Business Reporter asked Jim Buckle, MD of Lovefilm UK for his views on the UK’s nascent connected TV market
How is the UK’s connected TV market coming along?
Connected TV will become a mainstream TV product regardless of whether it is used or not. This year we’ll see an evolution towards that with more and more products and services becoming available. The more services there are, the more people will connect, and the more people connect, the more companies will want to deliver services to them.
It’s quite a contrast with 3DTV, which started to come to market at about the same time. 3D is a fantastic cinema experience but watching 3D content in the home is quite a strange activity. I don’t see it becoming a mainstream feature of TV viewing.
The TV industry is starting to resemble the PC industry. The processing power that people get on PCs, tablets and laptops grows exponentially all the time as a way for manufacturers to define and maintain their price points, but the actual potential of the features to get used or even understood by consumers decreases over time.
Connected TV offers viewers a lot of options. How can any particular service stand out from the others?
It’s all about placement and brand recognition. If your app is placed near the top left-hand corner of the main menu that viewers get when they switch on their connected TV service, next to BBC iPlayer or [Channel 4’s] 4oD or other services that people would recognise, then that helps. If at the same time you are already a recognised brand, then that helps even more. As well as this, you need to promote your service outside of the TV environment.
How has Lovefilm managed the transition from being primarily a DVD-by-post company to being primarily a media streaming company?
It’s a funny thing being in a business where you know that eventually it will die! In the second half of last year, we realised that we had to step off the fence and decide whether we wanted to promote ourselves to the consumer as a streaming business or as a DVD rental business or as a combination of the two. We felt that the time had come to lead on streaming as our simple message for the future.
It’s been quite difficult over the years to know when exactly to invest in internet delivery. We didn’t want to invest heavily too much in advance of when consumer demand was going to be there. But we’ve sensed over the last 12 to 18 months that there has been a gradual build-up in consumer demand. BBC iPlayer has really started to make people aware of the idea of watching content over the internet, and that has blazed a trail that the likes of us can follow.
The step-up in demand is really driven by how much good content you have available to people so there’s actually something there that people really want to make the effort to go and watch; by what major devices are you on; and by now heavily you promote your service. Each time we add a new device or a new studio deal or extra content, we see a step-up in usage. If you were thinking about launching a service that’s going to be available on connected TVs right now, you wouldn’t want to limit yourself to connected TVs as it’s still quite a small market. You would want to make your service available on PCs, laptops, tablet computers and mobiles as well.
How important is content quality in driving connected TV take-up?
If viewers know that the internet is coming through their TV, and that it’s more likely to give them something they want to watch than what they’re going to find on their electronic programme guide (EPG), then that will become something they will do more regularly. Rather than scrolling through to page 96 of the Sky EPG, they might immediately go to what’s on Lovefilm or what’s on BBC iPlayer. The more that becomes a positive experience, the more it reinforces their behaviour to do that. The other thing we must do is take away the effort for people. It’s not just about having great content, it’s a question of when viewers go into those services, do they provide things for you that viewers actually want to watch? They might like to know that Lovefilm has 10,000 films that they could watch, but actually they’d quite like them to present 10 things that they really do want to watch. So it’s not just about quality but about personalisation as well.
What else could be done to move connected TV forward?
The process of buying a TV could be a lot easier. When I bought a Sony Bravia connected TV recently, I expected it to have an in-built wireless receiver, it took me a little while to figure out that I needed to spend another ?50 or ?60 buying a wireless dongle to plug into the TV. Buying a TV seems like a complex thing. The choice is somewhat bewildering, even for someone like me who works in the industry. For the average consumer, it’s quite hard to know what you’re getting for your money.
Can the UK’s broadband infrastructure cope with increased demand for TV via the internet?
It’s hard to tell. I find my broadband doesn’t deliver a great experience for me if I’m trying to watch something on a connected TV and another member of my family is using a games console at the same time. There is a really noticeable degradation in quality at peak weekend times if you and your neighbours are making heavy use of services. There’s a huge exponential growth in the use of internet and video still ahead of us. Obviously there’s a huge upgrade of the internet going on at the same time, so provided those two things go hand in hand, everything should be fine. If one goes slightly ahead of the other, then I don’t think it will be.
Lovefilm facing a future of tough competition
Lovefilm, a subsidiary of Amazon.com, is a UK-based provider of home video and video game rental through DVD-by-post and streaming video on demand in the UK, Germany and Scandinavia.
Subscribers can access the Lovefilm Instant digital service through a range of devices including connected TV, PlayStation, Xbox, iPad and a number of other internet-enabled devices. It is available on Sony, Samsung and LG connected TVs.
In January 2012, Lovefilm announced that it had reached 2m subscribers, driven by a record number of sign-ups in the fourth quarter of 2011. In February, for the first time, Lovefilm members streamed more films and TV series instantly over the internet via Lovefilm Instant than rented DVDs, Blu-rays and games.
The company said that the number of films and TV episodes streamed online through internet-connected devices exceeded the number of DVDs, Blu-rays and Games rented by over 20 per cent – a rise of 400 per cent compared to February 2012. Titles are also available on a pay-per-view basis via Lovefilm Box Office.
The service faces competition from Netflix, a media streaming service that has more than 25m members in the US . Netflix launched in the UK and Ireland in January, offering viewers unlimited access to content for £5.99 a month. Lovefilm offers a variety of packages starting at £4.89 a month. Both services will soon face competition from Sky’s new internet-based offering NowTV.