Special Feature by Patrick Avenell
It was called a “new species of television”. The promotional poster showed a tropical bird with plumage of aquamarine, blood orange and teal and wings of translucent azure pollinating an ocean blue orchard. With LED backlighting and a contrast ratio up to 3,000,000:1, this television transported this vivid, colourful aviary into the family home.
“Samsung LED,” the advertisement said, “is the future of television”.
That was 6 April 2009.
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Part of Samsung's creative for its first range of LED TVs.
The future didn’t take long to arrive, nor did consumers show hesitation. Almost 85,000 LED TVs were sold in the first 12 months after Samsung’s first batch of LED LCD TVs arrived in store. The average sales price in that period was $3,255; injecting $270 million into the consumer electronics industry.
That figure was dwarfed in the next 12 months. With more suppliers in the market, improvements in manufacturing scale and good ol’ fashioned discounting, the ASP halved and units quintupled, resulting in $750 million worth of sales in LED TVs for year to February 2011.
While there was volume in the new technology, however, there was an ever-diminishing amount of value. The big technology innovation expected to drive consumers back up to the premium products was a squib. Now considered one of the great disasters of consumer electronics marketing, 3D TVs were unable to reverse the ASP declines.
There has been constant mutterings of impending OLED releases — Sony had lofty plans to release the new technology for the 2010 FIFA World Cup — but an actual OLED panel is yet to reach a retailer’s shop floor.
It seems strange that a technology described as “the future” in 2009 could feel so commonplace just four years later. Having made the CCFL LCD market redundant and reduced plasma to a niche category with cheaper prices, LED TVs is now the dominant technology in a diminishing category in desperate need of refreshment.
“Following devastating declines in 2012, the rate of decline for Consumer Electronics has continued to slow throughout the past three quarters: -28 per cent in Quarter 3, 2012, -19 per cent in Quarter 4 and -12 per cent in Quarter 1, 2013,” said Gwenno Hopkin from GfK Retail and Technology.
Although the TV market hasn’t grown, its decline has slowed.
“Despite an ongoing decline in total TV units sold, it is the high-end of the TV segment that is to thank for the sector’s slowdown in value decline,” continued Hopkin. “The TV segment has experienced an overall average price increase of 17 per cent due to a rapid increase in sales of 55-inch-plus models.
“Consumers continue to receive increased value for money, however, with the average price of a 55-inch LED Full HD 3D Smart TV down 16 per cent on Quarter 1, 2012.”
So while the value of the market is not increasing, there has been a long-awaited uplift in ASPs.
GfK had been warning the industry about the dangers of volume selling since the first drastic declines in 2010. At a Narta conference in Croatia, Hopkin’s boss, GfK managing director Gary Lamb said, “Volumes in TV are forging ahead, but the prices are in freefall,” and because TV sales equated to more than the rest of the electronics categories combined, this resulted in a “completely unsustainable market position”.
Although Kay Spencer the MD of Narta, a buying group including JB Hi-Fi, Bing Lee and Betta Home Living, called Lamb’s presentation, “The biggest wake-up call” for the industry, it has taken a further three years for the trend to reverse.
Three nascent advancements are driving the change: enormous screens, Smart functionality and Ultra HD.
According to research quoted by LG general manager, marketing, Lambro Skropidis, 78 per cent of TV purchasers list screen size as an important attribute when choosing a TV — more than any other option — resulting in a 56 per cent increase in 55-inch-plus panel sales. This large size sector of the market is growing steadily, from 12 per cent of all TV purchases in 2010 to 23 per cent in 2011 and now around 35 per cent.
The novelty of connecting your TV to the internet to play a naff game or check the weather is being replaced with comprehensive and attractive Smart TV content. Catch-up TV, Foxtel, live sport, music and video-on-demand, internet radio and web browsing are now being offered across the brand spectrum — and it is beginning to resonate.
Sony Australia group manager Paul Colley said the number of Smart Bravia TVs being connected to the internet has risen from 17 per cent in 2010 to over 70 per cent in early 2013, while GfK ConsumerScope data shows that Smart TV purchasing is quickly progressing from default acquisition to active adoption.
“The industry has certainly promoted the Smart TV message very actively, with concept awareness rising from 28 per cent in 2H 2010 to an impressive 82 per cent two years later,” said Dr Morten Boyer, who heads up that department at GfK.
Ultra HD is still something of an unknown quantity. Sony, LG and Samsung have all unveiled LED panels with 3,840 x 2,160 resolution (also known as ‘4K’) in sizes ranging from 55-inch to 85-inch. All have upscaling capabilities and Sony has begun re-releasing popular film titles that have been specifically remastered in 4K to play on Blu-ray player.
The TV industry should remain cautious in how they promote Ultra HD, however, according to DisplaySearch director Paul Gray.
“There has been a lot of discussion about 4K and what the industry wants to do next,” he said. “One of the big questions on this is how quickly people move because while you can make 4K panels, there are no standards for 4K broadcast…so the risk is consumers are, if you like, tricked into buying 4K displays [that don’t have content], so the industry has to hold itself back and hopefully not poison the water by moving too fast.
“Consumers are becoming interested — 4K is amazing if it is done really well — and the industry has to have the patience to do it really well rather than just rush in with unfinished products.”
Gray believes that Ultra HD is the future of LED TV but that future is not quite ready. Speaking from his global perspective, he said the industry has other challenges it must first overcome.
