TV Apps: Evolution from Novelty to Mainstream

1. Summary

TV apps — interactive, web-like applications meant to “enhance” the TV viewing experience by supplementing programming content with additional material and activities — are evolving quickly from a novelty feature on some Internet-enabled HDTVs and a few cable systems to a standard capability. Their rise is driven by rapid growth in the number of Internet-connected devices in consumers’ living rooms, growing consumer familiarity with mobile apps and strategic competitive forces that influence video service providers.

We project that by 2015, 6 in 10 TVs shipped worldwide will have a network connection (Ethernet, Wi-Fi or both) and that 70 percent of those will come with an embedded app platform and app store, for an installed base of 250 million app-enabled TVs. We further project that 3.7 million TV apps will be downloaded in 2010, and that number will grow to 965 million by 2015. One in four downloaded apps will be paid, the rest will be free, including those that enable paid services, such as Netflix’s subscription streaming video service.

Embedded app stores will be the method for bringing apps to the TV, but other approaches are also being pursued, including full, video-optimized browsers, such as Boxee, Kylo and Oregan Network’s Onyx Media Browser. Cable MSOs and IPTV service providers are also rolling out their own network-based apps platforms by leveraging industry-standard technologies like EBIF and Tru2Way. In some cases, service providers are also embedding third-party software, such as ActiveVideo Networks’ Cloud TV platform leased with set-top boxes to enable greater app functionality.

The most widely distributed embedded app platforms in 2010 include Yahoo’s Widget Channel, as well as those from Vudu (recently acquired by Wal-Mart) and DivX. But major mobile app platform providers Apple, Google and Microsoft are all eying connected TVs as fertile ground for extending their mobile franchises. Google, for instance, recently began work with Sony and Intel on an Android-powered Google TV platform, though no date of introduction has been announced. Microsoft recently released technical specifications for an embeddable version of its Windows Media Center Platform for consumer electronics devices. Apple’s iPad is fueling rapid development of media-related apps for its iTunes App Store platform that could eventually become the foundation for a revamped Apple TV strategy.

We expect that all three of the major mobile app platform providers will enter the TV apps space within five years.

Network service providers will ramp up their own apps platforms over that same period in an effort to bring more web content to the TV to hedge against competition from IP-delivered video.

Beyond the five-year horizon, embedded and network-based platforms will become integrated with cloud-based services that will enable platform providers to deliver richer, more computationally intensive applications and services.