1. Will widgets work? Web-enabled TV in search of a killer app Media & Entertainment

2. Whether its the traditional press and broadcast media, or the multitude of new media, audiences now have more choice than ever before. For media and entertainment companies, integration and adaptability are becoming critical success factors. Ernst & Youngs Global Media & Entertainment Center brings together a worldwide team of thousands of professionals with the industry knowledge to help you achieve your potential a team with deep technical experience in providing assurance, tax, transaction and advisory services. Our global media and entertainment professionals work to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately, it enables us to help you meet your goals and compete more effectively. Well use this study and other reports as a means of sharing information with you. Its one of the ways Ernst & Young makes a difference. 2 3. ContentsIntroduction2New technologies for a new age in television4iTVs long and bumpy road6Whats a widget?10Web-enabled TV forecasts14Key questions for content owners18Critical success factors20Conclusion22Contacts 24 Will widgets work? 1 4. IntroductionAfter years of missed attempts, web-enabled televisionConsumer Electronics Show that could prove game-changing. may nally have found its killer application. Much like The Channel provides a platform for the development of TV internet, mobile and iPhone widgets, TV widgets enrich thewidgets which are internet-enabled applications that will reside entertainment experience through the delivery of information, on the television screen. The functionalities of widgets can range entertainment and social networking capabilities that sit right from a small icon showing basic information (such as a weather on the viewers TV screens similar to computer desktop icons. forecast) to a full-screen, content-on-demand experience. When viewers click on a downloaded widget, however, theyErnst & Young believes TV widgets could be the catalyst to wide- enter into an alternate media world that could be as simple as aspread adoption of web-enabled TV. The reasons are threefold: partial-screen local weather report or as deep as a full-screen movie VOD archive. Content companies from television to movie 1. Consumer familiarity: Many consumers are well retailers are seizing the opportunity to build new distributionacquainted with widgets from their internet and mobile channels, galvanize consumers growing TV/online multitaskingdevices. Apples App Store alone is forecast to earn habits, extend their consumer relationships and forge new$1.2billion in sales by 2009, with a signicant portion of revenue streams. To capitalize on this opportunity, contentthese sales coming from widgets.1 In addition, consumers owners, media distributors and device manufacturers alike will are interested in introducing more active behaviors into need to develop new provisioning capabilities across platforms,their television viewing experiences, as demonstrated by forge new channel partnerships and package content and their growing propensity to multitask across online and advertising in innovative and engaging new ways and thats television mediums. This content category is both familiar just for starters. to consumers and aligns well with their evolving televisionconsumption habits, all of which may help fuel the useof TV widgets. Recent increased usage of internet TV Its frankly way beyond just passivelyofferings, such as Hulu, has also accustomed consumers tointeractive video experiences. watching broadcasts and is no doubt the 2. Content company adoption: Television companies are future of TV.seeking ways to enhance their brands and extend theirrelationships with consumers. Likewise, video rental - Boo-Keun Yoon, Executive Vice Presidentretailers are searching for new ways to monetize their of the Visual Display Division, Samsunglicensed content. TV widgets provide content owners with Electronics, as quoted in TVs Tune to an additional platform by which to enhance consumerengagement and extend their brands. Many content the Internet; Web-connected Television companies have already announced the development Sets Take the Show Floor at CES,and scheduled release of TV widgets, including CBS and Multichannel News, 12 January 2009,Showtime, who have announced they will be developingand releasing widgets over the next 12-18 months.2 via DowJones Factiva. 3. Application-focused technology: Intel has partneredwith Yahoo! to develop a technology that is easily Video-on-demand (VOD), digital video recorders (DVRs) andleveraged by content owners. Furthermore, they have a start-over technologies have made interactive television (iTV) multidevice hardware distribution strategy that fosters a capabilities commonplace in todays home. However, the success rapid market adoption. They are also actively promoting of web-enabled television (web-enabled TV) has proven far more their technology to all the critical value-chain players, elusive. For over a decade, web-enabled TV applications have including content, cable and consumer electronic been released with little success. However, Yahoo! and Intel, in companies. This strategy should result in a quick and partnership, displayed the Widget Channel platform at the 2009 scalable US market penetration. 1 Apples App Store could emerge as $1.2b business by 2009. AppleInsider, 11 June 2008. 2 Yahoo! brings the cinematic internet to life and revolutionizes web-connected television, Business Wire, 7 January 2009, via Dow Jones Factiva.2 Global Media & Entertainment Center 5. Despite these powerful drivers of technology adoption, TV Through a series of interviews with many of the major widgets are not without their challenges for content companies. players across the TV widget value chain, consumer TV widgets are a consumer-controlled medium, in which the research led by The Diffusion Group, interviews with viewer can pull down a variety of widgets from an application Ernst & Young industry experts and original data analyses, gallery, thereby allowing transparency and one-click access this report provides insights into these questions, and to competitors programming. In addition to the competitive outlines the key areas that must be addressed in order for challenges, there are also operational challenges. For instance,TV widgets to gain widespread adoption. a TV widget and full-screen show might be running simultaneous conicting advertising messages. Lastly, consumers have become accustomed to highly interactive, full-keyboard media consumption on their computers that will not easily transfer to the remote-controlled TV widget experience. The technology, therefore, raises a number of questions: Can the appropriate interactive capabilities of the internet port to the television set provide a compelling offering to consumers? Will consumers exchange less rich interactive capabilities for a 52 high-resolution television experience in the living room? If so, are TV widgets the killer app for the previously elusive web-enabled TV and what are the key success factors for consumer adoption? Will widgets work? 3 6. New technologies for a new age in televisionMass adoption of iTV has only recently shown modest gains. At the 2009 Consumer Electronics Show, television companies There is a formidable history of missed attempts to capturewere talking about the Yahoo!