News Paul Gray,
News Paul Gray, DisplaySearch’s Director of European TV Research A clearer picture of European TV DisplaySearch conference tracks the dominant trends DisplaySearch’s inaugural IFA conference — Europe TV: Driving, Or Driven By, The Global Supply Chain? — examined Europe’s TV ecosystem and the market’s trends, opportunities and challenges. Here, Paul Gray, DisplaySearch’s Director of European TV Research sets out the conference’s key findings Shipment of TV sets continues to thrive worldwide. The developed world has completed its conversion to flat-panel technologies. The market is therefore being driven by consumers in the emerging markets, such as Brazil and China, who are increasingly choosing LCD and plasma instead of CRT sets. Developed countries continue to show strong growth, with the move to digital broadcasting and terrestrial HD being key reasons for consumers to replace ageing sets. However, as these consumers are more pricesensitive (they have lower disposable incomes), these extra sets will contribute less revenue. Meanwhile, the developed markets continue to be intensely competitive, and this means that global revenues from TV sales are likely to peak in 2010-2011. Hans Carpels, President of Euronics, reminded the audience that there is still relatively low penetration of flat-panel TVs – around 32% of European households have one, compared to the over 80% who own a mobile phone and 60%- plus who have a digital camera. There are therefore still plenty of opportunities for retailers and set-makers. However, the TV market had changed in recent years. The mid market has shrunk from around a third in 1990 to 10%-20% today. Entrylevel products, or ‘white label’ store brands, now account for around half the market — a point expanded on by Richard Bass, Senior Manager of Display Products at Hitachi Media Group, who said that 40% of TV sales were now achieved through short-term promotion. Consumer habits are now driven by deals, with TVs now in many cases being impulse purchases. As a result, average prices for flat TVs in Europe have fallen to 14% of the 2004 prices. Euronics expects strong consumer interest in new features: 40% of the respondents in a recent survey expressed strong interest in their TV being connected to the Internet, with less than 10% expressing no interest in Internet on TV. However, many of these features require investment by set-makers and retailers in good pointof-sale demonstrations and consumer education. Furthermore, 3D in particular is hard to demonstrate at retail as glasses have problems when many sets are running together. David Hsieh, Vice-President of the Greater China Market at DisplaySearch, explained how the manufacturing structure of TV companies is changing: in 2009, around 25% of the LCD TVs made worldwide were produced by contract manufacturers. This is set to grow to 30%- 35% in 2010 and to around 40% in 2011. Meanwhile, the business is shifting its centre. The nature of TV assembly is changing, with TV set-makers moving away from buying an LCD module (with backlight and driver electronics) towards sourcing the LC cell (the sheets of glass containing LC fluid inside) and building these into sets. Dr Sungyoul Lee is the Global Electronics Industry leader for IBM Global Business Services, and has advised several toptier TV companies on redesigning their logistics and manufacturing systems. He identified three key challenges for CE companies. The first is accelerated globalization. Products nowadays have to launch concurrently around the world, and new aggressive competitors are appearing from the emerging markets (such as Chinese TV setmakers). The second challenge is convergence, which is blurring the boundaries between the CE industry, telecos, the media and ISPs. And the third is higher consumer expectations and the need for a direct relationship 70000 60000 50000 40000 30000 20000 Flat Panel CRT DisplaySearch European TV forecast 10000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 4
News with end-users via service or content transactions (by an app store, for example). Leading set-makers are beginning to build servicedelivery platforms to support their connected TVs and similar products. Apart from delivering appstore services, video and information, these platforms also allow the set-maker to track their customers usage patterns, which could result in a virtuous cycle, whereby product and service offerings are improved and new product ideas developed. Thus the relationship with the consumer moves from ‘fire and forget’ towards an ongoing association along the telco or pay-TV-provider model. Too often companies react to these challenges by implementing a global supply chain – but fail to change their governance model away from a regional approach. Global supply chains require global control. Petra Ebner, Elcoteq’s Director of Pre-Sales and Product Marketing, explained how contract manufacturing can assist in rapid launches worldwide, and how the sector is now undertaking warranty and end-of-life tasks in addition to conventional manufacturing. Local operating experience also means that providing services, such as help with import duty issues, is also part of the value-add. DisplaySearch introduced its connected-TV