"Smart" (that is, internet-enabled) TVs are still all the rage as consumer electronics companies dream of copying the Apple-driven evolution of the smartphone. They, too, want to create new revenue streams around the next great ecosystem.

Yet more than 40 percent of U.S. households that have smart TVs actually haven’t even connected them to the internet. Smart TVs, unfortunately, may simply be a 21st century version of WebTV (introduced in 1996) that enables third-party web applications to be displayed on the television. Which means that TVs still remain what consumer electronics companies like Samsung, LG, and Sony fear most: a "dumb" screen or just a video display monitor.

Operating a TV ecosystem is a lot more complicated than simply connecting a consumer electronics device to the internet. There are also key differences around the TV space – not to mention the growth of set-top boxes and streaming devices like Amazon's reportedly delayed one – that make the dream of smart TVs just that: a dream.

But… Look at What Apple Did With Smartphones. Why Can’t That Work for TV? ————————————————————————-

Fearful of relegating TV to remaining “dumb,” consumer electronics manufacturers look to the success of Apple’s iPhone/iPad/iTunes, Google/Android, or Amazon ecosystems as examples of what could happen with smart TV.

But do consumer electronics companies really think they can monetize the new feature of accessing the web with smart TVs? Even with an industry standard for smart TVs, it’s not likely that those companies could start charging Netflix, Amazon, Pandora, and others for access to their screens. And conversely, by not controlling the device, these service providers operate at the whim of the smart TV.

>Unlike with smartphones, for a TV ecosystem there needs to be an intimate relationship among the content provider, distributor, and device.

Stating the obvious, it’s important to emphasize here that a television is not a phone – it’s a display device. Phones, on the other hand, are communications devices that have evolved into portable computers. Where add-on features like apps don’t affect the operation of a phone call, on smart TVs that separation from content actually prevents the development of a rich TV ecosystem.

Why? Because, unlike smartphones with independent apps not dependent on content, a TV ecosystem needs to be based on “host” video content. There needs to be an intimate relationship among the content provider, the content distributor, and the consumer device. It's why cable boxes work perfectly for cable TV; satellite boxes work perfectly for satellite TV; and AppleTV boxes work perfectly with the iTunes store.

[#contributor: /contributors/59325632b8eb31692072ed04]|||Gary Myer was president of Sony Digital Media of America, where he directed U.S. efforts in digital satellite, cable, and internet products. Prior to that, he was vice president and one of the founding executives on the team that built and launched DIRECTV in the U.S. and Latin America. Myer is currently a strategic advisor to the digital media industry.|||

And although the Smart TV Alliance is attempting to create an industry standard platform, the core tenet of integration with content is still missing. For example, a common social environment for sharing, discussing (and ultimately creating) TV programming will be impossible with random-format platforms. Content providers and developers want a large installed base of devices before they create content for a platform.

Without an industry standard, various “flavors” of Android-based smart TV platforms will appear, along with the iOS ecosystem, which creates a dilemma for the app/content developers. Just look at the video game industry.

Set-Top Boxes Are Better Than Smart TVs —————————————

The industry dynamic above explains why Amazon, which already has its own streaming video service, is rumored to be developing its own set top box (STB) – though it was just reported yesterday that the company made the decision to delay the service.

Still, even the promise of another STB reinforces the “dumb” screen role of TVs. Unfortunately for television manufacturers, Google’s Chromecast, while not in box form, is an STB-like device that plugs into TVs and enables smartphones and tablets to display apps and what's playing on the television screen.

The reality is that a smart TV ecosystem that works throughout the home would require replacing each of the TVs in a household with a compatible device. But the average household has about three televisions. In that context, an under-$200 set-top box (STB) that works with all TVs is a much more attractive option.

An under-$200 set-top box that works with all TVs is a much more attractive option.Not only that, but STBs enable technology to be customized for video service while also operating independently for software updates and new product introductions. This is important when you consider that computer/web technology changes much faster than TV technology.

Finally, consumer electronics companies are averse to adding anything to the cost of a TV that isn’t absolutely necessary. The very idea of putting extraneous hardware into their products to avoid future obsolescence goes against their competitive cost mindset.

Controlling the TV Ecosystem Requires Controlling the Device and the Service ——————————————————————————

Currently, apps on smart TV range from Facebook and Twitter to Pandora and Skype. And although some of the apps are over-the-top (OTT) video providers like Netflix and Hulu – which happen to be among the most-used smart TV apps – all these apps operate independently of the television programming provided by pay-TV operators (cable, satellite, telco).

But a true television ecosystem must functionally integrate the apps with the television programming service and content being offered to the consumer. That’s the only way to create a unified content portal for a simple search, navigation, discovery – and social experience – that will enable personalized/customized programming and advertising for the viewer.

>Web technology changes much faster than TV technology. But the idea of avoiding future obsolescence goes against the consumer electronic mindset.

Only through an analysis of viewer data from this custom, user-centric portal can the ecosystem host enjoy higher CPMs for advertising insertions. It’s also a way to help content creators deal with the inevitability of channel unbundling and à la carte offers to their customers.

Once such “ownership” of a customer is established, the ecosystem can expand to include content displayed on other devices (smartphones, tablets, watches, and so on). But it can’t happen without the ecosystem host controlling and billing for the video service and other content. And that won’t happen unless the host controls the device and the service/content. It’s also why there’s still no device and service that competes with incumbent pay-TV providers.

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Bottomline: The TV ecosystem is waiting to be created. But consumer electronics companies won’t be the ones to create it.

This will take more than hardware expertise. It will require a service that controls the consumer device. Most importantly, it will require mutually beneficial relationships and data exchange between the service provider and content providers to enable a new business model for video distribution.

Once that ecosystem is established, though, social and realtime data feedback can give content providers the confidence to migrate from their legacy, linearly scheduled programming business model to unbundled, on-demand, à la carte programming. These changes may not benefit TV device manufacturers, but they will benefit the content providers, the service provider, and the consumer.

Editor: Sonal Chokshi @smc90