-Intel Widget Channel platform. audience and make money with a compelling iTV offering. Some ABC, CBS, Showtime and others have announced their intention argue that one of the earlier attempts, the pay-TV channel to release TV widget offerings over the coming year.6 Interactive Premiere in Germany, led to the downfall of one of the great marketing agencies, such as Schematic, have developed television empires the Kirch Group.3 the capabilities to assist media companies in creating andprogramming these widgets.7 These companies are betting that But the last decade has witnessed a owering of iTVinteractive media applications on internet and mobile devices applications, with both VOD and DVR usage now somewhathave accustomed consumers to a wide variety of interactive commonplace.4 While these iTV applications are gainingexperiences, which include accessing, sharing, discussing and currency, neither is yet web-enabled. The few web-enabled iTVmanipulating media, which can be ported to the TV. applications which have launched, such as WebTV, have failed to achieve wide-spread adoption.5 TV is becoming more like the Internet. It is experiencing a content explosion that . . . requires search capabilities.- Keval Desai, Product Management Director, Google 3 German MHP now in doubt, Inside Digital TV, 5 February 2003, via Dow Jones Factiva, 2003 Phillips Business Information, Inc. Some might argue that it was the pay-aspect of the channel that led to its failure, as Germany is primarily a free-to-air market and pay channels have historically struggled. However, it was the large investment in the interactive technology for Premiere which contributed to the challenges the Kirch Group faced. 4 In 2008, US VOD household penetration was 41m and DVR was 30m. US Video-on-Demand (VOD) Households, eMarketer, 5 December 2008 and US DVR Households, by Subscription Type, eMarketer, 5 December 2008, both citing data from MAGNA. 5 Microsofts MSN TV2 easy to use, a bit pricey, The Baltimore Sun, 17 November 2005, via Dow Jones Factiva. 6 Yahoo! brings the cinematic internet to life and revolutionizes web-connected television, Business Wire, 7 January 2009, via Dow Jones Factiva; CES notebook, CABLEFAX, 12 January 2009, via Dow Jones Factiva, 2009 Access Intelligence, LLC. 7 We also liked, Advertising Age, 30 March 2009, via Dow Jones Factiva; 2009 Crain Communications, Inc.4Global Media & Entertainment Center 7. Will widgets work? 5 8. iTVs long and bumpy roadOne of the rst iTV technologies was introduced in 1996 In 1999, British Sky Broadcasting (BSkyB) introduced a simple with the launch of the WebTV service (see Figure 1).8 WebTV form of iTV through its Red Button service. With the push allowed viewers to browse the internet and send email via their of a red button located on the consumers television remote television screen. The service achieved 150,000 subscribers control, consumers are able to request additional information within a year of its launch and an estimated one millionon programming or advertisements, send text messages subscribers by 2004.9 However, WebTV never gained wide- directly to the network, replay footage or participate in polls spread consumer acceptance, due to its cost (which included posted through their television program. Over 90% of BSkyBs a $200 keyboard purchase, plus a $9.95 to $21.95 monthlysubscribers have utilized the Red Button iTV functionality since subscription fee),10 its lower-screen resolution, its relativelyits introduction.11 limited user interface and the prevalence of affordable personal computers.Figure 1. History of iTVRespondTV andPremiereNetix TimeCommerceTV World Roku HP WarnerMediaSmart TV Cable BSkyB RedAOLTV Xbox Widgets Button LiveAppleWebTVTV (UK) 1994 19961999200020012002 2003 2006 2007 20082009e Time Warner Set-top box Set-top box Set-top box Pure-play Gaming Premiere Media Media adapter Provider- Internet- launches iTV between TV button between TViTV console with withdraws itsadapterspecic enabled Allows content service in and internetand Internetinfrastructure internet support forset-top applications Provides a Allows from PC to be Orlandoproviders connectivity the box that run on Enabledlimited form Providedcontent from viewed overcease multimedia TV set Penetrated internet of access to the Subscription- PC to be TV set or Enablesoperationshome 4,000 homes browsing on interactivityinternet, email based viewed overstreamedonline To beplatform iTV one year TV includingand AOLs IMservice TV set directly from streaming introducedspecication later in-program service along enablesinternetof Netix in 2009 Failed due to due to Still voting with TV users to videos on System was poornancialcommercially Less than oneprogramming download TV set expensive; functionality Stilldifculties available, million unitsgames as cost of a set- and screen operational Failed due tohowever, have beenwell as non - top box wasresolution, monthly penetration is sold in the twogaming $3,000 subscriptionsubscriptionstill low due to years it hascontent suchfee, and thecost; reduced cost (>$300) been availableas videoseventualemail and thedue, in part,introduction of functionality technicalto the Applelow-cost PCs(could not open savvyiTunes walledattachments)required togardenand poor user set-up ainterface home networkvia PC 8Firm will launch TV web browser, Los Angeles Daily News, 10 July 1996, via Dow Jones Factiva. 9The Microsoft connection has kept WebTV relevant, The Richmond Times-Dispatch, 8 October 2007, via Dow Jones Factiva; Microsofts MSN TV2 easy to use, a bit pricey, The Baltimore Sun,17 November 2005, via Dow Jones Factiva. 10The Microsoft Connection has kept WebTV relevant, The Richmond times-Dispatch, 8 October 2007, via Dow Jones Factiva. 