[Ten thousand words of heavy and in-depth] The strange current situation of the smart TV industry witnessed in the past ten years

Just like newspapers are leaving us, the TV industry seems to have reached its most dangerous moment. The opening rate is declining year by year, young people are moving away from large-screen TVs at an accelerated pace, and TVs are gradually retreating from living room entertainment centers to home decoration. However, what is even more strange is that whether it is from sales data, stock data or market growth, the TV industry is a "prosperous" scene.

However, one fact has exposed the "Emperor's New Clothes" - the advertising value of large-screen TVs is seriously underestimated, even worse than the advertising in elevators.

According to data from Aowei Interactive Entertainment, by the end of 2019, China had 270 million smart TVs, covering 210 million households and 630 million users. However, in this market with hundreds of millions of users, the advertising market size is only tens of billions.

The data speaks.

According to the latest data from the State Administration for Market Regulation, the overall size of my country's (i.e. mainland China) advertising market reached 867.428 billion yuan in 2019, an increase of 8.54% over the previous year.

The 2019 National Radio and Television Industry Statistical Bulletin released by the State Administration of Radio and Television shows that in 2019, the national advertising revenue was 207.527 billion yuan, of which traditional radio and television advertising revenue was 99.885 billion yuan and TV shopping channel revenue was 21.047 billion yuan;

In 2016, Hunan Satellite TV’s advertising revenue was 11 billion yuan, but in 2019, its advertising revenue decreased to less than 9 billion yuan.

In other words, the Internet TV advertising market, which covers 630 million users, accounts for about 4.8% of the overall advertising market, about one-tenth of the traditional radio and television advertising revenue that is already on the decline, and only half of the TV shopping market revenue, which is about the same as the advertising revenue of a local TV station, Hunan Satellite TV.

I have to say, it's quite shabby indeed.

So, why is he holding the golden bowl but looking like he is begging for alms? What is the problem?

The Paradox of Smart TV

The bottom line is that smart TVs are becoming increasingly out of touch with the times.

Data released by CSM shows that the average daily usage time of smart TVs reached 164 minutes in 2012, but by 2019, this figure was only 117 minutes.

What does this mean? After seven years of transformation, smart TVs have made great progress in content, functions, and performance. However, users have been fleeing this platform.

Although more than 40 million smart TVs are sold every year, you can tell without me how many of them are bought home and placed in the living room as decorations.

Smart TV manufacturers are keen on price wars. While fighting, they also complain about the low profit margin of smart TV hardware, which has now dropped to less than 2%, and many brands are losing money to gain publicity.

For users, when TVs become decorations, what are the dimensions of resolution, chips, and color gamut to consider? The cheaper the better.

I even have reason to suspect that if smart TV manufacturers can launch a 1:1 simulated smart TV model, it may be more popular in the market and reap a much higher hardware profit margin than it is now. Anyway, no one will watch it, so just make it a decoration.

To put it bluntly, a smart TV is nothing more than an Android phone with a larger screen, but with worse performance, smaller capacity, and more awkward operation.

Speaking of this, does it sound familiar to you?

When the first iPad was released in 2010, it faced similar accusations.

If you Google the keyword iPad and set the time to January 2010, you can see overwhelming criticism online.

The famous technology blog Gizmodo even listed eight major shortcomings of the iPad, including "no physical keyboard" and "no Flash", and believed that the iPad had no chance of winning against netbooks whose prices were falling day by day.

The discussions among netizens about the iPad are basically about "What's the difference between this and the iPhone?" and "Isn't this just a large iPod touch?"

Of course, we all had the privilege of witnessing how successful the iPad was in the end and how it created a whole new product category.

How did Apple do it? Looking back at the first iPad launch, the answer lies in Steve Jobs’ speech.

At the beginning, Steve Jobs severely dissed netbooks, saying that netbooks have no advantages over regular laptops except that they are cheap.

There is obviously an ecological niche for a brand new product between smartphones and laptops. Mr. Joe believes that this product should be more comfortable and convenient than notebooks and mobile phones in terms of browsing the web, emails, viewing photos, videos, listening to music, and reading e-books and magazines.

Of course, we all know today that although the iPad had some deviations in its later content production strategy, as the saying goes, "productivity before purchase, iQiyi after purchase", the iPad has its own unique charm in content consumption.

Why didn't the iPad become a vase? Because the iPad was never successful simply because of its good hardware, large screen, and high resolution. The iPad quickly gained market share because Apple had already clearly arranged the use scenarios of the iPad. For many netbook users, their use scenarios have been fully covered by the iPad.

