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Reinventing the TV Experience

Excerpts from a keynote address at the Set Top Box 2.0 conference on December 6, 2007

For many of us, some of our fondest childhood memories involve our first favorite television shows, displayed on an old square and clunky TV set in the living room.

That particular box was an analog device in an analog world. This was the norm long before most of us had ever heard of the Internet and the fun of going online for video, e-mail, stock trades, and e-commerce auctions. It is interesting to step back for a moment and compare that first-generation analog TV with the Consumer Electronics 2.0 successor: the digital flat-panel TV which emerged in the 1990s. Digital TV technology gives us a variety of screen sizes with incredible resolution and stereo audio. Digital technology has another key advantage — the ability to connect other digital devices to your TV — from DVD players and digital media recorders to game consoles and set top boxes. The winners during this transition were the companies who moved with the changes in technology and consumer demand.

Another huge shift in consumer entertainment and lifestyles is happening today with the emergence of Internet content, including after-air programming from broadcast networks, home-made videos and Web channels, delivering a rich variety of specialized content and Internet-driven experiences that shape the lives of consumers.

Video on the Internet is very exciting, but something is glaringly absent: the digital TV. There is a gap between the TV experience and the Internet.

The irony is that many media companies share a vision of Consumer Electronics 3.0, the convergence of the Internet with the TV experience. Networks now stream after-air programming over the Internet, and movie studios also participate by making at least some of their movie libraries available for download over a variety of services.

To this point in our evolutionary story, most Internet content is delivered to the PC in the den, and not to the digital TV in the living room. With the emergence and popularity of Internet content, two digital entertainment ‘islands’ have grown up in the home — the PC and the TV. Intel conducts extensive social science research on consumer behavior and technology, and what we are finding is that people all over the world like their TVs for their simplicity and reliability. They do not want a PC somehow jammed into the TV.

At the same time we are also discovering that many viewers use their PCs for Internet access while they watch TV. They might be looking up something about the actors, or information on the hot new car in a show, or, like my daughter, sending instant messages to friends. What this tells us is that many Internet experiences are perfectly compatible within the context of TV viewing.

We have the technology to bridge between these PC and TV islands, specifically TVs and set top boxes designed to enable the transition to Consumer Electronics 3.0, the era of Internet-connected CE.

This is a unique moment in the history of the consumer electronics industry. Technology and consumer behavior are intersecting in the living room, and this creates opportunities to build new business models, new partnerships and new consumer experiences.

We can accomplish this by combining the best of the Internet with the best of mainstream media, and consumers are ready for new connected usage models. In fact, if we survey consumer trends, we find they are actually a little ahead of the industry when it comes to creating these experiences.

Significant numbers of consumers already watch Internet-based TV content. According to the Conference Board and TNS, around 16 percent of US households watch TV broadcasts online¹. That content comes to these consumers when they want, wherever they are, and they have a great deal of control over it.

We also find that this notion of controlling the TV experience influences viewing habits of more traditional fare. The Nielsen TV rating service found that 42 percent of broadcast primetime viewing occurs through some form of DVR playback². Time shifting is now a standard experience in consumer video, because consumers want control.

What this means for the CE industry is that the concept of “anytime, anywhere” viewing — what we once thought was the ideal for consumers — is now giving way to something much more pragmatic: context-based viewing.

Wherever you talk with people around the world, you find that the living room context is relaxed and communal. Family and friends mix their interests and passions together in the living room. Consumer Electronics 3.0 offers new ways to extend that relaxed, communal experience by delivering new interactive applications and services to the TV.

Games, karaoke, security, video phone and photo sharing are just some of the usage models that are attracting consumer interest. It is important to remember that this context is not about the Internet reaching into the living room to crowd out the TV experience. On the contrary, it is about the consumer selectively bringing Internet-based content and services into the living-room context.

It is easy to imagine other Internet-based services that could appeal to consumers. It might be choosing what news ticker you want at the bottom of your TV screen. Or maybe weather conditions are important. The Internet serves up that information any time of day. Financial updates appear in real time — so you can keep track of your personal stocks as you watch your favorite programs.

As consumers, we all want more content choices and greater personalization of our TV viewing experience. And we want it in a living room context that does not isolate us, but keeps us in contact with our family, friends and the rest of the world.

Enriching the TV viewing experience with the Internet will require compelling new service offerings, easy-to-use navigation tools and the advertising model to pay for it all.

Providing consumers with new choices means helping them navigate to what they want, without radically disrupting the control models they already know. In other words, there can be no mouse or keyboard in the living room. The remote control needs to remain the main navigation tool.

A second essential ingredient is the user interface itself. It must keep the programming center stage while presenting choices related to the consumer’s context, and integrating it all together smoothly. Linear broadcast content, Internet content, and personal content from many sources all need to be accessible from the big screen.

Service providers have already evolved both the remote control and the UI as the world of TV has expanded to support new devices and services. Context-based viewing will require continuing evolution, and Intel and others have been active in finding solutions.

Combining broadcast, broadband and personal content requires the power to move beyond simple menus and navigation, to control multiple connected devices and categorize the content from all available sources.

