The ill-fated competition in Internet TV still depends on content

Last month, under the ban of the State Administration of Radio, Film and Television on illegal software on Internet boxes, many smart TV boxes issued announcements to block a number of illegal software. This makes the future development of TV boxes, which are already "ill-fated", even more difficult, and the market space is not optimistic. At the same time, Internet TV, which provides massive content, has gained a development opportunity. However, under the current market conditions, how much market space can Internet TV have, and what should its profit model be?

Change

TV box market shrinks

In recent years, as Internet TV boxes have overturned traditional viewing methods, the living room market has gradually become a field that capital giants are competing to deploy. However, the good times did not last long. Starting from June last year, the State Administration of Press, Publication, Radio, Film and Television (SARFT) issued a series of rectification orders for boxes. Among them, it not only required the closure of the download channel of illegal video software in Internet TV terminal products, but also required the cessation of the TV program time-shifting and playback functions provided in the boxes.

The matter did not end here. At the beginning of last month, the State Administration of Radio, Film and Television issued industry regulations to block 81 illegal applications in the first batch in order to rectify the chaos in the TV box market. Public information shows that among the 81 illegal software, Fengyun Live, Himalaya, Panda Audiobook, 360 Movies and TV, Taijie Video, etc. were on the list. This is undoubtedly a fatal blow to the boxes launched by Internet manufacturers who believe that "content is king".

As soon as the regulations were issued, relevant companies followed up immediately. On the 14th of last month, Tmall Magic Box issued a notice stating that in response to the relevant policies of the State Administration of Radio, Film and Television, it decided to upgrade the system. After the upgrade, the first batch of 81 illegal and illegal third-party applications announced by the State Administration of Radio, Film and Television will be blocked. In addition to Tmall Magic Box, other set-top boxes equipped with Alibaba YunOS system have also issued notices to stop service and upgrade. TV box operators including Kaiboer Box, Inphic Box, and Wasu Media all responded at the first time, saying that they would upgrade the system before November 15. The direct effect of the upgrade is to block the 81 illegal applications announced by the State Administration of Radio, Film and Television.

Internet TV has an opportunity

Under the ban, the core functions of TV boxes that attract consumers are becoming less and less. At the same time, the stock of traditional TVs that have demand for TV boxes is gradually declining. Under the influence of these two aspects, the market space for TV boxes has been greatly compressed. According to data from AVC, in October this year, the retail volume of TV boxes was 486,000 units, a month-on-month decrease of 2.4%; the retail sales were 120 million yuan, a month-on-month decrease of 4.3%. Both retail volume and retail sales have declined.

Hu Xuedong, an analyst at the black-and-white electronics division of AVIC Cloud Network, said that the rectification measures of the State Administration of Radio, Film and Television are mainly aimed at illegal integrated software. These software illegally link to the content of copyrighted video service providers, so this rectification will affect the user experience, but it is actually beneficial to legal and compliant equipment manufacturers, and Internet TV is the beneficiary.

Aowei Cloud Network predicts that in the next two years, China's TV market will maintain a low growth rate of about 2%, but the share of Internet TV will continue to grow rapidly. It is expected that the sales volume of Internet TV will reach 10.1 million units in 2016, and the share will reach 22%.

Regarding the next development of Internet TV, Hu Xuedong introduced that first, the hardware will be further upgraded, including large screen (55 inches and above), ultra-high definition (UHD), ultra-thin, curved, high color gamut, OLED and other features and functions will become the standard of Internet TV. Secondly, video compliance. Radio and television supervision may affect the installation of non-compliant software on some TVs, and the content experience may decline. However, Internet TV can increase the creation of self-made content and exclusive content on the one hand, and further improve the TV experience on the other hand, such as reducing the impact of advertising on the TV viewing experience, so as to gain growth opportunities.

analyze

Future competition will not be about hardware

Three years ago, when CRT TVs were transformed into LCD TVs, China's TV sales reached a peak. After that, the color TV market entered a long cold winter. In the same year, Internet TVs represented by LeTV entered the market at a low price and achieved impressive results in a short period of time, posing a threat to traditional TVs.

Lu Renbo, deputy secretary-general of the China Electronic Commerce Association, said that after Internet TV entered the television industry with its ultra-low hardware prices, traditional color TV companies' products could not compete with it in terms of price. The latter eventually chose to launch their own Internet TV brands to participate in the competition. Color TV giants including Skyworth , TCL , and Hisense have successively launched their own Internet TV brands.

New Internet brands are still pouring into the TV field, such as the recently launched PPTV TV and Weijing TV. So far, the number of domestic Internet TV brands has increased to 13. In the sluggish market environment, the competition in Internet TV is quite fierce, and the performance of manufacturers is also under pressure. According to the semi-annual report of LeTV, in the first half of 2015, LeTV's subsidiary LeTV Zhixin had an operating income of nearly 2.8 billion yuan and a loss of 286 million yuan. From 2012 to 2014, LeTV Zhixin was in a loss state.

As more and more Internet TV brands appear on the market, low-price competition can no longer win the market. The price war is getting more and more intense, and the method of choosing to make profits on hardware has basically become a spent force. Recently, several new Internet TV brands have basically pushed the price to the lowest line in terms of their hardware configuration. Looking back, brands such as LeTV TV, Baofeng TV and Xiaomi TV are all making money by paying for content, competing to see who has a better source of programs and who has more "massive" content.

Lu Renbo said that at this time, "content naturally becomes the focus of competition among Internet TV brands." Hu Xuedong also said that in the future Internet TV field, whether it is a box or a smart TV, having rich compliant content and improving user experience will be the main development direction.

Way out

Internet TV will make profits from content

Internet TVs are all claiming to make money from content rather than hardware, and the model of using software to subsidize hardware will become the mainstream in the future. Industry observer Liang Zhenpeng analyzed: "When the sales of unprofitable TVs reach a certain number, the model of making money by relying on content will achieve a balance between profit and loss, and then gradually achieve the goal of profitability."

According to a person in charge of LeTV Zhixin's public relations department, the monthly revenue of LeTV Super TVs from just the power-on and power-off ads alone exceeds 10 million yuan. Through this model, LeTV can set prices below the mass production cost. It's not just the power-on ads for TVs, "Music Fan Festivals and press conferences also have companies investing in advertising support."

Manufacturers have seen the importance of content to Internet TV and have begun to compete for content copyrights. This summer, LeTV and PPTV announced that they had obtained exclusive all-media copyrights for different events. LeTV and Xiaomi once went to court over the exclusive online broadcasting copyright of the TV series "The Happy Life of Jin Tailang".

Lu Renbo said that from the perspective of mass consumers, they naturally hope that the content on TV will become richer and richer, and it is best if it is free. For regulatory authorities, they hope that the content will become healthier and the market will become more orderly. As operators or managers, they hope that the market can become bigger and bigger.

Lu Renbo said that there are two types of Internet TV manufacturing companies, one is Internet companies that produce TVs, and the other is traditional TV companies that "go online". Smart TVs are not the exclusive domain of Xiaomi and LeTV, in fact, traditional companies are also making them. In the future, the business model that advocates charging for services will definitely be realized. However, at this stage, no company relies entirely on service production, and all rely on hardware to produce products. "In the future, Internet TV will definitely be a charging model."

In general, the current TV market is not growing fast, maintaining at 45 million units per year. Lu Renbo said, "The TV industry is basically at a very low sales volume. In the future, Internet TV will strive for licenses and content. The company with the best content services will win the current Internet TV war."

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.