Creating a Sustainable Business Model for the TV Industry

Strategic analysis on the Smart TV ecosystem

By MASSACHUSETS IN61WTUTE Eileen J. Park OF TECHNOLOGY

Bachelor of Science JUN 18 201 Ewha Women's University, 2003 LIBRARIES MBA Seoul National University, 2014

SUBMITTED TO THE MIT SLOAN SCHOOL OF MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF

MASTER OF SCIENCE IN MANAGEMENT STUDIES AT THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY

JUNE 2014

0 2014 Eileen J. Park. All Rights Reserved.

The author hereby grants to MIT permission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part in any medium now known or hereafter created. Signature redacted Signature of Author: / ' /MIT Slo'an School of Management May 9, 2014

Certified By: Signature redacted_ Michael A. Cusumano SMR Distinguished Professor of Management Thesis Supervisor

Accepted By: Signature redacted- Michael A. Cusumano SMR Distinguished Professor of Management Program Director, M.S. in Management Studies Program MIT Sloan School of Management

i [Page intentionally left blank]

ii Creating a Sustainable Business Model for the TV Industry

By

Eileen J. Park

Submitted to the MIT Sloan School of Management on May 9, 2014 in partial fulfillment of the requirements for the degree of Master of Science in Management Studies

ABSTRACT

Over the past decades the revolution of electronic devices had a major impact in our everyday lives. The penetration of PCs and distribution of Internet made it easier to communicate with people around the world. The rise of smart phones changed many aspects of our everyday life, the impact ranging from alarm clocks to email consumption to video conference calls. The era of connected devices now trigger a radical change in an area that has not been disrupted over decades - the TV experience. By integrating the Internet into television sets, Smart TVs will allow consumers to use on-demand streaming media services, listen to Pandora Radio, access interactive media, use social networks, and download apps. In light of this industry change, several questions arise from the perspective of TV manufacturers. Can the Smart TV become a platform leader and create a sustainable ecosystem? What is the business model for TV manufacturers and how will they collaborate with other stakeholders? How will the smart TV create value for the customers and not get dis-intermediated? This thesis looks at factors that drive the industry change and identify challenges and opportunities to address. Overall, the thesis provides a strategic direction for television manufacturers.

Thesis Supervisor: Michael A. Cusumano Title: SMR Distinguished Professor of Management

iii ACKNOWLEDGEMENT

I would like to express my sincere gratitude to Professor Michael A. Cusumano for his role as my thesis supervisor. His lectures and insightful feedback on my work contributed to my learning and to a better end product. I would also like to thank Professor Andrei Hagiu of Harvard Business

School who introduced me to the various aspects of platform strategy.

I am thankful to Min Lee at Samsung Electronics who helped me grow professionally and was also willing to discuss his opinions and aspects on the Smart TV platform. I am truly grateful to

Professor Namgyoo Park at Seoul National University for his guidance and support throughout the years. I would like to thank my friends and MSMS crew for their support and great teamwork, making my time at MIT memorable.

Most importantly, I would like to thank my wonderful family for their unconditional love, support and prayers. I would not be able to do this without them.

iv [Page intentionally left blank]

v TABLE of CONTENTS

Contents Page

C H A PTER 1: Introduction ...... 8...... 8 1.1 Research Background and Objectives ...... 8 1.2 Research Approach...... 9 1.3 K ey Platform Concepts...... 9 1.3.1 Platform Definitions and D istinctions ...... 9 1.3.2 Platform Leadership ...... 9 1.4 Sum m ary of Chapters ...... 10 C H A PTER 2: A nalysis of Sm art TV Ecosystem ...... 10 2.1 D efinition of Sm art TV ...... 10 2.2 Sm art TV Background ...... 11....I1 C H A PTER 3: Sm art TV Platform A nalysis ...... 16 3.1 TV Industry Paradigm Shift...... 16 3.1.1 Content Providers ...... 18 3.1.2 Broadcast/CableNetworks ...... 18 3.1.3 N etwork operators(D istributors) ...... 19 3.1.4 Device Manufacturers ...... 20 3.2 Sm art TV Platform Ecosystem ...... 21 3.2.1 Sm art TV Industry Platform ...... 21 3.2.2. Sm art TV Platform Ecosystem ...... 23 3.2.3 Smart TV Ecosystem Overview ...... 24 3.3 Sm art TV Platform Challenges...... 27 3.3.1 Control Over the Platform ...... 27 3.3.2 Control Over the Content...... 28 3.3.3 Control Over the Customer...... 30 CHAPTER 4: Case Study - Strategic Direction for Samsung Smart TV ...... 31 4.1 Sam sung Sm art TV Developm ent ...... 31 4.2 Com petitive Landscape...... 32 4.2.1 Sony Bravia TV ...... 33 4.2.2 LG Smart TV ...... 34 4 .2 .3 Go o g le ...... 3 4 4.2.4 Apple TV...... 35 4.3 Sam sung's Platform Strategy...... 36 C H A PTER 5: Conclusion ...... 41 W ork Cited...... ------...... 43

vi LIST OF FIGURES

Figure Page

Figure 1: Smart TV and Smartphone Comparison...... 11 Figure 2: Internet Penetration R ate...... 12 Figure 3: US Household (M) of 10Mbps+ ...... 12 Figure 4: Global Smart TV Sales and Average Selling Price ...... 14 Figure 5: Smart TV Industry Development...... 16 Figure 6: Traditional TV Industry Ecosystem...... 17 Figure 7: Smart TV Trajectories of Industry Change...... 17 Figure 8: Pay T V N et A dditions...... 19 Figure 9: Impact on Stakeholders with Consumer Adoption of IP-delivered Video Growth...... 21 Figure 10: Sm art TV Ecosystem ...... 23 Figure 11: Smart TV Sales Forecast and US Market Penetration...... 24 Figure 12: Smart TV Players Strategic Moves...... 25 Figure 13: Sm art TV Platform s ...... 27 Figure 14: Available Smart TV Video Content Apps n ...... 29 Figure 15: TV-Internet Connections and Preference of Device for OTT Services...... 32 Figure 16: Global Smart TV Market Share ...... 32 Figure 17: Streaming Device Market Share in US...... 33 Figure 18: Smart TV Alliance Members ...... 34 Figure 19: Google's Business Model ...... 35 Figure 20: Apple's Closed Ecosystem ...... 36 Figure 21: Features used Once/per week by US Smart TV Owners ...... 37 Figure 22: Ambidextrous Organization...... 39 Figure 23: Samsung's Smart TV Platform Architecture Vision ...... 40

vii CHAPTER 1: Introduction

1.1 Research Background and Objectives

Over the past decades the revolution of electronic devices had a major impact in our everyday lives. The penetration of PCs and distribution of Internet made it easier to communicate with people around the world. The rise of smart phones changed many aspects of our everyday life, the impact ranging from alarm clocks to email consumption to video conference calls. The era of connected devices now trigger a radical change in an area that has not been disrupted over decades - the TV experience.

In the past, the TV industry moved along the S-curve through technological innovations from manufacturers. For example, in the 1980-99's CRT TV dominated the market and Sony was the leader. In early 2000, Plasma technology disrupted the market and Panasonic led this change. A few years later, the LCD technology became mainstream and Samsung took over the market. After two years, the market demand soared with the breakthrough LED technology, which led to slim, energy efficient TV sets. However, when the "Smart TV" concept was introduced to the market in 2010, this disruption was more of a feature innovation instead of a technological innovation - bringing the Internet to the TV through devices such as connected TVs, latest generation set top boxes, and connected game consoles.

Integrating the Internet to the TV undoubtedly is changing every segment of the TV industry from content, distribution and devices. The TV is transforming into a potentially powerful platform, therefore market players' must rethink their business models and build a distinctive competitive strategy to succeed in the battle for the living room. These markets require distinctive competitive strategies because the products are parts of systems that combine core components made by one company with complements usually made by a variety of companies. But the future of TV will lie in the hands of those who can change their thinking to master the business of next-generation TV, and not just the technology.

In light of this industry change, several questions arise from the perspective of the stakeholders of the Smart TV industry. Can the Smart TV become a platform leader and create a sustainable ecosystem? What is the business model for TV manufacturers and how will they collaborate with other stakeholders? How will the smart TV create value for the customers and not get dis-intermediated?

The objective of this thesis is to address the underlying challenges and opportunities that various stakeholders face in the Smart TV industry, especially in the case of a manufacture company.

8 1.2 Research Approach

- Apply core concepts of platform leadership and industry platforms to the current TV industry * Analyze market trends and business models related to Smart TV ecosystem * Use case studies, interviews and consumer research to identify platform strategies * Review key issues the Smart TV ecosystem stakeholders are facing - Suggest a platform-based strategy that TV manufacturers must adopt to create a sustainable business model within a platform-centric ecosystem

1.3 Key Platform Concepts

1.3.1 Platform Definitions and Distinctions In this study, the term platform is adopted from the external (industry) platform defined by Gawer and Cusumano. Industry platforms are products, services or technologies that are similar to the former but provide the foundation upon which outside firms (organized as a 'business ecosystem') can develop their own complementary products, technologies, or services (Cusumano & Gawer, 2002). Industry platforms are defined as products, services or technologies developed by one or more firms, and which serve as foundations upon which a larger number of firms can build further complementary innovations, in the form of specific products, related services or component technologies. There is a similarity to internal platforms in that industry platforms provide a foundation of common components or technologies, but they differ in that this foundation is "open" to outside firms. The degree of openness can vary on a number of dimensions - such as level of access to information on interfaces to link to the platform or utilize its capabilities, the type of rules governing use of the platform, or cost of access (as in patent or licensing fees) (Cusumano M. A., 2012).

