Understanding the Connected TV Market
Confusing terminology aside, Connected TV sets will likely simplify your approach to TV programming and web services.

The never-ending cycles of product “improvements” in the television manufacturing business are actually less complicated than their marketing may suggest. True, keeping track of the exact features (screen size, resolution, compatibility details, etc.) of every iteration of every brand can be confusing even for tech-savvy consumers. That’s not because the devices have become increasingly difficult to operate, though. A lot of the puzzlement stems from TV nomenclature. What’s the difference between Sharp‘s (PINK:SHCAY) Aquos LC46LE830U Quattron 46-inch 120 Hz TV and the Aquos LC46LE835U Quattron 46-inch 240 Hz TV? A couple of hundred dollars and a slightly improved image, but you’d never know it judging from the ridiculous model names.

2012 is the year of the Connected TV. The bad news: This

Here’s the idea. A Connected TV, or Smart TV, is a television that has a plethora of services built directly into it. Like smartphones or PCs, these TVs run on operating systems, run apps, and connect to the Internet to provide streaming entertainment. Unlike the offerings of traditional cable and satellite services like Comcast (NASDAQ:CMCSA) or DirecTV (NASDAQ:DTV), the bulk of content available on Connected TVs is available on-demand rather than scheduled. Think movie/TV services like Netflix (NASDAQ:NFLX) and music services like Pandora (NYSE:P). Connected TVs also provide access to Web-based social networking tools like Facebook and Twitter.

Up to now, the number of Smart TV products on the market has been split between set-top boxes that are connected to regular HDTVs and full-featured Connected TVs with on-demand features built directly into the sets. Going forward, the industry will focus more and more on building Smart TVs and forgoing set-top boxes altogether. Nothing demonstrated this more than January’s International Consumer Electronics Show in Las Vegas.

Who is making the goods? First are the companies making the operating systems running on Connected TVs. Google (NASDAQ:GOOG) is looking to control the market with Google TV the way it’s seized the smartphone market with Android. While Google TV devices have been available for over a year, it was only at CES that the company publicly revealed its greatly expanded partner list. Nearly all of Sony‘s new Bravia HDTVs are Google TV-equipped Connected TVs. Samsung (PINK:SSNLF) is also making Google TV-equipped sets as part of its Smart TV (an actual brand name in this case) line of Connected TVs. Budget TV maker Vizio is also making Google TV sets. Other television manufacturers, like the aforementioned Sharp, use proprietary operating systems for their Connected TV sets.

Google is slowly stealing market share in the space from Yahoo (NASDAQ:YHOO), whose Yahoo Connected TV was a pioneer in this area, with Samsung, Sony, LG, Toshiba, and Vizio using the platform between 2009 and 2011.

Set-top boxes that provide Connected TV functionality to sets are still a part of the equation. Roku provides a cheap, compact device that’s gained a strong, growing following. Apple‘s (NASDAQ:AAPL) self-described hobby project, Apple TV, is also a player in the space. Of course, that’s the company that may galvanize the Connected TV business later this year. Rumors have been swirling since October that Apple will sell its own line of connected HDTVs later this year. These sets will almost certainly run on Apple’s proprietary iOS operating system, the same platform powering the iPhone and iPad. The popularity of those connected devices guarantees a level of familiarity in consumers that should ease the confusion that surrounds the rest of this new TV market.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.


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