[opendtv] News: Behind The Internet TV Revolution

http://www.forbes.com/2010/10/14/yahoo-boxee-roku-technology-internet-tv.html?partner=alerts

Entertainment Tech
Behind The Internet TV Revolution
Adam Ostrow, 10.14.10, 12:00 PM ET

The television is about to become the latest medium to get a major makeover at the hands of the Internet. Already more than half of Americans are watching TV and surfing the Web simultaneously. But another trend--giving connectivity to the device itself--is going to fundamentally change the business models around television and the way we consume and interact with content.

Yahoo, which has been an early mover in the space, anticipates that 8 million to 10 million devices with its Connected Television platform preinstalled will be in consumers' hands by March 2011. That's triple the amount in March 2010, according to Russ Schafer, Yahoo's senior director of product marketing for the platform. Market research firm iSuppli estimates that by 2014 some 148 million televisions with Internet connectivity will be sold annually.

Millions of consumers who buy televisions from the likes of Samsung, LG and Sony won't just be plugging into the programming offered by their satellite or cable provider, they'll also be able to access applications ranging from Facebook to eBay and view content from a limitless number of video publishers.

That represents a shift similar to what we saw in print media, where the Internet (and mobile phones) opened up the opportunity for anyone to become a content creator. Blip.tv, which bills itself as a "next generation television network," has been eyeing this trend since 2005, hosting thousands of independently created shows. Now--according to cofounder Dina Kaplan--blip.tv is serving up nearly 100 million views each month (or, put another way, about 10% of the combined audience of the major TV networks) across the Web, mobile devices and, increasingly, Internet-connected televisions.

The Growing Market for Internet-Enabled Televisions

Blip.tv is growing its audience by forming partnerships with traditional TV manufacturers and a new breed of company in the set-top box market that lets consumers connect to the Internet via their televisions. One of those companies is Roku, which sells its entry-level box for $60. CEO Anthony Wood told me the company is closing in on 1 million customers and that the average user is consuming 33 hours of content each month using the device.

Roku rival Boxee has amassed about 1.2 million users so far, says CEO Avner Ronen. That's just through its downloadable app, which requires users to connect their computers to their televisions. The company plans to introduce its own box in November and bring with it a string of content partnerships, like BBC and Major League Baseball, as well as from companies like blip.tv and other purely digital outfits.

Boxee is planning to monetize the set-top box in part through a transaction platform that Ronen says will let publishers "offer content and charge for it without the need for users to enter payment information ... [they can pay] with just one-click" for things like premium content, tickets or subscriptions. Roku has plans for a similar platform that will launch this fall. For now, both Roku and Boxee let their content providers control their own advertising and keep the revenue generated by it.

The Changing Advertising Landscape

The potential for new forms of advertising isn't lost on any of these players, though. Experiments are still very early stage, but Yahoo's Schafer says that, right now, "the basic ad formats are the same as we use on the Web ... and you're just playing it to a different device. But the next stage is Yahoo bringing our own advertising offering further optimized for television ... monetizing our service first and then offering it to third parties."

Pandora, the popular Internet radio service that also has millions of users across connected devices, recently extended its ad platform to Internet-enabled televisions. "Campaigns on this newest platform will primarily feature audio ads, which create a more lasting and emotive connection with consumers. The ability for brands to connect with consumers using audio ads on an in-home device is a new and exciting opportunity," says Chief Revenue Officer John Trimble.

Meanwhile, blip.tv sees opportunities for targeting ads with unprecedented levels of precision. For example, the company recently developed a campaign for Electronic Arts that was able to target Xbox 360 owners with an interactive ad for NCAA Football '11 that allowed them to download a demo of the game to their console. Kaplan says that such complexity can't yet be achieved across the dozens of different television and connected device manufacturers, but that "within a year we'll see video advertising much more seamlessly transition from web video to the TV set."

Such interactivity is already possible with so-called "second screen" providers, which are building social experiences on smartphones and tablets that allow users to interact with friends and content as they watch their favorite shows. They simultaneously create opportunities for engagement that have both the networks and advertisers excited.

Philo is a startup that, along with competitors like Miso and GetGlue, has taken the concept of "checking in"--popularized in recent months by location-based apps like Foursquare--and applied it to television shows. Users can check in to shows, interact with friends who are also watching and engage with ads in unique ways. For example, the company recently launched a promotion for the upcoming film You Again that enters users into a sweepstakes when they check in to shows like Glee or Dancing with the Stars and interacts with the ads through Philo's app.

Prime Opportunities for Television Networks

The huge shift taking place in the TV landscape isn't lost on the networks. CBS is getting its content on a multitude of connected devices and experimenting with a variety of content plays, social features and revenue models. Zander Lurie, SVP of strategic development at the company, doesn't see new consumption models making networks like CBS irrelevant. "We're excited by the fact that these services are offering consumers more ways to view our content. The priority [for us] is to create more opportunities for our content to be consumed than ever before. As long as we have a business model in place for that [type of] consumption we win," says Lurie.

Despite all of the activity, Internet-connected television will shift even more dramatically over the next year, with both Google and Apple introducing their own set-top box offerings this fall. While upstarts like Boxee and Roku might see that as validation of what they helped pioneer, it could significantly disrupt the business models emerging in the quickly evolving world of Internet-connected television.

Adam Ostrow is editor in chief at Mashable, a widely read blog that covers the latest technologies, trends and people driving the current evolution of the Web.


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