Be sure to check back regularly for updated industry insights and analysis.
Be sure to check back regularly for updated industry insights and analysis.
Tablets Becoming First Screen Choice…not just “Second Screen”
“Second Screen” is a term that typically refers to a tablet, smartphone or other companion device which allows consumers to interact with content they are consuming on the so-called “First Screen” or television in the living room. Second Screen experiences range from search and discovery apps to enabling users to interact other viewers (aka Social TV), or deeply engage with the content in a meaningful way. Second Screen services and applications are becoming in many ways a must have for networks and provides advertisers another touch point to consumers and is enabling additional monetization of content. With well over 50 million tablet owners in the US as of December 2012 and over 133 million US smartphone owners, the potential for syncing TV viewing experiences with mobile devices is enormous. However, the operative word here is “potential”. A recent study by IAB/IPsos concluded that over 80% of tablet and smartphone users who are multitasking while watching TV are doing something completely unrelated to the show they are viewing. The numbers are well over 90% for those that are viewing with a PC. These numbers should be sobering, but not discouraging for anyone who is developing for the second screen. Certainly it must be said that second screen experiences are evolving rapidly and as they become more compelling, content creators will find these experiences an invaluable way to reach and interact with their passionate and core audiences.
While these experiences will continue to gain traction with consumers, content owners and service providers who continue to view the “second screen” as secondary to the TV in the living room, may be missing a growing trend among key segments of viewers that do not consider their tablets “second screens”, but rather as their first screen of choice…sometimes.
Data released from Ooyala and comScore point to a growing trend among users. According to Ooyala’s report, table and mobile viewing made up more than 10 percent of all online video plays during Q1 2013. This is keeping pace with last year’s dramatic growth where mobile and tablet viewing doubled over the course of 12 months in 2012. Broken down further, the data showed that mobile and tablet viewers spent 52% of their total viewing time watching content over 10 minutes long and of this about 25% of viewing is content over 60 minutes long.
Why the transition from Second Screen to statistics about online video viewing?
Second Screen experiences inherently rely on the TV as the primary viewing and content consumption device. This view of the television landscape is short sighted and does not consider the growth of Broadband TV services nor the fact that the largest screen will always be the consumer’s first choice. The best screen may be the tablet. This notion is underscored by recently released data from Deloitte in which tablet owners were asked which type of content they will consumer on their tablets over the next 12 months.
Feature length movies came in at 38% with “professionally created Internet content” at 25%. Before moving on to other stats, the fact that this was included as a category in the survey and that it received the second highest response should provide a boon to companies such as Netflix, Hulu and Amazon who are developing original digital content, as well as content creators like Fullscreen and Maker Studios which have built highly successful YouTube networks. 60-minute TV dramas came in at 18% with 30-minute sitcoms at 17%. Beyond the startling response to professionally produced Internet content, the fact that feature length movies came in at 38% shows tablets becoming for some users the first screen of choice for viewing and not just a second screen companion.
What is the future of tablet viewing?
Given the continued strong growth in tablet sales, particularly in relation to PC sales, we expect to see tablets and mobile devices carving out an increasing share of online video viewing. While the TV will remain the primary viewing device in the home, it will continue to cede ground to untethered devices which allow consumers greater choice and flexibility in their viewing habits. Content creators and video distributors need to view tablets and mobile devices not only as platforms for Second Screen experiences, but rather as a First Screen with enormous monetization potential. While the data is almost a year old, comScore found that over 25% of tablet users had paid to watch content on their tablets. The potential for “First Screen” monetization is also underscored by data from Juniper Research showing that as of 2017 over 2 billion mobile and tablet users will watch TV and video on their devices and that these devices will increasingly become the primary and in some cases only viewing screen among younger demographics.
When you have over 700 channels in your current lineup, the significance of adding an additional service from start-up Net2Television might be lost in the cloud. (Excuse the very obvious pun!) A closer look at this announcement shows why this is an extremely significant announcement for both companies and a huge win, for advertisers and content owners as well.
