Much has been written about connected TV and its predicted growth for 2012, yet so far it has failed to truly gain popularity among consumers.
Questions remain about the services viewers want to receive through their TV set, and who really stands to benefit – hardware companies, e-tailers or advertisers?
We spoke to Suranga Chandratillake, CEO of video search engine blinkx, to discuss the opportunities and challenges that exist within the connected TV industry today.
There are a lot of companies investing heavily in connected TV this year. Do you think this will be the year it gains a foothold with consumers?
Connected TV is at the threshold of mainstream consumer adoption and has been for some time now, primarily driven by extensive investment from internet and technology companies.
But 2012 could be the year that it finally reaches the tipping point – all the signs are there.
In May last year we partnered with Roku to provide its customers with access to our extensive index of professionally produced content via a blinkx app.
To begin with viewer numbers were nothing to write home about, but over the last few months there has been a real buzz around the app and uptake has been exponential.
Internet TV is already prevalent in homes and it has been there for some time now, but not in the way many people thought.
Rather than through dedicated TV sets it is being accessed through devices where the web is the secondary function, like Playstation and Xbox 360.
Access to things like the iPlayer is changing people's relationship with their TV, but someone will need to create a killer app that is accessed through the TV which consumers can't live without in order for connected TV to reach its full potential.
Speaking of the 'killer app', what functionality do you think it will have to offer to really take off with consumers?
The truth is we simply don't know. A lot of people are leaning towards social TV, but I disagree.
Consumers are getting used to sharing opinions and discussing programmes on social media, but this is done through their phone, tablet or laptop and it will take a fundamental shift to break that mindset.
While this form of interaction is growing, the irony is that use of companion devices in this way actually makes them a barrier to a truly connected TV experience.
I think the killer app will come from a company that is not on anyone's radar at the moment and it will fundamentally change the way people use their TV.
Who stands to benefit most? Content providers who can sell additional adverts and subscriptions, or e-tailers who can sell products through internet connected TVs?
Connected TV doesn't just shake up the linear TV model – it will ultimately extinguish it.
Connected TV has the potential to deliver benefits across the entire ecosystem if everyone plays their hand well, but there are two key beneficiaries: consumers and content providers.
For consumers, the level of freedom it offers to access and watch what they want, when they want, is unparalleled in the history of TV. And it means that for the first time we all become schedulers for our very own personal channels.
Moreover, advertisers will benefit because the level of segmentation that this provides means that TV advertising will have the potential to combine scale and targeting for the very first time, and content providers will charge a higher premium for brands to access their target markets.
Watching TV is a social experience. Do you think social networks are yet making the most of the opportunity?
TV shows have always sparked conversation, so it stands to reason that people are taking to social media to express their views around a particular programme.
In terms of facilitating and hosting those conversations, and providing a springboard for deeper engagement with fans, social networks are doing this well.
It may seem that the next step is for the social networks to establish themselves as a platform for watching professionally generated content, but this proposition has a couple of challenges.
Firstly, consumers don't see a social network as a place to watch content. Secondly, you would need to be online to view the programme.
Thirdly, some brands may be reluctant to advertise on a platform that is more commonly known for user generated content.
With this in mind, I believe social networks have a key role to play in the future of TV, but that role is limited.
Is the real opportunity actually with second screens, such a smartphones, rather than with internet connected TV sets?
No. Second screens will continue to play a key role in the way consumers engage with each other as connected TV comes of age, but in the long-term the TV will remain the Lord of the living room and the most effective conduit for everyone.
Do you see traditional broadcasters dying out, in the same way that the newspaper industry is in decline, or will they survive as long they keep investing in content?
No. In this business, content will always be king, so it doesn't matter whether it's a streaming service or a traditional broadcaster – unless you can attract the eyeballs you will not survive.
In the world of connected TV ad revenues will still be the major driver for the commercial stations, and the potential for greater audience segmentation and targeting means that ad rates will increase. But the foundation for this success has to be quality content.
YouTube and MSN recently redesigned their homepages to focus on channels. Are theme-specific channels the future for connected TV?
Everything is being categorised to make things clearer and easier for the user. Naturally, as connected TV progresses, themed channels and grouping of content will become the norm.
One of the greatest potential challenges for consumers around the arrival of connected TV is finding the content you want to watch from a potentially limitless catalogue.
The grouping of channel themes is very much in line with the 'lean back' experience associated with traditional TV and helps consumers by pushing relevant content to them.
There is huge competition for content among broadcasters at the moment. Netflix, LoveFilm, Sky and YouTube are all battling to secure more original content – is there space for all of them to exist or will one dominant brand emerge?
As with traditional television, there is scope for multiple broadcasters to exist provided they are offering compelling and unique content.
In reality, it is very difficult for any one provider to have all the programmes that would appeal to every user.
That said, it is inevitable that some dominant players emerge and others disappear.
The online video space is a hugely competitive sector and we've seen some high profile casualties in recent years including Joost, and others failing to launch, such as Arqiva.
Similarly, do you think it is likely that one hardware company will dominate the industry, like Apple does currently with tablets, or will it be a more diverse industry?
Hardware in the TV space has always been extremely competitive.
At CES this year we saw numerous companies including Google, Microsoft and Samsung launching new devices, but currently no-one is set to dominate.
The achilles heel for most manufacturers at the moment is the interfaces, which are giving a bad experience and putting consumers off.
The exception to the rule is Apple, but when it comes to connected TV their devices could be too restrictive for most users.
The appeal of connected TV is its potential to connect consumers with content from a virtually limitless catalogue online.
Apple's products deliver such a seamless experience because the company controls every facet of the user's journey.
Whether they can replicate this and provide access to TV content at scale remains to be seen.
What is blinkx's strategy for taking advantage of the opportunities presented by connected TV? Are you aiming to power search in third-party apps (similar to current agreements with MSN and AOL) or create your own blinkx branded apps?
Our strategy is a combination of both empowering search through third parties and creating our own apps.
We have already embraced the arrival of connected TV, launching a TV API (application programming interface) designed to allow TV and set-top box manufacturers access our 35m hours of online video.
The API pulls content from across the web, but is capable of filtering results based on the capabilities of the user's devices, taking account of supported video formats.
David Moth is a Reporter at Econsultancy. You can follow him on Twitter.
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