ABI is hawking its latest report on the “Home Theater PC” market (we weren’t aware there was such a thing, but what do we know?). The bottom line is that Internet functionality continues to invade the living room—whether through set-tops, gaming consoles, connectivity devices like Apple TV and Roku’s Netflix box and, yes… even TVs themselves. ABI’s take: The “all-in-one” design is starting to take hold as manufacturers try (in many cases, unsuccessfully) to make the experience simple for consumers. In fact, ABI analyst Steve Wilson says this “combinational trend” won’t amount to vast Internet surfing via TV as manufacturers work toward that simplicity goal.

“For instance, both Samsung and Panasonic have announced TVs where the user can connect directly to the Internet,” he said. “However, these likely will be limited to specific Web sites and services and cannot yet provide the full flexibility of a PC connection.”

For content providers, this could be an obvious opportunity as they all position themselves for space within these environments. But the interplay with MSOs could be challenging. For example, should NBCU or Viacom do a deal directly with CE manufacturers or avoid such deals for fear of upsetting distributors that already pay license fees for that content? ABI points out that CinemaNow, an online movie service, announced in May a deal with Microsoft to rent and sell nearly 3,400 movie titles and TV shows within Windows Media Center. Using a direct PC-to-TV connection, the user can watch content directly on a TV or even burn DVDs, permitting access of purchased content across the full range of devices. Netflix’s deal with Roku, meanwhile, simply involves a set-top that connects users to Netflix’s thousands of downloadable movies. It’s perhaps a curse of riches for content providers, who must balance new distribution opportunities with their bread-and-butter ties to cable and satellite distributors. What else is new, right?

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