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Connected TV Apps Transforming Video Entertainment

Software applications (apps) have been the primary focal point in the smartphone and media tablet worlds for some time. Now, with the advent of smart connected TVs, people everywhere are rapidly adopting online video applications that are changing their on-demand viewing experience.

According to the latest market study by In-Stat, their forecast estimates that over 60 percent of these connected households will use a TV app at least once per week. However, these apps won't likely be provided by an incumbent pay-TV service provider. Clearly, other companies are driving this trend.

"As expected, Netflix and YouTube currently dominate the TV application space," says Keith Nissen, Research Director at In-Stat.

But as Netflix competitors become more numerous and as applications are optimized for the big screen, TV apps will become part of the mainstream TV viewing experience. They will transform video entertainment.

Once again, the current dominant entertainment industry players have been passive to disruptive market transitions. How will traditional pay-TV providers react to this latest threat to their core business model?

Why did they not see this transition coming, or why did they ignore the apparent shift away from linear channel viewing? Who is guiding them through these changes? Should the pay-TV STB vendors have already created a developer ecosystem that leverages open APIs and thereby help fuel new service delivery innovation?

There are so many of these troubling questions that have been left unanswered. Meanwhile, the pay-TV service subscriber losses are mounting.

In-Stat's latest market study found the following:
  • Shipments of connected TVs with integrated TV applications will grow by an average 36 percent over the next five years.
  • 22 percent of U.S. broadband households already own an HDTV with integrated TV apps.
  • TV apps are not the primary reason for purchasing connected TVs -- but they're the reason the balance of power is shifting in the marketplace.
  • Adoption of online video streaming services, such as Netflix, does not increase the propensity to purchase online video content.
  • The viewing of DVR recorded TV programming does not lead to the adoption of free VOD services from a pay TV operator.
  • Consumers favoring subscriptions to both pay-TV and online video services rose from 18 percent to 30 percent during 2010, contributing to the continued growth of Netflix.

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