What do these stories tell us? One, that watching television via the internet is real – with just one single provider (Netflix) taking up as much as one fifth of all traffic. Two, that current business models for television might soon be outdated.

The move by the three networks comes as no surprise – local affiliates of the US networks have been complaining for some time that the networks make programmes available for free on the web, while they have to pay for the right to broadcast them. With connected TV sets such as Google TV it is just too easy to watch network TV series on demand – for free.

One response from the networks has been the introduction of Hulu Plus, a paid for service, a premium section of the Hulu video portal, a joint venture between News Corp, NBCU and Disney. One solution for the networks might be to start to offer TV series against payment via Hulu Plus to connected TV owners. And indeed, Hulu and Google TV confirmed that talks are going on the make material from Hulu Plus available on Google TV on a transactional basis.

Meanwhile in Europe

Now these examples apply to the US, but in Europe connected TV sets, as well as all kind of hybrid devices, are also making big inroads into the market. On the one side, there are the consumer electronics manufacturers who bring out TV sets and Blu-ray players with connected services such as Philips Net TV, Samsung@Interent and Sony Bravia Internet TV who offer access to a limited walled garden of video content – and, in theory, also access to selected video portals on the open internet.

Then there are the platforms such as Canal+ in France who combine their regular TV offer via DTH satellite, IPTV or DTT with online access to their own walled garden – in the case of Canal+ the Le Cube box, which offers direct access to their ‘Canal+ a la Demande’ VOD service. And in the UK, BSkyB has started the phased roll out of its Pull VOD service Anytime+ using the connected capabilities of its Sky+ HD service. Such services only offer content from the platform – or at least controlled by the platform.

The question is now – will customers accept these limitations? The answer will of course be ‘no’ – people have grown used to the open internet and will also demand that of video over the web services.

UPC – the Horizon project

Cable operator UPC has taken the concept one step further with the Horizon project. Liberty Global chief strategy officer Shane O’Neill gave attendees at the recent TIF conference at Dublin Castle the first glimpse of the Horizon Connected Home Gateway, scheduled for deployment across the UPC network during 2011.

“On the face of it Google TV looks like a threat, but in reality the cable industry will do what it has always done, and try to embrace innovation developed elsewhere and incorporate it into its own service. I think there’s a very strong likelihood that you’ll see the cable industry embed Google television and that functionality into its own set-tops, so that it’s not a threat but a cool new way to search for video”.

Explaining that the new box would bring a marriage of linear TV and the internet, O’Neill said that multiple screens had meant the social aspects of TV had disappeared, but that the social networking features included in the UPC Horizon box would go some way towards restoring this. “We won’t necessarily watch together, but we will discuss it on the television, through Facebook”.

Horizon will enable the consumer to do four key things; to access the internet, as well as the pay-TV offering; to enable to stream content downloaded on the PVR throughout the house; it will enable any content held on a PC or other devices to be viewed on the main TV. Navigation, which O’Neill said UPC was becoming increasingly obsessed with, comes through the NDS Snowflake UI.

We have not yet seen a Horizon box actually working and it will be interesting to see how access to web content will be handled. The easiest way would be using widgets or apps, which will give easy access to various web services. A keyboard on the remote, which is planned for Horizon, will also make sure that any website can be accessed – at least in theory.

Vodafone’s  hybrid TV in Italy and Spain

Vodafone Italy has deployed the Vodafone TV Connect service, involving a hybrid set-top box bringing together a DVB-T tuner, internet access via dedicated widgets and access to locally stored content. The company is now also launching a similar service called Vodafone Internet TV in Spain. The box, developed by French company WyPlay, receives DVB-T channels, both free-to-air and pay-TV, as well as a number of IPTV delivered services including VOD.

In Italy, the TV Connect widgets include Vodafone Calcio (football), the weather, horoscopes, information and more. The STB is available in retail under €200, with discounts available for Vodafone DSL customers.