Why do smart TVs become vases? You can only think of watching movies and TV series.

Is it true that watching movies and TV series on smart TVs is much better than on smartphones? I'm afraid not.

After turning on the TV for a few minutes, you have to watch a startup advertisement. The video platform membership is not compatible with the mobile app. You also need to purchase a TV version membership separately. When you cast the screen to the TV, it says "copyright is restricted", @#￥%……&*!

The fact is, even if smart TVs are as convenient as mobile phones for watching movies and TV series, many people will continue to use their mobile phones and iPads at home out of inertia. You know, "laziness" is really engraved in human DNA. Many times, I clearly bought a 4K Blu-ray disc of a movie, but in the end I still chose to watch the so-called "Blu-ray quality" on IQiyi on my mobile phone.

Let's talk about something even more desperate. Even if every smart TV in China is an ultra-high-definition 8K OLED TV, supports Dolby Vision, Dolby Atmos, MEMC dynamic compensation, and has professional picture quality optimization algorithms, iQiyi, Youku and Tencent Video mobile members can also provide TV users with ultra-high-definition content resources for free. Isn't this a dreamy start? Can smart TV manufacturers make money from services like this?

The answer is probably still no.

Even if the experience is better than that of smartphones, it is useless because the value of long videos is not high enough. A membership fee of 100 or 80 yuan a year can allow users to enjoy the complete content library, and then the user becomes a pure negative asset of the platform. A movie is 90 minutes long, and the platform cannot make any profit from users, but can only continue to spend bandwidth costs.

This is the same on mobile and TV platforms. In the process of consuming long video content, there is no longer any valuable interaction, and there is only a one-way flow of content between users and devices. Watching a movie is a process that emphasizes immersion, and any interaction that attempts to forcibly break the immersion will instead reduce the user experience.

iQiyi, Youku and Tencent Video are suffering from losses of hundreds of billions every year, so it is even more difficult for television stations to make profits from long videos.

Smart TV, should it be “smart” or “TV”?

So, does the smart TV industry itself have no value?

How is that possible? Even if there are 270 million juicers, there should be several valuable industrial chains derived from them. After all, these are 270 million intelligent systems that can be connected to the Internet and output content.

Although China sold 370 million mobile phones in 2019, it only sold 47.72 million TVs. However, it should be noted that according to Jiguang Big Data, more than half of Chinese mobile phone users change their phones less than two years later, with an average replacement frequency of about 20 months. Mobile phones are for personal use and have privacy attributes.

The average usage time of TVs in China is 7 years, and each TV covers an average of 2.48 users. From the perspective of number of users/service life, it is not inferior to smartphones.

Personally, I think the biggest problem facing smart TV manufacturers is that they have not yet gotten rid of the traditional industrial thinking of the past.

Looking at the product launches in recent years, where did manufacturers focus their attention and space?

4K, 8K, OLED, quantum dots, MEMC, zone dynamic light control, picture quality engine, Dolby Vision, HDR, HDMI 2.1, low input delay, etc. These are all frequent guests at press conferences. If a press conference fails to invite four or five of them, the host will feel ashamed.

Did you notice? These are all display technologies.

You said: "Isn't this nonsense! At the TV press conference, what else should they brag about if not the display technology?"

However, these are all used to describe the screen display effects. Isn't this still treating the TV as a traditional screen?

If you regard yourself as a traditional manufacturer, then please increase the profit margin of the hardware. If you dare to sell products at a price with a net profit margin of 2%, aren't you first considering yourself an Internet company and hoping to make a profit from services?

Of course, the smart TV conference also has reserved programs, introducing content layout, UI design, and inserting advertising and marketing content in the video content in a thousand and one ways; of course, there is also the unavoidable IoT, smart home layout, and AI functions. Without a voice assistant or far-field voice, you would be embarrassed to say hello to people.

However, AI is still a tool. As mentioned above in terms of content scenarios, the value that can be mined is currently limited.

As for the most important core configuration of smart devices, everyone basically just mentioned it briefly.

The Xiaomi TV Master Edition 65-inch, priced at 12,999 yuan, is equipped with an MTK 9650 processor and has an AnTuTu score of 63,000, which is roughly equivalent to the performance of the iPhone 6 released six years ago. The storage combination is only 3GB+32GB. To put it bluntly, even Xiaomi knows that there are really not many applications to install on your smart TV, so what's the problem with inferior hardware?

It is true that display technology is also constantly sinking. Nowadays, smart TVs that cost only one thousand yuan can also have MEMC, and OLED TVs have also dropped to the ten thousand yuan range. However, if you pay a little attention, it is not difficult to notice that the popularity of smart TVs on the Internet is shockingly low.