11The red button debate, B & T Weekly, 28 September 2007, via Dow Jones Factiva, 2007 Reed Business Information Limited. Additional insights were yielded through Ernst & Youngmarket-expert interviews.6 Global Media & Entertainment Center 9. People dont want complexity theydont want the Internet dumped ontheir TV. They dont want URLs andbrowsers either. - Michael Greeson,The Diffusion Group Will widgets work? 7 10. iTVs long and bumpy road (continued)Media adapters are a more recent development in the history of Figure 2. iTV technology matrix iTV. These devices, such as Apple TV and the HP MediaSmart, enable consumers to stream content (including photos, video Challengers Leaders and music) from their computers to their television sets. Mass Game consoles adoption of these devices has been stymied by their retail price TV widgets ($200 or more) and the technical expertise required to congure a home network so that their computer and media devices can communicate with each other.Inter- WebTV iTV technologies are highly variable, depending upon the activity Niche playersVisionaries maturity of the technology and the level of interactivity they BSkyBs Red Button provide. More mature iTV technologies tend to have less Media interactive capabilities both quantitatively and qualitatively adapters DVRs with game consoles having the highest levels of both Roku Video on demand characteristics. Of all these technologies, web-enabled TV applications, such as TV widgets, are the least mature, yet provide the greatest amount of interactivity (see Figure 2). Maturity of technology History has shown that the presence of certain functional requirements can make an iTV technology (and new media applications in general) more successful than others. 8Global Media & Entertainment Center 11. What works? What doesnt work? Ease of use Consumers will be more likely to utilize an iTV Using the TV as a PC Most consumers are not interested in application if it has a simple and elegant user interface and replicating the full functionality of a PC (e.g., word processing, does not require in-depth knowledge of networking.nancial management, sending and receiving emails, etc.) on their television set. Utilizing a keyboard on a PC is a Advertising-based services Consumers prefer free to fee. lean forward experience, as opposed to the lean back/ Content that is funded by an advertising-based model may laid back experience of television viewing. Other barriers have a much higher adoption rate than services requiring an to PC-on-a-TV include the difculty in replicating the 24 PC out-of-pocket expenditure on the part of consumers. monitor experience on a 52 television set (font size, etc.) and Premium content While advertising-subsidized experiencestranslating keyboard capabilities to a remote control.12 iTV are more readily acceptable, consumers have demonstrated amust be its own experience and avoid simply translating the willingness to pay for content which they perceive as having aconsumer PC experience to the television. high value. Media available on a transactional basis (e.g., paid Limited content choices Fragmented, or walled garden movie downloads), is still a viable model, provided that the offerings, which restrict and limit consumer access to a transaction price for the content is perceived by the consumer specic set of applications, limit consumer choice and, as being reasonable and the content is perceived as having a consequently, adoption.13 It is imperative that new iTV premium value, such as movies or a highly rated series. solutions provide consumers with the breadth of opportunities that the internet itself provides, not prescribe what types of content are delivered or by whom it can be accessed. Multiple subscription-based services Consumers already pay a monthly fee for their internet connectivity and their television programming; they do not want to pay an additional monthly fee in order to replicate their existing internet service on their television set. While past WebTV attempts can provide insights into what doesnt work, they provide little insight into untested technologies, of which TV widgets are a prime contender. 12Yahoo!s Next Frontier: Internet TV; The Web pioneer is working with Intel and television makers to inaugurate TV widgets that will add some Internet content to home viewing, BusinessWeek.com,12 January 2009, via Dow Jones Factiva, 2009 McGraw-Hill, Inc.; Web-TV integration remotely possible, ZDNet News from ZDWire, 1 March 1999, via Dow Jones Factiva, 1999 ZD Inc. 13Walled gardens come tumbling down; Web 2.0 forces telcos to rethink strategy, Telecommunications International, 21 August 2007, via Dow Jones Factiva, 2007 Telecommunications Magazine. Will widgets work?9 12. Whats a widget?TV widgets are mini-applications with a wide range of potentialprovide fully programmed television channels that ll the full offerings. TV widgets, selected by the consumer, will sit, liketelevision screen with streamed movies or television shows. While computer icons, at the bottom or side of their television screen.leveraging this technology to develop fully programmed channels In their simplest form, TV widgets enable consumers to view keyraises a number of issues ranging from regulatory to audience information, such as news, weather or sports, via a tool bar. Once cannibalization the variety and potential of these services and enabled, the tool bar can be docked at the bottom or side of the applications are extensive. television screen. They might also include a Now Playing buttonTV widgets will be powered by the Intel Media Processor CE 3100 that can alert viewers to programs on their favorite channel. Asystem-on-a-chip (SoC), which incorporates a central processing more interactive application might include Web 2.0 features,unit, audio and video processors, and a graphics engine all such as sending instant messages to friends, posting on messagein a single device.14 This new internet-enabled SoC is built into boards and participating in social networking exchanges aboutConsumer Electronic (CE) devices such as HDTVs, DVD players the events or characters on the show they are viewing. Suchand set-top boxes. The CE 3100 chipset and design framework an application could allow viewers to debate opinions in realwill be released in the US in 2009, with subsequent releases in time as they watch the performances of their favorite singersEurope and Asia Pacic. on American Idol. In the most advanced offering, TV widgets can Figure 3. TV widget screen shot 14Intel Media Processor CE 3100: Product Brief, Intel Corporation website, www.intelconsumerelectronics.com/Download/320307-003US.pdf, accessed 17 February 2009.10 Global