1.3.2 Platform Leadership To identify the importance of the industry shifting from product-centric strategies to platform-centric strategies the study applies concepts such as 'The 4 Levers' which explains broad categories for platform leadership strategies, and 'Coring & Tipping' regarding strategies to create a platform or encourage a market to adopt your platform. (Cusumano & Gawer, 2002)

The 4 Levers: Firm Scope, Platform Technology, External Relations, Internal Organization- broad categories for implementing a platform leadership strategy

Coring & Tipping: "Coring" is the set of activities a company can use to identify or design an element (a technology, a product or a service) and make this element fundamental to a technological system as well

9 as to a market. It addresses to solve the problem - How to create a platform market where one does not yet exist? (e.g., solve an "essential" industry system problem). "Tipping" is the set of activities or strategic moves that companies can use to shape market dynamics and win a platform war when at least two platform candidates compete. - How to encourage a market to adopt your platform when multiple platforms compete? (e.g. subsidies of one side)

1.4 Summary of Chapters

This thesis consists of five chapters and the following is the executive summary of the main chapters.

Chapter 2: Focuses on analyzing the factors that brought upon the Smart TV era and the impact Smart TV has on the TV industry ecosystem.

Chapter 3: Analyzes the Smart TV platform, value chain and ecosystem. This chapter also illustrates each stakeholder's value proposition and business strategy. In addition, this chapter identifies Smart TV industry key issues on controlling the platform, content, and customers.

Chapter 4: Case study on Samsung's Smart TV strategy and future recommendations.

Chapter 5: Summary of Smart TV platform analysis and strategy with suggested framework on how to gain platform leadership in the Smart TV industry.

CHAPTER 2: Analysis of Smart TV Ecosystem

2.1 Definition of Smart TV

A Smart TV is either a television set with integrated Internet capabilities or an add-on streaming device for television that offers more advanced computing ability and Internet connectivity than a basic television set (Hoelzel, 2014). Smart TVs allows the user to install and run more advanced applications or plugins/add-ons based on a specific operating system. For example, Smart TVs enables the user to browse the Internet, watch YouTube video clips, and download game applications from the television set. In more detail, the Smart TV can be placed into two categories, although the two share many characteristics.

- Smart TVs: Television sets that contain a built-in Internet connection and often feature a proprietary operating system, typically controlled by the manufacturers. These tend to be companies with a trajectory in the traditional TV market, such as Samsung, Sony, and Vizio.

10 - Streaming Devices: Televisions that lack independent "smart" features and dedicated Internet connection can instead receive added features and Internet access through a streaming device that plugs into a TV. This can be a set-top box like Roku, or a thumb drive-sized device like Google's Chromecast.

Although connected TVs were available to the market since 2007 the term 'Smart TV' was used since 2011 only after smartphones became mainstream. Using the Smart TV concept was an attempt from the television manufacturers to follow the footsteps of the mobile phone industry's success on the transition to smartphones. The manufacturers thought that customers who were familiar with the smartphone features would naturally understand the concept of Smart TV. Consequently, many features and user interfaces of the early Smart TVs resemble the features of a smartphone such as weather/stock feeds, web browser, and notepad applications. However, the aim of Internet connected TVs is not to nudge consumers toward some unfamiliar behavior like searching Google on TV in their living room, but to enhance the everyday experience of watching television. The industry is learning that the smartphone and Smart TV are two distinct devices with different purposes and usages. Therefore, it is essential to understand the main differences between the two industries.

Figure 1: Smart TV and Smartphone Comparison

Smart TV Characteristics Smartphone Characteristics - Center of the living room, shared device - Personal device one carries with them all the time - User interface/experience is more suitable for - User interface/experience is suitable for two-way one-way communication communication services - Consumers expect a lean-back experience - Main function is to communicate - Average product lifecycle is 5-7 years - Average product lifecycle is 1-3 years

Source: Kwon, Digieco 2012

2.2 Smart TV Background

The growth of Smart TV can be discussed in mainly two perspectives: Technological factors and user behavioral factors. Both are correlated to each other since technological developments drive a change in the user's lifestyle and vice versa.

- Technological Factors Throughout the past, new technology has proven that it can change the way we receive news and entertainment. Radio challenged newspapers in the early 1900s, and television challenged radio. Now, due to the proliferation of Internet and technological enhancements in bandwidth and codecs, the traditional television has its own competitor - the Smart TV. First of all, the increased access to Internet broadband across developed economies escalated the penetration rate of Smart TVs. In 2005 the world

11 population was 6.5 billion and although globally only 16% were using the Internet, in the developed world 51% of users were it. By 2013 the number was up to 77%46, which indicates that most of the households are equipped to use a Smart TV. The increase in broadband speed also affects the spread of Smart TVs because broadband connection of up to 10Mbps enables users to easily stream video content online. The increase in global number of Smart TV sales reflect this development as 114.9 million units (2010) more than doubled to 307.4 million units (2013) with a 28% compound annual growth rate.

Figure 2: Internet Penetration Rate Figure 3: US Household (M) of 1OMbps+

2005 2010 2013 40 - 33.2

World population 6.5 B 6.9 B 7.1 B 30 - 24.6 19.5 Using the Internet 16% 30% 39% 20 - 13.7

Developing world users 8% 21% 31% 10

Developed world users 51% 67% 77% 0 2009 2010 2011 2012

Source: International Telecommunications Union Source: Parks Associate Estimate, 2009

Another driving factor was the technological enhancements in video content distribution such as Internet Protocol television (IPTV) where services are delivered using the Internet protocol suite over a packet- switched network such as a LAN or the Internet, instead of being delivered through traditional terrestrial, satellite signal, and cable television formats. Unlike downloaded media, IPTV offers the ability to stream the media in smaller batches, directly from the source. As a result, a client media player can begin playing a video clip before the entire file has been transmitted. This enabled video streaming over the Internet bringing services such as live television, time-shifted television (catch-up TV) and video-on-demand (VOD) directly to the living room.

A more impactful method is over-the-top-content (OTT), which also does not involve multiple system operators (MSO) and uses an open Internet and unmanaged network open ecosystem. While IPTV network type is closed, proprietary network, accessed via a specific Internet service provider, OTT delivers content directly from the provider/content aggregator to the viewer using open network. OTT video streaming services provide the benefit of low cost and flexibility of content usage among devices, therefore services such as YouTube, Netflix and Hulu adopted this technology as an economical VOD delivery model. Most of these services were the killer applications for Smart TV and led users to stream content across multiple devices.

12 In addition, digital convergence and the decline of hardware prices positively affected the growth of Smart TVs. Info.org (Project, 2005) defines digital convergence as "the trend for various ICTs to become digital and for CTs to be based on packet switching and to operate over a common network infrastructure." Digital convergence is the priming of underlying digital technology components and features, such as voice, texts, video, pictures, broadcasts, presentation, streaming media, global connectivity and personalized services; the combination of all of these features and abilities from multiple electronic systems into a simplified, converged and computer-mediated communication system to enable individuals interact, play, communicate, collaborate and share information in many new ways. Based on digital technologies encompasses converged devices, such as smartphones, laptops, Internet enabled entertainment devices and set top boxes, converged applications (e.g. music download on PC and handheld) and converged networks (e.g. IP networks) (Yoo, 2011). This give ways for devices to bring the Internet to the television set through different paths. For example, game consoles such as Xbox or PlayStation not only provide gaming entertainment, but also work as an add-on Smart TV device that delivers video content and applications to your television. Blu-ray players function as high-definition video content players as well as set top box type Smart TVs.

This is related to the term N-screen (connected devices) as a "unified entertainment experience across several devices," (Hong, 2014) meaning that one can seamlessly switch between watching the same program on one's TV, tablet or smartphone, with the software adapting the programming to the various formats automatically. Although each device performs its own task and they have different internal architecture, the common thing they share is each of them serves the users whatever it is. Another thing they share among them is they are connected to Internet. Therefore, manufactures and content providers look for ways to optimize their products and services so that it will integrate standardized formats or features compatible to other devices. Therefore, the explosion of smartphones, tablets and laptops are all related to the penetration of Smart TVs, as users want a more seamless connected experience.

The decline in Smart TV prices also impact the adoption of Smart TVs making the technology relatively accessible to consumers. The global Smart TV market shows this trend as the average selling price for Smart TV declines with a compound annual growth rate of -9.3% as unit shipments increase with a 23.2% growth rate.

13 Figure 4: Global Smart TV Sales and Average Selling Price

Unit Shipment (M) -Average Selling Price (U$)

300 - 2100 - 2500 250 195 1800 1750 150-20 200 -- 1500 150 9 10 100 -- 50 -- 500 0 0 2011 2012 2013 2014 2015 2016 2017

Source: Frost&Sullivan (2012)

User behavioral factors As the core consumer segment for digital devices shift from Baby boomers and Generation X to Generation Y many user needs and values have changed. Baby boomers are people born during the demographic Post-World War II baby boom between the years 1946 and 1964 (Age 68 to 50) who enjoys a lean-back experience of a television. Generation X are people born in 1966 to 1976 (Age 48 to 38) who are familiar with Internet, and Generation Y are people born in 1977 to 1994 (Age 37 to 20) also called 'Millennials' (Werner, 2011). A survey done in 2010 by US Bureau of the Census illustrates that Generation Y account for 29% of the US total population. Researches also discovered that the annual income of Generation Y surpassed that of the Baby boomers in 2012, making Generation Y the lead consumer in the US.

Although characteristics of Generation Y vary by region depending on social and economic conditions, as education writer and speaker Mark Prensky defined, the key characteristic of generation Y is 'digital natives' meaning a person who was born during or after the general introduction of digital technologies and through interacting with digital technology from an early age, has a greater understanding of its concepts.