Navigation must be expanded, and content should be grouped for easy access. Internet search and browse capabilities must be integrated, and all of these elements must be powered by 3D graphics for full consumer engagement and content management.

Figure 1. The first-generation menu-based interface shown at left was designed to control just a single input. The prototype fourth-generation TV user interface, on the right, provides viewers with controls over multiple inputs. It involves the integration of Internet search and browse and multiple windows with 3D graphics panes. (Source: Intel)

For example, most consumers are already familiar with the idea of using different graphics panes to control different things on the screen, such as consulting the program guide while watching a show. It should be possible to smoothly extend that UI format into the 3D environment.

The first competitors to get the UI right will have a tremendous advantage in the world of Consumer Electronics 3.0, because beneath this usability model is a set of business models that make new experiences possible.

Whatever role you play in the CE industry, potential new partners and revenue streams will be all around you as we move into the third generation of consumer electronics. Consumers will become active contributors to the value of these partnerships – if we respect their privacy and give them good value in return.

For example we could adopt the ‘recommender’ model, similar to the systems now used by major online retailers. Service providers could alert history buffs to new documentary programs and then provide links to explore further content. In my view, we are moving toward a world where TV-oriented marketing is something that consumers will consider a surprise and a delight, rather than an annoyance.

The ability to collect click-through data using the TV can support powerful new advertising models. For example, ad telescoping is gaining popularity, because participants make more money as consumers guide themselves through the investigation and consideration process.

The standard 15 and 30-second ad formats are already moving to pre- and post-roll spots that leave the content uninterrupted. Advertising “minisodes” provide 5-minute promotional spots designed to build on the popularity of program content.

New UIs can extend that concept even further by providing separate content and advertising graphics panes, in much the same way that cable programming guides work today. When a product message comes around, the ad pane could amplify that message and provide ways to get more information. The consumer might pause the content to look at the advertising option or put the ad in a queue for later viewing.

The set top box already provides the ramp between the TV and the cable network, and the next generation devices can provide the bridge that lets consumers bring the Internet into the living room. Currently, the majority of installed STBs are underpowered from a performance and business model perspective. Today’s box does only what is needed in the current model, at the lowest possible cost.

To harness the vibrancy of the Internet and frame it for the TV, set top boxes need to be redesigned to provide higher performance in three areas:

• The next generation of boxes will need added processing performance to run graphics-intensive interactive applications and 3D UIs, and new boxes will need the compute power to run the multimedia and Internet applications that in turn will drive new business models.
   
• Consumers will expect greater interactivity from the Consumer Electronics 3.0 transition, and the computing power must be available to deliver that interactivity.
   
• Independent software vendors will port applications and multimedia tools to the set top box, and the platform will need to provide the performance headroom to expand the range of interactive applications that can be downloaded to the device in the future.

This capability will enable service providers to upgrade set top boxes in-place, without changing the hardware. New revenue-producing applications will be downloaded over the network, quickly and cost-effectively, helping drive ARPU and maximize subscriber loyalty. All of these possibilities start with the next generation set top box, and Intel is actively pursuing the platform technologies to make it a reality.

If you are an OEM, you get a new generation of device to sell. But that is only the beginning. The next generation set top box opens the possibility of recurring revenue beyond the device acquisition. You have the opportunity to build brand equity with consumers by selling IP-based services through retail online channels. None of that was possible in previous generations of set top platforms.

This new generation of set top boxes creates opportunities for others in the TV value chain. If you are an Internet content or service provider you can put your brand on another screen in the home – the TV.

By enabling service providers to offer cost-effective downloads of new applications and services, next-generation set top boxes help providers generate optimal return on investment with reduced capital and operating expenses. Service providers will be able to push new services created by a larger group of third-party developers. As we have seen, the new generation of set top boxes provides the foundation for “click through” revenue streams, and new opportunities in the advertising model that have not been available before.

Similarly, media content companies will be able grow their audiences in new ways, providing new types of content experiences through the merger of TV programming and the Internet.

Fortunes are won and lost during technology transitions like the one we are now entering. The move from Consumer Electronics 1.0 to 2.0 occurred before our eyes, and we are now on the threshold of the transition to Consumer Electronics 3.0.

The Internet is already an entertainment medium on the PC. We now need to bring the richness and creativity of the Internet to the TV, the traditional entertainment platform in the home – and Intel is now developing the next generation set top box platform technologies to make it happen.

Kids growing up in the world of Consumer Electronics 3.0 will have far different memories of TV than we did. They will still kick-back on the sofa, and they will spill popcorn on the floor like we once did, but their TV entertainment experience will be virtually limitless.

People are ready for new ways to enjoy their TVs, and we all win when we provide consumers with what they want. By working together, service providers, content providers, OEMs and technology companies can reinvent the TV experience for generations to come.

1) Consumer Internet Barometer, Trends in Usage & Attitudes, press release, www.consumerinternetbarometer.us/press.cfm, Oct. 15, 2007

2) The Nielsen Company, May 31, 2007

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