Apps, simplicity of use, to determine OTT device supremacy, analysts say

The strength of available apps and platform simplicity will be key factors determining the success of Apple Inc., Google Inc., Roku Inc. and Boxee Inc. as they compete for customers in the emerging North American over-the-top TV market, analysts say. Apple now dominates in worldwide sales of Internet TV devices as the landscape becomes more competitive. According to Apple, the company sold more than four million Apple TV units by the start of the year. Roku has shipped 3 million devices, and tech news service GigaOm calculated in February that Google had sold between 500,000 and 1 million Google TV boxes. Boxee said this spring it reached the 200,000 mark. Independent technology analyst Carmi Levy said over-the-top TV products remain in a nascent phase, yet to be tracked by analysts or fully understood by consumers, and the market will be dominated by the most user-friendly service with a diverse app store. “We are still not at the point where a consumer can walk in to a store and make an educated buying decision on one of these products,” he said. “In the smartphone and tablet market, it has always been about the apps, and as we look forward to television, it will also be about the same thing.” He said Apple’s iOS operating system and Google’s Android system are “ideally positioned” in the evolving television market. The iOS platform now offers about 650,000 apps and Android about 600,000. Apple now leads the market for over-the-top TV devices and analysts said they believe the company will continue that lead when, as expected, it launches a luxury iTV device by the end of first quarter of fiscal 2013. Canaccord Genuity analyst Mike Walkley said by email Tuesday that he continues to forecast that timeline for a release. Apple has sold more than 6.8 million Apple TV units, according to company CEO Tim Cook. During a Jan. 24, 2012 earnings call, Cook said the company sold more than 2.8 million Apple TVs in the 2011 fiscal year. In a third-quarter 2012 earnings call on July 24, Cook said the company sold four million units during the first nine months of the 2012 fiscal year, “which is pretty incredible.” Levy said Apple has a history of going into immature markets and creating consumerism by drawing in the average buyer, and he expects the company to do so with iTV. David Adams, vice-president of corporate development at Accedo, an Internet TV app developer headquartered in Stockholm, Sweden, said in an interview that the United States market has not seen as wide an adoption of Google TV and that, right now, developing apps for Google TV is not a high priority for media companies seeking ways to reach as many people as possible with little investment. “You start looking at the platforms with the most users and Google TV isn’t there anywhere,” Adams said. Logitech, the maker of the Revue set-top box for Google TV, said last July it was reducing the price of the device from $249 US to $99 US. Google said in June that its product will continue to grow TV apps as Sony Corp. launched a new Google TV device, now available in Canada. Sony's new device features a remote control with a backlit keyboard and a touch pad, and a motion sensor for games. At the Consumer Electronics Show in Las Vegas in January 2012, the company said that since its Google TV 2.0 update in October 2011, the device had more than doubled sales. “There’s promise there, but certainly they need to market it and get it out there,” Adams said. Duncan Stewart, director for technology, media and telecom at Deloitte Canada, said in a phone interview that he estimates sales of over-the-top TV devices have collectively reached more than 10 million worldwide. The precise number of users is difficult to determine because analysts don’t know how many consumers continue to use them, he said. “Because of the early adopter phenomena, a lot of people could be buying these devices, playing with them for a little while because they want to be on the cutting edge, but then they may go back to something else,” Stewart said. Stewart and Adams said the makers of over-the-top TV devices compete with gaming consoles like Microsoft Inc.’s Xbox Live or Sony’s PlayStation 3 (PS3), which enable over-the-top subscription services like those of Netflix Inc. Adams estimated that in North America there are 20 million Xbox Live users and about 10 million PS3 users. Gaming consoles are getting a lot of attention and Roku is seeing a “significant amount of super users” who use their devices 10 to 11 hours per week, he said. In an emailed statement to The Wire Report, Ha Thai, director of corporate communications at Roku, said “we have only disclosed that we have shipped more than 3 million Roku streaming players, with most of these being in the U.S.” Liz Dellheim, a spokeswoman for Boxee, said in an emailed statement that the company cannot give out its sales numbers. In an April 12 message on Twitter, Boxee said it reached a total of two million users and 200,000 users of its Boxee Box device. PC Mag reported April 13 that Boxee Box maker D-Link Corp. also confirmed that it had sold 200,000 Boxee Boxes. Stewart said the over-the-top TV market is growing but “the big consumer success in terms of re-inventing TV has not yet occurred.” Platform simplicity and ease of use, he said, will be a key factor in device success. NPD Entertainment Group analyst Keith Nissen said in a phone interview that the number of apps, although key, is not the only factor for success. “Both Google and Apple recognize that having access to a huge number of apps is great and is going to be a big part of their product line, but what people really want to do with the big screen is watch TV,” he said. To attract consumers towards the higher priced Apple and Google TV products, the companies should try to provide a superior video content offering. He said Google and Apple should bundle offerings such as Netflix, Hulu, HBO Go, Amazon Inc.'s Amazon Prime, and other services, to offer more premium content. “They could aggregate premium TV and subscription VOD services, and that would be a compelling thing as an alternative to pay TV,” he said. Nissen agreed that Apple will become the over-the-top market leader. “I expect they will figure it out,” he said. “They will come out with a service and it is going to change the landscape of the entertainment industry.” dgrenier@thewirereport.ca -- CORRECTION: An earlier version of the story incorrectly stated the number of Apple TV units sold.

Apps, simplicity of use, to determine OTT device supremacy, analysts say

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