At CES Asia, there was an interesting panel discussion about the future of television that featured four key Chinese players. Their vision is quite different from what we are accustomed to hearing at US-based events.
On the panel were Oriental Pearl, Hisense, PPTV and LeTV. Hisense and LeTV are well known TV makers with Hisense being the number one Chinese brand and #3 TV maker worldwide. LeTV focuses more on the high end. We did not know who the other two companies were, so we visited them on the show floor afterwards to learn more and try to put their comments in context.
Both companies are essentially content providers but they are morphing into something else. The analogy in the US might be if Amazon started selling its own branded TVs or if they partnered with a company like Vizio to offer really good deals on bundles of content, TVs and shopping. (This echoes the comments about broad interests owned by Chinese players from the IHS event in London a couple of weeks ago [IHS Analysts Look at VR & Media Trends] – Man. Ed.)
PPTV, for example, started with an app to watch movies and sports using existing cellular and Internet infrastructure. Now, it is selling its own 4K 55” TV as well as a 3D smartphone. Oriental Pearl started as a content aggregator buying movie, episodic and sport content and offering it via cellular and IT infrastructure. Now it is selling PlayStation and Xbox consoles to view its content, it was showcasing a VR platform in its booth and selling a range of TV content. The company has a subscription model to access content with prices ranging from 100 to 300 RMB (~$12-$50) per month. It has a strong focus on sports content.
Hisense has a more traditional view of the future of TV, perhaps, as they talked about the TV set still being the most important screen in the home and the hub of content management. One of the biggest hurdles is the remote control, which is still too complicated especially as content sources proliferate.
LeTV agreed that control of content needs improvement and said their voice recognition system works well as it also has some intelligence built in. And, it is important to build a horizontal ecosystem that allows content and data sharing across a consumer’s devices more easily. Their products feature high end components, but they offer it at nearly cost with income derived from selling content services, including exclusive content, on their platforms for 490 RMB (~$160) per year. They also generate income from advertising on these channels. This is a new twist on the razor blade business model and is kind of like Netflix or Amazon selling you a great TV at a great price so you will subscribe to their content platforms – but with advertising too.
Oriental PearlTV noted that the old broadcast model is changing rapidly. With IPTV and other platform, distribution options are multiplying, but content is what will drive success. They currently have 22M users and pioneered the idea of a subscription service for IPTV. They offer a range of exclusive content that is attractive to consumers
Hisense also has some sort of subscription service and says they now have 18M users – still well below the 80M members that Netflix has, but they will get there.
But attitudes toward content will have to change, noted PPTV. They said that they think 99% of Chinese consumers believe that Internet-based content should be free, yet they are willing to pay to go to a movie in the cinema (and the box office is up in China).
The other component that is being widely integrated into these new models is shopping. Each is finding a way to take a piece of the action when consumers shop via their connected TV.
This panel was a bit of an eye opener that things are quite different in China – and that some US players may want to take a look to see if such ideas might play here in the US as well. – CC
