Two recent pieces of research from our Digital Home Observatory have given us tremendous insight into one of the great strategic challenges of the digital content age: how digital consumers navigate their way through the complexity and wealth of choice they are now faced with. In two key emerging areas – TV apps and online video – we have identified key lessons for industry players seeking to build new opportunities in these markets.

The first report, TV Apps: Owners Won't Give Them Up, researched behaviours and usage surrounding the apps available on the latest generation of connected and smart TVs. Recent adopters of these devices were interviewed and observed in their own homes to understand the thought processes they were going through as they made use of these advanced capabilities.

Surprisingly, perhaps, we found that most of the participants in our study had not intended to buy a “connected” or “smart” TV when they first purchased the device. The key deciding factors when buying a TV, even for “smart TV” buyers, were those we have recognised for many years: price, picture quality, screen size, high resolution and matte screen. A typical respondent told us:

“I didn’t know there were apps on the TV till I got it home. The sales guy told me I could watch iPlayer on it but that’s all I knew”

But every one of our participants, once they had installed the TV and begun to explore its capabilities, became hooked on at least some of the apps, to such an extent that they felt the apps had become the most important element of the TV’s capabilities and that they could not imagine being without them.

Critically, however, our research found that users were unlikely to make use of apps with which they were not already familiar from other devices and services. So Hulu Plus subscribers would quite happily use the Hulu Plus app on a smart TV, but would be reluctant to explore apps they did not already recognise.

Our second report, The Online Video Discovery Process, emphasises the variety in discovery processes apparent in different types of online video application. The discovery process related to television shows, for example, assumes a high degree of knowledge about the specific show and even a particular edition or episode of that show: viewers frequently know precisely what they are looking for and are less interested in recommendations or suggestions.

However, viewing of movies online is often driven by a quite different set of motivations. The decision to watch a movie is often taken only when no television shows of interest are available from various sources. And partly for this reason, many potential movie viewers have not decided which movie they wish to watch when they begin the discovery process. This explains why recommendations engines are much  more critical in the movie genre than in television shows.

There is a lot more richness to be found in our research which can’t be revealed in a blog posting. But these pointers demonstrate that technology vendors and service providers still have a great deal of work to do as they maximise the business potential of emerging connected television platforms.

Smart or connected TV is still very much in its infancy: early implementations, going back to 2007 or earlier, certainly had their limitations: the products now being introduced are clearly a leap forward in terms of user experience, and our research shows that their advanced features and apps can offer high levels of appreciation and satisfaction. But the industry will fail to meet its objectives if it does not urgently address the remaining challenges, which largely centre on communicating the benefits of connected TV to potential customers. Manufacturers, developers, service providers and retailers must each play their part.

David Mercer

Client Reading: TV Apps: Owners Won't Give Them Up; The Online Video Discovery Process

Over the past six months, Strategy Analytics has conducted in depth interviews with 60 consumers across five countries who are watching over-the-top content on their television screens. This group - that we call "Connected Media Consumers" - access online content via a variety of methods: some own connected TVs, BluRay players or gaming consoles, while others have purchased digital media center PCs or media adapters. Despite this diversity, when it comes to their attitudes and motivations for consuming OTT content, we have found that these consumers are often surprisingly similar. Saving Money is Not the Main Motivation The rising number of "cable cutters" who have cancelled their pay TV subscription and consume only OTT media has received a lot press recently. However, our research has found that, while saving money is a factor for some of our Connected Media Consumers (especially in Spain or China), the vast majority are using OTT primarily as a way of increasing the variety of content available to them and providing the convenience and flexibility to consume their preferred content anytime, anywhere. For most, OTT supplements their broadcast viewing and our research has shown that the vast majority actually consume more content now than they did before adopting connected media, and that their number one method of consuming content is still broadcast. They mostly tell us that broadcast TV and OTT content serve different purposes and that both are valuable to them. When families come together to watch TV, they are most likely to be watching a program 'live' as it is broadcast. As such, for these consumers, watching broadcast TV is likely to be considered a social activity. By contrast, OTT content is more often associated with personal interests. For this reason, we have found when observing these consumers in their homes that attention levels for broadcast TV are generally lower than for OTT media. While broadcast TV is being 'watched', family life is occurring, whereas digital media is generally consumed at a time when the viewer can devote much more of their attention to the content. Legal Alternatives to P2P Sharing of Digital Media Needed Finding the content they are interested in is the biggest frustration for these consumers. Most are willing to pay to be able to find all of their favorite content in one place. They also want better options for discovering new content that may be of interest to them. While many have no qualms about accessing content illegally via file-sharing, there are also many - especially in markets like Germany - who do this only reluctantly because there are no legal alternatives that truly meet their needs. Our research suggests that if a solution was available that met their demand for access to international content in one place, there would be strong demand. Discovery of Content Based on Social Recommendation is Highly Desirable Since digital media is more likely to be consumed by an individual alone rather than with the rest of the household, and since attention is higher, consumers place a much greater emphasis on the relevance of the content to their tastes. This means that many of them choose to watch their preferred shows via digital media. It also means that they choose the digital content they watch more carefully and seek out information to help them decide whether it is worth watching a particular show or not. To identify content that will be most relevant to them, these consumers place great value on recommendations. We found that recommendations based on reviews or activity generated by friends is of the highest value, while recommendations automatically generated based upon the preferences of other users of a service are also valuable (e.g. “People who watched this also liked...”). Appropriate Controllers Required for Digital Media Access According to our interviews, one of the main limitations of connected media consumption is current controller technology. Text input - for content searching - is cumbersome using traditional TV remotes. Additionally, consumers want fewer and smaller controllers in their living rooms, while at the same time they are wary of universal remote controls because they are concerned that these will not replicate every function of all of their existing remotes. We believe that bundling more appropriate controllers for digital media consumption will be vital to driving adoption. Our research suggests that touchscreen and direct pointing technologies represent the most effective technologies to meet the interface needs of these consumers. For more information about Strategy Analytics’ in depth research with Connected Media Consumers, click here.

Strategy Analytics has recently completed a series of in-home interviews and observations with a segment that we call “connected media consumers” – i.e. individuals who connect their home entertainment devices to the web to access and view digital media content on their televisions. By taking an ethnographic approach, we identified four key motivators for adopting media connectivity that are common across those we studied. • They want a more personalized TV experience. Having access to web-based content on their TVs frees them from the standard cable/satellite TV schedules, allowing them to watch what they want, when they want, and where they want. This also enables them to pay just for the content they are interested in. • They want to customize the TV experience – i.e. to control and configure their set up to optimize it to their situation and preferences. For example, being able to choose the way they see advertising on Hulu.com is important to them. • The discovery of new content is also important. They use services such as Pandora online radio because they like how it suggests new music based on their established interests and preferences. The ability to discover new, and importantly relevant, content is a compelling part of digital media entertainment for these consumers. • And finally, they want a more social TV experience, so that they can share their experiences with friends and family, both physically and virtually. They are at the forefront of the convergence between social networking and digital media. The full findings of this study, which includes insights into barriers to adoption and unmet needs of connected media consumers, are available for purchase here: Profiling the Connected Media Consumer: a Contextual Study.