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Vertical Integration Is the Key to Successful Internet–Television Convergence

Early attempts to bring networked video to consumers’ television screens have fallen far short of success, but that may change soon with the arrival of new vertically integrated solutions and business models, according to a recent study from ABI Research.

Thus far, initial product offerings have been centered on a computing and home networking model; but vendors are learning that they need to provide end-to-end solutions in order to attract new consumers.

The Digital Living Network Alliance (DLNA) supports broad communication between networked devices and even handset manufacturers such as Nokia have shown how a Wi-Fi–enabled handset plays a role in the connected living room. Microsoft has been busy with its Media Center Extender technology, now repositioned as “Extender” technology for the Windows Media Center.

Extender technology can be embedded in any suitable consumer electronics device, in addition to standalone DMA (Digital Media Adapter) clients, and is featured in products from both Linksys and D-Link, as well as the HP MediaSmart TV.

“While Extender defines a specific implementation, the more generic DLNA devices continue to gain widespread industry support,” says ABI Research principal analyst Steve Wilson. “Today, however, these have less visibility at the consumer level.”

But ABI Research believes that video is the big fish – and home networked–based approaches are beginning to take a back seat to efforts being made by companies that directly link Internet services with television. Leveraging their strong brands, companies such as Apple, Netflix, and TiVo are providing more vertically integrated solutions.

At Macworld, Apple announced an upgrade for Apple TV, which allows consumers to rent movies directly from iTunes without going through a PC. The TiVo PVR now supports Amazon Unbox, allowing consumers to buy or rent from Amazon. In addition, Netflix and LG announced an agreement to work together – bringing Netflix movies directly to the living room via an LG client. In all probability, this client will be embedded in an existing LG product such as a TV, DVD player, or PVR. [ABI Research]

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