China’s Big TV Set Sales are Booming
Paul Gray is from his own business, Graypixel Ltd, but was at the 4K HDR Summit to replace a speaker from Omdia who was unable to attend. Gray previously worked for Omdia as a TV analyst and has attended the event for the previous ten years. This is the first of several reports we plan from this annual event.
The TV market is seeing little growth and volume is very very stable – even the pandemic wasn’t like 2010-2014 when CRTs went to flat TVs, analogue went to digital and SD went to HD. These changes all came along together and the market briefly hit 250 million sets per year. However, new TVs are getting bigger as the industry is driven by the area of TVs, so if the industry can’t sell you more TVs, it will sell you bigger TVs, Gray explained.
One region that is going beyond the ‘one extra inch per year’ of most countries’ trend is China, where the market is ‘absolutely soaring away’ in terms of screen size. By the end of this year, the average TV size of new sets sold in China will be 65″. In regions such as Europe that’s an ‘aspirational’ size and the share of larger sets is lower, but in China it’s the norm. China is where the large LCDs are made, so the logistic cost of supplying very large screens is smaller and China has ‘unique economics’.
High Performance Grown Very Fast
Looking at TV set technology, high performance TVs are really growing very fast with LCDs driven by miniLED backlights which exploit the technology developed for large direct LED displays to allow LCDs to have ‘OLED-like’ performance. Gray thinks that LCDs are like seagulls. They are successful because they are smart, move fast and are very, very adaptable. (He’s a keen sailor!) OLED is a fantastic technology, but development tends to be more difficult and LCD is incredibly flexible.
There have been many technology breakthroughs in miniLEDs, especially by TCL and Hisense of China. The companies, Gray believes, are ‘doing to the Koreans what the Koreans did to the Japanese’ and ‘What the Japanese did to the European TV makers’. The Chinese brands are very aggressive and especially in miniLED technology.
Different Strategies Being Tried
However, there are three different strategies being used by brands to market their TVs and to try to make profits. Typical margins for a TV brand are just around 2% to 3%, so to make, for example $100 profit from a set is extremely attractive. So, in the US, the model has shifted from ‘make a box, sell a box’ to business models that can drive recurring revenue. Omdia estimates that around $100 in recurring revenue is potentially available from a TV set installed in a consumer’s home from advertising, metrics and usage data. This means incredible pressure on the set makers to get consumers to connect the TV and keep using it.
Previously brands wanted you to buy the next TV as soon as you had bought this TV, but now, the idea has changed to getting you to use your new TV a lot and keep it in service. In the past, apps on smart TVs ‘greyed out’ after a few years, but now there is a good incentive to keep developing and supporting apps to drive usage. That’s good for the consumer.
China Has Less Advertising
However, in China, the trend is still about set sales as there is only a small TV-based advertising market and advertising is very tightly controlled. ‘The rest of us’ (around 5 billion people outside the US and China) have smaller advertising spends and smaller TV sets as well as smaller incomes. This makes it tricky for brands to have a single global strategy and Gray said they are trying to ‘muddle through’ with a bit of recurring revenues in some countries. France and Spain only have low levels of advertising, relatively, but Italy, for example, has a lot of terrestrial TV with plenty of advertising. In Africa or South-East Asia circumstances are different.
Gray has long been a skeptic in terms of the market for 8K TVs, and that hasn’t changed, but he is very positive about the need to develop 8K for content capture and product in 8K. (and in the past he has highlighted the need for 8K and beyond for VR and large immersive displays)
As was said at Cedia and IBC, no conference is complete these days without reference to AI. Gray said that it’s not clear where the added-value is from AI in TV. It has been a target for development, but Gray thinks that content discovery might really benefit from AI-help as the proliferation of Free Advertising-Supported TV (FAST) channels increases to the level of potentially ‘thousands of channels’.
FAST Needs a Reality Check
Gray suggested a reality check on the potential for FAST content. He showed Omdia data that shows that Meta and TikTok revenues are bigger than everything else put together. A lot of the FAST market revenue is in China and overall it is ‘way down’ in revenue opportunities. Retail media is a big segment. Video is being produced by retailers and that’s a big revenue opportunity. If TV could capture a share of that retail media, it would really make a difference for the TV sets.
Finally, he looked at the big opportunity of getting advertising more seamlessly integrated into the content. How can UHD exploit its advantage, he asked? Wide color gamut really helps to improve the power of advertising, especially for clothing*, but UHD gets you closer to ‘reality’ and that could really help advertisers to capture more of that huge retail media spending.
Here, at the 8K Association we would point out that the original aim of 8K was to get ‘closer to reality’ so if Gray sees an opportunity for this, so do we.
* The writer has seen several initiatives to deliver more accurate color in online retailing. The experience of retailers that have worked on this has been that the decision to buy and the decision to accept goods are separate. Even if the color matches, customers may reject goods on arrival and even if it differs, they may be happy to accept them.
