Connected TVs and other networked digital home devices are on a tear, growing from 120 million systems last year to more than 650 million worldwide in 2014, according to a Webinar from market watcher Parks Associates (Dallas). The growth signals a gradual decline for DVDs and the potential for new opportunities still being defined.
"The high penetration sets the stage for the next wave of development which is getting feedback about what users want to do with connected TVs and transitioning from video at retail to online," said Kurt Scherf, principal analyst at Parks.
Early studies already contradict the conventional wisdom that Web-linked TVs are primarily for accessing video on the Internet or local PCs, not for Web surfing or email.
Parks studies show so far connected TVs are mainly being used for email (46 percent), surfing the Web (44 percent), and listening to music from a PC or online (34 and 26 percent). Watching video from the Web or a local PC follows at 23 and 16 percent.
"We don’t know what happens when consumers get an open browsing experience on the TV," said Scherf. "We may be surprised--new kinds of games could be significant and maps and real-time traffic may be more widely used than people think," he said.
A handful of integrated initiatives such as GoogleTV will lead in deploying the systems and reaping early market knowledge. GoogleTV could actually help drive new kinds of use cases such as using smartphones and tablets as remotes, Scherf said.
Several other platform plays are rolling out. Accenture has developed an end-to-end connected TV offering, Accendo Broadband is preparing a TV apps store and IBM and Philips are collaborating on an offering. Yahoo already has its WidgetTV available in 100 countries with TV makers such as LG, Samsung, Sony and Vizio.
In addition, Apple is rumored to be planning something in this space, perhaps new content partners for its iTunes store or AppleTV box. But Scherf said he believes open Web initiatives will be more successful than closed ones.
The online video picture
About five percent of U.S. homes with broadband service will buy connected TVs this year, about four million units, Parks products. About six million will buy connected Blu-ray players.
"More than a third of HDTV displays sold this year will be Web connected and upwards of 75 percent of Blu-ray drives sold this year will be connected," Scherf said.
In the first half of this year Sony and Samsung led the way in connected TV sales with 23 and 20 percent of the market respectively. LG, Vizio and Panasonic followed with about nine percent each.
Devices to specifically link the home TV and PC are also on the rise with projected sales of about six million units this year. Many use Wi-Fi or its variants, although at least two companies are using ultrawideband links.
Growth in U.S. online movie sales through consumer devices is forecast to rise from about $700 million in 2010 to more than $5 billion in 2014. That's still a fraction of the multibillion dollar DVD rental business, but an increasingly large one, Scherf said.
"DVDs won't fade away but they will certainly be supplemented," said Scherf. "Online video will slowly replace the retail DVD store," he said.
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