Optimizing the Smart TV Experience

A Parks Associates Whitepaper Developed in Cooperation with Applicaster All rights reserved | www.parksassociates.com | © Parks Associates Evolution of Video intheHome Experience theSmart Optimizing TV and connecting householdsacrossand connecting theglobe. “stay-home” state brought crisis, onby videohasplayed theCOVID-19 acentralrole informing, inentertaining, The useofvideohascontinuedto evolve over acentury. From nearly erathrough thebroadcast-only thecurrent that better attracts,engages, andretains videocustomers. andcreatehelp drivecontent anoptimal userexperience discovery TV appecosystem integratingto avideooffering withinthesmart of alsoaddresses theimportance experience. It state ofthe smart TV anddisruption on videoconsumption,andthefutureof COVID-19 the forefront experience, theimpact ofthein-homevideoviewing to further home, therole oftechnology inpushingthesmart TV This whitepaper inthe highlightstheevolution ofvideoandthe TV connected homeandconsumer viewing. continuesusage, to thesmart bethecenterpieceTV ofthe Through technological advancements andskyrocketing half ofUSbroadband householdsowning at leastone. isnow amainstream with The product smart TV videodevice.-connected 7 in10USbroadband householdsown at leastone orbroadcast viaantennas. services to OTT TV traditional pay-TV transitioning primarily service, US broadband householdscutthecord ontheir From Q12019to Q12020,more than6million decreased to 62%. services inQ12020,while adoption oftraditional pay-TVservice 76% of USbroadband to householdssubscribed anOTT

of pay-TV services. of pay-TV services. anincreased use 1in5reporting and nearly increase inusageofonlinevideoservices anUS broadband householdsreporting unprecedented levels, 3in10 withnearly driven in-homevideoconsumptionto orders andwork-at-home mandates have routines ofallconsumers. Shelter-in-place thelifestyles andfundamentally impacted has healthcrisis The COVID-19

© Parks Associates

more than

Six Stages of Video Evolution At the center of the at-home video ecosystem is the TV, which has evolved to become the hub of the connected home. Six stages of disruption and highlights of each era showcase the evolution of video and the TV.

Broadcast Narrowcasting

On-Demand On-the-Go and App OTT Content COVID-19

1920 19401930 1950 1960 1970 1980 20001990 20202010

Stage 1: Broadcast Era Stage 2: Narrowcasting Era • Video signals are first transmitted over-the-air to • Video signals are transmitted to a localized set of reach a broad audience via TVs households based on geography and target • In the US, the emergence of the “Big 3” broadcast audience via cable networks: ABC, CBS, and NBC • Paid cable channels such as HBO offer exclusive • Through live newscasts, broadcasters are able to premium content deliver news and information nationally • Turner, through CNN, expands the nightly newscast to the 24-hour news experience that changes how consumers news and information

Stage 3: On-Demand Era Stage 4: On-the-Go and App Era • VCRs, an early example of a component device, allow • , a placeshifting streaming device to recording of television programs to later connect to at-home video devices while on the go, • Modern internet delivers information and is introduced entertainment online, and YouTube emerges, as • With a sleek design, multiple features, and ease of does iTunes video marketplace use, the iPhone transforms the video experience into • VOD platforms, DVRs from TiVo, and on-demand OTT an on-the-go app-based first environment services deliver more control to customers to access • Smart TV operating systems, such as Android TV, video content when, where, and how they want it integrate advanced online video features into an • Smart TVs integrate online interactive features for app-based unified platform to power at-home streaming and other activities online video experience and better democratize app development Experience Optimizing the Smart TV

Stage 5: OTT Content Era Stage 6: COVID-19 Era • Explosive OTT service growth spurs proliferation of • Shelter-in-place orders and work-at-home mandates original content from a variety of online sources force consumers to be homebound to consume video • Digital-first productions create content specifically • Video consumption levels skyrocket across various for online platforms (e.g., Funny or Die) devices and services • Exponential increase in content drives the use of • Smart TV remains the primary video device and the apps and connected entertainment devices, such gateway to the connected home as streaming media players and gaming consoles • Original content production comes to a halt with smart TV as hub

