Connections

For the foreseeable future, we’ll be seeing the continued popularity of mobile devices and over-the-top (OTT) services for viewing TV content, as well as more cord-cutting and 4K content, according to executives at Kaltura and TV app developer 24i.

These trends come as the VCR — the “first connected device” — takes its last dying breath, Iddo Shai, director of product marketing at Kaltura, said during a July 28 webinar on “The State of Connected Devices.” He was referring to recently published reports from Japan that Funai would be manufacturing its last VCRs by this month after only 750,000 units were sold in the past year, not nearly enough to justify continued production. “It wasn’t connected to the Internet, but it was connected to our TV and managed to allow us to do things we didn’t know [were] possible” before it, including time-shifting TV and the ability to buy a TV show or movie and watch it over and over again, he said. “The VCR kind of introduced a whole world of possibilities which we … take for granted now with all the different TV devices that we have today.”

“In the future, we’re going to be using a lot of different devices and not so much rely on the kind of traditional devices that we’ve been relying on for, I would say, the last 20 years,” he said, adding: “That means more mobile devices, more connected devices and less set-top boxes.”

Cord cutting and mobile

One trend that is “fueling this revolution” is the continued dominance of mobile devices, he said. Some companies that started in the mobile sector are now shifting to TV and, more and more, into content production, he said, pointing as examples to Apple and Amazon.

“We are also seeing the cord-cutting or shaving” of the cord by consumers, as well as an increasing number of people who never had a cord, he said. “We are seeing that, especially among younger viewers” of TV content, who he said are “less inclined to connect” to pay TV and are interested in OTT distribution.

However, “at the same time, we are seeing that pay TV is strong” despite all that cord cutting and shaving, he said, pointing to the strength of companies like Comcast in the U.S. and Sky in the U.K.

“People are still happy to pay for TV because it never buffers and you always get HD quality and the latest content,” he said. “But we are seeing a change that is going to become more and more apparent as the younger generation, who never had pay TV in many cases, will become the majority of TV” viewers, he said.

We are also seeing that traditional TV content distributors are “warming up to the idea of OTT distribution,” he said, pointing to new OTT apps introduced recently by companies including CBS, Showtime and Univision, as well as two from NBC that include SeeSo, a comedy app focused on its own older content as well as content it’s acquired from other companies.

Social media has also become important, especially with “discovery and pushing all these different devices and making sure that people know that they exist and either register or keep coming back to the ones they already registered for,” he said.

Predictions

Shai predicted that, by 2025, 50% of TV viewers 18-31 years old will either cut the cord or will be people who never had a pay TV subscription to begin with. But the other 50% will still be connected to some kind of pay TV service, he said. The trend form there on, however, will be a “steady decline” among those who pay for TV services, he said, calling that a “very important trend” to keep an eye on because it’s “eventually what’s going to change how all of us consume TV.”

Connected device usage is up 15% this year from last year and 23% of OTT delivery is on connected devices, he said. But he suspects it could be closer to 35-40% when it comes to premium content that people want to view on the largest screens possible, he said.

The four most popular connected devices are Roku, Amazon Fire, Chromecast/Google Cast and Apple TV, which he collectively referred to as the “fab four” of connected platforms. Last year, eight of 10 connected devices sold were one of those four players, with Google in first place, followed by Apple TV, he said, citing Strategy Analytics data that counted both versions of Apple TV. The popularity of Amazon Fire and Roku is “pretty significant” and “growing steadily,” he said.
Most U.S. broadband homes have more than two connected devices, on average, so it makes sense for app developers to develop for 2-3 devices because most people use more than one device, he said.

The same main trends are being seen by 24i, said Pieter Siekerman, its CTO. Just a few years back, connected devices were used for only a small percentage of video that was viewed, but it’s been “growing steadily,” he said. The relative cheapness of Chromecast is a major reason for its popularity, he said.

Smart TVs, meanwhile, are quite popular in Europe and South/Latin America, at least partially because the devices from Roku and Amazon Fire are focused mainly on the U.S. and U.K., Siekerman said. Vizio has a large U.S. market share on smart TVs, but that is not the case in other markets, he said.

Over the past year, Roku did a “major overhaul” of its development platform, enabling developers to build more customizable apps, Siekerman said. In the last six months, Roku has also been “quite active” with its software upgrade cycle, and it’s been “actively pushing out new features” and improvements, he said. Those enhancements could be the result of about $45 million it recently received in funding, he said. Roku has a large market share on its set-top boxes, but it’s now also gaining share via the Roku TV platform that’s been incorporated in TVs by manufacturers including RCA, Sharp and TCL, he said. Roku also started expanding recently to more countries, so it’s becoming “more relevant” outside the U.S. now, he said.

In contrast, Amazon Fire TV came out only about two years ago and, out of the gate, offered new features including voice search for titles that’s since been copied by other brands, he said. It’s become closer to the Android platform now, so requires less modifications from developers making apps for those devices, he said. Amazon doesn’t provide Fire TV sales data, so it’s hard to estimate what market share Fire TV has, but its share is limited mainly to the U.S., he said.

The Android TV platform “hasn’t been a real attention puller” so far, he said, adding it’s been gaining market share “stealthily” on TVs including Sony’s smart TVs. Samsung continues to stick with the Tizen smart TV platform, while LG continues to stick with its webOS platform despite the fact that it recently started fielding a small number of Roku TVs for Best Buy, he said.

Google recently performed a major hardware refresh for Chromecast, and has sold 25 million of those devices to date, although that’s less than he expected when factoring in its relatively low cost, he said.

Siekerman predicted that app development will grow significantly over the next year on the Xbox One game console because of Microsoft shifting to Windows 10 app development. That’s a “really big shift” because it makes it easier for developers to shift apps to the console, he said.

What about Blu-ray?

Blu-ray Disc players, meanwhile, are no longer relevant as a smart TV platform, he said, adding his company stopped developing software for them because the market share on them was too small to make it worth the effort.

Other trends around connected devices include the start of “synergy” developing between apps for the mobile platforms and connected TV platforms, he said. He pointed to the fact that iOS apps can now easily be adapted for Apple TV, while an Android app can easily go to Fire TV and Android TV, and Windows 10 apps will be able to easily go to Xbox One consoles. That “will grow the ecosystem” of apps, he predicted.

There is also increased support for 4K on connected TV platforms, but Apple TV and Chromecast don’t offer 4K yet, Siekerman noted. It’s going to soon be difficult to find smart TV devices that don’t support 4K, and the ones that don’t will be cheap, low-end products, he said. Despite the lack of broadcast 4K, there’s more 4K content available now than a year ago if you have an Internet connection, he said.

High dynamic range (HDR) is the “buzz word” this year, but he predicted “it’s going to be a while before people have TVs which support this.” HDR is like 4K two years ago, but, like 4K, it will become the “new normal” and the impact from it will be “probably bigger than 4K on the viewing experience,” he said, adding: “For once, it’s a bit more than a buzz word; it’s actually an improvement.” But, for now, it’s “still in the experimental phase” with competing standards, he said. HDR TVs also tend to cost a lot more than TVs without the feature.