Media & Entertainment Center 13. Widget applications help organizecontent and enable search anddiscovering relevant content easier. - Michael Greeson,The Diffusion Group Will widgets work? 11 14. Whats a widget? (continued)The wonderful world of widgets The TV widget landscape consists of content owners, media distributors and device manufacturers, who together provide the services to support the end-to-end TV widget capabilities (see Figure 4). Figure 4. Widget landscape Access/interactivityProduct ServiceContentContentInteractivityaccessaccess searchnavigationCreateDistributeAggregate ReportContentAccess/ Sales/Installation/ PaymentContentProgramming Marketing Reporting security delivery consumptionnetwork processing CreateCreateProductSubscription Software Invoice PlanningFormat Self-service content widgetbundlingcontractsdownloadmanagementAcquire Content ConsumerAdvertisingServicePayment User SecurityDelivery content bundlingtargetingconsumption accessprocessingprole Advertising PersonalizedSponsor - ProductAccount AccountScheduling StorageMonitoring productadvertisingshipsaccess updatesmanagementplacementRoyalty ProductAvailabilityeCommerceprocessingsupportDistribution Advertising Event Service salesplayersdrivensupport Content players Device playersIntel and Yahoo! have enabled the creation of widgets via the design of the chipset and the availability of the application framework development kit. To promote their technology, they have fostered relationships with the key players in the TV widget landscape including: Content players CBS, Showtime and others are developing applications that enable users to interact with displayed programming, request content on demand, respond to polls or send their comments and opinions to the broadcaster. Initial content on widgets will range widely from information push applications (news, weather, sports and stock updates) and extra programming footage, to the full streaming of VOD movie services offered by Blockbuster and Netix.15 Content companies are also partnering with interactive marketing rms, such as Schematic, to assist in the design of TV widgets, enabling their development and entrance into the market.16 12Global Media & Entertainment Center 15. Distribution players Device manufacturers, cable operators Open framework will spur development and online service providers such as Yahoo! are developing widget galleries to provide consumers with access to TV widget applications can be built using the Intel-Yahoo! libraries of diverse applications. Intel and Yahoo! are drivingdevelopment framework, enabling developers to design an openness principle for gallery owners, requesting thatcustomized widgets for specic TV content providers and gallery owners include all widgets; however, preferred audiences. Much like the Apple iPhone Developer Program, placement within the galleries will be highly valuable to widget which spurred the development of over 15,000 applications producers.17 In theory, the more visible the application, thefor the wireless device and which will generate an estimated higher the likelihood of its selection by consumers (as is the $1.2 billion in revenue for Apple by 2009,21 the Intel-Yahoo! case with Electronic Program Guides). Content owners willapplication framework will enable developers to create myriad likely sign deals with these distribution players in order tomini-applications for internet/television interaction. Content optimize the placement of their branded widget. No doubt owners, distributors and internet developers will be able negotiating a prime spot in preloaded galleries will be a critical to create widgets utilizing standard internet programming success factor for individual widgets. technologies, such as JAVASCRIPT, XML, HTML and AdobeFlash, thus lowering barriers for application development.22 Device players Arguably the key to rapid adoption of TV widgets, device manufacturers will work with companies suchConsumers will be able to select, or pull, the desired as Intel to embed widget support in set-top boxes, DVRs, application into their devices Widget Gallery either by activating DVD players and television sets in order to ensure a fast anda widget that has been preloaded on their CE device or selecting comprehensive route to market for this technology. Several CEone from the Yahoo! Widget Gallery. However, as widget manufacturers, including Samsung, Sony and LG Electronics, technology becomes more sophisticated, content providers have announced their intent to ship widget-enabled high- will synchronize the availability of widgets based upon the denition (HD) television sets in 2009.18 Internet connectivityprogramming being broadcast and push them to consumers to enable widget selection will be made possible by ethernet for selection. These pushed widgets will relate directly to the ports or wireless USB devices installed in the televisionprogramming on the screen and will enable users to interact sets. Consumers will be able to access the widget-basedmore fully with the content being displayed. applications via a short-cut button on their remotes.19Figure 5. Web-enabled TV sales TV widget application technology sits in a walled garden on the internet, meaning that it is fully web-enabled. This Web-enabled televisions, annual unit sales, US platform structure allows the technology to leverage many(millions) internet functions and capabilities, potentially including advertising-serving, performance-monitoring and content-76.0 serving infrastructure.20654.043 2.22 1.010.20.402008 2009e 2010e 2011e 2012e 2013eSource: Park Associates, Internet video: Direct-to-consumer services,(2nd edition), 2008. 15Yahoo!, TV makers unveil deals to webify the tube, Penton Insight, 9 January 2009, via Dow Jones Factiva. 16We also liked, Advertising Age, 30 March 2009, via Dow Jones Factiva, 2009 Crain Communications, Inc. 17The Mossberg Solution: Yahoo Widgets lend brains to boob tube, The Wall Street Journal, 25 March 2009, via Dow Jones Factiva, Dow Jones & Company, Inc. 18Ibid. 19Ibid. 20Interview with Lance Koenders, Technical Assistant to the SVP & GM, Digital Home Group, Intel Corporation, 3 March 2009. 21Apples App Store could emerge as $1.2B business by 2009. AppleInsider, 11 June 2008. 