A consistent shift toward long-form online video consumption, including live TV, is driving first-time purchases of a range of connected consumer electronics devices, including Blu-ray players, gaming consoles, IP connected devices, set-top boxes, smartphones and smart TVs. Taken together, 1.2 billion units worth more than $360 billion were shipped in 2012, according to Frost & Sullivan.

Unit sales expect to nearly triple to 3.1 billion devices by 2017, driven by new purchases as well as upgrades to higher-end, feature-rich devices. However, competition and demand are compelling device manufacturers to discount their prices, globally and regionally, the firm found, which bolsters uptake but drains some revenue out of the ecosystem.

"Consumer appetite for online and personalized content, including both on-demand and live TV, anytime and on multiple screens simultaneously, is going to remain the No. 1 driver of the consumer video devices market," said Frost & Sullivan’s (News - Alert) digital media industry manager Avni Rambhia. "Internet video disrupted the Pay TV industry once; today, a wide range of consumer video devices…are forcing a remolding of business models across the board."

Mobile video in particular is seeing massive growth, and, accordingly, smartphones account for nearly half of total market units currently and will continue to spur market expansion going forward. But the rapid adoption of tablets and smart TVs and sustained sales of set-top boxes (including home gateways) are also significant contributors to overall growth.

Meanwhile, forging partnerships with content service providers, game developers and app developers to ensure a total package that will appeal to consumers is key to winning market share in a space where every new generation model has the potential to swing the fortunes of a vendor significantly – one way or another.

"From a service provider perspective, a personalized, convenient, and intuitive user experience is critical to achieving service popularity," concluded Rambhia. "Vendors who craft compelling services that are consistently available across all major devices will find that users are willing to pay (directly and through ad viewing) for such experiences."

One fly in the ointment though is the demand for affordability. Frost & Sullivan said that the competition to innovate and differentiate, while still lowering prices, is stressing the market in terms of risk and return on investment.

"Price does matter to the large majority of consumers, but features and innovation determine early market success," said Rambhia. "Thus, a strategy that straddles both price and feature sets is most likely to succeed in the long-term."

Meanwhile, regional vendors pose greater competition to global vendors in high-growth emerging markets as they continue to improve the quality and reliability of their devices while addressing local price sensitivity.

Bottom line? The consumer video devices market is transforming the way users interact with their phones, televisions and computers and is spurring a growth spree, driven by soaring consumer demand for a ubiquitous video experience and growing affordability. But price-performance is a challenge that needs to be addressed by vendors at a global level and also region-by-region in order to fully capitalize on the market opportunity.