What's on TV? Soon, the Internet

Apple, Others Roll out Hardware to Link PCs to Living Rooms

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NEW YORK (AdAge.com) -- Ten months ago Steve Jobs shook up the TV industry by bringing the ladies of Wisteria Lane to iTunes. This time around, he's introduced something potentially more disruptive: a device that brings broadband content and the silver screen into the living room.
Soon, you'll be able to watch viral video clips right on your flat-screen TV.
Soon, you'll be able to watch viral video clips right on your flat-screen TV.

In the iTV future previewed at Apple's media event last week, consumers will be able to pause "Pirates of the Caribbean" bought from iTunes while catching up with ZeFrank and watching an ABC News webcast. But that isn't just the future; it's one example of how the long-promised convergence of the web and TV might actually be upon us -- this time for real.

Content, not hardware
If it works, it will be because Mr. Jobs and others are realizing that content, not hardware, is still king. And with studios and networks cutting more deals, content is finally catching up to technology.

About 40% of Americans are interested in some kind of connectivity, according to an August study by Parks Associates, a firm that watches the consumer-technology market. And the longer they use broadband, the more that number should increase. Right now about 4 million homes have connected multiple-entertainment devices but by 2010, Parks estimates that number will be 29.9 million -- or 36% of all broadband-connected homes.

"Consumers have aspirations about media-sharing within the home, but it's not something most are doing right now," said Michael Gartenberg, senior analyst at Jupiter. He expects that to change as more content and devices become available.

Interpublic's Emerging Media Lab has named this kind of convergence -- building out the digital home -- one of five key trends to watch for 2007. Already companies such as Akimbo, Sling Media and TiVo are betting that consumers will want a PC-to-TV connection. Greg Johnson, who directs the lab, said gaming consoles such as Microsoft's Xbox 360 and Sony's PlayStation, which are connected to both the internet and TV, have perhaps the most potential to make it happen.

Having the right devices
He has connected his PC to a 30-something-inch flat-panel TV and said it has "stunning quality." As long as you have a media-center PC or a proper set-top box, enough bandwidth and the right cables to connect the devices, it can be done -- just not as easily as most consumers would like. But, Mr. Johnson warns, "These things are never forced by hardware, but by applications or content."

Parks Associates analyst Harry Wang agrees and said the two biggest barriers to connected-entertainment devices are content availability and user experience.

"Absolutely there's enough content to give you an incentive to get broadband somehow to your living-room devices," said Josh Goldman. He's betting his company, Akimbo, on that, and cites others such as Microsoft and Cisco that are also betting heavily. It's important, he said, not to think of it as a substitute for TV but as "a huge supplement -- things like Movielink, devices like Akimbo, plus tens of thousands of TV shows, video blogs, programs from foreign providers, kids' providers."

TiVo, meanwhile, has launched TiVoCast through a deal with online-video provider Brightcove, which offers broadband content as part of its content menu.

"The key is we're trying to make it so that you as an ordinary human can access it," Jim Denny, VP-product marketing at TiVo, said.

Marketers will have to adjust
Of course, if consumers can access 10 times the content anytime they want, what becomes of the prime-time schedule? Mr. Johnson said that's been a concern since the advent of time-shifting, but this could accelerate the shift -- and that means advertisers need to become more nimble. "There will be more accountability, more community-based viewing, more flexibility in terms of you scheduling your own programming, and advertisers will have to adjust to that."

TV networks are getting into the act too, offering more of their content online -- and sometimes optimizing it for porting to a TV. MTV Networks, for example, has invested time building a Windows Media Center version of its Overdrive broadband channel. With the proper connections, the picture on a 50-inch plasma connected to the PC was brilliant. And navigating the menu with a remote was a cinch-better than most cable operators' video-on-demand systems.

All the major broadcast networks are streaming their shows, and iTunes has more than 220 available.

Walled gardens
Not good enough, said Mr. Wang, analyst at Parks. "The vision of the connected entertainment platform," he said, "is to allow content to freely flow from one platform to another." And right now, the bulk of the content is still locked up in the walled garden that is cable or satellite TV service. Even iTunes, after all, is a walled garden.

Of course, the business of broadband is still nascent. BMO Capital Markets, in a report studying the emerging video market, said that although broadband will eventually have a material impact on traditional delivery methods, it's still minuscule. By 2009, it could be a $3 billion market. Today's combined TV ad market? $268 billion.

And what's worrisome about Apple's announcement, said Tracey Scheppach, VP-video innovations director at Starcom, is there's still no clear ad model for top-tier content in iTunes. So if Apple's iTV takes off -- and it's quite possible, given its success with the digital-music market -- where do advertisers fit in? In all of Starcom's studies and experience, consumers are "overwhelmingly adopting the ad-supported model -- they want to have their content subsidized when given the choice," Ms. Scheppach said.
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