Yesterday was the first day of the Digital TV Summit 2012. At 12pm today I will be contributing to a panel discussion focusing on Why social TV is the next big thing and I thought it a good idea to republish some facts, figures and findings from Informa before the event. If you can make it down it would be great to see you. Call me on 07868 823055 if you fancy a coffee, chat or post conference drink.
Executive summary
- Although Informa has generally become more pessimistic regarding the future of smart TV, this does not mean that the device will not sell well. In 2017, 82% of all TVs sold will be smart TVs – a sharp increase from 25% in 2012.
- The launch of the WiiU marks the start of the next generation of consoles coming to the market. The improved graphics and control mechanisms, and the better integration of diverse media services that are expected with these devices, will drive console sales.
- Globally, the smart TV will have both greater sales and a larger installed base than other smart-TV devices by 2017. However, its importance varies greatly by region: Informa expects it could become more of a key aggregator of OTT services in developing markets.
- Smartphones will affect smart-TV devices both positively and negatively. They will encourage users to connect their devices, but will also set the bar for what “smart” means to a level unattainable by many TV manufacturers.
Market status: "No longer connected devices, but smart ones"
Since Informa last forecast what were then called connected devices in mid-2011, a major rebrand of these devices has occurred. Manufacturers seeking to cash in on the public’s positive association of the word “smart” with advanced connectivity have rebranded their connected TVs as “smart TVs”.
Informa groups together four different device types into a wider smart-TV-device category: smart TVs; smart Blu-ray players; games consoles; and media streamers (Roku or Apple TV devices).
The decision by manufacturers to refocus on so-called “smart” functionality has principally been taken because 3D failed to capture the imagination of users, who see it largely as a gimmick. 3D – once a key distinguisher between premium TVs and their value-focused peers – has been relegated to being yet another extra feature. In its place, the “smart” brand is being used as the key to identifying premium TV sets. This change in direction has meant that manufacturers have not pushed connectivity into lower-value TV sets as fast as Informa believed they would.
Of the leading manufacturers, Samsung was the earliest to implement this marketing change and it benefited considerably. Its brand is now closely associated with the most cutting-edge TVs and it has increased its market share in the top end of the market.
However, despite adding the smart brand and functionality to Blu-ray players, manufacturers have not restricted it to premium devices only. Although this behavior is inconsistent with keeping the smart brand a premium one, it is required to ensure that Blu-ray players remain relevant in a world where users consume increasingly more digital content (see fig. 1).
A weak global economy hinders sales
Market development: "Big installed numbers will fail to make as big an impact"
By 2017, 53% of all TVs in homes worldwide will be smart TVs or connected to smart-TV devices – an increase of 37 percentage points from 2012 – and, by 2017, smart-TV devices will account for 87% of total sales of TV and media players. However, the reality is less dramatic than these percentages suggest, as many of the smart-TV devices will be concentrated in only a few countries (see fig. 3).Year-on-year sales of all TVs have been hit by macroeconomic factors. In some developed countries, sales growth has simply stagnated, while in those where GDP has decreased, sales have fallen significantly. Many leading manufacturers, including LG and Sony, have reduced the number of TVs they expect to ship in 2012.
Informa has become more pessimistic about the expected reach of Blu-ray players in forthcoming years. Additional features and heavily-reduced prices have only resulted in small increases in Blu-ray player sales. The years between 2012 and 2015 will be vital for the Blu- ray players – and indeed the format – to establish itself. And the introduction of 4K TVs may be a key driver to take up.
Games console sales have fallen significantly from their peak of 2010. An industry that once boasted that it was recession proof is looking considerably vulnerable at present. Not that the recession is completely to blame. All of the games consoles are coming to the end of their lifecycles (see fig. 2), a time that typically sees heavy reduction in prices to keep sales up. However, this generation’s average retail prices are staying stubbornly high. Sony has even gone as far as pushing the price up on the top-end PS3 despite introducing a model that is cheaper to produce. Ultimately much rests on sales of Nintendo’s soon-to-be launched WiiU and how quickly Microsoft and Sony launch their own next-generation consoles.
