimum social experience for viewers – to see and send Facebook status updates and to tweet about what they are watching? What relationships will they have with the social networks. They have the brands. needs social recommendation and discovery services. Facebook and Twitter now have key roles in pay-TV. Next-generation EPGs need social graph data Screenshot 3: NDS “Oona” concept user interface with social interaction for TV Note links to viewer’s Facebook friends and their comments on the Entourage TV show. systems and social data to facilitate such recommendation and discovery.13 How Connected Television Transforms the Business of TV HOW DOES SOCIAL TV AFFECT PAY-TV? Beyond consumer-facing TV apps. the nexus between social networking and television poses major issues. The TV manufacturers’ strategy to provide video-on-demand direct to viewers similarly requires social recommendation.tv Research and Reports on the Future of Television . For any pay-TV operator. particularly as rival platforms and the CE manufacturers move to define their own social TV offerings. These can encourage viewers to subscribe to more expensive packages and to buy more video-on-demand content. either directly or via middleware providers such as NDS? Can they pioneer innovative services using social data to improve their competitive stance? Pay-TV’s challenge and opportunity is to create a winning formula for social TV.

This enables EPGs to incorporate recommendations to viewers from their Facebook and Twitter friends when planning viewing. EPGs and broadcasting. Twitter and connected television transform global TV advertising. in addition to linear broadcast and VOD. personal recommendation is thought to be even more effective. Ireland.tv © Futurescape Ltd 2011 www.tv Contact us: info@futurescape. Disney. Australia.14 How Connected Television Transforms the Business of TV Internet connectivity opens TV sets to a torrent of Web video. Fox. However. UK. pay-TV. Digitas. BBC. Israel. In addition to overcoming the problem of excess choice. Germany. Eutelsat. Norway. France. Spain.futurescape. Buyers are industry leaders at:  International advertising and media agencies  TV broadcasters and producers  Cable. TV Week. Campaign and the World Advertising Research Center (WARC). Please contact us with your requirements. Solutions include suggestions based on an individual’s previous viewing preferences and critics’ choices. Publicis.tv ABOUT FUTURESCAPE Futurescape publishes strategy reports on the future of television. MediaCom.tv Research and Reports on the Future of Television . contact Colin Donald: colin@futurescape. Ogilvy. Find out more at www. such recommendation can also help boost pay-TV average revenue per user. USA. Custom reports can be commissioned for specific research interests. For more research on connected TV and social TV. Televisual. MediaPost. The European EPG market alone will be worth $555m by 2014. satellite and mobile operators  Media owners and publishers  Industry analysts and government agencies Global companies purchasing reports include AT&T. Netherlands. as described above. Orange. For senior executives making key decisions on the fast-changing digital media future. Conventional electronic programme guides (EPGs) cannot navigate so much extra content. HBO. Hungary. ITV. CBS. Our latest report is Social TV: How Facebook. UBS.futurescape. Broadcast. Virgin Media. Italy. Futurescape's research is regularly quoted in media and marketing publications such as Media Guardian. Worldwide customer base: Austria. Sweden. Canada. EPG and middleware providers are already integrating social networking tools and data into their software. Warner Bros. Singapore. Content recommendation via EPGs again gives the social networks a significant role in that sector.