Broadband TV faces barriers to adoption

News from CES started pouring onto the wires Monday, and a lot of the announcements relevant to online video were related to delivery of content to the living room. Samsung, LG, Intel, Adobe, Netflix, Yahoo! and Amazon all announced plans to bring broadband video delivery either directly to HDTVs, or to next-gen devices like Blu-Ray players and gaming systems.

While broadband-enabled TVs are not new to the market, they haven't become widely used yet, due to the paucity of broadband offerings for them and their prohibitive price. It remains to be seen whether TVs with Internet access to online video and other rich media content will thrive, or flail under the added cost of the connectivity, which may not prove to be a clear value add to the consumer.

Dan Rayburn made interesting points about barriers to adoption of broadband TVs in a post he wrote Monday. He quoted a Park Associates research report that predicts 3.6 million broadband-enabled TVs will be sold by 2012, which, as Dan points out, isn't a game-changing number. He also asserts that current broadband-enabled TVs cost about $300 more than standard models, which certainly will turn a large amount of consumers off if the price disparity doesn't drop. It's going to be tough for TV manufacturers to convince strapped consumers to buy four figure HDTVs at all in the next 12 months, let alone one with a debatably necessary $300 broadband connection.

I think the real driver of growth in online video content delivered to HDTVs will come through next-gen gaming systems. With 11.7 million Xbox360s and 5.7 million Playstation 3s sold to date in the U.S. alone, millions of households could have broadband access to the TV through these devices. They both have ample computing power and storage space, so with simple software upgrades akin to what we've already seen through Netflix's Xbox360 offering, these devices could bring online video content to the living room much more quickly than broadband-enabled TVs will.

A company that solves the compatibility issues and transcoding problems for content delivered to the next-gen gaming systems could turn its solution into a very profitable product. Much has been made of Microsoft's inability to capture Internet share from the likes of Google, but if the Redmond team could crack the Internet to the living room puzzle through software upgrades to its Xbox360 product, it could be the first true entrant in what should develop into a huge market. It remains unlikely, given the prohibitive cost and general consumer malaise, that the broadband TV providers will corner it. - Pete 

For more:
- see Dan's post on broadband TVs here