William A. Draves and Julie Coates, authors of Nine Shift: Work, Life and Education in the 21st Century, wrote that Millennials have distinctly different behaviors, values and attitudes from previous generations as a response to the technological and economic implications of the Internet. They found that 97% of these students owned a computer, 94% owned a cell phone, and 56% owned an MP3 player. They also found that students spoke with their parents an average of 1.5 times a day about a wide range of topics.

14 Other findings in the Junco and Mastrodicasa (Junco & Mastrodicasa, 2011) survey revealed 76% of students used instant messaging, 92% of those reported multitasking while instant messaging, 40% of them used television to get most of their news, and 34% of students surveyed used the Internet as their primary news source. The followings are some key characteristics of Generation Y that effect and drive the growth of Smart TVs.

Generation Y characteristics that drive Smart TVs - Higher purchasing power: Generation Y population have seen their parents work hard and then watched their pensions disappear, so now they anticipate enjoying life rather than saving. Gen Y's annual spending power exceeds $200 billion and they also influence another $50 billion in purchases. (Escalera, 2012) Especially, compared to the Baby boomers the Gen Y's are willing to invest in big-ticket items such as TV sets, game consoles and mobile devices.

- Accustomed to multi-tasking: The traditional TV set is still the most watched device for video content (average of 24 hours and 44 minutes/per week), however research from media tracking institutes such as Nielsen illustrate a continuous decline in traditional TV viewership. Instead, Gen Y's are increasingly watching shows on non-traditional media (average 5 hours and 39 minutes online/ per week), but most often, they engage old media (TV) and new media (portable devices) simultaneously in what's known as "the second screen." Researches show that 89% of the people surf the Web on their computer while watching television on a set. (Zigmond & Stipp, 2011) Therefore, it is inevitable for Smart TV manufacturers to incorporate Web features, applications and increase the connectivity with portable devices to the traditional television set to sustain the position in the center of the living room.

- Used to on-demand, streaming content: Studies from Dan Zigmond and Horst Stipp show that Gen Y watches less live TV and more on-demand/streaming content through other devices such as DVRs, PCs and Smartphones. (Zigmond & Stipp, 2011) This disrupts not only the TV manufacturing industry, but also the broadcasting, advertising industry. Gen Y's are consuming content on new media and interacting with TV in innovative ways where conventional live TV may become obsolete. The industry must think of time-shift content, de-bundling of channels, and personalized advertisement models.

- 24/7 connected: Some refer to Generation Y as 'the Facebook generation' implying that instead of getting a person's number, this generation would add you as a 'friend' on Facebook. (Westlake, 2008) Research from Nielson shows that 72% of this generation is on Facebook. This data emphasizes how connected and socially active Gen Y is. Therefore, Gen Y is leading the way in

15 socializing online around television, which brings new opportunities to change the TV viewing experience from a one-way experience to an interactive two-way experience.

Both technological and user behavioral changes shape a new era for the TV industry opening new business opportunities for multiple stakeholders in the value chain. Figure 5. illustrates how the Smart TV industry was shaped as the technology and user experience changed.

Figure 5: Smart TV Industry Development Year '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

U ADOBE FLASH PLAYER Online Video Format

@omcast. DVR/IPTV v nvnFOS DIRECTV

amma4on

Over-the-Top hulu henV6V

XBOX LVE SONY chromecast Devices Googe V amazon f rei V

Source: Company Website

CHAPTER 3: Smart TV Platform Analysis

3.1 TV Industry Paradigm Shift

As illustrated in Figure 5, 2007 was a revolutionary year for the TV industry. Netflix introduced over-the- top subscription offerings to the market by launching its on-demand Internet streaming service. Broadcasting companies and content providers such as NBCUniversal Television Group (Comcast), Fox Broadcasting Company (21st Century Fox) and Disney-ABC Television Group joined together to create Hulu to offer their content via OTT. WhereverTV started free live streaming TV channels on the Internet making TV content more accessible. Hardware manufacturers such as Samsung, Sony, and LG launched the early Smart TVs and Apple launched AppleTV -- a set top box type Smart TV.

The main topic in 2007 Consumer Electronic Show (CES) and MacWorld was 'Content Portability' meaning that users can seamlessly watch their content anytime, anywhere on any device. Microsoft

16 founder, Bill Gates said, "The Internet is set to revolutionize television within five years, due to an explosion of online video content and the merging of PCs and TV sets". CBS CEO Les Moonves said, "Media companies' future is in content that extends to multiple platforms . The convergence of the Internet and TV is disrupting the video/television industry and has the potential to transform the entire ecosystem for every player-both established and those that are just emerging into this dynamic industry. The disruption can be explained by looking at the change in the business models of each player in the market. The traditional ecosystem for the TV industry consists mainly of six major stakeholders. It starts with the content owners such as TV, movie studios that create content based on the sponsorship they receive from programmers. The programmers such as large broadcast/cable networks aggregate contents into program channels and receive the licensing fee from network operators while granting the rights to content. The network operator's main activity is to distribute the content to households through the television sets and receive a subscription fee from the end users. Advertisers take part in the system by paying ad fees to either programmers or network operators for an advertising slot embedding in the programming.

Figure 6: Traditional TV Industry Ecosystem

Content Broadcast Network Device End Providers Networks Operators Manufacturers Users

Advertisers

However, factors from 'Trajectories of industry change' (M.Mogahan, 2004) show that television industry is going through a radical change -- everything is up in the air. The followings are each stakeholder's core activities, assets and the threats they are facing.

Figure 7. Smart TV Trajectories of Industry Change Core Threat Activi Non-Threat

Threat

Core Asset

0 Advertisers 0 Telecom Non- Threat

17 3.1.1 Content Providers Content providers' core activity, the recurring actions your company performs that attract and retain suppliers and buyers, are mostly creating content and receiving sponsor from programmers or advertisers. The threat they face are now the multiple formats of content they have to deliver and how they would deliver it on various devices. This may also be an opportunity as the content providers gain more bargaining power over the programmers since they are open to creating their own direct-to-customer channels through applications, OTT services, and websites.

The core asset of content providers will be the creativity, excitement and knowledge of the content. This may maintain unthreatened for content providers in high demand, however, the de-bundling of channels and growing demand for d la carte puts low demand content in a tough position. For example, a documentary show might not be as popular as 'Game of Thrones', but HBO bundles different genres in its programming and charges a flat-fee. If it were possible to charge a different fee per show, documentary shows may not be able to survive. In addition, OTT services like Netflix are moving into the content creation space, investing and creating shows such as 'House of Cards' bringing upon new competition.

3.1.2 Broadcast/Cable Networks Broadcast/cable networks such as NBC, Fox, and CBS aggregate content from providers and receive an affiliate fee from the distributors, which is the main activity. This is threatened by Smart TVs and OTT services because the value of content decreases when programs are rebroadcasted through Internet for free. The content providers can bypass programmers and distribute content individually. In addition, there is an increase in the de-bundling of channels that puts a major threat on the profitability because a typical cable network strategy would be to develop one or two hit programs and fill the rest of the linear lineup with inexpensive content to maintain a relatively low cost. The hit programs attract network operators, making the channel a "must have" content granting the programmers the negotiation power to ask for fees. The rebroadcasting and de-bundling of channels risks the core activities of programmers.

Core assets such as control over content and programming television shows are also threatened due to the various distribution channels the ecosystem provides. The more content is distributed freely or de-bundled, the less power broadcast/cable networks have, therefore it is harder to charge a premium to distributors. This explains why NBC, ABC, CBS and Hulu have blocked Google TV-enabled devices from accessing their Web content since the Google TV launch in 2010. (Miller, 2010)

18 3.1.3 Network operators (Distributors)

The network operators face the biggest challenge when it comes to disruption in the television industry because the core activities of network operators are to provide the infrastructure and service of video distribution network to users and charge a subscription fee. However, the threat is that people are "cord- cutting" pay TV and increasingly using the Internet content to replace the linear cable television model. Research from Moffett Research in 2013 (Spangler, 2013) discovered the US pay TV sector as a whole lost 316,000 subscribers for the 12-month period. Craig Moffett mentioned that, "Cord cutting used to be an urban myth. It isn't anymore." Meaning that there is a threat that distributors may lose their service user base to substitutes such as Nexflix, Hulu and Amazon Instant Video where consumers can enjoy watching d la carte individually tailored shows with a lower cost.

Figure 8. Pay TV Net Additions

1000 - 800 - 600 400 TelCo 200 Subscriber - ... s tellit Net Additions 0 - (thousands) * V.. -200 - 0. 00 .0. 0., * ,0 .0, 0, 0 00 -400 - 0. *. e ,* . 0 0. 0. .00 * -600 - * -800 - Cable -1000 - 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Source: Bernstien Research

The core asset for network operators is their wide distribution network for millions of users. In addition, a large part of the network operator's asset is from advertisements. However, ever since the Smart TV emerged the other players in the industry have the opportunity to go through other distributors, which wdakens the control over the content. Therefore, programmers have a stronger negotiation power and start to request a higher affiliate fee for the content. Also, advertisers start to look at other media channels such as social network services or Smart TV platforms. Network operators try to defend their core activities and assets in order not to follow the steps of the music industry where companies such as Apple disrupted the market by de-bundling albums and creating a new platform for the users. For example, Comcast, Time Warner Cable and other distributors launched a 'TV everywhere' service that allows their subscribers to

19 access their respective content on digital platforms, including video on demand and live streaming of the channels themselves. (Lasar, 2009) This helps subscribers go through the service provided from operators and maintain revenue streams. The activities Comcast recently done illustrates the strategic position distributors are showing. For instance, in 2014 Comcast bided $45 million for Time Warner Cable so it will gain even more leverage over the country's market place for television, broadband Internet and phone services. (Comcast, 2014)

3.1.4 Device Manufacturers Device manufacturers revenue stream is mostly from selling hardware with enhanced features and technologies that repeatedly attract end users. This model is threatened by the change in industry for both Smart TV set manufacturers and add-on device manufacturers. In general, the risk is that people are migrating from television sets and substituting it with other devices such as PCs, tablets and mobile phones. Specifically for set manufacturers the threat would be that add-on devices provide the end user to upgrade their conventional TV sets at a lower cost also providing most of the applications and services the set makers does, therefore the product life cycle for TV sets may extend to a longer period resulting in decreased sales. Research from eMarketer shows that in 2014 US market, the add-on Smart TV devices share was 53% and 47% came from Smart TVs. This indicates the television set manufacturers are under pressure. For add-on devices the threat is coming from network operating firms that have 110 million subscribers (Spangel, 2014) in the US and Comcast, DirecTV and Verizon are pushing into the hardware business with set-top boxes to lock-in customers through their services.

