Consumer Appetite for High-Tech Television
From HDTV, to Video on Demand (VoD), and perhaps to a la carte

By: Bruce Bahlmann - Contributing Author (your feedback is important to us!)

Created: February 12, 2006

This paper is the product of Market Research which is available from Birds-Eye.Net.

The television is the most popular and most used consumer electronic device on the market today. Yet for all its popularity in the marketplace it is also by far the simplest, least advanced and most forgiving device within most homes. In this article we will explore the evolution of the features that make up what we call television. Through this examination, the real genius of the television will become clearer, enabling us to evaluate consumer appetite for new high-tech television features that are currently being deployed as well as take a stab at defining what will likely trigger sales of televisions in the future.

Introduction

In 1927 an American engineer named Philo T. Farnsworth was the first inventor to transmit a television image comprised of 60 horizontal lines. The image transmitted was a dollar sign. Although Farnsworth was not the first to invent a television, he was credited for the design of the first complete electronic television system and filed for his first television patent in 1927 (pat#1,773,980.)

Since this time, the television as well as the programming and operational capabilities associated with it have evolved and experienced unforeseen adoption. Today the average person watches between 15.1 and 21.4 hours of television a week (source Digitrends). This exposure is the result of widespread adoption of the television into consumer homes. While the introduction of the Internet has had an impact on the use of the television (reducing the amount of television viewing an average by 4.5 hours) the television still consumes a majority of the average person’s attention by a factor of 3 to 4 times that of the Internet. By comparison, the television is easier to operate than the Internet and provides instant entertainment – just turn it on or flip through the channels to find something that is of interest. Remote controls for modern televisions are very basic compared to what is possible given the advanced technology readily available today. The television is also normally located in an inviting area/room that offers optimum lighting and viewing for one or more individuals with many creature comforts. The ‘family room’ is often the location of the television – so gathering and comfort are often features of the room where the television is located.

Table 1.0 Television Innovation History

With the growth of television came innovations (see Table 1.0) that turned a black and white television into color in 1953. Then the advent of the transistor allowed televisions to become ‘solid state’ (or miniaturized) rather than tube based in 1969, then stereo sound in 1986, and more recently digital television in 1997, and high definition television in 1996. What is next on the horizon of television innovation? Perhaps super high definition television (SHDTV), only the amount of data that needs to be sent to display such detail has yet to find a medium – even today’s fiber optics would be hard pressed to delivery such bandwidth with its current number of wavelengths. However, many thought that way about high definition television (HDTV) when it was first invented - regardless test trials started in 1990, the first FCC license was issued in 1996, and now it is in use in 10 million homes of the over 248 million US homes with television.

After almost 80 years of enjoying television, innovations in television have historically been slow in the making. In this day of Internet Time, Moore’s Law, and fast food the best we have been able to do in terms of rolling out new television innovation is 7 years – a far cry from the 6-18 month cycles on the Internet. Interestingly, 7 years is also the expected shelf life that cable operators hope to achieve out of each Set Top Box (STB) that they purchase for installation in consumer homes. However, 7 years only represents the timeframe for major electronics innovations that impact television. The cycles for these to reach wide spread adoption by consumers is much longer. For example, HDTV was first rolled out in 1996 not until 2006 was programming widely available. The 2006 Super Bowl was the first to broadcast completely in HDTV and we still have yet to see HDTV homes reach more than 10% of all US television homes. What about all the other innovations that impact television that take much less than 7 years? In this article we will look at some of these innovations and how they are shaping the future of television.

Innovation in Screen Size - Quantity rather than quality drive sales

Perhaps the most important short term innovative aspect of the television that evolved throughout television’s history was not what it could do, how clear the picture was, or how good it sounded but rather how big its screen was. The bigger the better - no matter how advanced its capabilities, larger televisions have always been a hit. Televisions have grown in size from 17”, to 19”, to 25”, to 27”, to 32”, to 34”, and onward. Tube based televisions have taken us all the way to 40” and now plasma, DLP, and LCD are taking us to 42”, 50”, 60”, and beyond.

It wasn’t until 1968 that Sony introduced a significant improvement in the picture quality of a television with its patented one-gun Trinitron picture tube. This came 4 years after the first plasma television monitor was created in 1964. Tube-based televisions represented the reference standard in television brightness, contrast, and overall picture quality for nearly 50 years (plasma is the current reigning standard).

