Internet TV will turn your next HDTV into a set-top box

Ryan Lawler of NewTeeVee has written an excellent post about how the just-concluded Consumer Electronics Show demonstrated that HDTV manufacturers have become the new consumer gatekeepers, and cable (as well as satellite and IPTV) operators are just another content option. This is thanks to the Internet TV functions built into almost all of the major-brand HDTVs introduced at the conference. Some manufacturers, such as Samsung, Vizio and Sony, have licensed Internet TV technology from Yahoo, Google and/or Boxee. Others, such as Panasonic, have developed their own Internet TV systems.

Lawler's argument is somewhat premature, in that only a small minority of installed HDTVs have Internet TV capabilities, and sales growth in the U.S. market has slowed to only 1% per year. Nevertheless, it points out a "blind spot" in many industry observers' thinking (including my own). The focus to date has been on set-top boxes from Apple, Boxee, Google, Roku, etc. The argument has been made that most consumers won't add another set-top box to the one they already have from their cable, satellite or IPTV provider.

Last year, the U.S. Federal Communications Commission proposed a new set-top box design called AllVid that would combine the functionality of service provider and over-the-top set-top boxes in a single device. However, Internet TVs don't require a separate set-top box for over-the-top Internet video, and as Lawler points out, consumers' incumbent multichannel video services show up as one of many content choices, including Netflix, Amazon on Demand, Twitter, Pandora and other services. These Internet TVs accomplish most of the goals of AllVid without requiring any changes to existing set-top boxes.

On the other hand, just as there's currently a lot of consumer confusion about how to choose among Apple TV, Boxee, Google TV, Roku, Vudu and other over-the-top set-top boxes, there will be confusion about the Internet TV services built into the new HDTVs. That's in addition to the existing confusion over HDTV resolutions, refresh rates, backlight technologies and 3D technologies/formats, all of which may be enough to stall consumer adoption. I don't think that there's a chance that we'll see any real standards, either de facto or imposed by the consumer electronics industry, to lessen the confusion. It will take several years for technologies and formats to shake out.

Sooner or later, however, most HDTVs will be Internet-enabled, and at that point, the third-party set-top box argument will be moot. The real challenge for the current set-top box vendors will be to get their systems integrated into HDTVs. Yahoo is in the lead today, but with strong competition from Google and Boxee, it's not likely to keep it over the long run.