Apple Working on Smart TV Set: Competition Set to Increase

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Gartner estimates that the worldwide unit production of smart TVs will grow from 69 million in 2012 to 198 million in 2016, and this amount will account for 85% of all produced TVs in 2016 as forecasted by Gartner. According to this new report by Gartner, amid increasing speculation that Apple (NASDAQ: AAPL) is working on an Internet-connected television set, other television manufacturers are making the move to the Web too.

What Is a Smart TV?

Smart TV sets are sets that are able to access a wide variety of content from the Internet over a broadband connection, and can receive traditional TV broadcasts through terrestrial transmissions or via satellite, cable or an Internet Protocol TV (IPTV) set-top box.

At this point of time Apple already offers Apple TV, a a small white set-top box that allows users to stream content from iTunes, Netflix, Hulu Plus, YouTube and other sites. But the step to an Internet-connected set means more opportunities for brands, advertisers and Apple itself.

Why Is This interesting?

Due to smartphones’ and tablets’ connectivity users are able to pull content from the Internet from one device and push that content to the TV. Especially with video (but also with pictures), who wants to see those on a small screen? An ecosystem that provides an easy experience to enable this has an advantage. The marketing advantage for those TV manufacturers that also make smartphones and tablets is that it makes the education towards the consumer a lot easier. Think for instance of Google (NASDAQ: GOOG) TV (Google TV is a smart TV platform from Google co-developed by IntelSony and Logitech). Google and Sony can benefit massively if they provide this holistic user experience enabled by their devices.

I think Apple has an advantage because of their friendly and qualitative user experience compared to the Android platforms. Google already is creating an ecosystem of smartphones, tablets, TVs and even cars, so I foresee an interesting competition between excelling user experience and breadth and depth of the ecosystem.

A recent survey by Morgan Stanley Research suggests consumers would be willing to pay a 20 percent price premium over competitors' offerings to get their hands on a physical TV set made by Apple. This once more shows how attractive the Apple brand and experience is.

Paul O'Donovan, Gartner principal research analyst, said in a statement that "It is critical for the TV industry during this global economic downturn and decline in consumer confidence levels to sustain sales and maintain or grow market share—especially in emerging markets. This is difficult when demand has slowed, so the extra functionality offered by smart TVs becomes the product differentiator —if prices are already competitive and all other variables are equal between brands.”

Utilitarian marketing Is the Opportunity for Smart TV

I’ve written around one hundred articles on Connected TV, Social TV and media convergence on and I don’t think the functionalities offered by Smart TV sets become the product differentiator.

First of all because the demographics aren’t yet fully optimal so that Smart TV can benefit. It is Generation C that is growing up digitally, other generations have difficulties to understand all these technologie. Critical mass for advertisers and brands to do something with the offered applications on Smart TV will not diffuse fast. Research by the NPD Group supports this with numbers, showing that Internet-connected TVs are used to watch TV and that's all.

However, this challenge offers an opportunity, namely that of utilitarian marketing: creating a brand utility that solves the most frustrating problems customers experience when they use the companies’ products and services. Not many brands are doing this yet because it’s hard to create a good brand utility. In the case of all the developments in TV and consumer electronics, this might well be the opportunity to create brand awareness and loyalty.

In my opinion, thìs could be the differentiator amidst the competitive Smart TV market.

GLCuccureddu has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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