The core asset for hardware companies is the technological capability to create hardware innovations such as new backlight solutions, better design, and seamless connectivity. However, the Smart TV industry requires capabilities in creating a platform where software, user interface/user experience, and killer content become valuable assets. This is one of the reasons why players such as Google, Apple, and Amazon are readily joining the industry to create a platform.

Surveys from Informa based on responses from TV, telecoms and Internet executives on Figure 9 suggest that broadcasters and network operators will have the biggest negative impact among the stakeholders in the next five years. Results indicate manufacturers of devices and online content aggregators are likely to be positively influenced. However, it is easy to see why types of company built on old business models might be threatened by new Internet players, but with a dynamic capabilities point of view there is no reason why any individual firm can't use the same technology to its advantage. The threat to the player's core activities and core assets pushes them to innovate and expand beyond their original business model creating new growth opportunities. TV expands into creating a platform and new stakeholders such as

20 telecommunication companies, web search engines, and portals enter the ecosystem. All members of the value chain are trying to have an increased role across the ecosystem to gain leadership over the platform, content and consumer.

Figure 9. Impact on Stakeholders with Consumer Adoption of IP-delivered Video Growth

N Uncertain N Neutral U Negative M Positive

Manufacturers of connected devices Content aggregators (e.g., Netflix, YouTube) Content providers (e.g., creators and distributors)I IPTV operators Network equipment vendors Social networks (e.g., Facebook) Mobile operators Games console manufacturers Telcos Broadcasters Pay-TV operators Cable operators Free-to-air TV operators Satellite operators 0 10 20 30 40 50 60 70 80 90 100 Responses (%) Source: Informa Telecoms&Media 2012

Eventually, the future of TV will be in the hands of firms that rethink their core activities and core assets to master the business of next-generation TV, and not just the technology. This leads to firms' developing or reallocating the resources and capabilities to compete on the basis of platforms, and not only on products, requiring a different approach to strategy and business models.

3.2 Smart TV Platform Ecosystem

The television industry is no longer a horizontal value chain business relationship between the stakeholders. Because of the Internet, it has evolved to a multi-sided platform with complex interactions among the players. The players do not develop stand-alone products, but are involved in an industry-wide platform. Therefore, there are potential differences in the strategy, implementation, business model and value capturing. It is important to understand the platform and ecosystem dynamics in order to develop an adequate strategy.

3.2.1 Smart TV Industry Platform The Smart TV industry is evolving into a platform ecosystem where there is a platform, complements and network effects. Therefore, a new challenge is to compete in platform markets within and industry and to innovate through a broader "ecosystem" of partners and users not under any one firm's direct control. To understand the importance of creating a platform ecosystem for Smart TVs one must clarify the concept

21 of a platform. First of all, a Smart TV needs a broader application of strategies as it would not be an in- house "product platform" but would be an "industry platform". Cusumano (Cusumano & Gawer, 2002) defined an "industry platform" as the following:

1. Technology or set of components (or services) that creates a common place or foundation,

2. That brings together multiple parties beyond a single firm ("market sides") for a common purpose,

3. Where value can increase exponentially as (a) more users and (b) more "complementary" products & services are added that make the platform more useful.

Smart TVs integrates the technology of running complete operating systems or mobile operating system software that provides a platform for application developers. This creates a commonplace or foundation for the users. In addition, Smart TV platforms or middleware have a software development kit (SDK) and/or native development kit (NDK) for apps so that third-party developers can develop applications for it, and an app store so that the end-users can install and uninstall apps themselves. This illustrates the purpose of bringing together multiple parties beyond a single firm to enhance the viewing experience. In the case of Smart TVs, the value can increase exponentially because the more viewers/users of the services leads to more complementary products/services and vice versa. For example, OTT content distributors such as Netflix and Hulu are offered in most Smart TVs because they are a killer application and most Smart TVs want the service available on their platform to attract more users. The more users they acquire, the likelihood of more complementary services such as Pandora and Skype will be added.

Cusumano and Gawer (Cusumano & Gawer, 2002) identified two main differences between an in-house "product platform" and an "industry platform", which are essential to the success of becoming a platform leader for Smart TVs. Their definition of an industry platform is a foundation or core technology in a "system-like" product that had relatively little value to users without complementary products or services. The platform producer often depends on outside firms to produce the essential complements. In the case of Smart TVs, without complementary products or services such as applications, content or Internet services the devices will just be a dummy box sitting on your table. To facilitate other firms and user communities to adopt the platform technology and contribute complementary innovations, Smart TV manufacturers provide tool kits such as software development kit (SDK) so that content providers or application developers can easily access the technology and develop complementary services.

The second essential difference between a product and an industry platform is the creation of network effects. The smartphone industry demonstrated the power of network effects as Apple's iOS and Google's

22 Android operating system dominated the industry within a few years. However, unlike the smartphone industry Smart TV is still struggling to create a platform that will create powerful network effects and a win-win ecosystem structure.

3.2.2. Smart TV Platform Ecosystem As mentioned in Chapter 3, the traditional value chain of the television industry is disrupted due to the change in consuming video content and Internet connection to TVs. The relationship between stakeholders in the ecosystem is no longer a sequence of activities, but a simultaneous web-like interaction.

Figure 10. Smart TV Ecosystem

App End E nUs S o r c : e r1 s D e v e lo p e r s Aggregators TV 'y Platforms

Content Broadcast/ Network Device Providers Cable Operators IneManufacturers Networks

Advertisers

Source: 2011, Samsung Electronics Conference

New roles and players emerge in the Smart TV ecosystem as the TV expands to provide a platform from its conventional one-way broadcasting model. Smart TV becomes the focal device in the ecosystem based on the aggregation of applications, content and closeness to the end-user. Internet-based aggregator influence broadcast/cable networks therefore the positioning of broadcast/cable networks has changed from a pure content aggregator to a distributor and creator. New business models such as applications and OS platforms emerge to create a platform ecosystem, however it is crucial to find a tailored solution for the TV industry because the TV market is fundamentally different from the smartphone market although the platform ecosystem looks similar. The biggest difference is that phones are communications devices and the applications do not affect the operation of a phone call, however, on Smart TVs the separation

23 from content prevents the development of a rich TV ecosystem. There needs to be an intimate relationship among the content provider, the content distributor, and the device.

3.2.3 Smart TV Ecosystem Overview To get better insights on the dynamics of the ecosystem it is important to understand the current situation and stakeholder's strategic moves. The market potential of Smart TVs are huge based on data from Digital TV Research (2014) in total, there will be more than 759 million televisions connected to the Internet worldwide by 2018, more than doubling from 307.4 million at year-end 2013.

- Market Outlook

In the United States, Connected TVs will be in nearly 53 million American households by 2016, accounting for 43% of all U.S. Globally, shipments of smart TVs will reach a tipping point in 2015, when they will overtake shipments of traditional TVs. It is clear that the growth of Smart TVs will be strong and there is an attractive market to reach. Many companies are now joining the market to take a part in the ecosystem not only because of growth in Smart TV devices. Although many users are migrating to other devices such as PC, tablets and mobile phones, the television still represents the largest consumer device market with a potential to grow even bigger.

Figure 11. Smart TV Sales Forecast and US Market Penetration -% Of Households With Connected TV 800 759.3 43% 673.4 60 39% 45 700 583.8 5034% 40 600 486.7 29% 3 500 /% 397.4 40 30 400 23 250/ 307.4 30 18% 20 300 227.8 163 20 15 200 114.9 10 100 1 0 - - 0 50 0 0 03 2010 2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016

Source: Digital TV Research Source: eMarketer

First of all, research from Nielsen (2014) indicates that the advent of the web did not cut into TV time because the average daily TV viewing hours went from 4:06 hours (1991-1992) to 4:51 hours (2011- 2012). In addition the average monthly media viewing, in hours are 145 hours for TV and 28.5 hours for Internet showing that many people still use TV for viewing media entertainment. Another attractive factor

24 is that 119 million people (41% of total) in the United States who own a TV set have at least 4 TVs in their household. Value wise, TV still represents the world's biggest advertising market encompassing roughly $350 billion in global TV ad spending, or 63% of all advertisement spending. (Cattaneo, 2013) TV is also the centerpiece of the world's most important entertainment markets, including TV, gaming, movies, and related services and infrastructure. In other words, Smart TV market has a large, captive audience, spending a lot of money on entertainment, and very attractive to advertisers. However, the living-room entertainment has tough gatekeepers as a small handful of giant media companies control live TV content, distribution, and advertising, and they are notoriously slow when it comes to technology innovation. In addition, there is no dominant Smart TV platform so the TV app system is reminiscent of the mobile app ecosystem before Apple debuted the iPhone App Store in 2008. Therefore, many companies are fighting to conquer the space in the living room. The market is fragmented with no main firm driving the industry; however strategic movements from each player illustrates insights on how the ecosystem is evolving.

- Competitive Landscape

As mentioned, the Smart TV platform is currently highly fragmented with various players trying to mark their territory and plant a flag in the center of the ecosystem.