Net2TV’s Portico Service was launched in 2012 on Philips Smart TVs and delivers free ad-supported TV programming from companies like Discovery’s Revision 3, CBS Interactive’S CHOW, Popular Science, CNET and other branded content. Founder and CEO, Tom Morgan’s vision for the Portico TV service is that TV content viewed on a Smart TV should simply feel like TV. “You should raise your wine glass more often than you raise the remote”, according to Tom. By stitching together high quality, short-form pieces and curating them into programs ranging in length from 30 to 90 minutes, the Portico TV service simply looks and feels like a normal “lean-back” TV viewing experience. This experience allows Net2TV and its advertising partners to dynamically insert interstitial commercials, rather than pre-rolls or overlays that are typical of other BroadbandTV experiences. Net2TV estimates that nor more than 6 commercial breaks will run per hour with a maximum of 60 seconds of commercials which cannot be skipped by the user. Although dynamically inserted and targetable, the current implementation on Philips Smart TVs does not allow for clickable and interactive ads. The free ad-supported model, paired with engaging niche content and an ecosystem which allows Net2TV to tap into traditional TV advertisers as well as brands which may not have previously had the resources to launch advertising campaigns, is undoubtedly a winning strategy. The hang up for Net2TV is scale and perceptions building around the SmartTVs.
On the perception side, the good news is that the Smart TV market is growing. Aggregated estimates from researchers indicate that around 67 million Smart TVs shipped in 2012. According to IHS, this number could be as high as 141 million units and 55 percent of the total TV market by 2015. While this represents a huge number of households and potential viewers for a TV service like Net2TVs Portico TV, there are challenges. There is nearly universal agreement that the connection rate of Smart TVs to the Internet is roughly 50% of total households which instantly halves the number of potential viewers. This is further reduced by estimates that range from as low as 20% to as high as 60% of users actually using the Smart TV apps to find and view content. Recent surveys from NPD and 3D Focus break down these numbers and show that in response to the question “How often do you use smart TV apps?,” 38% said Never or Rarely, 23% said Occasionally and only 24% said regularly. A rough calculation of the 67 million Smart TVs that shipped in 2012 shows a potential of approximately 4.8 million users that would regularly use a Smart TV App to view content. An additional challenge for Net2TV in the near-term is the approximately 6% market share for Philips-branded Smart TVs manufactured by Funai.
Simply stated, despite having tackled the advertising issue and delivering fantastic content, the long-term success of the Portico TV service will depend on Net2TV’s ability to quickly and sustainably scale the service. Enter Roku. Delivering the Portico TV service on Roku gives Net2TV instant access to an installed user base of over 5 million devices. The scaling effect in potential viewers for the Portico TV service is only one aspect that makes this a significant announcement. Upon launching the service on Roku, Net2TVs Portico TV will be one of only 2 services that offer free ad-supported television. By combining dynamic ad insertion and the user profiling information available, Net2TV will be able to offer advertisers targeted advertising to consumers who are in large part not reached by traditional pay TV services. Unlike on the Smart TV service, ads delivered to the Roku platform will have access to the full feature set, including clickable advertising allowing advertisers to offer engaging and interactive ads.
While clearly a win for Net2TV, Roku benefits from having additional professionally produced content which consumers are passionate about. The platform also becomes a proving ground for the free ad-supported TV model to other content owners, aggregators and service providers which over time, could increase the popularity of Roku with both consumers and content owners alike. What is clear is that consumers overwhelmingly prefer free, ad-supported content to PPV and subscription-based services. In a presentation at the spring 2013 OTTCON produced by X Media Research, a YuMe executive presented data from a study they conducted with Frank N Magid Associates on precisely this question. Well over 50% of respondents prefer to watch free, ad-supported TV content as opposed to only just over 20% who prefer subscription and around 18% who would prefer pay-per-view. As Roku continues to expand its lineup of premium content offerings which are ad-supported, this device will force consumers to make critical choices about keeping their pay-tv services or accessing their content over-the-top.
This announcement definitely represents a key milestone for Net2TV and its Portico service. The company estimates that the service will be available by end of the year on over 20 million screens. This is an extremely ambitious, but achievable goal. Due to its implementation of HTML5 and rending UI in the cloud, porting its service quickly to multiple devices will allow for quicker adoption by multiple manufacturers. While Net2TV will clearly see adoption by other Smart TV manufacturers this year, we hope to see the service on iPads and Android tablets as well which are accounting for an increasing percentage of non payTV viewing. More on this point to come in future articles!
Greg Fawson, President and Principal Analyst - X Media Research, Inc.