© Parks Associates All rights reserved | www.parksassociates.com | © Parks Associates Technological Advancements inSmart TVs Other important advancements in smart advancements important insmart Other haveTVs evolve beenmadeto further thedevice. Dolby Vision, Atmos. andDolby high definition. Advanced audioandvideocapabilitieshave alsoemerged, includinghighdynamicrange(HDR), have beengreat madeinvideoquality, strides whichhasprogressed from standard definition to 4Kandnow 8K Technological development andapplications. advancementscontinuallypushthesmart ForTV’s example, there App Stores HomeScreen andSmart TV Streamlined App Development Process Operating Systems development as well as content discovery throughout the smart TV ecosystem. throughoutdevelopment aswell thesmart ascontent discovery TV The pushofappsto theforefront through appstores andthe homescreen hasaccelerated design and along thebottom ofthescreen representing real prime estate. hasnow becomeaprominent placeto launchapps,of thesmart withhigh-profile positionssuchastherailTV appscanbebetter promotedIndividual andaccessed through appstores andmarketplaces. The homescreen management over thecourseofentire applifecycle, from submissionthrough updates. launchto software solutions. others usingthird-party These provide stores astructuredenvironment andmarketplaces to support hasbeenthedevelopmentA majoradvancementfor ofmanagedappstores smart from ,TVs LG, and been integrated into theprocess to provide amore seamlessappdevelopment experience. controls andoperation,stability,Quality for to functionality andconformity have content ratingrestrictions to develop andmanageapps. (SDKs) encouragecompaniesfrom andexpertise alllevels oftechnical ability kits The appshasbecomemuchmore development process streamlined. for development software smart TV TV Store ecosystem to managevideoappsandotherapplications. advantageoftheintegrationParticipating manufacturersutilizingAndroid Play couldalsotake oftheGoogle TV ofmanufacturersandplatforms. across avariety solutionthatcouldbewhite-labeled system anduserinterface It representedbecause itwasnottiedto orfamilyofdevices. box aspecificdevice operating anout-of-the recommendationuniversal search engines. anddata-driven The launchofAndroid wasespeciallysignificant TV operatingsystems capabilitiesof are withadvanced alsoenhancingthecontent discovery Smart TVs TV viaastreamlined platform thatisaugmentedfunctionality updates. withsoftware home. Android TV, andFireTV, amongothers,TV, allow seamlessintegration ofadvancedfeatures and The emergence ofthetelevision operatingsystem canbeutilized hasrevolutionized inthe how thesmart TV Voice Control The integration of voice control capabilities into smart In Q1 2020, 30% of TV owners TVs via personal assistants such as Alexa, Assistant, and others has been a major step forward. This report their most used TV integration eases the discovery of video apps and their has a voice-enabled remote associated content. The voice-enabled has become one of the more useful and successful methods control, voice assistant, or of easing and augmenting the user experience. can be controlled by a smart The integration of voice control in TVs through a variety of speaker versus 10% reporting methods has increased significantly. voice controls in Q1 2019.

Other Advancements The smart TV has closed the gap with mobile devices for a better app-based video experience through a variety of other developments. The number of apps and associated breadth of features continues to increase. The introduction of HTML5 browsers has optimized apps to run on the smart TV and better render the apps. Remote controls from a variety of sources, including pay-TV services and smart TV manufacturers, have integrated dedicated video service buttons, giving consumers more power to choose apps immediately at TV launch. Finally, the co-viewing experience between mobile devices and smart TVs has been better integrated to promote more seamless cross-device engagement with video content.

Consumer Attitudes Towards Smart TV Features Video consumers continue to value the benefits of smart TV features. Advanced audio and video features such as 4K Ultra HD, 8K Ultra HD, HDR, and Dolby Atmos are considered more essential in the purchase process for buyers. However, newer features such as integration with smart home devices and voice control are gaining momentum.