Figure12. Smart TV Players Strategic Moves

Value Creation Aggregation Distribution Consumption Chain

Music, movies, news, Provides the video Render content sports, television distribution network 2-way IP communication Activities programs, and video aggregation, scheduling, DTT/Cable/IPTV/IP/ Integrated media production, adoption to transcoding, presentation, Satellite/ 4G, ingestion (OTT/Linear) conversion web video LTE/Satellite through devices

Fox, BBC, Disney, MGG, r Paramount, NFL, Warner Borthers, Sony, BMG, ESPN, ABC, NBC, Universal Discovery, HBO, FOX, bo CBS, CNN, Amazon, Google, Trends BBC iPlayer, Cox, Time Warner Cable, H1un Netflix I tnivorml Comcast, CableVision, Verizon, AT&T, Dish Apple, Samsung, LG, Sony, Google, Tivo, Roku. Microsoft

Source: 2011, Accenture

25 Content owners or providers are launching Direct-to-Consumer services and are participating in the industry initiative such as Ultraviolet, which is organized by all major studios (except Disney), electronics manufacturers and retailers to enable buy-once and view anywhere service with digital lockers in return for a premium/up-charge. Firms such as BBC is pushing across the value chain to a distributor and OTT service by launching services such as iPlayer, an Internet television and radio service and software application that streams video clip content including whole TV shows. Content owners have more opportunities to distribute their content either directly through their channels or through OTT platform and VOD platforms.

This loosens the control from the aggregators, which might benefit the content providers but causes a risk in losing the relationship with aggregators. For example as Figure 11 shows, aggregators are also expanding horizontally to gain more control over the ecosystem. In the case of Netflix, because killer content is so important they pay studios large amounts to attain hit content. For instance, Netflix was willing to pay $300 million (est.) per year for exclusive rights on Disney movies starting in 2016. However, the increasing cost of content does not create a sustainable business model for aggregators, therefore they readily invest in creating content independently. In addition, broadcast and cable networks are offering content directly through their own websites and applications as a distributor. More recently Amazon expanded from a content aggregator, Amazon instant video, to a player in the consumption area by launching Amazon Fire TV - an add-on streaming device.

Distribution operators are also moving along the value chain. For example, Comcast is prominent in the device business with their Xfinity TV box that has on-demand, pay-per view features and apps such as Facebook, Pandora, and newsfeeds. The compelling position they have is the 22.6 million subscribers (as of '14. 1Q) locked-in using their boxes. (Comcast, 2014) The US pay TV market is roughly 110 million subscribers all providing services through their designated set-top boxes, which implies a huge threat on the device manufacturers. Currently distributor giants are providing the boxes bundled with the subscription fee and profit from the total subscription fee rather than the value of the devices, but if they were to aggressively invest in the hardware business the competition would be fierce. Comcast is moving into the aggregation and content creation business by acquisition of firms such as NBC Universal, E! and MGM. Owning cable networks/content gives them leverage to negotiate with other cable networks for their channels. Comcast is also planning to expand vertically by announcing the merger with Time Warner Cable in February 2014 combining the top 2 US cable networks. The consolidation could help Comcast to compete with satellite providers like DirecTV, wireless phone companies like AT&T and new streaming services like Netflix.

26 Device manufacturers such as Samsung and Apple as well as OS providers such as Google and Microsoft have their own store-front for content distribution. Samsung uses the Smart Hub interface as a gateway to content, as Apple provides iTunes, Google Google Play, and Microsoft Xbox Store. Channel apps are individually offered in most devices, threatening the aggregation model and Boxee and Roku have developed set-top boxes that offer OTT video and live TV broadcast stations. Xbox Entertainment is aggressively looking for exclusive content partnership with Hollywood studios trying to attract more users on their Xbox Live Gold subscription program, which replicates the traditional cable network business model.

3.3 Smart TV Platform Challenges

Although all stakeholders in the ecosystem are rushing to create a common place for the Smart TV, no firm has "cored" or "tipped" the market mostly because within the ecosystem there are conflicting business models and ecosystems as well as many alternative paths to the TV. In 2011, former Apple CEO Steve Jobs said to the author of his biography, "'I'd like to create an integrated television set that is completely easy to use, it would be seamlessly synced with all of your devices and with iCloud.' No longer would users have to fiddle with complex remotes for DVD players and cable channels. 'It will have the simplest user interface you could imagine. I finally cracked it."' However, Apple still has not come up with a solution for the Smart TV ecosystem partially because there are so many stakeholders involved with different interests and because competitors are defensive on Apple disrupting the TV industry and controlling the content and consumers as it has done with the music and smartphone industry. This is not only a problem for Apple but it applies to all Smart TV platform players. There is three major challenges the ecosystem faces: Who will have control over the platform, content, and customer.

3.3.1 Control Over the Platform The essential goal is for a firm to define and control the platform meaning that the platform will be the ultimate gateway for users in bringing Internet to the TV. Currently, the Smart TV ecosystem is so complex and fragmented that each player has its own platform. The ecosystem for the Smart TV is dependent on content and apps need to be based on "host" video content. Therefore, cable boxes work for cable TV; satellite boxes work for satellite TV; and AppleTV boxes work with the iTunes store. As players compete for the living room each platform has a different operating system, user interface and user experience making it harder to create a common foundation for developers and content providers to easily build on and extend.

27 Figure 13. Smart TV Platforms

Operating System Content Access Openness Apple TV 1OS iTunes (no app store) Limited Amazon Fire TV Fire OS Amazon Instant Video SDK Google Chromecast Chrome OS/Android Google Play NDK, SDK LG Smart TV WebOS Smart World SDK Roku Linux Channel Store SDK Samsung Smart TV Linux (Tizen) Smart Hub Limited Vizio Proprietary Internet Apps SDK Source: Company Website

Top Smart TV manufacturers all use a dedicated operating system and each have their own content store. This divides the market into even smaller addressable markets for developers. As a result, it is difficult for app developers to be productive - time and cost wasted on coding, porting, testing for different platforms. This leads to an overall less productive ecosystem where compatibility and complementary products hamper the growth of the industry. There are some industry initiatives called 'Smart TV Alliance' (Smart TV Alliance, 2013) led by companies such as LG, Toshiba, and Panasonic to align on Web specifications (HTML5) and on audio, video specifications (DRM, Codec, Streaming, etc) so that it will reduce time and cost for application development. Although the attempt to create an industry standard platform for developing apps is a step forward, the core tenet of integration with content is still missing. For example, a common social environment for sharing, discussing (and ultimately creating) TV programming will be impossible with multiple format platforms. Cases from the smartphone market show that a fragmented platform may result in lower quality, lower value apps. For example, Android maintained an open platform that boosted Android install base higher than Apple's, however Apple makes estimated $5.1 million in revenue per day from app store where Android makes $1.1 million per day. One of the reasons are that developers seem to prefer iOS because it is significantly less fragmented-78% of iOS users are running the latest version, compared to the roughly 50% of Android users on all versions of Android Jelly Bean. (Smith, 2014) Content providers and developers want a large installed base of devices before they create content for a platform. This may seem like a chicken-and-egg problem, but it is clear that the Smart TV platform is too fragmented for it to create a sustainable ecosystem.

3.3.2 Control Over the Content Traditionally, the aggregators and network distributors mostly controlled the content. Content providers would receive an affiliate fee for the content rights and the aggregators would negotiate with advertisers on the allocation of ads in the programming and distributors would receive a subscription fee from the viewers. However, due to the content redistribution on Internet, de-bundling of channels and cord-cutting

28 of cable pay-tv, all players are fighting for the exclusive rights of the content and a vast majority of studios and even device manufacturers are positioning themselves to have higher control over content. By looking at the top video apps available on Smart TVs we can see a conflict between businesses and competition over content. For example, Amazon does not provide Amazon Instant Video services on Apple TV or Google Chromecast since they are competing with these companies in both the video content and device segment. By providing the competitors their services, they are reducing the incentive for consumers to buy Amazon Fire TV products. Netflix's business is based on subscription fee, so they would like as much exposure as possible making sure their services are available on every device. In addition, because Netflix has 44 million subscribers they have the negotiation power to persuade content providers to join their platform, and device manufacturers to preload their apps giving them more access to a larger subscription base. All Smart TV devices advertise their services with the number and quality of content they have available on their services. Therefore the partnership with content providers and cable channels are more interdependent than before.

Figure 14. Available Smart TV Video Content Apps

Apple Amazon Google LG Samsung Vizio Xbox TV Fire TV Chrome Smart Roku3 Smart TV_ FireTV cast TV TV Netflix

Amazon Instant Video o 01 iTunes

Hulu Plus 0I HBOGo 0 le

YouTube W 0I

Crackle o 0 W1

Showtime Anytime I III

WatchESPN b I

Pandora o or

Source: Company Website

HBO's hit show "Game of Thrones" highlights the importance of owning the rights of the content and controlling it as it refused to sell it's program as an individual channel, making it highly anticipated as a premium cable channel bundled in a subscription package. HBO is a very profitable part of Time Warner Inc.; therefore "Game of Thrones" was never sold as a subscription on iTunes as it airs, and never offered its content to Netflix. Cable realizes that HBO is a way to sell people and its valuable benefit made even

29 more attractive by the emergence of HBO GO app and smash hit originals. In Apr.2014 HBO and Amazon signed a $300 billion extensive, multi-year agreement that brings many of the premium channel's greatest shows including The Sopranos, Six Feet Under, and The Wire to Amazon Prime Instant Video. (Stelter, 2014) The deal also includes "early" seasons of Boardwalk Empire and True Blood. Newer shows like Girls, The Newsroom and Veep will be made available to Prime subscribers, but not until three years after they've first aired on HBO. Even though hit series like Game of Thrones will not be on the list; this will be an advantage for Amazon over Netflix as HBO adds 17,00 new titles to Amazon through a single content licensing agreement and HBO receives $300 billion for content that was aired 3 years ago.