22Widget Channel: Technology Brief, Intel Corporation website, www.intelconsumerelectronics.com/Download/320270-003US.pdf, accessed 17 February 2009.Will widgets work?13 16. Web-enabled TV forecastsIntel has adopted an aggressive multipronged device strategy Multitasking has become commonplace to get chip-enabled equipment devices into the marketplace. The rst device to ship with the Intel chip will be HD televisionThe ability to watch television while also keeping updated with sets. Parks Associates has forecasted that sales of web-enablednews or engaging in social networking and email activities is televisions in the US will grow from 400,000 units in 2009 toalready an established practice among consumers in the US and 6 million units in 2013, a 97% compound annual growth rate Europe. A Yankee Group study found that 56% of all US consumers (see Figure 5). IDC has forecast the number of network-enabled browsed the internet/used email while also watching TV.25 video devices (including TVs, media adapters, DVD players andIn addition, a survey of 14,193 European online consumers DVRs) in the US to grow from 12.6 million in 2009 to almost 66by Forrester Research found similar results with over 50% of million by 2012.23 However, the sale of web-enabled TV-enabledEuropean consumers aged 19 through 29 reporting watching CE devices is not the only variable to be considered to determinetelevision while using the internet (see Figure 6).26 future consumer adoption.These studies show that consumers, especially the younger Consumer uptake is difcult to forecast, especially given thegenerations, will be more likely to adapt to integrated television wide variability in interactive technology adoption rates. For and internet offerings, which cater to and combine both activities, example, it has taken 10 years for US households to achievewhile maintaining the consumers focus on the television screen. a 25% penetration rate for DVRs; eight years to reach a 25% penetration rate for VOD; yet only seven years for 25% ofFigure 6. Multitasking consumers console and handheld gamers to connect their devices online.24Percentage of EU consumers who watch The lack of previous wide scale web-enabled TV adoption addstelevision while emailing/using the Internet an additional element of uncertainty to the widget uptake rate. However, there are several key consumer behaviors that suggest All 43% they will embrace this technology.12 to 1545%16 to 1847%19 to 20 51%21 to 2458%25 to 2953%30 to 34 47%35 to 3944%40 to 4442%45 to 49 41%50 to 54 36%55 to 5931%60 to 6427%65+ 24%0%10% 20% 30%40% 50%60%Source: Forrester Research, Inc., European Multitasking ConsumersPresent Both Challenges And Opportunities, October 2008. 23Worldwide and US Home NetworkEnabled Video Devices 20082012 Forecast, IDC, September 2008, document # 214155. 24US Video-on-Demand (VOD) Households, eMarketer, 5 December 2008 and US DVR Households, by Subscription Type, eMarketer, 5 December 2008, both citing data from MAGNA; Videogames,Warrens Consumer Electronics Daily, 11 March 2009, via Dow Jones Factiva; US Census Bureau, Households, Families, Subfamilies, and Married Couples. 25Yankee Group Research, Inc., Anywhere Consumer: 2008 U.S. Entertainment Survey, 24 December 2008. 26Forrester Research, Inc., European Multitasking Consumers Present Both Challenges And Opportunities, October 2008.14 Global Media & Entertainment Center 17. TV widgets fulll a lot of pent-updemand for the interactive TV market. - Allen Weiner, Gartner analyst, as quotedin Yahoo! weds Web with TV,The San Francisco Chronicle,19 January 2009, via DowJones Factiva, 2009 Hearst Communications, Inc. Will widgets work?15 18. Web-enabled TV forecasts (continued)Consumers know widgetsAnd the survey says... Computer widgets: Consumers have already embraced the According to primary research, consumers are very interested in use of targeted, mini-applications on their computers, as widget-based TV applications. A Parks Associates report found evidenced by the popularity of desktop widgets (applicationsthat over 30% of US consumers consider the idea of news and parked on the desktop such as calendars or clocks), browser information widgets on their television to be appealing,28 while widgets (applications used to customize a users browserapproximately 61% of consumers surveyed say they would like home page such as those found on the Google Gadgettheir TV to connect to the internet.29 A study from The Diffusion directory) and social widgets (such as those installed by Group found that 76% of consumers believe having a widget Facebook users). These widgets provide consumers with toolbar on their primary TV would be valuable.30 direct access to targeted applications and features, similar to While it is inherently problematic to forecast consumer adoption TV widgets. According to a study published by Razorsh, an of a nascent technology, the prior insights and research suggest interactive marketing agency, 55% of connected consumers that there is the appetite, familiarity and history to indicate (those people with broadband internet access who use social that consumers could embrace TV widgets. That being said, it networks and digital media) use computer widgets on their was the ndings of The Diffusion Groups consumer research desktops with some frequency and 62% use them on sites concerning the most highly valued applications which provide such as Facebook and iGoogle.27 some surprising insights into the areas of consumer demand.31 When 26 applications were tested, it was the Search/Discovery and Find/Watch functions that proved the most desirable.[The TV] content explosion hasWhen asked to rank the widget-based applications in order of preference, the following appeared as the top-listedimplications: Consumers need searchapplications with 75% or more of respondents regarding themcapabilities and advertisers want to as valuable:know that they are reaching the1. Ability to immediately nd and watch episodes of currentright consumers.season TV shows - Keval Desai, Google 2. Ability to immediately nd and watch online TV programs from a major network 3. Up-to-the-minute weather information customized for Mobile widgets: Mobile widgets are another means by which your location consumers are personalizing their device experience with4. Ability to immediately nd and watch TV programs no targeted applications. Mobile widgets enable consumers to longer on the air quickly access information without having to navigate the internet via their device browser, saving time and effort for5. Up-to-the-minute breaking news headlines the user. As discussed earlier, iPhone widgets have been particularly successful.This is great news for television companies! The majority of consumer interest still revolves around premium television 16Global Media & Entertainment Center 19. programs, with widgets simply providing the ease of access relevant to their two main constituents: consumers and and depth of content similar