“One of the things that people don’t realise is that the global TV business shrunk slightly last year and the futures of growth are really shifting to emerging markets,” he said. “Developed markets have gone through that switch to digital or are very nearly at the end of it, so new sources for growth to business have to be found.
“For developed markets, it is shifting from selling more TVs to selling better TVs and encouraging consumers to spend a little bit more by offering new features, such as 4K and, above all, services from the internet.”
Australia’s switch from analogue to digital is reaching conclusion. Within six months, analogue signals will have ceased nationwide and digital will take over altogether. Senator Stephen Conroy, the minister formerly responsible for the switch-over during the Gillard prime ministership, had been an active promoter of the Switch:
“We don't want anyone to be left behind,” he said, shortly before resigning his position. “With only months left until analogue TV signals are switched off in Remote Central and Eastern Australia, now is the time to ensure you, your family and your friends are digital ready.”
When the switch-off occurs on 10 December 2013, whatever TV sales retailers would gain as a result will slow to a crawl before stopping. In post-analogue overseas markets, Gray has observed that the industry must be ready with new ideas to replace these switch-over sales.
“TV brands are having to learn and understand how consumers watch things and how they consume content and how they mix tablets and smartphones. In different countries, people live their lives very differently, and this is a huge challenge for TV brands; to move into the future and understand consumers.”
The longterm solution may be OLED, provided it is marketed and retailed responsibly, but this is a long way off, according to Gartner TV analyst Paul Donovan. He said that while Ultra HD will start taking serious share in the 2010s, it might not be till next decade that OLED is commonplace.
“I think Ultra HD in LCD will probably start to make some significant effect on the larger size LCD panels by 2015 or 16 when I see retail prices falling significantly,” Donovan said. “For example, a major TV manufacturer has told me they expect retail prices of around US $2,000 for a 55-inch Ultra HD LCD TV
.
“For OLEDs, I think they will take a little longer; perhaps another 4-to-5 years before they start to make significant inroads on LCD. This will be because prices and production yields will remain relatively high as the market transitions to Ultra HD LCD panels first as costs here will fall quicker.
“This is okay for the TV manufacturers. OLED TVs will remain a premium product with some significant profits for them: something they will try to sustain as long as they can while they reduce production costs for OLED TVs.”
The view among Australian TV suppliers is mixed.
Sharp national marketing manager Mark Beard is counting on the size trend continuing through what he called a “challenging” 2013.
“Big Screen TV (independent of technology) will be the key focus of the consumer. As we saw with LCD and Plasma – the consumer doesn’t always get caught up in the technology, they just want a great picture,” Beard said. “This will be the case in the future – size will be the driver and the technology a secondary consideration. Technologies like OLED and 4K will make further inroads.”
Panasonic, which hasn’t publicised an Ultra HD roadmap and only has LED models up to 55 inches, is focusing on Smart features.
“It’s clear that connectivity of multiple devices within the home is growing and evolving,” said product marketing manager Maetham Roomi. “Telsyte research suggests 2.4 million tablets were sold last year and predicts the market will grow by more than 50 per cent this year — interaction with smartphones and tablets has never been so important and this trend is expected to increase through 2013.
“The TV market is changing and adapting to meet the needs of increasingly tech savvy consumers, with year-on-year improvements in image quality and Smart features a must-have in today’s competitive market.
“Internet-connected TVs are now present in 18 per cent of homes, with 45 per cent of Australians watching some video online via a PC or laptop each month, on average. Consumers are also increasingly using their TV screen for other purposes: gaming, viewing DVDs, online browsing or playback.”
It’s all about 4K at TCL. Intriguingly for a Chinese brand, national sales manager Nick Redmond said he is determined to lift ASPs through trade education on the benefits of Ultra HD
“The major issue facing the TV industry for a decade now is putting value back into the market,” Redmond said. “It’s an opportunity that comes around and is spoken about every time a new technology is launched, and we are there again with 4K.
“The main difference here is that if we get the demonstration, education and training right, this technology can really address the price and profit erosion we have all experienced over the last two years.”
Redmond said the lessons from the failed 3D launch must be learnt and acted on to ensure the outcome is different.
“The very positive side of 4K is its ability to hold its average selling price, even during the aggressive pre-Christmas promotional period. The market is also more aware of how they should market this technology, having being burned by 3D TV, which hasn’t captured the attention of the broader public as had been hoped.
“3D technology was going to be the price saviour but it wasn’t demonstrated well, it wasn’t explained well, the technology was introduced haphazardly and it was homogenised very quickly.”
At the other end of the spectrum from the Chinese challenger brands is Korean powerhouse Samsung, marketer of the most expensive general release TV in the country. The 85-inch S9 combines all the features considered a must for increasing ASPs: Ultra HD, enormous screen size and broad and diverse Smart TV options.
At RRP $40,000, however, the S9 is not a TV for everyone. It has been encouraging, therefore, to see suppliers target specific consumer needs with high end panels are more affordable, though still premium, price points.
Sharp has its ‘ginormous’ range of 70-inch (RRP $4,799), 80-inch (RRP $10,999) and 90-inch (RRP $19,999) LED TVs; LG Electronics has a broad range of LEDs with Smart functionality from RRP $979 for a 32-inch model up to RRP $4,899 for a 60-inch panel with all the bells and whistles; and Sony has unveiled its smaller-size Ultra HD Bravias, at RRP $5,999 (55-inch) and RRP $8,999 (65-inch).