Important Features when Buying Current Smart TV US Broadband Households Using Smart TV Most Often to Access Content Online and Having Speci ed Features

Must Have Nice to Have Do Not Want

4K Video/Ultra HD High Dynamic Range (HDR) Works with a TV Antenna that Receives Local Broadcasts 8K Video Dolby Atmos Dolby Vision Optimizing the Smart TV Experience Optimizing the Smart TV Apple Airplay, Airplay 2, or Built-in Ability to Control and/or See Information From Smart Home Devices A Remote Control with Voice Search Enabled The Ability to be Controlled by a A Built-in Voice Assistant that uses the Device’s Microphone 0% 25% 50% 75% 100% % Rating at Speci ed Level of Importance © Parks Associates

One-third of US-based smart TV purchasers cite newer features such as voice control and smart home device integration as “must-have.” All rights reserved | www.parksassociates.com | © Parks Associates continue to accelerate. to search for content,TV ofthedepthandbreadth ofavailable theimportance streaming videoappswill valuable.of available As streaming more videoandaudioappsisalsodeemedvery consumers usethesmart While more standard considerationssuchasscreen size, theamount brand, are andvideoquality mostimportant, Finally, ofavailable amongconsumersplanningto appscontinuesto smart buyanew rise TV. theimportance providesof theappstore, considerablevaluefor itsfeature thesmart TV setamongat-home videoconsumers. isbetter increased across allmeasuredsmart features.TV From easeofnavigationto to thesize content discovery andastreaming mediaplayer,Among householdsthatown bothasmart TV thepercentage whobelieve the continuesThe to smart improveTV itsperceived value across ofkey avariety features andtechnologies. Integration Products withOther Ability to Control Smart Home to Control DevicesAbility Smart and Appliances US Broadband Households Owning Both Streaming Both US BroadbandPlayer Media HouseholdsOwning andSmart TV Available Streaming Video and Audio Services Apps Quality/Reliability Connecting to Internet Connecting Works with Smart Speaker DisplayWorks withSmart or Smart Ease ofNavigating UX Attractiveness ofUX Attractiveness HDR/High Dynamic Range Picture Quality Range Picture Dynamic HDR/High High Resolution/Dolby Atmos 3D Audio Features ispreferred where Smart overTV SMP Remote Control Content Search Size Voice Control Finding Apps Number of Audio/Video InputsNumber Audio/Video of Top Purchase Considerations for Future TV among Households with Both Devicesamong Households withBoth Voice-controlled RemoteVoice-controlled % Valuing Smart MoreTVs While Comparing withStreaming Players Media US Broadband HouseholdsIntending to Buy TV Built-in Voice Control 0% 4K/Ultra HD Quality 4K/Ultra 8K Picture Quality 8K Picture Curved TV Screen TV Curved OLED Screen Screen Size Screen Brand 10% 0% 20% % Ranking Among Top Among Ranking % 5 35% 30% © Parks Associates 40% © Parks Associates Q1/2020 Q1/2018 70% Optimizing the Smart TV Experience © Parks Associates © Parks Tablet from 2017. nearly 40% from US broadband households households US broadband average on consuming are of than 20 hours more weekly on video content an increase TV, the smart of Q1 2020 Q3 2017 US Broadband Households US Broadband TV +39% Between Q1 2019 and Q1 2020, consumers subscribing to an an subscribingBetween to 2019 and Q1 2020, consumers Q1 OTT six million video service roughly equal to 76%, jumped to an OTT subscribe to households that US broadband more service before. than the year

5 0 The COVID-19-related transition of work-at-home and shelter- of work-at-home transition COVID-19-related The TV has pushed usage of the smartin-place never-before-seen to devices. other video and further it from levels separates

Total Average Video Consumption by Platform (2017-2020) Platform by Consumption Video Average Total 15 10 25 30 20 Average # of Hours Per Week Per Hours of # Average The COVID-19 crisis has dramatically changed how households are consuming video from both a device and both a device and video from consuming COVID-19The crisis are households changed how has dramatically lift as states service do so even shifted continue to dramatically and will habits have Consumer perspective. orders. shelter-in-place The TV been the primaryThe has always consume video device to during daily lives this the disruption to However, in the home. deviceglobal pandemic has pushed the video further the to of the connected home ecosystem. front survey Associates data based on Parks consumption level, This 2020, as the pandemic was of March weeks the last three from than double its first stage in the US, is more through moving than weekly and more the average consumption on times that of mobile devices. five Impact Consumption on Device Impact of COVID-19 on Video Consumption Video Impact on of COVID-19 Nearly one-third of US broadband households cite a smart TV as their primary streaming video device, nearly double the rate of streaming media players and computers. Primary Methods of Streaming Online Videos (2019-2020) US Broadband Households Q1 2019 Q1 2020 40%

