Business alliances were as important as new technologies at last week's Consumer Electronics Show in Las Vegas, as consumer electronics manufacturers worked to differentiate their products by cutting deals with programmers and multichannel operators.
Samsung announced alliances with both Comcast and Time Warner that will allow cable subscribers later this year to use all the applications on Samsung's new smart TVs, including the internet content. The agreement will also allow subscribers to more easily search for TV programs and movies, and to watch TV programming on Samsung's Galaxy Tab.
Meanwhile, Sony announced a deal with Time Warner Cable that would allow subscribers to access all of the smart TV's features and the MSO's live programming without a settop box.
Echostar's Sling Media also cut a deal with Verizon so that users with Sling-based equipment can access content from Dish over Verizon's new 4G network if they are willing to pay a subscription fee to Verizon.
Such alliances are likely to become even more important over the next year, as CE manufacturers roll out more Smart TVs and tablets with Internet connections. Shortly before the show, the Consumer Electronics Association estimated that over 80 tablets would be shown at the show and that worldwide tablet sales would hit about 30 million in 2011.
Overall, the CEA is projecting that global retail sales of consumer electronics will increase by 10% to $964 billion in 2011 from $873 billion in 2010. In the U.S., factory sales to retailers should hit in $182 billion, up from $175 billion in 2010.
The proliferation of new devices and new ways of accessing content prompted a number of comments at sessions about the prospect that a growing number of consumers would use these devices to discontinue their cable subscriptions and threat these devices posed to traditional TV and multichannel players.
But the high profile announcements between CE manufacturers and multichannel providers seemed to indicate that multichannel providers were embracing over-the-top content and that the new smart TVs and tablets would be used to enhance the existing multichannel experience with online content, much-improved search functions, interactivity and the ability to access more content on mobile devices.
"Much of what we hear about over the top has to do with changing consumer behavior," noted Terry Denson, vice president of content strategy and acquisition at Verizon Communications during one of the sessions at CES. "We see it more as an opportunity than a threat. If we as distributors can capture consumer expectations [of being able to access content on multiple platforms] and provide a seemless experience we are well positioned as long as content providers are not giving content away for free, we are well positioned."
Such moves would be important for the future, as operators seek to differentiate themselves with multiplatform content offerings, argued Dan York, president of content at AT&T.
He noted that AT&T's U-verse IPTV offering has been the fastest growing multichannel provider in the U.S. for five quarters in a row and that their all IP platform has positioned them aggressively rollout offerings for multiple platforms.
Some also argued that the market for OTT could see a shakeout. "The market is overcrowded," argued Rob Riordan, executive vice president of Cellcom. "The middle man is not going away. The consumer needs to have things made simple and that is where the carrier comes in. The person that wins will be the one who makes it simple."
Operators did worry, however, that programmers might undercut the multichannel business model by making more content available online for free and that they would demand extra fees for making content available on other devices.
"Subscriber sshould be able to access content that they've already paid for whenever and wherever they want," York noted. "It isn't our intent to charge for access to other devices and we think it should be one price."
"If they start to give away that content that undermines the core bread and butter" business models that have sustained both operators and programmers, he added.
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