No end in sight for Samsung’s smart-TV hegemony
- Samsung has used the screen-technology shifts in TVs to transform itself from being a contender into the undisputed champion of the TV market. In particular, its early moves first to LCD and now to LED and OLED have helped it achieve the scale necessary to make a profit from TV sales.
- Rival TV manufacturers have been left floundering at Samsung’s rise, especially the previous leaders of the premium-TV sector, Sony and Panasonic. No rival has come up with a compelling strategy for competing with Samsung.
- Second-placed LG continues to shadow its every move, a strategy that has paid dividends but might not be enough to overtake Samsung.
- Three expected developments will undermine Samsung’s position: the launch of a TV set from Apple, competitors’ launching of OLED TVs that are ready for the mass market at the same time Samsung does or earlier, and the emergence of Google TV or Android as a serious platform.
- Samsung itself is at a crossroads. It needs to decide whether it will persevere with its own smart-TV platform or adopt Google TV. It alone has enough scale not only to justify continuing to develop its own platform but to benefit from retaining this independence.
Market dynamics
By some distance Samsung is the world’s leading manufacturer of flat-screen TVs, a category that includes plasma, LCD, LED and OLED TV sets (see fig. 1). The situation is even more exaggerated for smart-TV sales, of which Samsung has a global market share over 30% (see fig. 2).
Fig. 1: Flat-screen-TV shipments, 2011
Companion-device strategies: how the mobile tail will wag the TV dog
- The majority of technical challenges that will hold back how quickly smartphones and tablets become a key part of the TV experience are located in the TV and set-top box devices.
- The number of major companies that will have significant market shares in both the TV and mobile-device markets will increase. Google and Apple will use their strengths in mobile to establish themselves in the TV market. Despite its strengths in mobile and TV, Samsung might struggle to ensure that purchases of one device will push users to buy the other.
- Many TV manufacturers are expected to adopt Android and Google TV as their smart- TV OSes. This will further reduce the already tenuous link these manufacturers have with their users. For TV-only manufacturers, the benefits that Android brings might outweigh the negative impact of being cut off from their users.
- Manufacturers should use the TV as a churn-reduction device to keep users within their family of devices. Informa believes, in the long run, that the TV will increasingly become a companion to the tablet and smartphone, and not vice versa.
Introduction: In the home, the TV remains the primary screen for entertainment, because it tends to dominate the living room and is connected – where there is one – to a home-cinema sound system. The increasing size and improved picture quality enable it to offer the most compelling video experience to users.
But the TV is no longer the only screen of note in the home, and users are showing an increasing appetite for using their smartphones and tablets in the home. Increasingly, these devices are being used as companions to the TV experience.
Market status: Companion devices have four main functions
- Alternative TV screen: Content can be streamed over the Internet, or from the set-top box (STB) or the connected TV to a companion device. The latter requires at least two TV turners – one for the TV and the second for the tablet. For linear TV to be viewed on tablets and smartphones, it must be transcoded to MPEG-4.
- Control: Both TV manufacturers and pay-TV providers have launched apps that enable tablets to control the connected TV or STB. Social TV: Two problems are associated with social TV services on the TV screen: The TV is not the ideal screen for text-heavy services, and it is a communal, not personal, device. Tablets solve both of these problems.
- Content server: Companion devices can push content to the TV or one another. Apple’s Airplay is the leading service. But rival services – such as Twonky Media and Skifta – are gaining traction.
Technical challenges lay outside the companion device
Many TV sets do not come with the additional tuner required to push TV content to a companion device. Outside of the US – where three TV tuners are common – the STB tends to come with only a single additional tuner, designed to enable two programs to be recorded at once on a DVR. Many STBs cannot transcode video from MPEG-2 – the most common linear- TV video format – to MPEG-4, because they lack the required hardware.
As remote controls, companion devices work well, especially tablets: It is easy to scroll through large swaths of content on the EPG – much quicker than using the traditional physical remote. However, at present the method of control is rather convoluted. Typically the control signal is sent over Wi-Fi, not directly to the TV or STB. Sony and Motorola both offer embedded IR, enabling their tablets to control a wide range of devices regardless of manufacturer.
