Sunday, April 7, 2013

First Quarter, 2013: Are we on track? An update to the definitive research "The 2nd Screen: Transforming video consumption"

The first 3 months of 2013 has been explosive for 2nd Screen.  Apps have improved, new apps have continued to launch, clear evidence of growth in the revenue associated with the market can be seen, and the convergence of 2nd Screen companion experiences and 2nd Screen viewing experiences has continued.

In this brief summary, I am going to make references to our published research (“2nd Screen: Transforming Video Consumption”, a 252-page report published during our 2nd Screen Summit @ CES on January 7th), as well as to blogs and conferences we have hosted and attended during the last 3 months.  However, the information should be relatively coherent if you have been paying attention to the space even a little bit.  If you are attending today’s 2nd Screen Sunday @ NAB, you will have the opportunity to buy discounted copies of the Executive Summary, Market Starter Pack, or the Full Report as required.  
  1. Market Trends.  Perhaps the best way to gauge where the market is headed to look back at the predictions we made in the report (page 77 and in our blog on New Year’s Eve) and to see if we are on track:
    1. The "digital land grab" continues, marked by consolidation,
      failure, and improved user experiences.
        Well Viggle didn’t successfully complete the acquisition of GetGlue, but the market itself has continued to consolidate.  Dijit did acquire Miso, giving the consumer branded NextGuide app which excels in the “To Discover” segment a strong head start on developing its features “To Enhance” the consumers’ viewing experience after they have found a show.  Additionally, zeebox continues to develop its consumer feature set out as have other app notables (Yap.TV launched v.4.0, Turner launched a new March Madness app that was even better than last year, and the Super Bowl, the Grammys and the Academy awards all got their own bespoke app experiences for second screen).
    2. Social feeds will be a feature, not the experience.  There has been a decent amount of debate in the blogosphere and at conferences, led by industry thought leaders Alan Wolk and Jesse Redniss.  Twitter is perhaps the best and most used tool for Social TV, but Social is only one component of the second screen experience, being aptly rounded out by the features making up the “To Control”, “To Discover” and “To Enhance” segments.  I am sure this debate will continue as Social TV continues to enjoy continued growth and press.
    3. "Discovery" will become a household word.  Well, we’re making progress, but we’re not there yet.  Expect DirecTV, Dish, and Time Warner Cable all to make announcements around their platform discovery in the coming months and for start-ups like BuddyTV, Dijit (NextGuide), Yap.TV and Matcha to continue their progress as well.  While Digitalsmiths continues to make progress in the Pay TV and CE space, larger industry service providers have been making their push (Kit Digital, Gracenote) as well.
    4. Tablet and smartphone usage reports will become about activities related to the TV.  Nielsen launched a social measurement service (after buying SocialGuide) and Twitter bought BlueFin.  More and more the statistics are pointing to behaviors while watching TV (shopping, looking for a show to watch, voting, etc).  Expect this trend to continue.  It is no longer a question of whether or not people use a second screen but rather what they are doing with them.
    5. Studios and networks save money, apps grow in 2 directions.  We saw announcements around CES where CBS Connect and Fox Now are consolidating multiple shows into their consumer facing app.  More importantly, we predicted that these branded content apps would create alliances with 3rd party apps like NextGuide and ConnecTV to expand their reach by syndicating their official metadata and content to promote a quality branded experience—and today Hardie Tankersly from Fox will be on stage to discuss exactly that.  
    6. Gamification will begin to lose favor with the press and consumers, only to begin to add value again towards the end of 2013.  Perhaps it is a bit too early to weigh in on this trend.
    7. Amazon and eBay will engage in a battle for the Second Screener's M-Commerce.  While Amazon is making progress with its “X-ray” feature for Kindle, there has not yet been a push from them on commerce and “Watch with eBay” is still massively under marketed.
    8. Cloud-based digital lockers will finally be taken seriously by consumers and the rest of the ecosystem.  There has not yet been evidence of discovery platforms scanning or presenting results from the UltraViolet locker service, but there are now 11m accounts on record and Saffron Digital announced an end-to-end service in partnership with Akami for UltraViolet retailers.  Progress.
