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NPD: Smart-TV Penetration Lagging in U.S.

17 Oct, 2012 By: Erik Gruenwedel

Smart-TV shipments are up 15% worldwide in 2012, but flat in North America

North America consumes the highest level of Internet-based video, including video-on-demand, yet has the lowest penetration of connected televisions, according to a new report from NPD DisplaySearch.

Internet-connected TVs (or smart TVs) are migrating from a novelty to mainstream, with shipments expected to grow 15% worldwide in 2012. With the shift, regional preferences and TV consumption habits are changing.

Critical to the development of connected TV has been the accessibility of content and broadcast services, which have helped propel penetration in Europe and Japan. In China, the availability of compelling, free content on the Internet has had a similar effect. Connected TV’s shipment shares were 26% in China and 34% in Western Europe in 2011. In 2012, it has grown to more than 40% in both regions. Japan has the highest penetration with more than 55%.

Smart- and connected-TV shipments account for a large percentage of TVs in most regions, but North America seems to be pursuing a different direction. Penetration is hovering around 20%, which is the lowest level of any region.

“North American households consume the highest levels of Internet video, averaging over 30GB per household every month (according to Cisco), yet they don’t seem attracted to connected TVs,” Paul Gray, director of European TV research, said in a statement. “We find that North America leads by far in paid on-demand services, which tend to be tied to set-top boxes.”

Smart-TV shipments are tightly linked to content consumption habits. For consumers in China, there is plenty of free content on the Internet and few structured services. This favors TVs with built-in browsers. Furthermore, Chinese consumers consider a TV to be a prestigious purchase and are prepared to invest more in them.

Meanwhile, Western Europe consumes more free content every month than North America. Terrestrial broadcasters’ repurposed content aggregators are beginning to dominate in Western Europe. These broadcasters have no interest in hardware, so connected TVs are flourishing with open standards such as HbbTV rapidly gaining acceptance and evolving with new features. The development of the Ginga standard in Brazil is following a similar path in Europe, with commercial broadcasters uniting around a common platform.

“TV brands want to add more functionality to their TV sets,” Gray said. “Smart TVs that have browsers and can access the open Internet are rapidly gaining share. Many TV brands introduced this function in their 2012 products.”

Nearly 9.5 million consumer-controlled (open Internet access) smart TVs shipped in Q2 2012, with 43 million expected to ship in 2012. This figure is forecasted to grow to 95 million in 2016.

At the same time, basic sets that link to the HbbTV and Ginga services will enter at the lowest price points in Europe and Latin America. The challenge for brands will be to bring enough value to their sets with extra functions. New open standards such as HTML-5 will help solve the problem of software updates and obsolescence in smart TVs, which should enable such sets to compete with cheap streaming boxes.

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