Couch potatoes get ready, because an entirely new form of Web surfing is coming your way in the form of Internet-Enabled Televisions (IETVs) from leading OEMs such as Sony, Samsung and Vizio.
Coming 14 years after the foundation of WebTV, a product and service that never quite lived up to its hype, some might be wondering if this is simply case of déjà vu all over again. However, there are significant differences between the technology landscape of the mid-90s and the state-of-the-art Digital TVs (DTV), modems and broadband services of 2009. VDSL and fiber-to-the-home increasingly are being adopted by consumers, offering download speeds of 30Mbit/sec. and more—three orders of magnitude faster than the V.34 modem speeds supported by the first-generation WebTV unit. When coupled with the deployment of more mature video-encoding algorithms such as H.264, the age of Internet-sourced video is definitely upon us.
A whole new world has opened up for consumers with the arrival of flat-panel televisions, their digital capabilities and increasing amounts of digital content served from non-traditional sources such as Vudu, Roku, TiVo, and Video-on-Demand (VoD) services. This is a dramatic difference from 10 years ago, when television was a mode of entertainment that was primarily available through either a broadcast cable, a satellite service provider— or from rented videos.
Besides broadcast television and DVDs, other content sources include movies on home computers, Internet sites like YouTube, Netflix, Amazon Video on Demand (VOD) and other content providers including Hulu and CinemaNow. Consumers are seeking ways to access various available content sources without adding more boxes or connections to existing televisions. This is where IETVs will play an important role in the digital living room of the future.
An IETV is defined as a set that has the capability to connect to the Internet either with a wired link or wirelessly, and provides sufficient system resources to support thin-client applications such as Yahoo Connected TV widgets and the Adobe Flash Platform for the Digital Home.
With the television market being driven by declining prices, brands are looking at ways to differentiate their TV lines from their competition. Adding new features helps not only with differentiation but also increases the possibility of charging a premium for a step-up model. These features include faster refresh rates, LED backlighting, improved dark levels, power savings and Internet connectivity.
Semi Opportunities
From a semiconductor perspective, IETV offers a new, stronger growth area in the midst of still positive, yet slowing, revenue expansion opportunities in the television space. From 2001 to 2006, the DTV semiconductor market was an area of key investor interest due to the increasing share of digital tuner/decoder enabled TVs. Interest intensified as the display industry shifted rapidly away from CRT and toward flat panel plasma and LCD technologies, and away from Standard Definition (SD) to High Definition (HD) models. However, during in the past three years, as retail and panel prices have eroded due to combination of the breakneck pace of technology development and the cutthroat OEM price wars in the TV retail arena, the semiconductor revenue growth potential has dwindled to the sub-10 percent five-year Compound Annual Growth Rate (CAGR) range.
IETV requires more system memory, the use of advanced decoder ICs with higher power CPUs—or multiple CPUs—and the inclusion of network interface capabilities, yielding strong growth potential for semiconductor suppliers. The only television semiconductor segment with stronger growth potential will be LED backlights for LCD TVs. iSuppli expects to see strong growth in the annual revenues for the IETV-required multi-format decoder enabled video processor from 2009 through 2013.
A Sound Strategy
The introduction of direct Internet access to DTV sets by leading TV OEMs represents a unique opportunity for these companies to finally have direct access, and thus additional potential revenue channels, to their end customers. With its offerings in both the consumer electronics and entertainment content markets, Sony appears to be well positioned to make IETV a central element of its battle plan in the DTV arena.
iSuppli believes that IETV will emerge as one of the key features that consumers will look for in the coming years as interest continues to grow for features such as catch-up TV and user-generated content from sites such as YouTube. Already in 2009 iSuppli counts more than 85 IETV models being offered at retail in the U.S. alone. Being a prerequisite for consumer adoption of IETV, increasing levels of broadband service to consumer households will also provide an increasing Total Available Market (TAM) for TV OEMs pursuing marketing strategies for IETVs.
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