The battle to control your TV is on: here’s how to profit

A nasty fight is breaking out for control of your living room telly.

The internet has already revolutionised the way we shop, the way we listen to music, and even the way we read. Now it looks like the humble TV is next.

The concept of smart TV' televisions that are hooked up to the internet is not new. But we could be reaching a tipping point. Big companies such as Samsung, LG and Sony increasingly hope that smart TV will be the next big thing, encouraging consumers to trade up from their existing models.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

And broadcasters are also having to compete harder for our business. BSkyB for example, is launching an internet TV service to compete with rivals such as LoveFilm and Netflix to offer the ability to stream' films direct to your laptop or tablet.

It's all good news for consumers. But how can you profit from it?

Smart TV's time has come

Smart TV sounds an exciting concept. Being able to watch what you want, when you want, as well as controlling your TV with voice commands and Minority Report-style gestures it's like science fiction heaven.

Sceptics will point out that the idea has been around for a while. Both Apple and Google have already made forays into the area, without astounding success. However, epublishing was around for many years before it became the serious threat to the traditional publishing model that it is today.

The point is, consumers need to have a reason to use something before they'll actually start doing so. Lots of people who once swore they'd never see the attraction of an e-reader over a real' book now appreciate the convenience of Kindles and iPads. You just need to find the right hook that makes something a 'must-have'.

And it looks increasingly as though smart TV's time has come. Both Google and Apple reportedly have plans for new hardware. The Wall Street Journal reports that Google is developing "a home entertainment system that streams music wirelessly throughout the home", and which could be adapted to work for video in the longer term. Meanwhile, Apple is expected to launch a new TV product later this year.

Great. So how do we profit from it?

Who will help manage all the data?

There's the rub. The consumer electronics business is brutally competitive. Picking winners when these sorts of companies go head-to-head for control of a market is little better than out-and-out gambling.

If we had to take a bet on a company that should do well from the smart TV revolution', we'd probably back Apple (Nasdaq: AAPL). As my colleague Phil Oakley wrote recently, the company is reasonably priced in any case, when you consider its cash pile. And Apple seems to have the magic touch when it comes to making must-have' consumer products: the iPad is a classic case in point.

But what other companies might profit from this? Well, if manufacturers can create TVs that seduce consumers to start watching even more content over the internet, then one thing is certain: the amount of traffic going around the networks will soar.

Already, South Korea's biggest internet provider, KT Corp, is demanding a share of the profits derived from smart TV. The way telecoms operators like KT see it, they build and maintain the roads (the network) that all this internet traffic goes down. So why shouldn't they get a share of the profits that these networks enable other companies to make?

In particular, big, data-heavy applications like broadcasting TV online "can be likened to heavily-loaded trucks slowing down the overall speeds" on the network, one KT executive told Reuters. That puts pressure on the likes of KT to upgrade the networks. "TV manufacturers are free-riding on our network, while our capacity to invest and upgrade is shrinking due to worsening profitability."

So in a first step, KT has blocked internet access through Samsung's smart TVs, arguing that manufacturers should pay for using its network. Needless to say, Samsung doesn't agree. And South Korea's broadcast and telecoms regulator doesn't seem too impressed by the move either. But given that KT controls half of the country's internet market, it promises to be a tough negotiation.

This is significant. As the FT points out, South Korea is the world's "most-wired country". Nearly every household (96%) has access to high-speed internet. So it's a potential trendsetter in this business.

That could mean that companies maintaining networks and providing equipment to upgrade networks could do well out of the TV business. In the next issue of MoneyWeek, we'll be looking at some promising picks and shovels' plays on the internet. If you're not already a subscriber, then click here to subscribe to MoneyWeek magazine.

This article is taken from the free investment email Money Morning. Sign up to Money Morning here .

Our recommended articles for today

Why investors should look forward to an Indian summer

China may be the stronger development story, but when it comes to investment, India is the place to be in 2012, says Cris Sholto Heaton.

Homeserve: special situation or falling knife?

Homeserve's share price has halved in the last year after a spate of complaints from its customers. So is this a temporary blip - and a rare profit opportunity for investors - or is Homeserve a value trap? Phil Oakley investigates.