Color TV giants: On the one hand, they are trying to attract customers by offering low prices, and on the other hand, they are struggling to find ways to make money

Recently, Apple, LeTV, Alibaba and other companies have been rumored to be bidding for VIZIO, the largest smart TV manufacturer in the United States. Although LeTV has issued a statement denying it, industry insiders believe that as television becomes an Internet terminal, Internet TV will become the target of Internet companies' attempts to subvert after smartphones.

Data shows that in the first half of this year, the retail share of Chinese Internet TV brands in the TV market was 16%, up 7.9 percentage points from last year. The leapfrog era of Internet large screens in family living rooms is coming. However, the embarrassing thing is that while industry giants are conquering the market and expressing optimism about the prospects of this industry, a proposition that is crucial to enterprises is still facing these Internet TV companies: how to make money?

As Internet TV is increasingly entering users' homes and becoming an increasingly popular Internet terminal, reporters recently conducted interviews and surveys on this industry in order to more comprehensively reflect the industry's current development status and problems it faces.

At present, the Internet TV ecosystem presents a situation of three models. One is the LeTV model, one is the model of traditional home appliance companies such as Hisense and Skyworth, and the other is the super-dimensional ecological model of Oriental Pearl and Shenzhen MTC. Wen Lan, an analyst of the Chinese home appliance industry, said in an interview with reporters that the commercial nature of the Internet TVs that are now flooding in has not changed as in the CRT TV era. In the next two years, it will also experience a one-to-ten market competition, and finally a few brands will remain after the reshuffle.

Internet TV attracts customers at bargain prices

At present, the price of a 40-inch Internet TV has already fallen below that of a mid-range smartphone.

The reporter learned from online and offline channels such as Gome Electrical Appliances and JD.com that the price of a 43-inch 4K Fengxing color TV is only 1,899 yuan, and the same-sized 4K Kanshang color TV is only 1,999 yuan, while the new Xiaomi 3S TV is as low as 1,799 yuan. A shopping guide told the reporter of the "Daily Economic News" that many 43-inch to 49-inch TVs are priced within 2,000 yuan, and young people buy more because these TVs are cheaper than smartphones, and some also come with membership experience services, "very worthwhile for consumers."

The reporter learned that the average price of similar 65-inch 4K curved TVs on the market is about 20,000 yuan, while the price of Xiaomi's TV of the same size has been cut in half, with the price as low as 8,999 yuan. In addition, Weijing TV has launched a flagship-level 55-inch TV in cooperation with Tmall, priced at only 4,198 yuan (with a 12-month content package), LeTV's 55-inch Super 4X55 TV is priced at 3,599 yuan, and Fengxing Chaowei TV's 65-inch G65Y is priced at 3,999 yuan.

Looking back at the development of Internet TV brands in recent years, the low-price strategy can only be regarded as the first step in its siege. Today, Internet TV brands have long since gotten rid of the barbaric and extensive bidding and directly entered the "free" era.

LeTV was the first to launch the "buy membership and get hardware for free" model, which successfully helped LeTV's TV business achieve a new sales peak of 467,000 super TVs and 1.015 billion yuan in total revenue for LeTV members. Subsequently, major Internet companies rushed to join the battle.

Liu Yaoping, CEO of Baofeng TV, said, "The 40-inch TV of 40X-Men version is priced at less than 1,000 yuan, and as the user value continues to increase, the hardware can be given away for free." The shopping guide told reporters that some consumers still don't know much about Internet TV, but through comparison in stores, they can see and touch it, and this model is cost-effective, so they can naturally accept it.

More than ten new brands added in one year

The "2015 China Internet TV Development Blue Book" survey shows that with the help of the development of Internet TV, the living room economy has regained vitality.

In this important period of opportunity, more new brands are joining in. According to incomplete statistics, the number of Internet TV brands increased by more than ten in 2015, and the total number of Internet TV brands has reached the same level as traditional TV brands, nearly 20.

Most new brands are born with a "golden key". In July last year, the smart TV of PPTV, a video website under Suning, debuted; in the same month, Baofeng Technology announced the establishment of a joint venture with RRS, Aofei Animation, and Sannuo Digital Video, and also entered the Internet TV market; in August, media tycoon and head of the Chinese Culture Fund Li Ruigang launched "Weijing TV" and obtained investment from Alibaba and Tencent; in October, Fengxing.com, through equity bundling, jointly announced that it would enter the Internet TV industry with Oriental Pearl, Zhaochi, Haier, and Gome.

Recently, in the popular "Sing! China", some careful netizens discovered that in the second episode, the light box logo of Whale TV and part of the TV screen were erased.

