It seems that technology triggers are often accompanied by the hype of future potential benefits, while the real value is elusive and slower to appear than industry journalists, analysts, or pundits would like, but I am going to lay out 10 scenarios that will develop in this still nascent industry during 2013.
1. The "digital land grab" continues, marked by consolidation, failure, and improved user experiences.
Starting with a safe-to-predict subject, 2013 will certainly unveil more apps whose business models literally won't pay to keep the lights on and some which will reveal areas of early promise where investors are willing to double down on their bets to consolidate consumers or distribution. I would expect consolidation efforts to continue to be focused on acquiring larger consumer audiences and for new efforts to be focused around distribution and advertising networks. I also wouldn't rule out "feature capability" acquisitions as the ecosystem battles begin to heat up (see 9 and 10 below). The failure areas will be marked by either poor consumer experiences or lack of utility (ie before you can worry about implementing a profitable business model, there has to be a reason why ordinary consumers are willing to download and use your app). Want a view into who I think the most likely successful apps are by consumer use segment? Come join us for the conversation at CES on January 7th where I will reveal my view of the leading second screen companion apps to Discover, Control, Share and Enhance your TV viewing experience. Or get the 250-page report from www.2ndscreensociety.com/research.
2. Social feeds will be a feature, not the experience.
While I do believe the hype in the press will continue to rage around how many social impressions were created during a show or event, I believe app developers will continue delivering strong social features with enough reach and consumer utility to complete the social experience online. After all, for the last 50 years we have been gathering to experience entertainment together, then gather around the water cooler to discuss our impressions, and finally asking each other to recommend content that is worthy of our future time investment. As apps further develop functionality along these 3 social sharing axes, consumers will gravitate to the utility of the experience as long privacy and social connectivity is given the respect it deserves--consumers want to control when and how their preference for viewing are shared.
3. "Discovery" will become a household word.
Pay TV operators (affectionally called MVPDs seemingly everywhere lately) will make a big push into transforming the experience of hundreds and millions of households across the U.S. and Europe by offering viewers better user interfaces to search for and discover new video content. While the grid guide will exist for long into our future, better user experiences will emerge for the 3 most common use cases when sitting down on the couch:
1. I know what I want to watch--just help me find it and play it.
2. I just want to kill some time--show the best options for me right now.
3. I really want to watch something interesting--help me find something worthy of my invested time.
Look for B2B firms like Digitalsmiths, ThinkAnalytics and Jinni to begin to power these Pay TV Operator experiences while second Screen apps like NextGuide, BuddyTV, and Matcha trying to deliver cross-platform experiences for those same consumers, combining Pay TV and OTT together in a single Discovery user experience.
4. Tablet and smartphone usage reports will become about activities related to the TV.
It seems every survey about which we read in 2012 discussed what percentage of smartphone and tablet owners were using their devices while watching TV. Now that there have been enough reports produced by diverse and reputable firms, you will start to see them focus on what really matters to everyone in this ecosystem -- the amount of second screen activity related to the first screen. Expect to see them focusing on a few primary activity sets related to future revenue streams:
- To Control. While perhaps the hardest to monetize, this is the most important feature for device makers and those hoping to win the digital video ecosystem war (see 9 and 10 below). Recurring app usage starts with utility.
- To Discover. Trying to find content to watch, with many in the ecosystem seeking to influence that decision through some form of advertising.
- To Enhance. This will come in the form of a) searching for or receiving additional (perhaps synchronized) related information to the program and b) second screen-based commerce (a subset of M-Commerce). Just a few weeks ago, Nielsen reported that of consumers using a tablet while watching TV, roughly 40% are using them to check information related to the program and 29% of 25-34 year olds are shopping while watching TV.
- To Share. Already hyped in the press to the nth degree, expect to start to see attempts to measure how impression affect viewership across demographics and how they influence others decisions to view content.
5. Studios and networks save money, apps grow in 2 directions.
There have been many conference panels with executives crying that consumers will never download hundreds of different apps for their viewing experiences (at least not with any scale), while at the same time arguing "one app to rule them all" is equally unappealing as branded TV shows, sporting leagues, major events and movies seek to differentiate themselves and leverage their valuable brands. Progressive changes in the ecosystem during 2013 will occur along video distribution channels, with film studios and networks finding ways to reduce the costs of deploying apps with real consumer reach while preserving brand value (shared platforms). They will also create alliances with independent 3rd party apps that support their brand values to extend their reach to consumers--because without reach, neither advertising nor brands cannot be monetized. These content creators will focus on Enhancing the viewing experience and improving the Social tools designed for sharing and extending their content brands. Content distributors, including Pay TV Operators, OTT video providers, game consoles, and even CE device makers, will focus on Discovery and Control, working hard to affect their fortunes in the ecosystem war (see 9 and 10), while they will power generic Enhanced viewing experiences and provide a platform for customized viewing experiences. The more the distributor can control the digital video ecosystem, the more value they will create later in both advertising and commerce, and of course in distributing content (not a money making proposition itself).
6. Gamification will begin to lose favor with the press and consumers, only to begin to add value again towards the end of 2013.