20%

0% Smart TV Streaming Computer Tablet Gaming Media Player Console

© Parks Associates Impact on Service Consumption The COVID-19 crisis has also impacted which services homebound households are using. Nowhere is the impact more evident than with OTT video services. OTT service consumption in the US has increased across a variety of business models in Q1 2020. For example, use of subscription-based services such as has spiked 8 points to 53%.

Consumer usage of different OTT service types has also increased.The spike in service consumption is forcing all providers to develop and maintain apps on a variety of connected devices, particularly smart TVs, to better compete and meet consumer demand.

OTT Service Use by Business Model (2018-2020) US Broadband Households Q3/2018 Q1/2019 Q3/2019 Q1/2020

90%

60%

30% % Using Speci ed Type of Service Type Speci ed % Using

© Parks Associates | © Parks All rights reserved | www.parksassociates.com 0% OTT Advertising-based TV Everywhere Pirates Freemium Watch Video Transactional Subscribers Services Users Previously Purchased © Parks Associates The increase in the OTT subscription rate has led to a further widening of the gap between OTT subscriptions and the adoption of traditional pay-TV services from cable and satellite providers. OTT adoption now outpaces pay-TV by nearly 15 percentage points.

Penetration of Traditional vs. OTT Video Services US Broadband Households OTT Subscription Traditional Pay-TV Service

80%

70%

60%

50% Q1/2017 Q1/2018 Q3/2018 Q1/2019 Q3/2019 Q1/2020 % US BB HHs Subscribing to Speci ed Service% US BB HHs Subscribing to

© Parks Associates

Subscriber losses from traditional pay-TV services have been taking place for years. The severe economic impacts The smart TV is a multi-purpose of COVID-19 are exacerbating the cord-cutting issues device that can deliver a faced by traditional providers and their higher-priced traditional pay-TV experience offerings. Consumers are putting their personal finances to much tighter scrutiny to weigh which services to keep as well as OTT, thus ensuring and which ones to cancel, extending the gap between its place at the forefront of the OTT and pay TV. in-home video experience no Though traditional pay-TV adoption continues to wane matter the source. and lose subscribers to OTT, it is still a viable method to view video for the majority of US households.

The continued rise of the smart TV for delivering video content during this challenging time is an incredible opportunity for service and content providers to create, develop, and maintain video apps that are optimized for

the smart TV. The jump in service consumption is also an opportune time for service providers to evaluate which Experience Optimizing the Smart TV business models and approaches are best to grow their subscriber and revenue bases.