Industry insiders believe that both in terms of exposure and netizens' discussion, Weijing's performance has greatly stolen the limelight from the main sponsor, and the main sponsor's 400 million yuan sponsorship fee carries the important mission of enhancing brand value, and expectations cannot be compromised due to Weijing's high exposure.

As a young brand, Weijing's bold bet on the phenomenal IP "The Voice of China" has undoubtedly ignited the competition among Internet TV brands in 2016.

Obviously, with the entry of new brands, the competition in Internet TV will be more fierce in 2016. As Feng Xin of Baofeng Technology said, the competition among Internet TV brands has just begun.

  Content is king and making money is hard

From the perspective of the current domestic Internet TV industry, there are two models that have been widely recognized by the market. One is the traditional home appliance model represented by Hisense, TCL, Skyworth, etc., which only produces hardware but not content; the second is the model represented by LeTV, which covers all aspects from hardware to content to after-sales.

The third model, Fengxing TV, which wants to challenge the first two models, is building its own super-dimensional ecological model, bundling five leading companies together with an original double-layer equity structure. In addition to Fengxing, Zhaochi shares are responsible for hardware, Oriental Pearl is responsible for content, and Gome and Haier are responsible for store sales.

Regardless of the model, these Internet TV companies have difficulty making money. Xiaomi and LeTV's Internet TVs are typically loss-making in terms of hardware, and the content is not yet profitable. Although the price of the additional offering of Zhaochi shares, which is currently being issued, was set at more than 12 yuan, the share price as of July 24 was only more than 8 yuan, which also shows that the capital market is not optimistic about the popular TV it dominates.

In fact, fierce competition also stems from the saturation of the market. According to data from AVC, global color TV shipments reached 230 million units in 2015, down 2.5% year-on-year. China has become the main region for color TV production and sales, and the growth rate has slowed down. In 2015, the retail volume of China's color TV market was 46.74 million units, up 4.8% year-on-year, and the retail sales volume was 157.2 billion yuan, up 7.5% year-on-year.

In addition, experts predict that starting from 2016, the market will enter a long period of stock market competition. Therefore, the low-price strategy of Internet TV makes the competition in the non-incremental TV market even more fierce, and the original pattern will inevitably be broken and reshuffled.

Wen Lan believes that the above three Internet TV models have their advantages and disadvantages, but the differences will become smaller as the industry advances. In simple terms, the current model of Internet TV is to jointly build an ecosystem and to create an ecosystem on its own. The model of cooperation between traditional TV companies and Internet companies is the so-called "+ Internet", which is the only way for both sides to get what they need.

Traditional enterprises embrace the Internet to gain not only the content and value-added service benefits, but also a new TV ecosystem. In April this year, Hisense reached a strategic cooperation with Wasu TV, ICNTV, iQiyi and Tencent Video. Skyworth and Konka are also doing similar cooperation. Konka has also deeply integrated Tencent Video's rich video resources, games and music, enabling Konka to provide content and value-added services.

In Wen Lan's opinion, Internet brands such as Xiaomi and LeTV, which were born with the Internet gene, have advantages in content and brand marketing that traditional TV brands cannot match. However, domestic traditional TV brands, led by Hisense, TCL, and Skyworth, are still in the first camp, and their advantages in technology and brand are insurmountable in the short term, and these advantages are more prominent in international markets such as Europe and the United States.

Data from AVC shows that in the first half of 2016, the market retail share of domestic traditional brands was 75%, and the share of each brand was relatively even.

Wen Lan believes that as the domestic video website landscape stabilizes and the alliance and bundling of Internet TV licensees ends, content supply will become more homogenous in two to three years, and the gap between new and old brands in content competition will narrow. In other words, content is king is only the first stage for TV brands with Internet genes to seize the market.

"After all, unlike the smartphone market, the frequency of television upgrades is lower, the bonus period is not obvious, and although the Chinese color TV market has been rising, it has already reached saturation. There are more than 20 content-based Internet brands competing to revitalize the existing market, and it is the mission of all brands to seize the incremental market." Wen Lan believes that low-priced Internet TV brands are putting the Chinese color TV market into an embarrassing situation of "increased volume but no increased revenue", and compared with brands with core technologies, these Internet TV brands lack the foundation for rapid development.

Dong Min, general manager of AVC's smart display and digital entertainment business group, revealed that in March this year, AVC and Tencent conducted a survey on the factors consumers consider when buying TVs. The results showed that as many as 36% of consumers pay attention to trends; 21% of consumers pay attention to appearance; and only 19% of consumers pay attention to price. When consumers enter the store to make a purchase, 73% of consumers plan to spend 2,000 to 9,000 yuan. Among them, the majority are in the range of 5,000 to 7,000 yuan.