3.3.3 Control Over the Customer The last challenge is who will control the access to the customer. As seen in Figure 12, all players in the ecosystem are expanding their role in accessing directly to the end-user. The logic behind it is simple -- the less intermediates, the less cost. Cable providers are providing apps and websites so users can stream video content on any device, but they still require a login with the user's cable subscription ID so they can control their subscription base. Firms such as Apple, Google, and Amazon each own a content/app marketplace, which gives them leverage in building an ecosystem around their platform using their own interface to seamlessly integrate users from their smartphone platform to their TV platform. However, with the current model there is a disproportionate share of revenue, profits and multiple monetization opportunities that make it difficult for customers to choose one single platform. The biggest challenge is to functionally integrate the apps and OTT services with television programming service and content being offered to the consumer. Creating a unified content portal for a simple search, navigation, discovery and social experience - that will enable personalized programming and advertising for the viewer is the optimal ecosystem. Problems between systems and proprietary standards make it that in order to access the ecosystem and earn the benefits of targeted advertising and interactivity, advertisers have to negotiate individual agreements with both television manufacturers and broadcasting distributors, a complex and costly process. Device manufacturers are having difficulty in finding a way to monetize their platform since the profit from content goes to the content providers or distributors, and because the platform is so fragmented the app market is still small to gain any influential network effect. Therefore, the profit of the apps is not beneficial. Even OTT service providers, such as Netflix are struggling to find a revenue growth factor as the prices of content rights increase, and the influence of network operators remain strong. Digital content creation, delivery, and monetization are complex multi-sided markets, like smartphone platforms and are very difficult for one firm to dominate.

30 CHAPTER 4: Case Study - Strategic Direction for Samsung Smart TV

There are many scenarios in creating the Smart TV ecosystem - which firm will create a common platform, control the content and be the ultimate gateway to the consumers? This chapter reviews the strategic direction for device manufacturer, Samsung, to create the best platform and tip the market.

4.1 Samsung Smart TV Development

As a television set manufacturer Samsung is leading the industry for 7 consecutive years by developing innovative Bordeaux red design TVs, ultra slim LED TVs and 3D TVs. Within the years of technological development, Samsung also has a history of Smart TV development starting from 2007. (Kim, 2011)

- The first Internet connected TV from Samsung launched in 2007 as service called "Infolink", which integrated real syndicated services such as weather and stock updates. This feature launched in 15 countries, mostly where they have advanced Internet broadband service.

- By the next year Samsung renamed the service to "Power Infolink" and added preliminary multimedia services, the first attempt to bring Youtube to the screen.

- In 2009, "Internet@TV" was the new name of the feature and added upgradable service and released the first SDK to developers.

- The next year, Samsung added an app store with paid apps and launched the service in 107 countries. Eventually, in 2011 Samsung renamed the feature as a TV category calling it "Smart TV". By then, the service supported full web browsing enabling you to search the Internet like you do on your laptop. In addition, they developed a content recommendation service based on the users viewing preferences and habits similar to the Netflix algorithm.

- In 2012, Samsung launched voice and gesture recognition features to enhance the search interface for a richer experience. Samsung also partnered with Dish Networks that acquired Blockbuster to provide thousands of Blockbuster's movies to Samsung's smartphones, tablets, Smart TVs and Blu ray players. Samsung also announced that they would focus their business model on device sales, app sales and video on demand sales and add a placement in their interface for advertisers to attract ad sales.

- However, in June 2013 Samsung changed the strategy and offered all the apps for free because most video streaming app providers preferred to bypass Samsung's payment system layer and directly have a subscription fee from the users. In July 2013, Samsung acquired Boxee, a hardware set-top box for digital video streaming, to enhance its cloud-based social networking, video streaming technology.

31 - Instead, Samsung focused on improving the user experience by providing a true lean-back experience. It strengthened the voice/gesture recognition sensors and added a 'Multi-Link Screen' function, which enables users to watch live TV with 4 other contents targeting the multi-tasking user habits. In addition, Samsung announced that it would provide more UHD content with Amazon and Netflix.

4.2 Competitive Landscape

Competitors for Samsung were usually large consumer electronics manufacturers such as Sony, LG, and Panasonic. However, as the Smart TV industry evolved competitors from software industry, retailing industry and even small start-ups are threatening Samsung's dominant position. Figure 15 illustrates the various ways users can now connect their TVs to the Internet. The most common channel is through game consoles (19.3%), and Smart TVs combined with Connected TV (add-on devices) is 16.5%, which is lower than Blu-ray players, however Smart TVs are the most preferred channel to watch OTT services on TV therefore if television manufacturers find a way to integrate cable channels, apps, and OTT services they might have an advantage over other devices.

Figure 15. TV-Internet Connections and Preference of Device for OTT Services

Ways to Connect TV to Internet Preference to Watch OTT services on TV

" Smart TV " Smart TV " Connected TV " Set-top Box 1 Game Console

* Media Center Box " TV/PC

* DVD/Blu-ray " TV/Smartphone/Tablet * Cable/Satellite STB " Game Console Laptop

"Desktop PC 1 Don't know Accenture Source: Apr.2013, DisplaySearch Others Source: Apr.2013,

Among the Smart TV manufacturers Samsung has a strong position in the global market and US market. South Korean rival LG electronics is also strong in this category and Japanese competitor Sony is losing share over the years.

Figure 16. Global Smart TV Market Share

4Q.'12 4Q.13 Change Y/Y 1. Samsung 25.4% 26.4% 1.0% 2. LG 11.9% 14.4% 2.5% 3. Sony 15.7% 14.3% -1.4% 4. Panasonic 7.7% 7.0% -0.7%

32 5. Sharp 5.6% 4.9% -0.8% 6. Others 33.6% 33.0% -0.6% Source: 2014,Strategy Analytics Connected Home Devices (CHD)

In the US, more people use streaming devices than television sets, and Apple TV has the highest share followed by Roku and Chromecast.

Figure 17. Streaming Device Market Share in US

U.S. Share Of Connected TVs By

Tivo 6%

Chrome cast 47% 14%

Source: Hillside Partners, BII Estimates 4.2.1 Sony Bravia TV In May 2010, Sony partnered with Google to launch the Google TV, the first Google Smart TV powered by an Android OS with Chrome browser, running on Intel Atom processor with Sony providing the TV devices, Blu-ray players, and PlayStation consoles. However, due to the poor intuitive user interface and lack of supported content the Sony-Google partnership ended as a failure. In 2012, Sony announced they would reduce the number of TV models by 40% for 2013 attempting to turn around the business by focusing on high-end products and not engaging in the low cost, price war. However, in February 2014 Sony announced that it would spin off the TV business that has lost $7.8 billion over a decade. (Martin, 2012)

Sony focuses its Smart TV strategy on cloud-based music and video content through a hub named "Qriocity" sourced by Sony Entertainment Network. However, it uses Yahoo-powered app store creating two layers of interfaces to go through for content. In addition, it applies a cross media bar (XMB) UI making users click through all the menus with their remote control. Through Sony's Smart TV, PS3, and PCs, it focuses on creating a N-screen device line-up and has an advantage of abundant content from its Sony Entertainment subsidiary.

33 4.2.2 LG Smart TV LG launch the Smart TV using a Netcast-based propriety platform and also joined Google TVs Android platform in 2010. In addition, LG has partnered with LG Uplus in South Korea to provide IPTV set-top boxes. Instead of focusing on Smart TV sales, LG is more focused on expanding its platform so general television users can also access Smart TV features and create a market place for the Smart TVs. In 2012, LG formed the "Smart TV Alliance" with Philips and Sharp to create an industry standard platform using the HTML5 technology for web based SDKs.

Figure 18. Smart TV Alliance Members

Companies Functionality TV LG, Philips, Sharp, Panasonic, Toshiba Smart TV manufacturer Set-top Box Abox42, Technisat Global set-top box manufacturer Hardware Qualcomm, Mstar TV chip set manufacturer Software Obigo HTML4 Web platform technology YuMe Digital video ad platform Ad Platform SpecificMedia Ad platform Infrastructure IBM IT cloud infra and solution

Source: 2014, Smart TV Alliance

In 2014, LG announced a new operating system based on the mobile platform WebOS. This operating system provides a simpler user experience by having a 'Live menu (content menu) bar' on the bottom of the screen and seamlessly transferring between live TV, OTT services and apps. LG provides a Magic Motion Remote that uses a pointing technology to enhance the convenience when searching through the menus and also embedded voice and gesture recognition.

4.2.3 Google Google's business started from Internet to mobile and expanded to the TV industry. In 2010, Google first entered the Smart TV market with an Android platform built on television sets manufactured by Sony, Logitech and others. Google already built a strong platform with their Android on mobile phones and wanted to expand the exposure to television sets to enhance their ad revenues by attracting more people to go through their Android platform. Google attempted to leverage its search engine and YouTube features to attract the TV ad market and provided chrome web browsers, Adobe flash player 10.1 to create a unified search for content such as Live TV, DVR, and Internet. Google blocked the competitors by only licensing 'Google search service' on devices that had the Chrome OS. Google was not competing on the

34 set picture quality and specifications, but more to expand Android platform to access users. The successor Chromecast, which is not a fully integrated television set, proves this point.

