DisplaySearch Panelists Explore Connected TVs and Keeping Up With Consumers3 Mar, 2009 By: Chris Tribbey
LA JOLLA, Calif. — The afternoon panel at the 2009 DisplaySearch U.S. Flat Panel Display conference was there to talk about Internet-connected TVs, but the topic shifted at one point to digital downloads vs. DVD.
Dan Casey, former VP of consumer research for NBC Universal, said digital delivery is a double-edged sword for the studios. On the one hand, they “love digital delivery.” And on the other, “they’re scared to death of digital delivery.”
The advantages are obvious: no packaging or manufacturing costs, no returns from retailers, no stacks of unwanted product in a warehouse somewhere in the Midwest.
“Being able to get rid of all that inventory, all those models of trying to figure out how much product to send where, goes away,” Casey said.
The downside? Money, of course.
Forty six percent of DVDs purchased, according to research presented, are bought on impulse. When people go shopping, they buy an average of 2.3 DVDs, often coming home with something they didn’t plan on buying. That goes away with digital delivery.
“How do we replace that in the digital space?” Casey said. “And another issue is the unopened DVD. About 10% of DVDs in people’s collections are unopened.”
Lastly, consumers understand that studios spend less on producing digital content, compared to physical product, and as such expect to pay less, Casey said, adding “studios do not like to pass on savings.” On top of that, consumer buying habits change in the digital world.
“If every movie ever made was available instantly, for $1.99, would consumer spending increase or decrease?” Casey asked. He said he believes it would decrease, significantly.
Richard Bullwinkle, chief evangelist for Macrovision, put it another way: “We believe consumers will show up in droves not to pay.”
Casey said licensing is a trickier issue for studio content, since the studios like to experiment with different windows and different versions of the same product. “One price doesn’t fit all,” he said.
Casey also reiterated why the DVD sellthrough business is so important to the studios.
“When a consumer rents a movie, about $1 comes back to studios,” he said. “When a consumer buys a movie, about $17 comes back to the studios.”
The common themes among panelists about getting Internet content to the TV were quality and ease of use. If consumers can’t get what they want, when they want, on their TVs, and if they can’t do it easily, then what’s the point?
“The adoption curve is going to be driven by content,” said Matt McRae, VP of advanced platforms for Vizio, adding that in the future, content delivered over Internet-connected TVs could focus ads to consumers based on ZIP codes. “We think this is the beginning of a transition from just TVs to fully connected products.”
Bruce Anderson, SVP and GM of Blockbuster OnDemand, said today’s video consumer is in charge, whereas in the past it was, first, the TV networks, and, second, the cable companies.
“Nobody wins if the customer has to decide … who controls their entertainment,” he said. “The complexity lies on [hardware manufacturers] to make sure Blockbuster is accessible on all platforms.”
In terms of access, people need a fast broadband connection to access Internet content on their TVs, panelists agreed.
“It’s early and it’s a little bit like the wild, wild West,” McRae said, regarding Internet service providers dealing with bandwidth issues.
Anderson added, “The broadband service provider eventually will realize they don’t have an actual brand. They have an entertainment-enabling brand.”
Richard Bullwinkle, chief evangelist for Macrovision, said the pace at which HDTV technology has changed and will change also is a concern.
“The thing that concerns me any time we look at this is most Americans consider a [new TV] a 10 to 15 year purchase,” he said. Many consumers may not be ready to buy a new, Internet-connected TV any time soon, and by the time they do, the technology may change again.
“There’s a huge hole in our industry on how consumers will discover this content,” Bullwinkle said. He added that personalization of content will be key in the success of Internet-connected products. “We don’t want to recommend to your 7-year-old what I was watching at 10:30 last night. … The devices will become intelligent.”
Anderson pointed out that a “connected TV is first and foremost a TV,” and that his company’s goal “on the digital distribution side of Blockbuster is to bring the best cinematic experience to every TV possible.”
“You can talk about set-tops, Blu-rays, but it all comes down to displays,” he said.
According to NPD research, 79% of Americans are watching network TV channels, and 67% are watching cable, but only 18% are watching Web content on their TVs.
“We’re a nation of traditionalists,” Crupnick said. “There are a lot of ways to watch TV, but few of us are using them.”
A full 60% of respondents would like to watch Internet content on their TV, and the same percentage would watch Web content on their TV if the content was the latest movie releases. Fifty percent of respondents said they want content instantly, if they’re buying a digital video, but a mere 5% said they would like to burn content they’ve downloaded to a DVD.
“Are consumers starting to turn around from the own-the-DVD model?” Crupnick said. “Attitudes seem to begin to [go that way].”
Other research from NPD presented at the conference included that 19% of Blu-ray owners are using BD Live features, and 60% of PlayStation 3 owners use the console as their Blu-ray player at least once a month. That last figure is up from 52% in August of 2008, and 43% in March of 2008. Of on-demand video, 21% of respondents are using cable, 15% Netflix (which had the highest satisfaction response at 78%) and 12% are using iTunes.
“The content options could be virtually endless,” Crupnick said.
According to research from Vizio, in February of 2007, a full quarter of American adults were watching TV shows online on a regular basis. In February 2008 that was up to 43%. And by 2012, Vizio forecasts that 90% of us will be watching TV online.
“The shift of power is moving to the consumer,” Vizio’s McRae said. “They’re demanding anytime, anywhere access. In essence they want millions of channels.”
The HDTV panel at the DisplaySearch. (L-R): Bruce Anderson, SVP and GM of Blockbuster OnDemand; Dan Casey, former VP of research at NBC Universal; Richard Bullwinkle, chief evangelist for Macrovision; Matt McRae, VP of advance platforms for Vizio; and Russ Crupnick, VP and senior industry analyst for The NPD Group.