For many people, the television has become standard equipment in their homes. Since World War II, television viewership and ownership across the world has skyrocketed. In India, a TV is the number one aspirational item for its rising middle class, and in America, millions tune in each night to watch their favorite shows. While there have been major design and technology upgrades since they were first commercially available in the late 1920's, the basic premise of television is still the same; watching produced programs. However, the "idiot box" is getting a major makeover. New televisions, which blend computers, the Internet and new levels of interaction, are gaining traction with consumers. These smart TVs are poised to continue their breakneck growth and could be an interesting portfolio play.

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Staggering Growth
Just as smartphones have become a personal lifestyle device, smart TVs are primed to do the same for family entertainment. These units offer a number of "Internet connected services" that normal TV sets cannot provide such as apps, media streaming, web browsing, games and Internet Protocol Television (IPTV). The basic idea is to move beyond just watching your TV, but interacting with it through this Web 2.0 linkage. So far, adoption of these new user-powered devices has been brisk. Among homes with broadband connections, about 22% of U.S. households now have HDTVs with built-in applications; 60% of that group accesses these apps at least once a week. Overall, nearly 7.04 million smart TVs were sold globally in 2010.

However the real growth lies ahead. According to a report from Topology Research Institute (TRi), the market for smart TVs is expected to experience soaring global growth throughout 2011 and 2012. The research predicts that roughly 25.18 million smart TVs will be sold this year, accounting for more than 10.4% of all TV shipments throughout the world. By 2012, global shipments of smart TVs will reach around 52.85 million units. TRi believes that social networking will become a popular application for TVs, just as it has rapidly overwhelmed the mobile device market. Some analysts are even more bullish on the sector. According to DisplaySearch, connected televisions will hit 138 million shipped units per year by 2015. (For an article relating to television products, read Will Digital TV Allow You To Ditch Cable?)

Besides the rush into Internet-enabled televisions, 3-D technology is also finding its way into homes. By 2013, over 4.3 million sets or about 50% of all HDTVs will include the new technology. DisplaySearch sees the total market increasing from 700,000 units sold in 2008, to 196 million units by 2018 as global demand in North America and the Asia-Pacific surges. Companies like Disney (NYSE:DIS) and DIRECTV (NYSE:DTV) have already begun offering 3-D content for home viewing.

A Smart TV Portfolio
For investors, this trend towards smart entertainment could be a great medium to long-term trend. While smart phone investors can use the First Trust Nasdaq CEA Smartphone ETF (Nasdaq:FONE) as an over-arching play, smart TV investors need to do some digging. Here are a few picks.

With about 1,000 application programs and more than 10 millions downloads, Samsung is emerging as one of major players in smart TV production. Within just three months of the company offering "smart hub" televisions, nearly two million smart TVs have been sold by Samsung. The company hopes to control more than 30% of the market. Standing in its way is tech giant Google (Nasdaq:GOOG). TV sets running Android based software from Sony (NYSE:SNE) and privately held Vizio are quickly gaining traction with consumers and could overtake the leader.

Perhaps the best way to play the revolution in smart TVs is through the firms providing the guts for the sets. Intel (Nasdaq:INTC) recently exited the smart TV chip market, which leaves plenty of room for Panasonic's (NYSE:PC) new lighting fast UniPhier family of processors for smart HDTVs. In addition, NVIDIA's (Nasdaq:NVDA) recently unveiled 3-D Vision technology will enable users to upgrade their PCs to a 3-D smart TV experience.

The Bottom Line
Televisions are quickly moving beyond their old "idiot box" moniker. New technologies in interaction and web integration are making smart TVs the go-to entertainment device for families. For investors, the growth in the sector could represent a wonderful portfolio addition. The previous picks are a great way to add exposure. (For an alternative, contrarian perspective, read 6 Reasons Why Products Fail.)

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At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

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