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Connected Homes December 2011/January 2012 Viewpoints

Technology Analyst: Kyle M. Whitman

2011: The Year in Review

Many people will likely remember 2011 as the year when content-rights holders in the United States pushed for new legislative action that would provide attorneys general—and private entities—with sweeping new legal tools to fight online piracy. Under the new legal regime, internet-content providers would lose many of the safe-harbor protections that they currently enjoy under existing law, potentially making the operation of many types of content-sharing and content-hosting sites legally untenable. As of the end of 2011, the legislation was still being debated, although its eventual passage will not necessarily be a win for rights holders: Legal experts opine that the legislation in anything like its current form will almost certainly be struck down by US courts. Rights holders did, however, achieve some meaningful progress in securing their digital content against widespread copyright theft during 2011 via successful implementation of some new digital-rights-management (DRM) schemes. For example, game maker Electronic Arts (Redwood City, California) transitioned its digital game-downloading service to incorporate server-based DRM authentication of both physical and digital copies of games, intending to compete with a similar—and highly successful—service from Valve Software (Bellevue, Washington). Although these developments certainly are significant for connected-home stakeholders and users alike, 2011's most significant home-networking developments involve changes within the smart-television industry and market and new entrants into the home-automation market.

Smart TVs: Successes and Setbacks

Smart TVs, internet-enabled televisions capable of viewing digital video content and running software applications, made up a significant percentage of all TVs sold during 2011. Some estimates peg 2011 smart-TV sales at more than 25 million units, or some 10% of all TVs sold during the year. In the United Kingdom, smart TVs made up more than 35% of all televisions sold during the 2011 holiday season. If accurate, such sales figures certainly represent a significant year-on-year sales growth for smart TVs and lend some credence to analysts' estimates that smart-TV market penetration will grow very rapidly in the years to come—perhaps reaching as much as 50% of all televisions sold by as soon as 2015. However, brisk sales of smart TVs during 2011 do not necessarily indicate that the way households use their televisions—and the television's role as a center of connected life—is on the verge of changing completely. On the contrary, the increase in smart-TV sales in 2011 seems to be analogous to the similar growth in the 3D-television market that has occurred during the past two years.

Like smart TVs, 3D televisions experienced significant sales growth during 2011—some analysts estimate a tenfold increase in 3DTV shipments since 2010. But although specific data are difficult to come by, all indications are that people are not viewing much 3D content in the home. For example, AT&T stopped carrying the fledgling ESPN 3D sports network on its U-verse digital-television service in August 2011, citing lack of user demand as a key reason for the decision. That same month, Australian broadcasters scrapped a plan to implement over-the-air 3D television broadcasts for similar reasons. The lack of demand for 3DTV content is difficult to reconcile with the high number of 3DTV sales unless households are buying 3D televisions not to watch 3D content but to take advantage of other features—for example, ultrafast screen-refresh rates and LED backlighting, which are typically included in 3DTVs. The 2011 smart-TV sales boom seems to indicate a similar situation: Analysts estimate that most smart TVs currently in use have never been connected to a home network and therefore cannot deliver their intended benefits. That most smart-TV purchasers do not seem to use advanced features for which they presumably paid a premium price suggests that people are buying smart TVs for reasons wholly unrelated to those features. Even retailers who sell smart TVs appear to be ignorant of their benefits; for example, a December 2011 survey of UK electronics and pay-TV retailers revealed that most salespeople are unfamiliar with the benefits of connected smart TVs and sold customers on the televisions by using pitches about features such as screen size and picture quality. Internet connections were notably absent from most retail locations, meaning that in-store demonstrations of most smart-TV functions are not even possible.

The smart-TV situation in 2011 certainly was not grim, however. Most smart TVs sold during the year were running variants of Google's (Mountain View, California) Android operating system (OS), and upgrade paths may open up for many such televisions in the near future when version 4.0 of the Android OS becomes deployed more widely. Android advocates expect the new OS to provide strong support for interoperability among smartphones, tablets, and other platforms—including smart TVs. Indeed, analysts suggest that many households are intentionally purchasing smart TVs as a means of future proofing themselves in case smart TVs one day become essential conduits for information and entertainment. But to truly change the way most people access video, games, information, and other digital content on their televisions, smart TVs may ultimately need much more than a unified interface and unimpaired access to homes' existing data networks. They will need to deliver a user experience that synchronizes with peoples' expectations and desires and delivers the content people want in a way that is more convenient than—or at least as convenient as—the myriad existing options potential smart-TV users already have. Delivering such a convenient and accessible user experience is no easy task and requires mastery not only of technology and interface design but also of complex business aspects associated with delivering compelling content to home viewers in a way that complements rather than threatens incumbent channels and players. The very public setbacks that the Google TV platform suffered during 2011 are examples of how navigating the complexities of the content-distribution business can be extremely daunting—and extremely critical to a new content-delivery platform's success. Rights owners that declined to stream to Google TV devices, including US broadcasters and the streaming service Hulu, apparently did so out of conviction that TV audiences who watch via streaming do not generate as much subscription and advertising revenue as do TV audiences who watch via broadcasting and packaged media. In mid-2011, Logitech reported that more of its Google TV set-top boxes were being returned than sold—a situation that disabled streaming services were likely partially responsible for. Later in the year, the company announced that it will not offer any new versions of its Google TV set-top box but plans to continue supporting existing units. Even so, Google TV appeared far from dead at the end of 2011—Google still had Sony as a partner and was courting other manufacturers.