    9. Device makers will jump into second screen with both feet.  Samsung certainly is “all in” on the concept, launching several second screen efforts to drive real connectivity amongst their smart phones, tablets and Smart TVs.  Expect Nokia, HTC, and Motorola to come to the party soon.
    10. ACR and the battle of the digital video ecosystems.  Prior to CES, there had already been market rumors of Netflix working their streaming ecosystem towards a second screen platform.  Now that DIAL (owned by Netflix) is out in the open and supported by  Google, there is a real possibility that an open API system will decrease the cost and complexity for 3rd party apps to connect to devices in the living room including Smart TVs and set top boxes.  Additionally, companies like Flingo are creating white label ACR ecosystems for smart TVs and other digital video devices, allowing the ecosystem owners to go to market quickly with a synchronized content capability.  Watch this space closely.
  2. Market sizing.  We took a bold stance in our research report (page 55) on revenue in the 2nd Screen space, claiming that 2012 had already seen $490m of attributable revenue from this market segment and the we expected the market to reach $5.9B by 2017.  When I stood on stage at CES to discuss this, I saw a lot of disbelief in the crowd.  We walked the room through the breakdown of mobile and online video advertising  ($6B growing to $17B) and m-commerce ($76B growing to $158B) and out logic for the incredibly small sliver of those markets that will be captured by 2nd Screen experiences in the living room (forgetting the opportunities in the convergence place between companion and viewing experience).  Right out of the gate, Super Bowl 47 had press for CBS Interactive claiming to have sold $10-12m in advertising for the 2nd Screen along.  Then the stats for living room shopping while watching TV started to pour in from various analytic agencies (very high percentages of smartphone and tablet owners are shopping while watching TV).  Throw in the content syndication model for apps sponsored by the NBA and MLB, and you quickly get a sense that this market is on a strong upward trend.
  3. Consumer app experience.  To round out the Q1 view, we should look at what applications have significantly improved their feature set.  This is important because no matter what the revenue or business model is for a particular app experience or ecosystem, if the consumer isn’t engaged and using the app on a regular basis, there is no opportunity to attract revenue.
    1. Events.  The Super Bowl (Keynoted today by Jason Kint), the Grammys and the Academy Awards all got their own bespoke app from their network sponsors.  March Madness upgraded their amazing 2012 experience to deliver an even more eye-popping 2013 app.  I would expect the Masters to double down on their strong 2012 showing and deliver an event better experience next week.
    2. 3rd Party Apps.  zeebox has continued to develop new feature sets for its app. 
      Yap.tv launched its 4.0 version and a Microsoft’s Xbox SmartGlass continued to expand its presence by launching an exclusive experience for The Hobbit.
    3. Network apps.  Fox Now, CBS Connect, USA Anywhere and Bravo Now continue to improve their app experiences, with Fox and NBC distributing their metadata to 3rd party apps to improve their branded content consumer experience across multiple apps.  HBO Go continues to invest in its converged 2nd Screen companion and viewing experience app as Game of Thrones hits its 3rd season.
    4. Sports apps.  The NBA continues its great 2nd Screen season, cleaning up on the Social side of the experience set and the MLB is just underway with a new set of features for MLB At Bat (presented on stage today by Joe Inzerillo).
    5. Finally, converged experiences are continuing to
      be a trend, helping consumers manage the transition from the living room scenario where a companion experience is desirable and a mobile scenario where a viewing experience is what is required.  March Madness and HBO Go leverage the authenticated Pay TV network for their video experience and I am expecting the Masters to do the same next week.  MLB and the NBA give you the opportunity to have a “lite” stats-only experience for free and a paid subscription for viewing out of market games.  With significant advertising and subscription revenue at stake here (and the converged experience being highly desirable by consumers), expect this significant industry trend to continue despite its increased development costs.  Expect sports apps and premium branded subscription TV to lead the way forward here.

So a relatively short but very action-packed summary for nearly 100 days of market activity.

We are looking forward to continuing the conversation today at 2nd Screen Sunday @ NAB, through a few webinars over the coming weeks, at our 2nd Screen Summits in NYC on June and IBC in September, and, of course, through our blog and Twitter activity (@ChuckParkerTech, @S32Day).
Look out for the next major update on this comprehensive report on June 27th in NYC.

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