For a large item with annual domestic sales of over 40 million units and an average price of nearly RMB 3,000, there are very few articles and discussions on the Internet about purchasing TVs. Most of the time, consumers pay directly for the order and then go home and wait for delivery.

This is not difficult to understand. I just watched a man tearing the Japanese apart with his bare hands and a son-in-law retaliating. What are you telling me about MEMC and OLED?

Ultimately, TV manufacturers have not integrated technology and functions into usage scenarios, and have not found the sweet point where technology and humanities meet.

Apple's press conferences rarely introduce technology in great detail, but instead focus on showing the new usage scenarios and better user experience brought by new technologies. The introduction of new technologies is not important, the demos that follow are the essence.

In fact, the enthusiasm for technology and parameters is the laziness of the home appliance manufacturers. They are unwilling to think about the needs of users, but simply display the technologies of the industrial chain. To borrow the words of Luo Yonghao, the former CEO of Apple's parent company: "We are all solution integrators, and the so-called black technology is all suppliers. Why are you pretending to be a grandson?"

The words may be rough, but the truth is there. Judging from the actual market reaction, the market response of these so-called high-tech products has always been mediocre.

Wu Jiali, head of operations of the black appliance business department of JD.com's home appliance division, said at the Living Room Economy Online Summit hosted by Western Securities: "JD.com's big data shows that categories other than TVs can often use some marketing methods to use new ideas and technologies to hype up new sales concepts and significantly increase short-term sales. But for TVs, even if new technologies emerge as the backbone of technology, they do not bring new user needs. In other words, new TV technologies do not take into account the immediate needs of users."

Simply put, the technologies and concepts launched by TV manufacturers cannot attract users to pay for them, and all the passion in the press conferences and press releases has become embarrassing self-congratulations.

A media outlet once held a poll on smart TV products, and the results showed that the products that received the most votes were neither those that improved performance nor those that added any picture quality technology. Users would rather lower the configuration or even spend more money than see startup ads. The disconnect between manufacturers and users has reached this point.

This is also why when Huawei launched the Smart Screen, it announced that it would never add power on and off advertisements, which won unanimous praise from the entire network and even became a public relations crisis for a certain factory that is keen on advertising.

In fact, smart TVs and smartphones, both of which are based on Android, have a lot in common. The smartphone market has also been mired in price wars over product homogeneity because of a failure to grasp the pulse of consumer demand.

Ultimately, the mobile phone industry stepped out of the shadows not by the emergence of any new technology, but by providing vertically segmented mobile phone products based on the needs of different groups of people.

For price-sensitive people, there are 100-yuan and 1,000-yuan phones that are the sales pillars; for people who are not price-sensitive, there are 10,000-yuan flagship models; for young players who like games, there are gaming phones that emphasize performance and heat dissipation design; for young women who like selfies, there are selfie phones equipped with AI beauty and high-quality front lenses; for users who like to take pictures of scenery, there are camera phones equipped with ultra-wide-angle, ultra-telephoto and night shooting modes.

However, Apple did not name the iPhone X an "OLED phone", Sony did not call the Xperia 1 a "4K phone", and Xiaomi did not define any of its phones as an "AI voice phone".

But smart TVs like to classify themselves this way. Smart TVs like to promote their "TV" attributes, so it's no wonder that people don't think they are "smart".

Under the epidemic, education becomes a new scene on TV

Undoubtedly, smart TV manufacturers are in a difficult situation. They have to rely on iQiyi, Youku and Tencent Video in the field of long video content. They can indeed make a little money from advertising, but even in today's market of only tens of billions, startup ads, shutdown ads and pop-up ads have already disgusted most consumers.

This is why all industry conferences related to smart TVs always mention "value", because the industry is really collectively confused about the direction of profitability.

So, focusing on the scenario, in which application scenarios would users prefer large-screen TVs over mobile phones and PCs?

Dai Ke, general manager of JD.com's home appliance and black electronics business department, combined JD.com's big data and gave his answer - education and games.

As the largest, or even the "only" third-party application distribution platform for smart TVs after 2017, Dangbei's data has also added two tracks - karaoke and sports.

The 2020 epidemic has greatly promoted the development of the online education industry. The search and sales data of JD.com’s black electronics also proves that “no classes but no learning” education has become an important usage scenario for smart TVs.

Against the backdrop of the epidemic, educational scenarios even changed the best-selling screen size of smart TVs, causing the most popular size to temporarily drop from 55 inches to 32 inches and 43 inches, and the sales share of TVs below 50 inches suddenly increased to more than 60%.