Figure 19. Google's Business Model

Cloud Service (Data)

o _- Offer compelling free services Service Platform (Subsidized by ad revenue) (Search, Gmail, Google+, YouTube, Google Maps etc.) - Build network effects to attract traffic - Sell ad space bidding options - Create platform layer users go through Android (SW Platform)

Devices (User Access) (Smartphones, Google TV, Chromecast, Nexus Tablets etc.) Source: 2011, Samsung TV Conference

By 4Q.2013, the $35 thumb drive was Google's best-selling product and was named 2013's No.1 device for teens in Time magazine. (McCracken, 2013) Google provides a Google cast SDK for app developers in order to have more online content such as video, TV programs and music available on Chromecast. In addition, there are movements indicating that Google might launch a Nexus branded set-top box to expand its TV platform. Google is targeting the home entertainment market and rather than sticking to its Google TV strategy, it seems to be creating an ecosystem around its Android OS. For example, in South Korea Google provided Android 4.0 as an operating system for Cenix and Valueplus set-top boxes. (KDB Bank, 2012)

4.2.4 Apple TV Apple has evolved from a computer manufacturer to an industry creator by launching iPhone and iPad. By 2007, Apple has entered the Smart TV industry by launching set-top box type Apple TV, but was not

able to disrupt the market. In 2012, Apple launched the 3 rd generation Apple TV at $99 in a smaller size with an upgraded AP chipset. Unlike Google, Apple is targeting to create an ecosystem around iTunes/appstore by locking in users with content and benefiting from the sales of the devices. Apple has the advantage of their user base of iPhone and iPad, which can be used as remote controllers or compatible N-screen devices for the Apple TV ecosystem. Moreover, recently Apple has been negotiating with cable networks such as Time Warner Cable to get exclusive Apple video content. This would enhance the user experience and exposure to content by adding more than 300 channels compared to the individual channel apps Smart TVs provide such as ABC, ESPN and HBO. Comcast, however, has not favored OTT services because of the threat of losing it subscription base and the negotiation on Comcast

35 buying Time Warner Cable might cause the Apple-Time Warner Cable deal to fall through. However, Apple has built a strong relationship with users through the 575 million iTunes accounts (Sep. 2013) giving them a competitive advantage in providing a seamless transition to a TV platform, enabling iTunes users to have secure access and commercialization of digital content. Apple's combination of hardware and closed software is an ambitious effort by Apple to establish a platform in the digital space. However, as Apple moves towards delivering an integrated user experience across all video content combined with innovative product design, the competition for leading the Smart TV platform get fiercer.

Figure 20. Apple's Closed Ecosystem

Content Platform Network End User Cable/Satellite Network Apple TV Internet Content iOS Distribution Operator iPhone iTunes Content iPad Bold: Apple Proprietary Technology

4.3 Samsung's Platform Strategy

In order for Samsung to position itself as a platform leader, it must consider several options. Cusumano and Gawner identified 4 levers of platform leadership. (Cusumano & Gawer, 2002)

- Scope: Scope comprises the amount of innovation the company does internally and how much it encourages outsiders to do. Managers of companies that are platform leaders - or that want to be (wannabes) - must weigh whether it is better to develop an extensive in-house capability to create their own complements, let the market produce complements or follow a middle road. * Product technology: Platform leaders and wannabes must make decisions about the architecture of a product and the broader platform, if the two are not the same. In particular, they need to decide how much modularity they want, how open their interfaces should be, and how much information about both platform and interfaces to disclose to outsiders who might become complementors - or competitors. * Relationships with external complementors: Managers must determine how collaborative or competitive they want relationships to be between platform producers and complementors. * Internal organization: The right internal structure can help platform producers manage external and internal conflicts of interest.

In the case of Samsung, the 4 levers must create a base for the company to then overcome the challenge the industry is facing. For scope, Samsung must identify what to do internally and allocate externally. For

36 example, in the case of smartphones Samsung tried to create an ecosystem around its operating system, Bada, but failed to do so because of the lack of support on content and fierce competition from system such as Android and iOS. Eventually, Samsung became the main supporter of Android OS and developed high-tech phones to partner with Google. However, for Smart TVs Samsung is striving to create a platform with its own operating system by leveraging its dominant market share and advanced technology. When Google launched the Google TV and was seeking for OEMs to partner with them Samsung was reluctant to join the process, as it would be replicating the smartphone model. The Smart TV industry requires a different approach from the mobile phones since the usage of Smart TVs are mostly to use OTT services or Internet browsing more than SNS and chatting. Therefore, Samsung should create a platform that facilitates OTT services, online gaming and Internet browsing more accessible across devices. By creating an opportunity for other services to easily build on and extend is crucial for Samsung to create network effects. Therefore, Samsung should invest in creating a better viewing experience such as picture quality, intuitive user interface and integrate content searching in its platform, but support the market to produce complements by building an architecture platform that third-parties can join.

Figure 21. Features used Once/per week by US Smart TV Owners

Video Call 23% App Download 24% Online Game 29% App 31% SNS 34% Paid OTT Service 50% Internet Browsing 60% Free OTT Service 61% Source: 2013, Business Insider

Second is the issue of creating an open ecosystem or a closed ecosystem. Many studies compare Google's Android to Apple's iOS in terms of openness. Apple is considered as a closed ecosystem as Apple's model is end-to-end control over the iPhone process, as only Apple devices run iOS and users can only buy software through the App Store. Apple must approve mobile applications developed by third parties before they go for sale on the App Store. On the contrary, Google's Android runs on many mobile devices and the OS is completely open for developer to create apps. Google's model has been to distribute the Android system for free to the developer community and let thousands of apps freely go on sale. This openness helped Google gain massive market share and lead the global mobile OS space in just five years. However, profit wise Apple makes $1 billion per month on device sales and more on its App Store sales because of the value of its products and quality of its tailored applications. For Smart TVs, since the

37 applications depend on the host content, it is more important to have control over the app development in order to create killer applications/content. For example, unlike the smartphone industry, having thousands of instant messaging apps or camera apps would not be as beneficial to the ecosystem. Instead, creating a solid platform that delivers personalized, on-demand video content would attract more users. Therefore, it is necessary to maintain a partially closed ecosystem where Samsung can have control over what apps are developed and sold on the platform, but offer the platform on multiple devices and make an industry standard to give incentive to the developers.

Third is the relationship with external complementors. For Smart TVs, it is especially important to develop partnerships with multiple stakeholders because the key to creating a successful platform depends on content. Users want to explore on-demand and connected services, such as social networking, while watching video content without compromising the traditional live TV experience. A platform leader must offer an extended and consistent offering to the end user: content, service and device. Therefore, the power to negotiate premium or exclusive content deals and the commitment of developer communities are essential.

In an interview with Min Lee, Samsung's Smart TV Product Planning Director, he said, "Samsung is negotiating with multiple cable operators to collaborate on making a better, simpler viewing experience for the end-users. We are investigating in making add-on devices that include a cable subscription service with the network operator's content, but on our operating system. This kind of discussion is possible because Samsung does not have any conflict with the operators in terms of business model. For example, Apple, Google and even Amazon are in a position where they own the distribution of content and the giant operators do not approve of it so would not be willing to freely negotiate terms."

Enabling Samsung's platform with technical capabilities linking in real-time TV apps with live TV would attract developers and end-users, creating a virtuous cycle. For example, if Samsung were to partner with major cable companies to provide the devices with features such as DVR with the partner's interface, but integrating real-time TV apps based on Samsung OS, this would attract the pay TV industry as there business model is not threatened and they have a larger viewer base with Samsung's TV potential buyers. In addition, content providers will be able to have more real-time social networking activity around their content, which targets advertisers. A social TV analytics start-up called Bluefin Labs identified that millions of people talked about television content on SNS websites. For example, Bluefin Labs research says that the 2013 Super Bowl was the most commented-on TV telecast of all time, with 28 million tweets about the game and 3.5 million tweets about brands and ads on the show. (Deighton & Kornfeld, 2013) This shows the market potential and needs for an integrated live TV content and social TV feature.

38 The next step would be to attract game developers and think of the degree of collaboration Samsung is willing to invest in. Smartphones transformed that gaming experience by creating an environment for simple, touch-based modular games. Games available from a Smart TV app store will definitely be a killer content and reinvent the way gaming is experienced on TV. Samsung must think of a strategy to attract gainers and developers, at the same time either compete or collaborate with game consoles such as PlayStation and Xbox. In addition, a platform also needs to be collaborative from the end-user perspective. A key differentiation point would be the integration of social networking services to content. Smart TVs have the ability to benefit from content discovery and recommendations meaning that by Samsung can use viewer data and analyze the patterns of each viewer to create a customized, user-centric portal, which can attract target advertisements. Samsung must converge the ways to access content and charge for that content by creating a Smart TV that combines ease of use with a winning killer application through partnerships with various stakeholders across the value chain.

Last is the organizational structure of the company to manage external and internal conflicts. In 2012, Samsung changed is Visual Display division's organization structure mainly in three ways. First, the role of area managers was expanded to oversee the profit and product strategies of the TV line up in addition to their responsibility of managing the sales in each subsidiary. Second, the Product Planning group was separated from the being under the umbrella of Marketing Division to an individual unit reporting to both Marketing and R&D executives. Third, the head of R&D was replaced with an executive experienced in software development, putting more emphasis on software and user interface/ user experience rather than the hardware itself. In 2013, a new group called Future Innovation was formed being in charge of new growth products and technologies. Despite the efforts, the organization structure does not empower teams to better negotiate with stakeholders or solve internal conflicts. In the case of Smart TVs, Samsung needs a designated team to focus on growing the Smart TV platform instead of having a product manager just focus on cost and profit. In an article in Harvard Business Review, Tushman (Tushman & O'Reilly III, 2004) introduced the 'Ambidextrous Organization' as a recommended tool for exploratory businesses. This structure helps different alignments connected through senior team integration, common vision, values and common senior rewards. Samsung's approach to creating a Smart TV platform should adapt features of the ambidextrous organization in order to foster breakthrough innovation, new business models and partnerships.