Innovation in Mass Production – Cost rather than features drive sales

While mainstay television manufacturers like Sony, Zenith, and RCA experimented with premium tuners, programmable remote controls, furniture like or contemporary enclosures, and advanced television graphical interface or guide features to attract new customers, newcomers in the television manufacturing business like Samsung sought to make ‘good enough’ televisions for the low end market. Fueled by the now ubiquitous solid state components lower cost televisions (sub $100) soon flooded the market decimating previous margins and forcing mainstay television manufacturers to move up market to higher end luxury televisions which sold fewer but commanded much larger margins.

Today, while high-end televisions are still available for video enthusiasts many household name television manufacturers in the US went out of business or were bought up. Initially these lower cost (commoditized) televisions featured inferior analog dial type tuners (manual channel changers) and have gradually migrated to very simple digital tuners and even simpler remote controls. Most commoditized televisions don’t come with external video connections (inputs or outputs) or modern day features – rather these televisions boast features that were introduced 5-10 years ago by previous top of the line televisions in the day. New features of mass produced televisions require that its components are readily available, in large quantities, priced at or near cost.

As a result of the widespread purchase of these commoditized television sets, consumers no longer covet their television but rather they look at them as disposable like their toaster. it used to mean something to have an XBR television from Sony, but today that just doesn't mean much. It is even becoming difficult to find someone who can repair these broken televisions. Unless it is something simple like a cord or a fuse, the television is just replaced - often with one that costs less than the original. Nowadays most televisions are not bought from an experienced television shop (because this is no longer a viable business), televisions are sold at unsuspecting places like furniture warehouses, hardware stores, and even grocery stores. Discount electronic super stores have replaced full service mom and pop or specialty stores. As a result of this lack of full service retail presence for the television, there isn't much retail sales support available to carefully attract and guide a high-end multipurpose television into the hands of the average consumer – we actually see this today as it is often very difficult to find sales people knowledgeable in the latest television innovations, HDTV products, or programming choices. In fact, few of today's sales people at Best Buy, Circuit City, Wal-Mart, and Sears really know the capabilities of the higher end televisions they sell. Many of these televisions are improperly set up (color, brightness, and contrast settings have been modified) and the signals fed to these units are split so many times that the best set on the premises may actually receive the worst possible signal. A recent trip to Best Buy showed a Zenith (the cheapest set on the racks) have the best overall picture and color over much higher quality sets by Pioneer and Phillips that cost nearly twice the Zenith. The sales staff was hard pressed to even determine the differences between the sets off the sticker placed on each set and knew little if any about these sets that wasn't on the 'cheat sticker'. With this kind of retail presence and sales channel, consumer electronics is severely limited in terms of what it can realistically roll out in terms of high-tech television features.

Innovation in Parental Control - V-Chip, Restricted Channels

Counter to innovations in screen size and mass production, innovations in user control of television programming features have been slow to develop to the point where they have had any significant impact on television sales. Channel blocking has been around for almost 20 years and the V-Chip has been around for over 5 years. Neither has positively influenced the sales of televisions. For a television innovation to be deemed successful, it must capture consumer interest and create buzz (people liking it so much they talk about it), and above all people must demand it. If people will pay for it, consumer electronics will build it. However, if the feature doesn't sell more televisions it is hard to justify the added expense (if selling televisions is your business) unless it is merely incorporated into the television as a means for being able to sell televisions within a certain market. Parental control is a feature that clearly people want and legislators want, but beyond that, it is more of a headache that anything else for the majority of other people who really couldn't care less about parental control as it just represents an obstacle to their need for unfettered access to content. Therefore, consumer electronics is happy to oblige to build this technology into their products to meet the minimum required to sell televisions in the US, but beyond that, there is no huge consumer education going on, no huge push to advise consumers that one manufacturer's implementation is better than another, and no movement to further perfect this feature or make it brilliantly easy for consumers to setup and use. Rather, television manufacturers just provide this feature so they can sell televisions in the US. There is no money in trying to differentiate ones product by parental control because it isn't a feature that drives sales.

I believe if the V-Chip is to ever really be a feature that drives television sales, it needs to be a required counterpart in order for people to view violent content. Parents, legislators, and the source of their mantra (programming producers and owners) all need to come together to make violent content ONLY viewable on V-Chip enabled televisions. In this way, it would drive more television sales, and likely be motivation enough for television manufacturers to really pay closer attention to how the V-Chip functionality is implemented within their televisions. Such a requirement could quite possibly lead better overall parental control for all televisions today and for well into the future. However until that happens (something tells me programming producers would never go for it), parental control will always be this good natured thing that makes a lot of sense to parents and legislators, but just not enough cents for television manufacturers to really do it right.