to the click-and-search functionality advertisers. TV widgets provide a potential answer. of the web that has previously been unavailable on the TV.32 In addition to simply galvanizing this consumer interest, content Achieve a rst mover advantage: A content player companies have several additional incentives to develop that is among the rst to develop a TV widget and place it TV widgets: within the Yahoo! widget Gallery could achieve several rst mover advantages: Increased engagement: Research has shown that consumers1. Individually branded widgets will have a much higher become more engaged with brands and programs throughvisibility at launch, as the overall number will be limited. increased exposure across multiple platforms. In early 2008,The higher the visibility of the widget, the greater its MTV conducted a study of consumers called the Multi-Screenchances to be downloaded onto the consumer device Engagement (MSE) Case Study, 33 using its show The Hills as a gallery and, once downloaded, inertia sets in and it has a focus of research. The results provided clear evidence that higher likelihood of staying. consumer engagement with programs and brands increases dramatically with each additional digital platform to which a2. Placement of a branded content-owners widget on viewer is exposed. The MSE Case Study also found that the the gallery, whether due to a preferred placement value of television advertising grows as viewers connect with agreement or through search results, will be key to marketing messages across screens and that an advertisersadoption. Content companies which release widgets positive brand image increased dramatically among fansearly can negotiate premiere gallery placement. who browsed The Hills content online.34 The study also found 3. Early downloads from a limited widget offering will that multiplatform offerings deliver a stronger impact on provide greater brand exposure. consumers, thus enabling higher advertising rates across allHowever, in order to develop and launch an application platforms.effectively, content companies must ask themselves if they have the strategic, operational, process and technological Brand enhancement: Making video content deeper andcapabilities to effectively monitor, measure and monetize a richer has been an increasingly important component ofwidget investment. brand enhancement as digital media has matured. Television companies are seeking ways to enhance their content brands and extend their relationships with consumers. Need to stay relevant: Content owners can utilize TV widgets to deliver a twenty-rst century, iTV experience to consumers without a large investment in technology. Television advertising is down and companies are seeking ways to stay 27eMarketer, The Widgetized Web, 17 November 2008, citing data from Razorsh LLC. 28Television 2.0: The Industry Perspective, Parks Associates website, www.parksassociates.com/research/reports/tocs/pdfs/Parks-TV2.pdf, accessed 20 February 2009. 29Widget Channel, Intel Corporation website, www.intelconsumerelectronics.com/Consumer-Electronics-3.0/Widget-Channel-Overview.aspx, accessed 20 February 2009, citing data fromForrester Research, Inc. 30How widgets will revolutionize TV, Penton Insight, 20 March 2009, via Dow Jones Factiva. 31Ibid. 32Ibid. 33MTV Networks Upfront Presentation: The Ultimate ROI: Return on Innovation , Wireless News, 10 May 2008, via Dow Jones Factiva, 2008 M2 Communications, Ltd. 34 The next wave in media measurement and engagement, Business Wire, 25 June 2008, via Dow Jones Factiva; The Hills is alive: MTV research links cross-platform marketing to brand afnity amongweb users, Adweek, 5 May 2008, via Dow Jones Factiva, 2008 Nielsen Business Media. Will widgets work? 17 20. Key questions for content ownersFrom an expense perspective, the costs to develop a TV Audience aggregation: Are we able to support broadcast widget are estimated to be relatively small ($50k-$150k) percommitments across platforms in a synchronized way? Do our application. However, the delivery and ongoing costs couldcurrent sales processes, data structures and systems support be far more considerable, depending on the complexity of themonetizing interactive TV capabilities, gallery placement application. Content owners must take into consideration theand optimization, and any other new competencies that costs to refresh widget content frequently enough to encouragewill be required? repeat use of the application, the impact on their Multiple Reporting, measurement and analysis: Do our data capture, System Operator (MSO) afliate agreements, the requirements engagement, measurement and reporting processes and to schedule and deliver advertisements within the widgets and systems adequately support interactive TV applications? the impact on their core advertising and program viewership Do our analytical tools support new demands for features, (see Figure 7). functionality, usage or advertising performance analyses? Some of the key questions that will have to be addressed include: Are our billing, third party or transactional, and advertising- based revenue recognition and collection systems able Content creation: Do we have the right content to support a to support new interactive capabilities? Are our current widget offering? Do we have the ability to modify the content systems capable of accurately invoicing and collecting on a for widget delivery? Do we have the necessary data, processes multiplatform basis? and tools to support an interactive application? Distribution and delivery: Do we have the right skill sets in-house to develop, program and deliver engaging widgets? Will our network and other infrastructure adequately support anticipated volume, capacity management addressability and authentication? Figure 7. TV widget considerations ContentDistribution AudienceReporting,creation and deliveryaggregationmeasurement and analysis Do we have the content to What partnerships, if any, do Can we insert Are we meeting our clientssupport a widget offering? we need to develop, deliver advertisements into ourchanging reportingStrategic Is our programming conducive and sell interactive TV?widgets? demands?to interactive applications? How can we best monetize Can we align our Can we report across clients, Can we program content our interactive capabilities? advertisements across oursales, properties, etc. toeffectively across channels? linear and widget offerings? provide transparency into Do our advertisers want to sales patterns? Which content creates thegreatest opportunity?pay for widget placement? Do we have the right creative