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Smart TV: Still The Tech World's Afghanistan?

First Posted: 01/04/11 02:29 PM ET Updated: 05/25/11 07:20 PM ET

Smart Tv

Ever since the advent of the Internet, some of the world's most innovative and ambitious technology companies have pursued a possible holy grail of home entertainment: combining old-fashioned television watching with the modern experience of surfing the Web.

Tech titans like Apple and Google, as well as upstarts like Roku, have led the latest offensive strike on the living room with devices they call "smart TVs," which essentially fuse television with the Web, bringing online content to the TV screen.

Some invite subscribers to watch, say, Martha Stewart's show while simultaneously using the same screen to order ingredients from Fresh Direct. Others bypass pay TV entirely, allowing viewers to handpick shows from online catalogues, such as iTunes or Netflix that instantly stream programming over the Internet.

Web-savvy tech companies have spent the last decade battling for command of the screens that dominate our lives, successfully capturing our attention on cellphones and computers. But the television screen has proven to be the Afghanistan of the technology realm -- the unavoidable place that every great power has dreamt of conquering, only to become bogged-down in a long, costly, and ultimately fruitless battle.

This week, as the technology world converges on Las Vegas for the Consumer Electronics Show -- the annual showcase for the newest, fastest and most-coveted gizmos -- smart TV will yet again be jockeying for attention. Boxee will debut another device, Internet-connected TVs will gain remote controls equipped with a Netflix button, and there are rumblings that Microsoft will unveil some form of "Windows TV," its answer to Google and Apple's smart-TV offerings. The question is, will these new entrants fare any better than their predecessors?

Why has the living room proven such a quagmire for the likes of Apple, Microsoft and Google, enormously successful pioneers that have built empires and attracted millions with must-have offerings in smartphones, software and search? Can this sphere ever be conquered, or will it prove impenetrable, even to the same formidable marketing and engineering masters who have managed to convince us to turn their brand names into verbs and trade in our cell phones every two years?

In essence, the goliaths of technology have placed a high-stakes bet on their ability to seduce couch potatoes with greater interactivity, yet it remains debatable whether viewers really covet a more active experience on a device known popularly as the boob tube.

The new services are asking consumers to voluntarily devote some of their leisure time to fussing with their home entertainment systems, detaching and reattaching wires while finding room for another box full of electronics. For their trouble, customers are promised liberation from the existing constraints of programming, buying in to a future in which they can watch shows on their own schedule, and at lower cost. But in the age of TiVo, Hulu and on-demand shows served up by cable providers, does that make smart TV compelling and new, or just another way of distributing the same content we already have?

And even if Silicon Valley musters the technology to create a fresh consumer craving in the living room, what will the new services use for content? The networks and cable companies that control programming may not be willing to share it -- a formidable obstacle between here and the widespread adoption of smart TV.

For Internet television to claim a spot at the sofa, longstanding business models that have swelled the coffers of media and cable conglomerates will have to be refashioned with new terms that force incumbents to split revenues -- and eyeballs -- with the entrants many of them have come to see as their enemies.

MAKING THE SWITCH

Long before such complex considerations, however, smart TV faces a more pedestrian question: What is it, exactly?

Even those tasked with selling the new devices are hard pressed to provide a satisfying answer.

Google needed two instructional videos and a website offering a visual tour of the technology to demystify Google TV.

Apple -- whose marketers introduced the iPod with the pithy pitch "a thousand songs in your pocket" -- seems positively tongue-tied when seeking to describe Apple TV. Its 2008 slogan, "Even more to do," made the product sound less like a coveted new gadget and more like the title for a list of chores.

Wikipedia is no help to the curious prospective consumer -- not unless someone out there has a hankering for a "television set with integrated ethernet or WiFi powered Internet capabilities holding 4th generation computing and processing capacity," as the Internet encyclopedia describes smart TV.

Ask an industry expert to describe the technology and prepare for a fusillade of jargon like "cloud TV," "network content devices," and "digital media receivers." This supposedly-boundless future awaiting us on our Web-enabled television screens remains largely inscrutable.

It also appears to remain far off. Around 100 million Americans, or nearly a third of the population, subscribe to some form of pay TV, according to the media and communications research firm SNL Kagan. But fewer than 4 million Web-enabled televisions were shipped last year, the Consumer Electronics Association reports.

Only about 10 percent of American consumers now watch television programs and movies transmitted via the Internet to their televisions, according to a Nielsen study commissioned by the Cable and Telecommunications Association for Marketing.

And yet, nearly a decade after the launch -- and spectacular failure -- of Microsoft's Web TV, the grandfather of today's Internet-connected sets, smart TVs may finally be gaining traction.

Last year, the pay TV industry lost subscribers for the first time ever, according to data from SNL Kagan. And in the second half of 2010, cable suffered record losses two quarters in a row, shedding over 1.4 million subscribers in the span of six months. While SNL Kagan blamed the lower numbers primarily on economic troubles and unemployment, the firm's senior analyst Ian Olgeirson acknowledged that the decline also appears to reflect an increased tendency by some consumers to replace their cable company with other ways of watching programming.

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