In Spain, the new service is set to compete with Telefonica’s IPTV service Imagenio and Orange TV as well as with cable. However, in contrast to its competitors, Vodafone does not plan to invest in content itself, but rather rely on DTT services in a hybrid box. Vodafone also has no IPTV services in the two countries, but has chosen to rely on DTT broadcasts for its main TV offer.

A series of widgets will provide access to Spain’s catch-up TV services. Additional content will be available from National Geographic Channel, Canal de Historia and Canal Cocina (entertainment).

The hybrid box, developed by French company WyPlay, allows access to the internet on the TV, including on-demand and streaming sites, and gives access to locally stored content, such as videos, photos and music. The box is “PVR ready”, allowing recordings to be made to a USB device, and includes DNLA, Wi-Fi and Ethernet connectivity and is also ready for both HD and 3D content.

At an IBC lunch hosted by NDS, which is providing middleware and security for the German launch, Diego Massidda, director of video & connected, Vodafone Germany said the project could be replicated in other markets. However, the German initiative is a different beast, combining Vodafone’s own IPTV offer with additional channels from cable or satellite, while in Spain, viewers get access to all the DTT channels, both FTA and premium, with additional content from the open internet using dedicated widgets for easy access. In addition, the WyPlay box also acts as a media centre, giving people access to their own locally stored content.

What is up for SFR?

Wyplay has also been selected by French IPTV provider SFR, in which Vodafone owns a share, to collaborate with its technical team to develop the software for its next generation of HD IPTV set-top box. With over 4 million broadband subscribers in France, SFR has decided to shake up the existing solutions in the market by proposing a revolutionary HD IP-STB solution in 2010. “We want to bring a new user experience to our customers by facilitating access, exchange, and consumption of all media; TV, internet, mobile, PC, NAS,” said Pierre-Alain Allemand, general manager Networks SFR, in a statement.

More details on the set-top box are expected before the end of the year. We expect the new SFR box to offer some kind of web access using widgets (or apps), as well as to locally stored content. The French IPTV is the most competitive in the world and SFR will need a device that will beat those of its rivals, which include the Canal+ Le Cube and the Orange Livebox 2.

Belgian’s Mobistar TV offer

The Belgian mobile operator Mobistar has launched its new Mobistar TV ‘quintuple-play’ package offering mobile and fixed telephony, broadband access and IPTV, DVB-T and DVB-S television.

Mobistar says it has developed a complete television solution combining multiple available technologies. Its hybrid television receiver gives access to satellite (via DVB-S), digital terrestrial (DVB-T) and IPTV television signals. Satellite offers HD quality (Full HD 1080) and 3D television experience and brings over 500 television and radio channels. The internet gives customers access to interactive services (EPG), content on demand (VOD) and “thanks to Mobistar TV’s intelligent platform”, customers can watch, record and manage their favourite programmes both on their television or mobile devices.

The satellite portion of the offer, delivered from Astra at 19 degrees East, echoes a similar implementation by Vodafone Germany. Mobistar is working together with the two Belgian DTH platforms from the M7 Group, TV Vlaanderen and TéléSat. The telecom operator uses the Viaccess PC4.0 encryption.

Mobistar is part of the France Telecom group and will use their Livebox to connect to the internet and to offer TV and radio to the television set. The Livebox 2.0 has wifi, is DNLA enabled and contains a 320 GB hard disk.

However, in both research reports the outlook for connected TV sets is bright. The figures from DisplaySearch refer to the number of sets shipped, the figure from Park Associates is devices in the home.

The new research from Parks Associates indicates the number of European households with a connected TV will grow from less than 4 million in 2009 to 47 million in 2014. The number of households with a connected Blu-ray player will jump from 5 million in 2010 to approximately 66 million in 2014.

