Written by Kurt Scherf, Vice President and Principal Analyst, Parks Associates

A reporter who was at CONNECTIONS followed up with some questions about Smart TVs and connected game consoles, so I thought that I would share some thoughts:

What are your estimates for the total worldwide sales for all major consoles?

Kurt: We expect sales of the major consoles to remain fairly steady over a five-year period – from 40.7 million units in 2011 to 45.1 million units in 2015.

Do you have stats on the total adoption of XBLA, PSN and Wii network worldwide (or in the US)?

Kurt: The last Xbox LIVE subscriber count I saw was January, when they reported 30 million. PSN had more than 69 million active accounts as of January.

Why do you feel 2010 was a milestone year as it pertains to connected TVs and connected game systems? Does 2011 have the same potential to be a game-changer. If so, why?

Kurt: For the connected TVs, I think the huge subscriber increase in Netflix (from 12.3 million at the end of 2009 to 20 million at the end of 2010) was a significant catalyst. With so much streaming content available to consumers, they’re increasingly looking for ways to have that content on the big-screen TV. I think also that just the wider availability of models with Internet-connectivity, along with the marketing that major manufacturers and retailers are putting into them (end caps at retail, VIZIO’s VIA apps commercial with Beyonce singing, etc.) has made a huge difference in increasing awareness and availability. A quick scan at Best Buy reveals that – among the 333 flat-panel TVs listed, 123, or about 37% are considered “Smart”). This fits really well with our estimate that 42% of TVs sold in North America this year will be Internet-connectable.

I do think that 2011 will be a game-changer year for Smart TVs, thanks to more models being introduced, an increased number of apps available (particularly focusing on entertainment like music and video, but also including capabilities for social networking (Facebook and Twitter) and even communications (Skype). I also think that the strong interest in all kinds of connected devices by pay-TV providers (chief among them Time Warner Cable and Comcast) to make their “TV Everywhere” content available on a growing number of devices is going to play a key role in opening up the Smart TV to content that was once off-limits (like pay-TV content and VoD). I would also expect the phenomenon to be quite prevalent in emerging markets like East Asia, Eastern Europe, and Latin America, where pay-TV providers are operating under “Greenfield” deployment rules, and would be less likely to invest in full-fledged infrastructure (such as a separate set-top box for every TV), but would rely on a growing number of IP-capable devices to connect to their services.

What products or services have you observed that extend the life of a connected game system beyond its usual 5 year threshold (i.e. the Xbox)?

Kurt: Certainly, the inclusion of a Blu-ray player into the PlayStation 3 has been a valuable asset, as has significant processing power and storage. I do think that natural human interaction (a la the Xbox Kinect and the PlayStationMove have also helped generate increased interest. In fact, the ten million sales of Kinect that Microsoft has reported have reinvigorated sales of the Xbox 360 to the extent that unit sales were up 29% in Q1 2011 compared to the same quarter in 2010.

What do you feel the potential is for connected TVs to contribute the potential cannibalization of connected game systems, as smartphones and tablets arguably have? Is this process already underway?

Kurt: We have seen two major announcements this year that point to the potential cannibalization – Roku including Angry Birds and VIZIO working with OnLive. However, I do think that games-on-TV are much more likely to focus on casual and parlor games, and not necessarily infringe on use of consoles for more graphics-intense gaming.