In the last several years, smart TV market share in the UK can be argued to be disproportionately small relative to the amount of communications promoting such products. While smart TV usage has increased by 2% annually to 7% of all TV owning households in the UK during 2013 (Ofcom), the amount of challenges to its success are growing quickly.
The growing problem facing smart TVs can be illustrated by how owners mainly use them, viewing content online, from catch up TV apps (57%) to streaming on apps like Netflix (38%). Consumers using smart TV technology to expand the existing core functionality of TV is expected, but it doesn't provide smart TVs a USP against connected TV
devices like game consoles (an estimated 4m Xbox & 3m Playstation users in the UK), set top boxes and growing plugins such as Google's Chromecast.
A majority of consumers buy smart TVs because they're replacing their old TV and justify the additional price point by buying the 'latest technology' (Ofcom). However, the growing awareness and variety of connected TV devices means it's increasingly likely that the consumer will be duplicating existing functionality in their home. A smart TV whose offering is mainly understood by the consumer to be Netflix and BBC iPlayer isn't going to be attractive when the Xbox or Youview in their home can already provide elements of this.
The disparity in price and buying cycle lengths between smart TVs and connected devices makes this risk of duplication even more pronounced. Increasing amounts of cheaper devices from set-top boxes and plug-ins like Chromecast and Roku mean those who want elements of Smart TV functionality can at a much lower price point, driving more immediate purchase and use. On the other end, next-gen consoles are offering an arguably greater smart TV experience as an add-on to their core gaming functionality. The Xbox One's HDMI passthrough technology and US partnership with the NFL best illustrates the current threat to buying a smart TV. Smart TV advances such as streaming gaming and greater mobile integration provide hope that future USPs can be carved out
against category competitors, but none of these seem to have the tangibility to differentiate in the short term.
Increasing competitors leaves the only core USP for smart TVs to come from its simplicity and consolidated functionality, operating as an All-In-One (AIO) device. Although, this does play well with the mass segment of the market that has yet to understand the benefits of a connected/smart TV, but it also requires manufacturers to do the hardest education job. As awareness of services like Netflix grow rapidly within the mass UK audience, connected TV devices gain a greater foothold into providing a solution to consumer interest at a much lower price point. Simplicity as a USP struggles in the face of this for all but the least tech-confident market segments.
The eroding viable core audience for smart TVs doesn't mean that the technology will vanish, just that the price premium unlocked by it will shrink. Smart TV manufacturers will be able to capture the lagging mass as they go in to replace their current TV and possibly prompt some to buy sooner, but the less tech savvy they target the longer the purchase cycle between sets can be. Smart TV functionality will likely become standard to TVs regardless of price range, moving beyond the premium and mid tier models it currently comes on.
While the 'standard' smart TV means that UK penetration will continue to rise, the next battle ground isn't ownership, but usage. Monetizing users of a smart or connected TV is an attractive proposition for all device manufacturers and already a highly contested area. Sky's AdSmart technology launch and the advertising possibilities that Microsoft and others offer to reach consumers as an audience are spoils that go to the default device / interface for viewing. Capturing viewing and using viewers as a data generation source is the key to monetizing customers beyond device purchase. Samsung's US launch of a 'shoppable' Super Bowl ad in the 2014 game highlights where smart TV manufacturers would like to be, but the more ground lost to connected devices in the short term increases the time before this can be a reality.
In the long term however, the death of the 'noticeable' smart TV means that TV manufacturers can become first stop access providers for viewers. Screen size and resolution advances will acquire more advanced consumers to buy TVs, but the lion's share of their interaction, and subsequently data will
be on connected devices.
By losing out on owning more technologically forward audiences to competitor devices, TV manufacturers may instead become the keepers of reaching the mass/late majority. Those who don't have a game console in the house, might not have a cable provider and would most likely find the simplicity of an AIO smart TV proposition attractive are a viable core audience to monetize access to, once this audience cycles into owning TVs that have standard smart functionality. However, such a possibility doesn't mesh with the ethos of almost all of the TV manufacturing giants today and will require a different communications and manufacturing perspective. Newest and shiniest many no longer be the best option and 2014 may be the start of an about face by the smart TV market from 'sophisticated and smart' to 'standard and simple'.