39 Figure 22. Ambidextrous Organization

Alignment of: Exploitative Business Exploratory Business

Strategic intent Cost, profit Innovation, growth

Operations, efficiency, incremental Adaptability, new products, breakthrough Critical tasks innovation innovation

Competencies Operational Entrepreneurial

Structure Formal, mechanistic Adaptive, loose

Controls, rewards Margins, productivity Milestones, growth

Culture Efficiency, low risk, quality, customers Risk taking, speed, flexibility, experimentation

Leadership role Authoritative, top Visionary, involved

Based on the 4 levels, the strategic direction for Samsung's Smart TV can be specified into a detailed platform-based architecture. Based on the needs of end-users and trends in the industry, there are two outstanding needs to modify the current industry architecture. First is the technical aspect of integrating all video, audio content in one simple interface. For example, providing a platform that users can easily use traditional live TV with DVR functions and have the option to watch re-runs on the OTT services as well as user generated content from YouTube. The current platform requires multiple logins and accounts for subscription in addition to set-top boxes with various remote controllers for each device. The key is to create a unified interface that enables users to seamlessly go through their content not only through TV, but also through Samsung's mobile phones, PCs and tablets. Comcast and Time Warner Cable executives have said they're open to new program guide interfaces as long as cable subscribers keep paying them.

Cable subscribers could be "authenticated" through Samsung's Smart TVs to prove they're subscribers.

The second vision is a business aspect, which is to connect the video content to social networking platforms so users can easily interact with each other while viewing the content. The user scenario is that the user watching a TV show on HBO Go could easily capture a part of the video clip with through

Samsung's technology and posts it on Facebook with their comments to share with friends. The friends can click on the video clip and it would automatically direct them to HBO's streaming service. This benefits the content providers as it attracts more traffic to their site and users can conveniently stay connected while watching TV.

40 Figure 23. Samsung's Smart TV Platform Architecture Vision

Integrated gateway for content Content ProvidrE * Adapted/interactive UI

Aggregators7TVtform End- SNS * Connected devices User Sites e Seamless social networking Distributors e Video analytics * Closed OS Advertisers

Samsung can use the viewing data to attract advertisers and incorporate ads to subsidize limited viewing time of video content such as the YouTube video model does. In addition, the platform should be opened to third-party firms such as the content providers and social network services so that companies can build on the platform to create integrated products. However, too much openness may make it easy to imitate and replicate the technology, therefore it is essential to close the core operating system licensing it to only Samsung devices or Samsung partnered cable set-top boxes. Overall, the most compelling aspect would be to create a simple, integrated and interactive user experience such as program guide interfaces, video recommendation services and connection with social network services. These experiences will attract users to the platform as it helps personalize the user profiles, which potentially builds network effects around the user base by attracting more complementary services.

CHAPTER 5: Conclusion

This research work started with the key question about how to address the underlying challenges and opportunities manufacturers face in the robust Smart TV industry. The connection of Internet to the TV set initiated a battle for the center of the living room from traditional TV manufacturers to companies from other industries because the potential market size for Smart TV is expected to be huge. Not only in device sales but also targeted television advertisements and TV app market place is speculated to be the next profitable ecosystem after the smartphone industry. Over the years, the technological change and consumer behavioral change triggered the industry to transform from a value chain based ecosystem to a multi-sided platform ecosystem. Based on Cusumano's definition of industry platforms (Cusumano M. A., 2012), Smart TVs have a strong platform potential as it is:

A device with integrated Internet capabilities with advanced computing ability that brings Internet video services streaming into the living room, solving essential problems for actors in the industry. The existing

41 platforms allow app developers to connect or build-upon the operating systems to expand the user base. In addition, even with the growth of smartphones, PCs and tablets that are threatening to substitute televisions, the value proposition that a Smart TVs has such as being a shared device (not personal device) with a large screen size and lean-back experience will be hard to substitute. However, due to the radical change in the industry all players' core activities and assets are threatened therefore, this requires firms to rethink their strategy to create the best platform and develop business models around core components and complementary products and services.

Especially in the case of Samsung, the key is to leverage the existing assets such as technology that enhances the viewing experience (picture quality, user interface, N-screen etc.) and position itself as a partner rather than a threat to operating networks because this is a competitive advantage Samsung has over competitors such as Google, Apple and Microsoft. In addition, to create a platform that facilitates killer applications and premium content Samsung must have control over the app development leading to maintain a partially closed ecosystem, but offer the platform on multiple devices and make an industry standard to give incentivize the developers to join the ecosystem. In addition, Samsung must reallocate its resources and organization structure to transform from a hardware platform company to software, cloud- based platform company.

However, even if Samsung cored the market and created a common platform for the industry the next step to consider will be whether the Smart TV market can become a winner-take-all or winner-take-most market and if not, the issue is how to get the market to tip more in Samsung's direction. Even the smartphone market where strong industry platforms exist still remains a fragmented market with 2-3 major players. If Samsung were to create a unique platform with a partially closed ecosystem, there could be more room for platform differentiation especially for game consoles because the core activity of these devices is different. The Smart TV platform will have strong network effects between the platform and complements, but because of various consumer preferences and needs the unlikelihood of users buying more than one platform will still be uncertain. Therefore, Samsung must prepare to continuously fight to dominate the center of the living room.

42 Work Cited

Cattaneo, L. (2013). Online ad market. Cambridge: Interactive Ad Bureau.

Comcast. (2014, Feb 13). Comcast Corporation.Retrieved Mar 20, 2014, from Comcast Corporation: http://corporate.comcast.com/news-information/news-feed/time-wamer-cable-to-merge-with-comcast- corporation

Comcast. (2014). Comcast Subscribers. Philadelphia: Comcast Corporation.

Cusumano, M. A. (2012). Industry Platforms and Ecosystem Innovation.

Cusumano, M. A., & Gawer, A. (2002). Platform leadership:how Intel, Microsoft, and Cisco drive industry innovation. Cambridge: Harvard Business School Press.

Deighton, J., & Kornfeld, L. (2013, Jun). Bluefin Labs: The Acquisition by Twitter .HarvardBusiness School, 2.

Escalera, K. W. (2012, May 2). Generation Y: Luxury's Most Buoyant Market. Retrieved Dec 13, 2013, from Generation Y: Luxury's Most Buoyant Market: http://luxurysociety.com/articles/2012/05/generation-y-luxurys-most-buoyant-market

Hoelzel, M. (2014). The Connected TV Landscape: Why Smart TVs And Streaming Gadgets Are Conquering The Living Room. BI Intelligence.

Hong, K. (2014, Jan 1). bogotobogo. Retrieved May 1, 2014, from bogotobogo: http://www.bogotobogo.com/WebTechnologies/n-screenconnecteddevices.php

Junco, R., & Mastrodicasa, J. (2011). Connecting to the Net Generation: What Higher Education ProfessionalsNeed to Know about Today's Students. Pennsylvania: NASPA.

KDB Bank. (2012). Smart TV Industry Overview. Seoul: KDB Bank.

Kim, E. (2011). Smart TV Future. Suwon: Samsung Electronics.

Kwon. (2012). Smart TV Possibility. Seoul: Digieco.

Lasar, M. (2009, Jun 24). ars technica. Retrieved Feb 10, 2014, from ars: http://arstechnica.com/tech- policy/2009/06/is-comcast-and-timewarers-tv-everywhere-tv-for-everyone/

M.Mogahan, A. (2004). Four Trajactories of Industry Change. HarvardBusiness Review, 1-3.

Martin, S. (2012, Apr 12). Sony plans to cut 10,000jobs, reduce TV models. Retrieved Mar 30, 2014, from USA Today: http://usatoday30.usatoday.com/tech/news/story/2012-04-12/sony-job-cuts/54199992/1

McCracken, H. (2013, Dec 03). Top 10 Gadgets. Retrieved Jan 10, 2014, from TIME: http://techland.time.com/2013/12/04/technology/slide/top- 1 0-gadgets/

43 Miller, C. C. (2010, Oct 21). The New York Times Bits. Retrieved Oct 6, 2013, from The New York Times: http://bits.blogs.nytimes.com/2010/10/21/big-networks-block-web-shows-from-google-tv/

Project, T. L. (2005, Nov 18). Info.org. Retrieved 05 01, 2014, from Info.org: http://www.linfo.org/convergence.html

Smart TV Alliance. (2013). Smart TVAlliance Invitation to Join. NA: Smart TV Alliance.

Smith, D. (2014, Jan 8). Apple's App Store Breaks Records, But Google Play Is Catching Up. Retrieved Apr 2, 2014, from Readwrite: http://readwrite.com/2014/01/08/app-store-sales-google-play- android#awesm=-oDr9CzEXUkDJXp

Spangel, T. (2014, Jan 14). Variety. Retrieved Mar 3, 2014, from Variety: http://variety.com/20 14/digital/news/cord-cutting-fears-overblown-pay-tv-industry-may-actually-grow- slightly-in-2014-1201040240/

Spangler, T. (2013, Aug). Cord-Cutting No Longer an 'Urban Myth': Pay TV Operators Drop 316,000 Subs in Past Year. Variety, 1.

Stelter, B. (2014, Apr 23). HBO shows coming to Amazon ... not Netflix. Retrieved Apr 23, 2014, from CNN Money: http://money.cnn.com/2014/04/23/technology/hbo-amazon/

Tushman, M. L., & O'Reilly III, C. A. (2004, Apr). The Ambidextrous Organization. 2.

Werner, C. A. (2011). The Older Population.Washington: US Census Beureau.

Westlake, E. (2008). Friend Me if You Facebook. TDR: The DramaReview 52:4 (T200) , 22.

Yoo, J. (2011). Service Platform Strategy. Cambridge: Massachusetts Institue of Technology.

Zigmond, D., & Stipp, H. (2011, Jan). Multitaskers May Be Advertisers' Best Audience. HBR , 1.

44