User demand for cross-platform video content is exploding. We have seen coverage on this trend ad nauseam. But the market has recently expanded into the realm of Connected TV. Try explaining this to your grandmother: video on TV, but it’s not TV? Three factors must be present for this expansion to turn from a fad into a full-on disruptive market of cross-platform utilization: consistent connection speed, device prevalence, and quality content at scale.
In theory, connection speed is an inherent advantage to Connected TV. If about 78 percent of U.S. households have broadband Internet access, it is not a stretch to imagine that most of those willing to pay a bit extra for a connected TV fall within that majority. Why the “in theory” caveat? Despite protests from cable companies that data speed is consistent, companies like Netflix have recently been bombarded by user complains of slow video speeds when everyone tries to watch video at the same time. This phenomenon is similar to a highway traffic conundrum; no matter how big the highway, enough cars typically pop up to create traffic. As a solution, private markets are emerging so companies can pay a bit more for higher-speed access, and pass the cost to customers transparently. As long as the FCC does not limit these markets, hopefully this trend will continue and users will be able to watch video without buffering, even if it means paying a bit more.
The device ecosystem also is growing. The PS4, for example, sold more than 1 million units in North America in 24 hours. Recently, Amazon announced it will begin shipping a video-streaming device in April, aiming to compete with Roku, Chromecast, and the like. And at the Consumer Electronics Show (CES) this year, the popular consumer electronics trade show in Las Vegas, Connected TVs quite literally stole the words out of Michael Bay’s mouth. This growth is helping fuel the cord-cutter generation that cable companies fear, as currently 9 percent of all households get broadband, but do not subscribe to a multi-channel video service, a figure that is growing.
Perhaps most importantly, content is growing in quality and scale. In fact, the online-only program House of Cards won a Golden Globe award this year and was nominated for three others. And as far as scale, the sheer demand for online video is exploding – in fact, last week Amazon said it is raising the price of its Amazon Prime membership by 25 percent in part because of the rising cost of acquiring video.
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