As consumer appetite grows, providers must integrate their offering within the smart TV app ecosystem in order to attract, engage, and retain households that are starved for video content. Optimizing the Smart TV Experience better signal reception signal better 4K HDR video support and DTS-X audio via Dolby Atmos immersive on-demand video enriched content access to interactive emergencyan upgraded alert system • • • • • • This new set of standards for over-the-air transmission of broadcast television has several has several television over-the-air of broadcast transmission for of standards new set This experience: audio and visual and customizable an interactive deliver benefits that NextGen TV does require a separate tuner or an antenna and a TV which could TV Next and a with a built-in tuner or an antenna NextGen Gen a separate tuner, does require 3.0-enabled ATSC developing already are and TV smart LG, be a boon for Samsung, manufacturers. will potentially of the technology nature and the customizable abilityThe add on key to features devices. thus pushing the of component devices, purchases the need for and reduce lengthen the product lifecycle TVsnext of smart wave further the fore. into capabilities of the in-home search personalization and universal drive the Data and analytics will continue to but makeTV. An individual video app can currently recommendations, content video experience via the smart TVa smart within individual apps unless that on consumer behavior cannot make based recommendations that has One area push the value of the device forward. change to will need to This app is open on the device. if example, for TV’s the smartgained traction Currently, of data and analytics through is use . TV and trigger content search universal their Apple tvOS on device, for content will allow for a user searches choose and then the user can content the desired all the apps that feature showing by recommendations view the content. launch to which app to become have While push notifications role on smart prominent TVs. a more will play notifications Push TVs fully on smart has not been utilized operating this technology beyond on mobile devices, ubiquitous to download, to notify the user of new apps use of push notifications for is the potential There updates. system the interactivity and other alerts of the user improve to new app features, recommendations, personalized experience. The expansion of the market footprint for ATSC 3.0 or NextGen TV, originally launched in South Korea in 2017, TV, launched in South originally in 2017, Korea or NextGen 3.0 ATSC of the market expansion The for footprint TV NextGen launched Vegas In in Las stations will continue in earnest fact, near future. in the broadcast several May 2020, with expansion in other marketsin late planned soon. • • • • This current era, marked by the COVID-19 pandemic, has accelerated in-home video consumption to levels never never levels era, marked in-home video consumption to current This has accelerated the COVID-19 by pandemic, TVWhile the smart now, of the home entertainment years has been a mainstay seen. many experience for before and interoperability and the improved apps, of video the continued proliferation advancements, technological connectivityTV with other devices heights in the home. has pushed the smart greater even to TV the smart will normal,” “new a to era the COVID-19 from emerge the world households across As be the heartbeat to home. of the connected continue The role of the smart TV will continue to evolve through the COVID-19 crisis and beyond in order to remain TVremain of the smart to COVID-19 the role crisisThe in order through beyond and evolve continue to will TV as the smart watch advancements to several are continues its There in the connectedhome. center and front development. Conclusion The Future of the Smart TV of the Smart Future The All rights reserved | www.parksassociates.com | © Parks Associates About The Author About The Entertainment content and services, consumerbehavior onemerging content andservices, technology markets INDUSTRY Entertainment EXPERTISE: countries acrosscountries theglobe. ApplicasterNew hasofficesin Miami, Jose, San London,and York, Tel Aviv, andsalesoperationsinmany other their audiences’ ofchoice. devices all theway to monetizing, thebrandto Applicaster andextend helpscompaniesbuildbetter userexperiences mediaappstrategy.architecture withinwhichcustomers canbuildandscaletheirmulti-device From prototyping Applicaster’s marketplace, SaaSplatform, Zapp,and extensivepartner provides modularplug-in anopen-ended, across mobile, andconnected appdesign devices connected anddelivery to-consumer TVs. With itsopenAPIs For more information, usat972.490.1113,[email protected]. visitparksassociates.com orcontact control systems andsecurity. consumerapps, consumerelectronics, advancedadvertising, energy services, management,andhome support and gaming, digital Broadband homenetworks, health,mobileapplicationsandservices, andtelevision services, The company’s includestheBroadband of digital mediaandplatforms, expertise entertainment Things (IoT), conferences, subscriptions. andannualservice studies, consumerresearch, custom primary research, reports, through market workshops,start-ups executive Founded in1986, Parks Associates creates research capitalfor companiesranging from Fortune 500to small responsibility for any inadvertent errors. foranyinadvertent responsibility United States ofAmerica. ofthisbookmay bereproduced,No part inany form orby any from means, inwriting thepublisher. withoutpermission Printed in the ATTRIBUTION—Authored by Steve Nason. Published by Parks Associates. ©Parks Associates, Addison, Texas reserved. 75001.Allrights DISCLAIMER — Parks Associates has made every reasonable effort to ensure that all information in this report iscorrect. to ensure We that allinformationinthisreport Parks reasonable effort assumeno hasmadeevery Associates Mass Communications fromMass ofFlorida. theUniversity Steve bothhisBSin earned Telecommunication withaconcentrationinBusinessandhisMA in strategy roles includingseveral intheemerging technology andmediaspace. research ofmarket andmarketing over Hebrings in a variety fifteen years experience services. Steve isaresearch director atParks Associates, content and specializinginentertainment Steve Nason,Research Director, Parks Associates specializing inemerging consumertechnology productsandservices. Parks Associates recognized isaninternationally research market andconsultingcompany About Parks Associates

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