forecast, which revealed that almost 40 million connected TVs are expected to be shipped in Western Europe in 2014. The capability looks likely to become a market norm in the UK, Germany, France and Scandinavia. A connected TV is not the same as a PC with a tuner, remarked Klaus Merkel, Senior Engineer of Platforms for Broadcast Services at IRT. A connected TV would not replace the PC – it is rather about using the Internet to enhance the TV experience. However, the limited capabilities of TV hardware and, in particular, the user interface requires web content to be extensively re-designed for TV applications, both technically and conceptually. However, a lack of standards requires services to be modified for each device. HbbTV (Hybrid Broadcast Broadband TV) is an open and available ETSI standard that is not based on the assumption of any gatekeeper position. It allows different business models – both free and pay – for both broadcasters and web services. Ninety per cent of the German broadcast market has now opted to support the platform, and France will launch HbbTV in 2011. LOVEFiLM – nicknamed the ‘Netflix of Europe’ – is evolving from a postal DVD Internet rental business into streaming either by subscription or VOD payments. Jim Buckle, the company’s Chief Financial Officer, demonstrated that consumers are attracted to connected T V. He reported that the LOVEFiLM customers who use the company’s connected-TV streaming service watch 50% more than its PCstreaming subscribers. Intel is well known for its involvement in Google TV. Wilfred Martis, General Manager for Consumer Retail Electronics at Intel, defined a smart TV as one that offers unrestricted access to the entire Internet; that is extensible via applications and services; and that provides an intuitive, high-quality user experience. However, it also needs to be smart enough to answer differing consumer needs: being a conventional TV when consumers want to flop down and be passively entertained, but being able to perform high-level functions when necessary. The ecosystem of components for smart TV is growing. There is now a choice of operating system, and middleware both for conventional CE functions and new applications. The case for a smart TV is clear: 58% of UK viewers have already used the BBC iPlayer for catch-up TV, while 47% of Germans would like to have Internet functions on their TV. However, this is the start of a major technology transition and, historically, such transitions happen fast, with market dominance changing in three to five years in 3-5 years, Martis observed. Such a transition could disrupt the TV business model, but it would not kill it altogether, he added. Advertising, for example, would still remain a critical factor. For Sky Deutschland, there remains a concern regarding 3D and how well it will translate from its early success in cinema to home viewing. Stephan Heimbecher, the broadcaster’s Head of Innovation and Standards, suggested there are several differences: it might, for example, feel a little odd to wear 3D glasses at home and screen sizes also tend to be much smaller. Moreover, the viewer feels more part of the action in a movie Shipment: Thousand Units 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 theatre, whereas there can be a slight puppet-theatre effect in the home. Lastly, the lighting and viewing conditions are ideal in cinemas and typically less ideal at home. Sky has just announced that it is to launch a dedicated 3D channel, believing that mixing 2D and 3D content on the same feed could cause customer confusion. The lack of existing 3D content, meanwhile, requires Sky to invest and build a capability to create its own (live) 3D productions. Finally, the launch of a dedicated 24/7 3D channel will enable 3D content to be sampled at any time, which is invaluable to retailers. While 3D is the logical next step in Sky Germany’s HD offer, it should be remembered that it took five years to establish HD. It will inevitably take several years to establish 3D. The challenges include building content libraries, gaining broadcasting experience and acquiring satellite transponder capacity, as Astra 19.2oE is fully used. Western Europe Eastern Europe Sky also noted that 3D requires a totally different way of making programmes, such as different camera angles to cover football. David Wood, Deputy Director of the European Broadcasting Union, noted that 3D pictures need closeby objects – a “camera up the nose”, in other words. He added that largecanvas 3D shots look either 2D-flat or like miniatures and suggested that it is perhaps not really suited to field sports, which are less immersive than, say, boxing. Meanwhile, there is as yet little understanding of what 2D production grammar will help 2D to 3D conversion. At this point in time, 3D has yet to find its place in production terms: too much depth dimension and it becomes just a gimmick; too little and it’s just 2D. While some of the early 3D movies have been little more than fairground shows, the potential exists for 3D to become an art form – but where between these two extremes it will end up is yet to be seen. Connected TV Forecast 2008 2009 2010 2011 2012 2013 2014 www.ifa-international.org IFA International • Monday, 6 th September 2010 5
