Connectivity Won’t Save Premium TV Market, Says DisplaySearch Analyst

The standard six- to eight-year lifecycle of a TV is on a collision course with the two-year lifecycle of the smartphone, NPD DisplaySearch analyst Paul Gray said Monday. Even as prices of TVs come down, consumers aren’t likely to upgrade TVs to be current with the latest connected TV streaming technologies, Gray told Consumer Electronics Daily, and the premium value the industry hoped to attach to the connected TV isn’t likely to carry forth. As consumers live with their connected TVs and smartphones, they'll find after a couple of years “that their connected TVs stop doing things or can’t do any new things,” Gray said. The gap between what’s available on TVs and what consumers can do on their mobile devices will broaden, Gray said. “And then people make a half step and buy an updated set-top box or use something else.”

Current half-step solutions to keep TVs current include set-top boxes or MHL (Mobile High-Definition Link) USB solutions that don’t require an additional remote control and are fed power by the host TV, Gray said. He cited Samsung’s Evolution upgrade kit launched with high-end TVs in the 2013 lineup (CED March 21 p1). Due next month, it will enable consumers who bought a Samsung Smart TV-based set last year to upgrade to new software in 2013. The module, which plugs into the back of a TV, is good through 2016, while requiring a $299 renewal each year to remain current. The module bypasses the processing in the TV, which “shows just how hard it is to modernize even recent hardware,” Gray said.

After looking at the Samsung service documentation for the sets and the module, Gray said, Samsung has done a “thorough job” with the upgrade slot, but success will depend on perceived value in a geographical region. “The U.S. is particularly price-sensitive,” he said, and he thinks the $299 module was overpriced when consumers could get multiple Apple TV and Roku boxes for the same amount of money. “And how much is it worth to upgrade the apps from one year to the next?” he said. “You may as well skip the upgrade and buy yourself another tablet."

The current manufacturer strategy to use connectivity as a premium TV feature “is a huge risk,” Gray said. “If you've got a connected TV that finds itself all at sea within three years compared with all the other devices out there, why would you continue to use this and value it?” he said. TV manufacturers shouldn’t try to make their TVs “a 46-inch iPhone,” he said. Instead, he advised, “worry about the things that a TV should be doing well.” That includes being a docking station for video and being able to fill the room with streaming video from Netflix and other sources on a big screen, using the tablet or smartphone as the content source.

Adopting open standards for “throwing” video wirelessly from a mobile device to a TV is crucial in the next phase of connected TV, Gray said. He referred to Miracast video mirroring that’s been adopted by LG, Roku, Panasonic, Sony and Samsung, among others. “My advice to other brands is to get into Miracast quickly because it’s such an obvious thing that the TV should be capable of doing,” Gray said. The other option is DIAL TV, promoted by Google and Netflix. “Both of them are important,” he said, “and both have parts to play” in the connected TV world.

With the connectivity feature losing value faster than the TV itself, the “billion dollar question” for the TV industry is “where is the lasting value in TV?” Gray said. Gray sees the lasting value in the shared viewing experience. Size sells, he noted, and people will pay more for larger TVs. But that depends on region, too. People living in Hong Kong and Tokyo are not going to buy an 80-inch TV because of limited real estate, he said. “The joke is that nobody in Hong Kong needs a remote control,” he said.

The moment of “fear” is approaching where the flat-panel market has plateaued and “what is the new growth driver?” he said in response to a question about the future of premium TV. “It’s very hard to see anything that’s as compelling as flat panel has been for the past 10 years,” he said. “That is a dilemma,” he said. For the meantime, and before a 4K infrastructure is in place to drive growth, TV makers are focusing on design and trying to make TV “a piece of furniture,” he said. “If you love a design you'll pay a bit more for it,” he said.

Another issue is whether the industry can maintain pricing of new technologies and “avoid suicidal price cutting,” Gray said. “If you have an industry that cuts price faster than it cuts costs, then it will end in tears,” he said. The TV industry isn’t “one feature away from the industry roaring away again,” he said. “You have to start running your companies differently.”