"This shows that price has become a non-determining factor. But in fact, the results of retail monitoring are quite different. 80% of sales are concentrated below 5,000 yuan." Dong Min believes that the current low prices, whether they are subsidized by off-market funds or supported by real money, are somewhat deceptive and have not realized their own contribution to the industrial chain.

The one-on-ten elimination battle is about to begin

The industry believes that as a newcomer, Internet TV brands have a relatively fast growth rate. However, if they rely solely on online channels and low prices, they will definitely not last long. The market competition pressure is high, the growth rate will slow down, and the disadvantages will also be reflected.

Wen Lan, who just came back from a visit to ten major home appliance stores in Europe, told the Daily Economic News reporter that European and American consumers are more mature, and low prices and concepts are not enough to gain market share. "The European Cup is slowly making Hisense and TCL, two black appliance giants, shine. Europe has just begun to recognize Chinese home appliance brands, and Internet TV brands still have a long way to go in this regard." Wen Lan said that the international market is not a touchstone for marketing concepts to win global consumers. What consumers need is trust, brand and quality. Internationalization is the inevitable path for TV brands, because the Chinese market is already saturated, and they must turn their attention to a broader incremental market.

Therefore, for Internet TV brands, mergers and acquisitions have become the best strategy to quickly occupy overseas markets. It was previously rumored that VIZIO was about to be acquired, and potential acquirers included Internet giants such as Google and Apple. Although LeTV denied it, the acquisition of VIZIO is in line with LeTV's latest strategy. Liang Jun, president of LeTV Zhixin, also revealed that LeTV TV will enter overseas markets this year, especially the North American market, mainly the United States.

The reason why VIZIO has attracted the attention of so many Internet giants is that it is the largest smart TV manufacturer in the U.S. Since 2007, VIZIO has been at the forefront of the North American TV market share, comparable to Samsung TV.

Both LeTV and Xiaomi are currently losing money on TV hardware. In terms of content, they may face development difficulties due to the large number of players, homogeneity of content and technology, etc. In fact, without a base of more than 5 million active users, it is empty talk to make profits from content and services.

With the influx of new brands, the market competition of one against ten is no less than the competition of traditional black and white TV sets. At that time, each province had a TV brand, including Panda in Nanjing, Feiyue in Shanghai, Taishan in Shandong, and hundreds of TV manufacturers such as Lily, Sika Deer, Shenyang, Venus, and Jinfeng. Now, the 80-year-old Panda TV has joined the super-dimensional ecosystem jointly created by Oriental Pearl, MTC, Fengxing, and Haier.

According to data from AVC, the top six TV brands, Skyworth, Hisense, TCL, Changhong, Konka and Haier, currently account for 75% of the Chinese TV market, and each brand has a relatively even share. However, with the marriage of TCL and LeTV, the sales of both brands may be directly increased. "In 2016, the market share of traditional TV brands will be further squeezed, and it is not ruled out that there will be an alliance similar to TCL and LeTV." Liu Chuang, vice president of AVC, believes that due to the impact of emerging Internet brands, the domestic color TV market is brewing changes.

Dong Min also believes that "there is a high probability that the brand landscape will be reshuffled this year. Skyworth and Hisense will continue to be strong, and small second-tier brands may give up resistance and leave the market in a more decent manner. In the future, the large-scale growth of the color TV market is differentiating into competitive growth."

Recently, the "China Color TV Industry Market Inventory and Trend Forecast in the First Half of 2016" released by Aowei Cloud Network pointed out that the Chinese color TV market is in an embarrassing situation of increasing volume but not increasing revenue in the first half of 2016. The report shows that in the first half of 2016, the retail volume of China's color TV market reached 23.51 million units, achieving a growth of 6.9%, but the overall industry retail sales were 71 billion yuan, a year-on-year decrease of 4.0%.

Regarding the situation of increasing volume but not revenue, home appliance analyst Wu Zhuo said that it was the low prices of Internet TV and the rapid development of e-commerce channels that caused the market prices of color TV industry to fall, leading to the decline of overall revenue. However, just like the current smartphone market, this situation will not stagnate. With the continuous influx of new brands and allies, the brand structure will undergo subtle changes in 2016.

Xiaomi Technology co-founder Wang Chuan also said that within two years, new brands will join the TV camp, but at the same time some TV brands will withdraw.

Obviously, 2016 will be a crucial year to determine who will be eliminated. How far can the emerging TV brands endowed with Internet genes go? Will they repeat the old path of the CRT TV era? The market will tell everything.

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.