Dangbei co-founder and president Lei Qi also confirmed this trend. Among the revenue sharing of Dangbei App Store, the proportion coming from education has reached about 10%.

A larger screen can show the teaching content more clearly, is more friendly to children's eyesight, and compared to handing a mobile phone or tablet to a child, a smart TV can make the child more focused, after all, there are fewer distracting contents on TV. 3GB+32GB, right... you know.

Moreover, the online education market is even larger than the entire long video content market. According to data from China Research and Consulting, including K12 education, higher education, adult education and other online education markets, China's distance education market size in 2019 was 414 billion yuan. If the education market opportunities can be seized, it will naturally be a shot in the arm for the smart TV field.

However, we have to talk about another issue in the smart TV market.

While pointing out the value gap in the education market, Dai Ke of JD Black Electronics also set hardware indicators for educational televisions - educational TVs should be equipped with touch screens, eye protection functions and cameras.

Of course, we believe that if it has a lens image recognition function similar to Huawei Smart Screen, the touch screen can be omitted, but eye protection and camera are essential.

However, how many smart TVs are equipped with cameras? Yes, very few.

In terms of smart phones, the culmination of this era was basically achieved in the iPhone 4 era. This 10-year-old phone had hardware configurations such as GPS, gyroscope, magnetoresistive sensor, front and rear lenses, light sensor, distance sensor, acceleration sensor, internal thermometer, etc., and quickly led the entire mobile phone industry to follow suit.

These hardware have promoted many application scenarios of mobile Internet. Navigation applications do not need to worry about which mobile phone does not have a GPS module, and mobile payments do not need to worry about which mobile phone does not have a camera to scan the code. Every mobile phone can be used for online conferencing.

Unfortunately, up to now, there is no such leader in the smart TV industry to set a hardware benchmark for the industry. Smart TVs struggling with a 2% net profit margin are more inclined to "reduce, reduce, reduce", simplify configurations to reduce costs, and reduce the ammunition consumption of price wars.

This means that when efforts are made in the field of education in the future, it will be difficult for existing users of smart TV hardware to obtain an experience above the standard.

Gaming TV (x), cloud gaming TV (√)

If "educational television" is a scene brought about by the times, then the gaming scene is an area that television has always paid attention to.

In the field of television, it is normal for hardware to lead content. In 2005, many trendy people in China used 1080P LCD TVs, but most domestic users could not watch 1080P content until around 2012 or 2013 when smart TV boxes became popular.

But if you are a gamer, you don’t have to wait that long.

In 2005, your 1080P TV will be put to good use - Microsoft Xbox 360 was released; in 2006, Sony PS3 also came out, and it also supported the playback of Blu-ray discs. Domestic PS3 players should be among the first group of people to try out 1080P Blu-ray movies.

The same is true now. In 2019, the domestic ownership of 4K TVs exceeded 70%, but the number of users who have watched true 4K content (not counting low-bit-rate content on video platforms) is extremely small, and most users have no channels to obtain high-frame-rate and HDR video content.

But it’s different for gamers. The PS4 Pro and Xbox One X released in 2016 already support 4K 120 frames HDR quality for some games.

For them, 4K and 8K can bring better picture details, OLED+HDR can bring higher dynamic range of pictures, 120 refresh rate can bring smoother motion performance, low latency within 200ms can bring more accurate input feedback, and HDMI 2.1's 48Gbps bandwidth can carry high-bitrate game pictures. These high-end technologies and configurations are no longer cold parameters, but the performance outlet of their host hardware.

JD.com data shows that the average price of gaming TVs can reach over 6,000 yuan, more than double the average price of ordinary TVs at 2,809 yuan. It is undoubted that launching high-end TV products for gaming scenarios can achieve higher product profitability.

Not only TVs, but also gaming computers, gaming laptops, and gaming phones that target gamers have also achieved huge success in their own fields.

However, there is a but here. According to data released by market research company Niko Partners, there are only 11 million console game players in China, accounting for only 1.6% of the total number of 685 million players in China.

And as mentioned earlier, using smart TVs as screens in this way is still the manufacturing industry's idea of ​​selling hardware, or a one-time sales mentality, and cannot bring more value to the smart TV industry.

You may ask? Smart TVs are also based on Android systems, so can we open up a TV gaming platform?

Congratulations, you have come up with the same idea as many game and TV industry leaders did 5 or 6 years ago. This has already been done, and the ending is not beautiful.

The TV sold by Xiaomi for 12,999 yuan has the same poor performance as the iPhone 6, with only 3GB of RAM and 32GB of flash memory. What can it do?