New Players in Home Automation

Google's forays into the connected home during 2011 did not stop at the television screen. In May 2011, the company demonstrated Android@Home, a new home-automation platform designed to connect smart-home objects—such as network-connected LED lightbulbs, climate-control systems, and appliance-control units—to smartphones running Google's Android operating system. Android@Home attracted significant attention but did not appear to build much momentum following the May announcement and demonstration. The concept of using a smartphone to control home-automation systems certainly is not new, but few home-automation players outside premium market segments have thus far delivered applications that have caught on widely with users. In theory, the smartphone-user-interface-design expertise Google gained from years of refining Android into a first-rate mobile OS ought to give the company an edge in smartphone-based home automation. But thus far, Android@Home has not demonstrated any truly standout benefits that might make home-automation systems compelling for end users to buy, install, and use, thereby facilitating the growth of a massive ecosystem of home-automation products. Google opted to use a new proprietary short-range wireless protocol—SNAP from Synapse Wireless (Huntsville, Alabama)—instead of the more familiar ZigBee or Z-Wave protocols. SNAP may have some technical advantages over competing protocols and may even become an important home-networking standard in the future, but even with Google's backing, such a takeover could take years—if it occurs at all. In the meantime, early adopters of Android@Home will need to buy a special network bridge to connect their home Wi-Fi networks to the separate home-automation network and then seek out compatible devices.

One notable new home-automation product on the market, Twine by Supermechanical (Cambridge, Massachusetts), is still in the very early start-up phase but is generating significant interest among home-automation stakeholders—perhaps for good reason. Supermechanical's 2011 Twine prototype product is a simple, palm-size wireless sensor box that connects to a cloud-based service, and users configure the sensor's automated-notification features using a series of drop-down menus on a user-friendly web application. Twine users can easily configure the device to, for example, send a text-message alert to a certain cell-phone number or issue a message to a certain social-networking-service account when its built-in sensors register a wetness, vibration (or lack of vibration), or other conditions and events. Many potential uses exist for a Twine device, and Twine's creators envision a universe of add-ons that will provide additional sensing and control functionalities. Beyond its very straightforward configuration and cloud-service integration, Twine's distinguishing feature appears to be its incorporation of an onboard low-power Wi-Fi transceiver in each sensor device. This Wi-Fi transceiver allows Twine units to interface directly with the existing, familiar, standardized wireless data network that is already deployed in the vast majority of households that are likely to use home-automation systems. Many millions of even the most technologically unsophisticated home users have experience in connecting new devices to their home Wi-Fi networks and may find adding another device (like Twine) a much simpler alternative to adding a home-automation network bridge and one or more devices.

Look for These Developments in 2012

  • Look for manufacturers to deliver on new ways to integrate tablets and smartphones with home-entertainment systems via decidedly low-tech means—specifically, through the incorporation of infrared transmitters into mobile devices. Users praised the inclusion of such transmitters in the few Android tablets that featured such functionality during 2011, and some type of infrared transmitter may become part of devices' standard panoply of sensors, cameras, and indicators in the course of the year (in much the same way that innovations such as proximity sensors, accelerometers, and magnetometers diffused very rapidly in mobile markets following their introductions).
  • Expect gaming services that are built around cloud-based rendering (see the April 2009 Viewpoints) and thin-client platforms to scale back, restructure, or even shut down operations in 2012 because of a mismatch between end-user needs and the quality of service provided. Such services have focused on delivering top-tier titles that attract a hardcore-gamer user base, with their key value proposition being that users need not invest in expensive hardware to play the latest, most graphically intensive games. Although such services have managed to deliver smooth game-play experiences, prevailing broadband speeds in such services' key markets simply are too slow to allow users to run games without significant compression in the video stream. Thus, very frequently, the graphics that an end user perceives while playing a game on a streaming service are lower-quality than the graphics a user experiences when playing the same game on a home-console system (even when the service is running the game on hardware that is much better than a current-generation gaming console). Given the relatively low price points of current-generation consoles, a large portion of game-streaming services' target user base might see little value in buying access to a cloud-based game versus buying the same game on a console. Some services already seem to be adapting to this market reality; for example, OnLive has served up "instant demos" of PC games, allowing users to try out new titles without downloading anything. Demo versions of high-end PC games are often very large downloads that require a time-consuming installation process, so the ability to try out a game instantly without waiting for it to download and install is compelling. Game-streaming services might become primarily a profitable niche that serves demos to home-console users—at least until a future day when broadband services become truly suitable for continuous high-definition streaming animation.
  • Do not expect 2012 to be the year that the smart TV achieves dominance over the living room, despite new technology introductions by LG and other major players and a revised version of Google TV. Apple (Cupertino, California) may also release an integrated smart TV as many analysts expect, but the company has thus far never managed to get more than a few major television and movie studios to agree to let it distribute content via its iTunes platform. Because pay-TV providers are entering the network-connected-television realm themselves via introductions of new set-top boxes with home-network connections and successfully partnering with Microsoft (to deliver pay-TV content using the company's Xbox 360 gaming console as a set-top-box equivalent), 2012 will more likely see pay-TV providers expanding their own dominance of the living room.