With Walmart (WMT) buying VUDU, some are speculating that the value to Walmart is the deals that VUDU has in place with seven leading TV manufactures to carry VUDU's platform on their sets. While this might look good on paper since it enables Walmart to sell as many TVs from their stores as possible with a platform they own embedded into the hardware, the problem is that even Walmart can't sell enough TVs over the next few years for it to matter.
While we keep hearing a lot about broadband enabled TVs, widgets and TV apps, no one seems to be asking how many Internet enabled TV sets need to be sold to actually make a difference in the market. If you look at the number of sales analysts are predicting for 2010, the numbers are all over the map. iSuppli predicts just over 13 million, Parks Associates predicts 7 million and TDG predicts 4 million. That averages out to 8 million sets this year, which is a really small number.
Out of that, many analysts who cover the TV market also estimate that only about 25% of those sets will actually be connected to the Internet. So that leaves us with about 2 million sets for 2010. How are those numbers to get excited about?
Microsoft (MSFT) has more than 20 million consoles connected to the Internet today. Yet that one device by itself has not changed the market in terms of content owners making money or impacting the revenue of any vendor in the Xbox video ecosystem. So how are a few million Internet connected TVs going to change this market so broadly like people keep saying? Even if we look at projections for the number of Internet connected TVs in the U.S. by 2013, iSuppli predicts almost 23 million and TDG predicts 43 million by 2014, it's still not a big number. If I take an average of their numbers and say there will be around 25 million sets in 2013, even if 75% of those are connected to the net, you're talking 18.7 million TVs, which doesn't change anything.
I think it is fair to say that if we combined the multiple Internet connected devices like TVs, gaming consoles and Blu-ray players they could create a real positive impact five years from now on the market. But TVs by themselves won't make that much of an impact in the next five years. Even some of the TV manufactures I speak to directly don't have any of their own estimates on how many models they will sell with broadband functionality built in as they don't see the numbers being that big.
I think Internet enabled TVs are cool, and make sense for some consumers. Many, many years from now they will matter to the industry. But for any content owner who thinks the Internet TV platform is going to change their syndication or monetization strategy anytime soon, they are going to be in for a big letdown.
Disclosure: No positions