Consumers warm to interactive television

76% of consumers say TV set widgets would be useful

The term "interactive television" causes many industry executives to roll their eyes. Rightfully so, given such 1990s debacles as AOL TV, WebTV and Time Warner's iTV.

Still, the concept of marrying the TV to the Internet hasn't died; TiVo, Xbox, PlayStation 3, Roku and others are doing it with limited success. Now, a new report suggests consumers are looking forward to more interactivity with their TV screens courtesy of "widgets."

Widgets are mini-applications docked on the bottom or side of a TV screen. With one click, a viewer can access local weather, stock quotes, breaking news, movie trailers, VOD and other content.

A new Ernst & Young report says consumers like the concept, and the Web-enabled TVs that make it possible already are on sale. This year, about 400,000 will be sold in the U.S., and by 2013 about 13.8 million of them will be in American homes, according to the report, which cites Park Associates for the data.

Meanwhile, a study from the Diffusion Group finds that 76% of consumers believe having a widget dock on their primary TV set would be valuable.

"There are far more people predisposed to these widgets than I expected," Ernst & Young partner Howard Bass says.

The good news for TV executives is that the Diffusion Group also discovered that what people mostly want from their widgets is more TV content. Some of the functionality consumers seek, in fact, already is available in some form or another via DVRs and VOD.

Among the top widget applications TV viewers want are those that make it easy to find and watch current episodes, up-to-the minute local weather, the ability to find and watch shows no longer on the air and breaking news headlines.

It costs $50,000-$150,000 to develop a TV widget, Ernst & Young says, though delivery and ongoing costs are considerable. Plus, there are issues beyond cost with which to contend:

-- Developing a viable business model. Ads and pay-for-premium content are early ones.
-- Content conflicts. Ford, for example, wouldn't want to run a TV ad while the widget dock is advertising Toyota.
-- The providers of TV -- cable, satellite and telcos -- need to embrace the technology and figure out a way to profit from it.

If these challenges, among others, are successfully hashed out, widgets could be the driving force that finally makes interactive TV truly interactive, beyond DVR and VOD functionality.

Widgets have a leg up on competing technology because of such big advocates as Yahoo and Intel. In April, Samsung began building TVs with Yahoo's widget software already installed, and Sony and LG have followed suit. Next month, Vizio will launch a 42-incher with the Yahoo widget engine and a keyboard hidden in the remote control for $1,000.

"This is the next big thing, and it's happening now," says Patrick Barry, vp connected TV at Yahoo. "It's not futuristic."

Yahoo's eventual business model is targeted video and interactive advertising. "TV is an emotional platform, but it's pretty dumb," Barry says. "We're combining the emotional power of TV with the science of the Internet."

Yahoo allows each family member to custom-build their TV Widget Dock with applications from eBay, Blockbuster, Amazon, the New York Times, Netflix, Twitter, CBS, ABC and Showtime, among others.

Yahoo supplies a kit, and developers from the partner companies "create any experience they want," Barry says.

One hot area is fantasy sports: Yahoo recently launched an application from a small company called Rallypoint that puts statistics related to the TV viewer's fantasy football team in real time on the screen.

Another popular one is from YouTube, owned by Yahoo nemesis Google.

"It's a great widget for watching YouTube videos in full-screen mode with all the YouTube goodness, including user comments," Barry says.

Widgets are not the "end all and be all of interactive and Internet TV, but they are a really significant development," Bass adds.

Paul Bond can be reached at paul.bond@THR.com.
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