Innovation in Video Recording and Playback - Digital Video Recording (DVR) and Video on Demand (VoD)

One company's persistence in offering a niche feature broke traditional television innovation boundaries and created not only a buzz around its feature but also became synonymous with consumer recognition of this feature and ended up setting the standard for how consumers perceive this feature. For years TiVo built digital video recording devices and sold them directly to consumers as a value added service to one's broadcast, cable, or satellite television programming service. TiVo has had its ups and downs with its own sales successes and partnerships with tier 1 service providers. However, through all this they never really turned marketing buzz into consistent profits nor have such features actually sold more televisions. While clearly DVR is a great feature and the consumers who have bought it find it hard to give it up, it is still by and large a niche feature. TiVo has not influenced consumers to purchase a new television rather it is a feature that helps up-sell a consumer to higher priced television programming packages - thus turning very ordinary or low end televisions into much more flexible and feature capable televisions. Video on Demand (VoD) also falls under that category. It is a great feature that caters to a niche group of consumers that have access to it, however it doesn't satisfy all the different types of televisions out there (notably HDTV which represents an increasingly relevant percentage of all the premium high-paying consumers out there). Although VoD increasingly reaches much of the cable footprint within the US, it also doesn't reach analog video subscribers which represent a significant portion of cable's subscribers. While usage of VoD continues to increase, such increase in usage is also at the hands of more lucrative but now dwindling Pay Per View (PPV) receipts. Like DVR, both VoD and PPV (at least in their current rendition) originate from consumer homes. Meanwhile, mobile phones are increasingly becoming significant consuming endpoints for video programming (159 million mobile phones vs. 248 million televisions - source CIA). DVR has also yet to reach into other domains such as mobile video.

Although the living room will always represent an attractive market for video programming, such programming packages are being challenged by demands for more diverse mobile content, a la carte home programming, and new high definition packaged media. Each of these challenges represent a different threat and opportunity for traditional television programming and delivery over cable, satellite, fiber, or the Internet. Consider the prospects that lie ahead for producers or distributors of video content such as selling the same content not only to DVD, but also to satellite, cable, fiber, mobile, and Internet. DVD or packaged media will always command a premium price and profit, it is just too well established globally and from a portability standpoint, there really is no substitute. This is why the likes of Netflix with it huge library of DVD and Blu-Ray titles (largest in the industry) wields such a weight - especially the simplicity of its business and use. However the next biggest market beyond portable media is much more nebulous and evolving to the point where the most likely candidate has yet to rise up and claim its fair share. I believe as technology improves mobile markets will take their seat behind packaged media, followed closely by the Internet. Beyond that, and a distant 4th will be satellite, than cable, and finally fiber.

Conclusion

While one could argue that adding something as simple as an Ethernet jack to a television could catapult the Internet into the living room, a much stronger counter argument (deeply rooted in television history) is that quality entertainment in the living room and the Internet are still years apart - dare I say seven and be geniusly right. In fact, I would argue that what is good for satellite and cable companies is not necessarily good for consumer electronics - no consumer electronics company is going to make it big selling DVRs. Likewise, no single programming feature is going to translate into selling more televisions unless there is a dependency between content and hardware like HDTV.

Demand for mobile and Internet content has the greatest potential to actually generate increased television sales unlike any innovation commanded previously. However such televisions won't be nearly as sophisticated as one would think would be the norm in the 21st century. Catering to what has historically proven out, mobile televisions will be very simple, perhaps merely tuner-less or changes could be more drastic from our current perception of a television. Software will take the place of hardware, and the complex pile of remote controls or coils of wires that make up today's home theater systems will be replaced with  two or fewer all digital, wireless, or multipurpose connectors. In the end, consumer electronics just wants to sell more televisions. However, unless there is a clear path to increased television sales, there just isn't enough money in consumer electronics coffers to risk development of promising television innovations. Especially since consumers merely look at televisions as disposable appliances where price and size is all that matters.

Check out these other Birds-Eye.Net papers/products regarding Video on Demand (VoD):

• Brushing the Dust Off Long Tail Video on Demand (VoD) Titles - Addressing the problem of accessibility in ever growing VoD libraries
• Consumer Appetite for High Tech Television - From HDTV, to Video on Demand (VoD), and perhaps to a la carte
• Video on Demand (VoD) Reinventing Itself - How technology and competitive shifts within VoD are defining next generation solutions
• VoD Market Research - VoD market research provides guidance for operators and opportunities for hardware, software, and content vendors
• VoD No Match for DVD Portability and Standardization - Predicting the outcome of competition between VoD and packaged media

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