Can we effectively and accurately Can we schedule Do our analytical tools supportteam to develop a multiplatformmonitor and report developing advertisements in aour clients demands forOperationaloffering?media applications (e.g., coordinated fashion across performance analyses? Do we have the correct content gaming, mobile)?our linear and widget Are we invoicing and collectingservice providers? - Are we able to support broad- platforms? the accurate amounts Are we able to modify our core - cast commitments across How will we manage the across all our platforms?content for a widget offering? platforms in a synchronized way?potential for conicting Do our current and historical How do we best work with our widgetadvertisements whencontent agreements allowtechnology team to align content consumers access a rival the integration of interactivewith technology capabilities?widget?elements? Do we have the necessary data, Can our data, processes and Can our data, processes and Will our sales and reporting and technologyprocesses and tools to price our systems handle delivering systems handle deliveringsystems be able to supportData, processinventory across platforms?iTV offerings?iTV offerings? iTV revenues? Do our systems and processes support Can our current sales Can our current sales Can our data, systems andcreating content across multiple processes, data structures andprocesses, data structures and processes support new dealplatforms with a compellingsystems support monetizingsystems support monetizing structures (e.g., newinteractive component? iTV capabilities? iTV capabilities?platforms, performance metrics)? Do we have effective programmanagement and communicationprocesses for preparing and deliveringan interactive application? 18Global Media & Entertainment Center 21. Will widgets work? 19 22. Critical success factorsTV widgets will not simply be a create it and they will come 4. Mitigate impact on core ad sales: There are several phenomenon. As applications develop and launch over the nextconcerns that will need to be managed in order to protect 18-24 months, Ernst & Young has identied ten critical successcore ad sales. First, ratings must be protected on the factors that the landscape players will need to address inchannel in order to guard against the erosion of advertising order for TV widgets to enter and achieve widespread adoption rates when viewers migrate their attention to widget in the marketplace: applications. This concern can be addressed via the use of side- or bottom-placed widget toolbars that will protect1.Develop a viable business model: Advertising and Pay-for- viewership ratings on the primary screen. A second concernPremium content are the most likely initial revenue models, is that conicting advertising (e.g., Ford versus Toyota)with television commerce (t-commerce) being a later but could appear simultaneously on the widget and core TVhighly desirable subsequent monetization model. As we screens. To manage this issue, television programminghave seen in other nascent digital media, it takes time to providers (including cable, telecommunications and satellitereach enough critical mass to yield signicant revenues. operators) can integrate widgets into their set-top boxes toCritical mass most often results from an acceleration of provide a platform for managing these channel conicts.36adoption rates and market consolidation. Therefore, it may Lastly, there is a concern that consumers will migrate tobe several years before TV widget-based sales revenues nonrelated (read competitive) content rather than stayingsupport a viable business model. within the companys content experience, which could2.Manage channel conicts: Television companies afliatereduce rather than enhance consumer engagement levelsagreements generally restrict the window and markets and therefore erode, rather than increase, advertisingwithin which rst-run content can be broadcast. In addition, rates. On the ip side, a consumer engaging with a widgetcontent available on premium services can only be accessed application that is docked in the taskbar may be moreby subscribers of those services. These contractualapt to stay on a particular channel through commercialrestrictions must be managed across widget offerings.breaks, rather than channel surf, thus increasing the overallCable operators have been working for several years on amount of commercials to which they are exposed anddeveloping an Authorization Engine to provide cloud potentially increasing advertising rates. While the contentauthorization to ensure content can be viewed by each company should have a mitigation strategy, the ultimatehousehold regardless of the distribution channel (traditionalimpact on ad sales is yet to be determined.TV, online or mobile).35 Until these capabilities are in place,5. Acceptance by the television programming operators:the majority of the television programming widgets will As discussed previously, the television programminglikely be restricted to marketing trailers and extra footage providers are critical to the applications success. They holdwhich would not have afliate or subscriber restrictions, the key to the set-top boxes, as well as the consumers.which begs the next issue. More importantly, their technologies are required to3.Provide a compelling consumer experience: TV widgets enable several aspects of next generation advertisingmust provide users with a compelling experience, for which capabilities. Operators will therefore need to embrace thisthere are two key components: developing an engaging technology and its role within the value chain, which wouldconsumer experience and offering compelling content. relinquish some of their controlled access to the consumer.Leveraging user-centric design can help developers toFurthermore, MSOs have their own initiative to provideoptimize the consumers widget experience by designing interactive advertising and content, Canoe Ventures. Giventhe experience according to the use and needs of the the early stage of widget discussions, it is still unclearconsumer. However, as The Diffusion Groups study haswhether the MSOs will choose to embrace their role withinshown, premium television content is the primary areathis nascent widget ecosystem or chose to go another way.of consumer interest. Determining how this contentcan be made available for early releases is critical tothe applications success. As such, balancing betweenchannel conicts and the consumers demand for premiumlong-form content will need to be managed early in thedevelopment process.35 Members Only; Cable Operators, Programmers Try to Build An Exclusive Online-TV Service for Subs, Multichannel News, 6 April 2009, via Dow Jones Factiva. 