Like Farmville and its creator Zynga, games as second screen experiences during a show have demonstrated both growth and reach, but the fickle consumer will quickly tire of this revision 1.0 marketplace for second screen games. However, as those companies react to consumer engagement, they will begin to deploy enhanced viewing experiences that offer multiple ways to engage with the show, movie or sporting event, allowing consumers to engage at intensity levels that fit their viewing style and interest. As this evolution develops and consumer penetration of tablets and second screen march upwards, gamification of second screen experiences will drag itself out of the trough of disillusionment and up the curve to providing both consumer and business value.
7. Amazon and Ebay will engage in a battle for the Second Screener's M-Commerce.
Despite the many naysayers in the industry, commerce on smartphones and tablets in the living room is starting to gain momentum (see item 4 above), and the prize for capturing additional engagement related to the viewing experience is huge. Amazon, with its Kindle Fire and Amazon Prime products, has been experimenting with a feature they call "X-ray vision", allowing the consumer to see which actors are on the screen during the scene. Expect this to quickly develop into object and contextual relationships for Amazon's real business--commerce. Ebay's "Watch with Ebay" app will continue to get better as well, leveraging metadata at a scene level rather than its current show summary level to improve the shopping experience. With conversion rates so low in M-Commerce, any incremental uplift in this already sizable market is valuable to retailers that have the breadth and scale to deliver across the many different kinds of viewers and content genres that make up the TV ecosystem.
8. Cloud-based digital lockers will finally be taken seriously by consumers and the rest of the ecosystem.
As tablet penetration continues to march upwards in consumer homes combined with digital video services that provide portability, digital video ownership will begin an upward trend. Consumers will need tools to manage their multi-service collections, across iTunes, UltraViolet retailers and Amazon. Expect the first Discovery features to begin to deploy from Vudu, Amazon and Flixster that not only analyze your Facebook likes of content and the results of your sign-up preference surveys, but also your actual video ownership. Innovative third party apps like NextGuide and Matcha which are already analyzing your Netflix and Hulu history and queues and Facebook likes will incorporate this data to improve your experience with them and to give you a digital video library management feature. After all, when faced with "I want to kill some time", the majority of consumers are implicitly asking for the recommendation to include content from any catalog subscription services they already pay for (cable, Netflix, etc) and their currently owned library (until recently, on the DVD shelf). Expect Pay TV Operators and OTT Video Providers to recognize this consumer need as well, and to begin to offer access to "owned" titles within their ecosystem as well, to attract consumers to use their UI more often without crossing the chasm to offering competing OTT services. I would expect Comcast Xfinity, DirecTV and Netflix to lead the way forward here.
9. Device makers will jump into second screen with both feet.
Spurred on by Microsoft's SmartGlass platform on Xbox, device makers from gaming consoles to TVs and Blu-ray players to smartphones and tablets will start publishing SDK's to access their system to both content creators and app developers alike in an effort to secure themselves in the coming ecosystem war. Major CE brands like Samsung and LG will work very hard to give consumers a better living room experience with their devices than in a mixed-device world, working to create improved cross-device brand loyalty. Gaming consoles will work hard to capture your video viewing time to become the point of living room convergence for digital video. Expect Pay TV Operators to be the last to recognize and react to these forces, continuing to hold their device APIs close to the vest until iTunes and Netflix both deploy their second screen ecosystems. Once they recognize the size of the threat, they will leverage their Discovery UI to be the entrance into a second screen ecosystem for their content world.
10. ACR and the battle of the digital video ecosystems.
In mid-2012, Xbox launched a second screen ecosystem called SmartGlass which heralds a new chapter in the industry that has yet to be fully recognized by the majority of players in the ecosystem. ACR, or automatic content recognition, allows the second screen to be aware of the content on the first screen. While the current experiences deployed on Xbox's SmartGlass create an Enhanced viewing experience for movies, TV and sports (NBA's Courtside), it also provides a better user experience to Control the first screen and an entry point platform for Discovery. However, the powerful Trojan horse here is that the ecosystem which can provide precise information about the content being viewed has two real monteizable advantages against their competitors: they can combine demographics with viewing context, creating 1) more valuable ad inventory and 2) more easily convertible M-Commerce experiences. Expect iTunes, Hulu and Amazon to all recognize this quickly and react with their own SDKs in the short-term. Keep in mind the simplicity of an "OS-level" Second Screen ecosystem--only one app ever needs to be downloaded by the consumer to gain all of the benefits. You can see a more detailed discussion on this very important topic at CES in the Civolution Vision newsletter (also published in this blog on January 5th), or exposed in much more detail in the 250-page research report to be published at CES entitled "The 2nd Screen: Transforming video consumption by enabling companion experience applications and content everywhere."
So, 10 major trends to look out for in second screen over the next 12 months. Looking back on my New Year's Eve blog from 2011, I certainly made at least one major mistake in my forecast for 2012--I seriously underestimated the pace and size of the second screen market in total. Let's hope that trend continues for all of us, and especially for the second screen companion experience market size that we are estimating to grow to $5.5B in 2017.
Happy New Year!
Chairman, 2nd Screen Society
President, the Intersection