Lei Qi, co-founder and president of Dangbei, once said in an interview, "There are thousands of games ported from mobile phones on TV, but almost none of them are well adapted. From the perspective of revenue, games account for a very small proportion."

Even if the adaptation is done well, and even native TV games are launched, this road does not seem to be wider. In 2016, Apple launched the AppleTV 5 with greatly improved performance. In order to promote TV games, the remote control even had a touchpad with an excellent feel, but in the end it was nothing more than a failure.

The nose was invented for breathing. If you insist on using it to eat noodles, that's not impossible, but the process will definitely be painful and the scene will inevitably be embarrassing.

However, TV games are not without opportunities. Recently, with Google, Amazon, Microsoft, Tencent, Alibaba, and Huawei all entering the cloud gaming market, and Sony, Nintendo, China Mobile, China Unicom, and China Telecom already having their plans, the concept of streaming games has become increasingly popular.

Simply put, cloud gaming is to put the game calculation process on the cloud, and the local device only needs to perform input and output work. The only performance requirement is video decoding.

Coincidentally, video decoding is the forte of smart TVs.

In other words, you only need to install a small cloud gaming app on your smart TV and connect a Bluetooth controller, then you can play large-scale PC games on the big screen, or connect to your mobile phone and play popular mobile games on the touch screen.

OLED, 4K, HDR, these configurations have all been activated, and cloud gaming also belongs to the large-screen ecosystem. It can be regarded as another content track for smart TVs, which can provide new value heights for large-screen TVs and allow TVs to take advantage of the cloud gaming trend.

Leave the computing to the cloud, leave the picture output to the large-screen TV, and keep the game revenue in the large-screen ecosystem. Cloud gaming is a win-win road for all parties.

Looking at the development of games, there are two development rules for game platforms: 1. The price threshold is getting lower and lower; 2. The way of playing is becoming more and more fool-proof and convenient.

From arcade machines, to PCs, to TV game consoles, to mobile games, this trend is becoming more and more obvious.

Cloud gaming pushes two points to the limit:

Cloud gaming has even eliminated the initial hardware cost threshold. You can use any mobile phone or TV you have, regardless of the configuration. If you happen to have a Bluetooth controller, the cost of trying it out is zero.

Seamless switching between mobile phones and TVs, no need to download or install games, maybe only AR glasses or brain-computer interfaces in the future can make it more convenient. Oh, by the way, AR glasses will probably also use cloud computing technology.

All of this is not just mindless YY. Now there are a series of cloud gaming platforms available on smart TVs, including Tianyi Cloud Games, Migu Quick Games, Wo Changyou, Mushroom Cloud Games, Gray Cloud Games, and Yunqiu Cloud Games, which can provide excellent gaming experience. As long as your home is in a 123-tier city and the network conditions are not particularly poor, you can get a good cloud gaming experience.

Although cloud gaming still faces some problems, such as the immaturity of cloud virtualization technology, the lack of willingness of game copyright holders to move to the cloud, high node deployment, bandwidth and network acceleration costs, and varying user-side network conditions, the industry has generally believed that cloud gaming and cloud computing are the inevitable direction of the future gaming and technology industries.

Even Microsoft, one of the Big Three and the creator of the Xbox hardware platform, is optimistic about cloud gaming and has taken aggressive actions in content copyright acquisition and subscription layout.

According to data released by market research firm Niko Partners, the overall size of the global gaming market reached US$120.1 billion in 2019, and the size of the Chinese gaming market was RMB 230.8 billion.

Embracing cloud gaming will undoubtedly bring a larger and more active market to the smart TV industry. The proposition of "content is king" still holds true, but this "content" is no longer long video content, but cloud gaming "content".

iPod brought online music, iPhone brought applications from the AppStore, and iPad brought videos, e-books, and e-magazines from the iTunes Store. These high-value contents not only made the platforms successful, but also brought profits to the platforms.

Smart TVs should rely on their audio and video advantages to open a subscription-based or market-based cloud gaming platform, allowing gaming scenes to return to the big screen in the living room. Games should be an audio-visual feast.

Smart TVs are the traffic entrance to the living room, the smart home hub in the home, and the immersive audio-visual equipment in the living room, reaching 630 million users. However, their manufacturers have been struggling on the "poverty line" for many years, worrying about "food and clothing (value)", just like a homeless person who owns a gold mine but doesn't know how to mine it.

Today's smart TVs should "talk less about theories and more about problems", talk less about parameters and more about scenarios, tell fewer stories to investors and give users more reasons to turn on the TV.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.