36Interview with Lance Koenders, Technical Assistant to the SVP & GM, Digital Home Group, Intel Corporation, 3 March 200920 Global Media & Entertainment Center 23. 6. Be usable and useful: Widget applications must featurea user-friendly interface as well as address an inherentneed or interest of the consumer. A desire for a deeper,richer content experience could provide this requisiteusefulness. However, content owners have beendriving consumers to the web for this richer interactiveexperience, so TV-based widgets must be a distinctexperience that addresses an as-yet unfullled interest inthe integration of internet and television. 7. Avoid TV-as-monitor: Another question arises as towhether the television will become an interactive devicein itself, or whether the computer will simply morph withthe television screen, which, in effect, becomes a largemonitor connected to the internet. TV widgets mustcomplement the televisions independent identity withinthe home by offering an integrated TV experience and nottry to mimic the experience of the computer. 8. Avoid potential regulation issues: Full-screen broadcastscould permit companies to launch fully programmedchannels without regulatory licenses. However, thereis a risk that legislators, particularly in highly regulatedmarkets, will force such offerings to cease to broadcast.As a result, content companies will need to manage theiroffering carefully. 9. Develop operational capabilities: As outlined above,there are many operational challenges that will berequired to program, schedule, broadcast and report onthe performance of TV widgets. These challenges willneed to be addressed in order to maximize the return oninvestment of these investments. 10. Create a killer app: The two main drivers of killer apps historically have been facilitating consumers getting what they want when they want it and improving their ease and immediacy of communication. If consumers do, in fact, want deeper, richer content while viewing TV, then widgets might likely fall into the former category. But demand must be tested as each application is developed. As demonstrated by both internet, mobile and iTV applications, some content (e.g., news, weather, movies) lends itself far more readily to the on-demand content than others. In addition, ease of use could be a big pull for content owners for example, a one-click icon to access web-stored warehouses of deep premium content (imagine Netixs entire inventory available via a click of the remote). Each content owner must evaluate the viability of its own available content and widget design with a focus on these dening killer app criteria. Will widgets work? 21 24. ConclusionTV widgets represent another digital media platform content companies can leverage to strengthen their relationships with consumers through the innovative delivery of content. In the short term, widgets will likely remain a means by which companies can reinforce their brands and strengthen their relationship with consumers. However, as consumer adoption ramps up, advertising and pay-for-play could prove signicant, as long as the critical success factors are appropriately addressed. When this happens, content companies may have found the killer app that yields mass adoption of web-enabled TV. 22Global Media & Entertainment Center 25. Will widgets work? 23 26. Contacts Telephone EmailGlobal Media & Entertainment CenterJohn Nendick, Global Sector Leader (Los Angeles, US)+ 1 213 977 3188john.nendick@ey.comSylvia Ahi Vosloo, Associate Director, Marketing (Los Angeles, US)+ 1 213 977 4371sylvia.ahivosloo@ey.comKaren Angel, Global Implementation Director (Los Angeles, US) + 1 213 977 5809karen.angel@ey.comYooli Ryoo, Knowledge Manager (Los Angeles, US) + 1 213 977 4218yooli.ryoo@ey.comPeri Shamsai, M&E Senior Manager (New York, US) + 1 212 773 9172peri.shamsai@ey.comPam Walker, Events Coordinator (Los Angeles, US)+ 1 213 977 3046pam.walker@ey.comGlobal area leaders and advisory panel membersFarokh T. Balsara (Mumbai, India) + 91 22 4035 6550 farokh.balsara@in.ey.comMark Besca (New York, US) + 1 212 773 3423mark.besca@ey.comNeal Clarance (Vancouver, Canada) + 1 604 648 3601neal.g.clarance@ca.ey.comNoriharu Fujita (Tokyo, Japan)+ 813 3503 1355 fujita-nrhr@shinnihon.or.jpDavid McGregor (Melbourne, Australia) + 613 9288 8491 david.mcgregor@au.ey.comGerhard Mueller (Munich, Germany) + 49 891 4331 13108 gerhard.mueller@de.ey.comBruno Perrin (Paris, France)+ 33 1 46 93 6543 bruno.perrin@fr.ey.comMichael Rudberg (London, England) + 44 207 951 2370 mrudberg@uk.ey.comGlobal service line leaders and advisory panel membersThomas J. Connolly, Global M&E Transaction Advisory Services Leader + 1 212 773 7146tom.connolly@ey.comAlan Luchs, Global M&E Tax Leader + 1 212 773 4380alan.luchs @ey.comPaul Macaluso, Global M&E Transaction Advisory Services Leader+ 1 213 240 7040paul.macaluso@ey.comChris Pimlott, Global M&E Tax Leader+ 1 213 977 7721chris.pimlott@ey.comGregg Sutherland, Global M&E Business Advisory Services Leader+ 1 720 931 4435gregg.sutherland@ey.comAdvisory panel membersHoward Bass + 1 212 773 4841howard.bass@ey.comGlenn Burr+ 1 213 977 3378glenn.burr@ey.comVincent de La Bachelerie, Global Telecommunications Leader+ 33 1 46 93 6205 vincent.de.la.bachelerie@fr.ey.comRick Fezell, Global Technology Leader + 1 408 947 6568rick.fezell@ey.comBud McDonald+ 1 203 674 3510bud.mcdonald@ey.comTim Teagle+ 1 213 977 3216tim.teagle@ey.comKen Walker+ 1 805 778 7018kenneth.walker@ey.com 24 Global Media & Entertainment Center 27. Ernst & YoungAssurance | Tax | Transactions | Advisory About Ernst & Young Ernst & Young is a global leader in assurance,tax, transaction and advisory services. Worldwide, our 135,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.For more information, please visit www.ey.com.Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.About Ernst & Youngs Global Media & Entertainment Center Whether its the traditional press and broadcast media, or the multitude of new media, audiences now have more choice than ever before. For media and entertainment companies, integration and adaptability are becoming critical success factors. Ernst & Youngs Global Media & Entertainment Center brings together a worldwide team of professionals to help you achieve your potential a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately it enables us to help you meet your goals and compete more effectively. Its how Ernst & Young makes a difference. 2009 EYGM Limited. All Rights Reserved.EYG no. EA0031 0904-1050235