“Connectivity is becoming standard in CE products,” said Kurt Scherf, VP, principal analyst, Parks Associates, in a statement. “Stakeholders as diverse as managed service providers, content aggregators, and third-party application developers will play a role in how these devices link to services and allow the consumer to discover new ways to interact with entertainment.”

Despite the growth of the connected TV segment, no clear front-runner has emerged. DisplaySearch said that only around 10% of the connected TVs sold in Japan have joined a network so far, while expectations for North America have been scaled back as the TV market struggles in the region this year.

In Europe, Parks expects a growing role for hybrid devices. “The growth of hybrid set-top boxes, which offer broadcast and broadband/IPTV options, is a major trend in the European video market, especially as the continent is poised for full DTT switchover,” according to Scherf. “For example, DTT coverage in France reached 88% of the market by June 2009, and the full switchover will finish in 2011. Industry consortia in several nations are working on set-top standards to enable interactive TV services. Efforts include MHP, HbbTV, Project Canvas, OHTV, and Hybridcast.”

By contrast to the connected TV market, uptake of 3D TVs among consumers has been limited by high prices and lack of content. Displaysearch expects that 3.2 million 3D TVs will be shipped in 2010, with growth to over 90 million in 2014. Based on this forecast, 3D will grow from 2% of all flat panel TVs shipped in 2010, to 41% in 2014.

“While TV manufacturers have bold plans and a lot of new products, consumers remain cautious,” said Paul Gray, Director of TV Electronics Research. “Consumers have been told that 3D TV is the future, but there still remains a huge price jump and little 3D content to watch.”

To a European audience this sounds pretty much like what teletext has been doing for the past 30 years, and remember that the concept never really made it in the US, or the promise of MHP even though proprietary middlewares were already doing the same thing.
Widgets, however, offer personalisation and a willing developer community that has already shown its commitment to the Apple Application Store. Like teletext, they are available directly through the television itself, rather than relying on an additional set-top box, but this time the initiative is coming from the receiver manufacturers and their partnership with the search giant and not the broadcasters.

Patrick Berry, VP, Connected TV, Yahoo! says that initial approaches were made to the broadcasters before pick-up was received from manufacturers that include Sony, LG and Samsung. A partnership with Toshiba will add some non-TV devices.

“We started with the operators and said ‘who represents television in the home?’ and we went to the operators, Sky, BT and in the US Comcast and AT&T,” according to Berry. “It occurred to us that the conditions weren’t right for doing what we wanted to do, but as we went through that process we also talked to consumer electronic manufacturers and there we found the right willingness and alignment, and a global opportunity.”

Yahoo widgets are currently available in ten European territories, each with local language support, and it is clear a global footprint waits. The widgets associate themselves with the native UI functions of the TV, adopting the language selected at installation.

Berry admits that the Yahoo Widgets are far from the first platform capable of delivering the weather forecast, but says what they provide is the scale, which the internet can offer developers for the first time. “We have an open platform that runs globally on very many different devices, so we don’t have the little silo or closed market problem.

“In small markets like Denmark, Yahoo is not going to have the native services and we couldn’t build them if we wanted to. But there is somebody in Denmark who has a great content service that is really relevant and what we are doing is creating the tools necessary to help those companies seek out their audiences locally.”

It is no surprise that Apple application developers are among the first to become interested in developing widgets. Berry predicts that the Dutch teletext application on your writer’s iPhone might soon find its way into US homes via the widget platform.

“In Silicon Valley and in other areas of the world there are these little clusters of development houses that specialise in this sort of thing. They understand how to quickly take what’s essential and make it into something useful. We use Javascript and XML and that’s familiar to them.”

The Yahoo widget engine is based on the Konflabulator, the desktop technology acquired by Yahoo in 2005, though the emphasis now is firmly on the TV market.

With a principal of always having the internet one click away, the widget interface can either superimpose itself onto an existing image that would include pay-TV content from a third party operator, or place the widgets around the sides of a reduced TV window. Public broadcasters take note.

