iPhone effect hits pay-TV

“People familiar with the internet and devices including the iPod and the iPhone want their TVs to work the same way. That means intuitive recommendation engines and easy-to-navigate screens.”

There  is no getting around the fact that Apple’s iPhone has effected big changes in the mobile phone industry, but the iPhone effect is reverberating elsewhere, not least in the pay-TV business.
In the mobile world, handset leaders including Nokia and Motorola have rushed to change the look and feel of smart-phones to compete against the slick and sexy iPhone. From touch screens to launching their own versions of Apple’s app store, the industry is trying to ride Apple’s wave of coolness.

But soon the attributes of Apple’s easy-to-use and fashionable handset could come to a TV set near you. “The iPhoneisaton of pay-TV is underway,” says Ivan Verbesselt, senior vice-president of marketing at conditional access and interactive TV specialist Nagravision, part of the Kudelski Group. For Kudelski the road forward seems to be to follow the iPhone lead and get better user interfaces and applications into their clients’ hands as fast as possible.
For example, the days of simple (and pretty inflexible) programme grids are on the way out. People familiar with the internet and devices including the iPod and the iPhone want their TVs to work the same way. That means intuitive recommendation engines and easy-to-navigate screens. And the next phase of the revolution could be just around the corner: the widgetisation of the TV.

How far away are we from selling TV apps much like iPhone offers mobile apps? Likely not so far away at all. The point is that, as in the mobile space, customers will start to expect better and more flexible navigation and access to all kinds of content. What is required for TVs, set-tops and their EPGs are new user interfaces that bring together linear, VOD, PVR and web properties in one place.

The iPhone factor is also about allowing many developers to write apps for the phones, opening up creativity while Apple holds onto a gatekeeper role to make sure the new app – whether a song identification service or a game – doesn’t crash the system.

If this kind of flexibility doesn’t make its way into the set-top box, savvy customers will look elsewhere. If their pay-TV operator doesn’t provide what they want, they can use the PC or, increasingly, the built-in browsers that are popping up on TV sets. The bottom line for cable and satellite operators is clear: if they don’t provide a compelling customer experience they will lose their customers to others who will.

Of course all of this is coupled with the ongoing convergence of internet and TV technology to create something new. And with the emergence of IPTV providers and over-the-top services including YouTube and Hulu, the competitive heat will only increase.

Over-the-top services increasingly will be built into set-top boxes and TV sets. Yahoo! TV is one example. Sony loading its own user interface onto its new, broadband-enabled TV sets to give its customers instant access to Sony movies and music videos is another.

“There will be more than a small battle for control of the user experience,” says Alex Osadzinski, executive vice president of product at Nagravision, and formerly a Silicon Valley venture capitalist. Osadzinski joined Kudelski less than a year ago to help it figure out what new products it needs to focus on. “Set-top boxes are not dead but they will start appearing with built-in user interfaces or server-based UIs.”

The ability to “do TV widgets” is going to become increasingly important. Widgets are of course simply small applications but how close are they to TV middleware? Osadzinski says they are very close and that one builds on the other. This is at least one reason why Kudelski is keen to increase its control of Open TV, the middleware company that allows on-demand and online services for pay-TV operators. “UIs have to evolve and the last thing we want to do is develop our own APIs and middleware when we have OpenTV, which is already doing that,” says Osadzinski.
Getting control of the 70% of OpenTV shares that Kudelski  does not already own has proven quite tough, due to opposition from Discovery Group, the largest independent investor in the middleware company. Kudelski says it is interested in controlling OpenTV for its software development capabilities (perhaps also for the US$114m (e80m) of cash on its balance sheet) but Discovery wants a higher price for its stake than Kudelski has so far offered. Of course perhaps as important for Kudelski is the large installed base of set tops that include OpenTV. This gives the owner a way to get quick and wide exposure for its current and future applications.

Given the pressure on pay TV to secure its current and future customers, OpenTV could be considered important ammunition and a good way to catch the iPhone trend. For others keen to stay ahead of the curve of TV widgetisation, the watchwords surely have to be innovation and flexibily.

For the pay-TV industry as a whole, catching the iPhone wave is a priority that it can ill afford to miss.

Kate Bulkley is a broadcaster and writer specialising in media and telecommunications. [email protected].