|Issue:||Asia-Pacific II 2015|
|Topic:||Moore’s Law to Kurzweil’s Law:
Should we be prepared for dramatic change in the television market?
|Title:||Associate Director of Consumer Electronics|
Simon directs all Futuresource Consulting’s consumer electronics research programs and is an expert across a number of CE technology sectors.
Simon manages the group’s continuous work in all aspects of CE, including wearables, TV displays, home AV, mobile, tablet and data-storage areas. In addition to managing the suite of continuous services, Simon is also a major contributor to various private client assignments.
Simon holds a Bachelors of Business Administration in Business Management from Lancaster University.
Global Sales of Smart TV continue to grow strongly. What is driving the market? Are consumers using these sets and if so what for? What are the implications for Broadcast and Pay-TV? Simon Bryant, Associate Director – Consumer Electronics, Futuresource Consulting, addresses some of these questions for Connected World with a specific focus on The Asia Pacific market.
High growth market
Although the TV industry spotlight has moved on to UHD and Curved screens, Smart TV continues to pervade the market as a value added feature and remains on course to reach the majority of homes in developed markets by 2018.
Internet connectivity is moving ‘top down’ through the TV price spectrum and will be an expected standard feature on mid-range and even low end products by 2018. Smart features like tile-driven navigation, interactive EPGs, gesture recognition and device mirroring appeal to consumers at the point of sale as part of a premium set proposition along with screen size, LED quality, design, audio, UHD, Curved etc.
Global Smart TV sales reached 120m units in 2014; China currently leads the global market with 28m units shipped in 2014.
Smart TV ownership will reach 70% of homes in all key regions by 2018. By the end of last year 17% of households owned at least one Smart TV, while in the APAC region it was 15% of households in 2014.
Unlike other worldwide regions APAC consists of many disparate markets witnessing varying widely degrees of adoption. Australia and Japan have among the highest household penetration rates in the world, 78% and 47% respectively (end-2014), but these countries contribute only 10% of the APAC volume, while China and India represent 67% of the region’s volumes, but Smart ownership is much less developed, 18% in China and negligible share in India. By 2018 APAC ownership is forecast to represent 37% of households.
Smart TV Killer Apps: Online video
Connectivity and usage levels are significant – over half of Smart TV owners say they use a service at least once a week (Source: Living with Digital Wave-10 May 2015).
Research shows Smart TV owners use a variety of apps like Facebook, Spotify, Twitter and Skype, but there is no doubt that video is the key interest driver. While interest and usage is highly focused on video at present, far lower interest exists for other genres or general Web use, a radically different profile to the mobile market.
Video usage is mainly concentrated on free content like broadcast catch-up TV, YouTube or subscription services like Netflix and Amazon, who do not generally need to share significant revenue with TV makers and offer little opportunity for exclusivity.
The evident lack of apps or content business model for TV hardware makers may be causing some vendors to re-assess their Smart TV strategies, especially given the ongoing cost of platform development and applications support, but no one manufacturer can ‘de-feature’ their sets and remain competitive.
Meanwhile, the industry may be re-assessing Smart TV strategies in the light of limited direct return on investment and a shift of focus to UHD; the ongoing cost of platform development and support for apps developers with little clear consumer payback; little opportunity to monetize apps or content, consumer interest concentrated on free or subscription video; limited scope for content exclusivity as a differentiator, except for a few examples e.g. ITV Player only on Samsung in the UK); the growing base of alternative Smart TV devices is marginalising the appeal of embedded Smart TV features, including very low-cost Digital Media Adaptors, as well as Consoles, Pay-TV STB’s, and Blu-Ray.
However while vendors will consider ‘de-featuring’ their TV’s as one way to address the commercial shortcomings of their Smart TV businesses, consumers increasingly expect Smart features and apps and there is no way for a manufacturer to unilaterally de-feature its products and remain competitive, so Futuresource believe the market will continue to develop. Although there are plenty of ways to access online video, Smart TV integrates Broadcast and Broadband services within a single user and control interface and in the view of Futuresource this will limit growth of DMAs* beyond 2016. Smart TV offers access to IP-delivered non-broadcast content like UHD, as well as opening the door to interactive long term concepts like targeted ad insertion and web/broadcast overlay.
Smart TV vendor strategies
As the world’s leading TV brand Samsung has a sufficiently high share in Smart TV (>25%) to maintain its own platform and apps program, as well as seeking exclusive content, but is also promoting Tizen as an open OS alternative to Google. Meanwhile Google is building support for Android TV which includes Sony, Philips and Sharp among its partners. The Smart TV Alliance is led by LG and supported by Panasonic and Toshiba.
Several regional frameworks are in existence e.g. acTVila (Japan), NGB TVOS (China), and HbbTV (Europe, also MHEG & MHP), most of which draw on open standards like CE-HTML and OIPF, but cause frustrations for TV vendors addressing a world market.
In practice, almost all platforms now support HTML5 running on a Linux core, meaning a high degree of future apps development commonality.
Apple TV remains the only gateway between TV and the Apple ecosystem at present.
Pay-TV providers and broadcasters are focused in the opposite direction, taking content out to the ‘second screen’, notably tablets and smartphones. Television Interactivity is also directed towards handheld devices, with ‘companion apps’ for additional programming, information, competitions, voting etc.
For most users today Smart TV primarily provides a convenient way to access online video content on the large screen. SmartTV is expected to grow to 215 million units in 2018, 82% of total TV sales, in APAC 90million units are forecast to ship in 2018.