Berry says the BBC has been “great to talk to” and it may be that public broadcasters become a source of widget development, given the resources already put into their websites.

Already, YouTube can be viewed through the connected TVs, as is the case with Apple TV, and almost every similar application seen on the tradeshow floor. The next stage is premium video that Berry says will be offered through Samsung TVs in the early autumn, presenting a discernable threat to pay-TV operators, particularly those who like BT Vision supposedly market themselves towards light TV viewers.

All providers of content need do is create their own application, be they Amazon or the ‘Acme Movie Co’, no agreement need be sought with Yahoo other than the approval of the application through the developer program. “Monetarily we really want them to pursue their business model, because that helps rise the tide, because as a commercial internet activity we’ll get a share of that. We’re not trying to get a share of every little dollar.”

Berry says that the US cable platform Tru2Way is not attractive because of the narrow specifications that have been set. “If you look at it from the development standpoint you just don’t want to be associated with it. People want to develop iPhone aps because they are really cool. It performs beautifully and your brand is well presented in that environment.”

He admits that there is no possibility of a single Yahoo device coming in and achieving the same scale as the iPhone. However, by working across multiple devices it is possible to encourage developers and through it users. Potential developers can sign up to Yahoo’s developer program, online at http://connectedtv.yahoo.com/, where they can also receive help from their peers. The first stage is to develop and test the widget on a desktop emulator, which can take the developer 90% towards the completion of their widget. The application is then uploaded to a special developer area so it can be tested on a compatible television.

Yahoo will act to make sure that any offensive, or potentially television-crashing applications, are removed from the system. Berry emphasises that to date this hasn’t been necessary.

“The model right now is for us to make the strategic investments necessary so that we can position ourselves for the long term and enable us to pursue the business models we’re comfortable. Today those are advertising and to a lesser extent premium services and we expect both of those to be available to us on TV. We hope to bring internet science to an industry that has been characterised not by science, but brute force.”

New Television Insider was among a select group of industry analysts to be invited to the central London location where Nigel Smith, VP and chief marketing officer, NDS explained that after last year’s focus on convergence, the company was turning its attentions to addressable advertising.

One concept is Infinite TV, which may be familiar to readers through earlier appearances at expos including the IPTV World Forum. Infinite TV is capable of running on a number of devices including PCs, hybrid set-top boxes, integrated digital TVs (IDTVs) and portable media players. Users can register their details and devices online and then view content. Advertising can be tailored to the content viewed, with advertisements appearing when the programme is paused – a functionality that must surely find its way into standard PVRs.

Although multiplatform, NDS was playing up the potential relationship between broadcasters and consumer electronics manufacturers, at the same time being careful not to promote a low end competitor to its core pay-TV constituency. Smith said many operators do not have a direct relationship with their audience other than through the web and this could be a way in.

The advertising elements have already been integrated with both the DART and Microsoft solutions.

Nick Thexton, senior VP research & development, new initiatives, said Infinite TV was being positioned as an open standard and being offered without any lock-ins. The stance is important given the number of approaches to so-called connected TV being explored by the manufacturers. “This is a different segmented market. We’ve been successful in reaching out, but there are other companies who would like to work with NDS, but see us as a pay-TV company.”

Advertising was also at the centre of NDS Dynamic, which uses the PVR/DVR to substitute linear scheduled ads with those more directly suited to the user profile of the subscriber. It is also possible to match advertising with recent viewing choices; for example the viewing of several hours of sports programming would indicate a particular demographic.

Also on display were a number of “proof of concept” demonstrations including the Multi-room DVR that has recently attracted the attention of BSkyB. DVR content can be transferred over a home network, and although functionality is focussed on TV programmes, it can also include the subscriber’s own music and photo collections. Subscribers can use a single DVR to network content to a number of set-top boxes – similar functionality was seen from Cisco at The Cable Show, held in Washington DC in April.