Who will win the battle of smart TVs?

Since the emergence of Internet TV in 2006, smart TV has been in the initial stage of concept speculation. The industry structure has undergone major changes in 2013, mainly reflected in the cross-border invasion of IT companies and Internet companies, which injected Internet genes into TV. In 2013, the sales volume of smart TVs in China reached 21.38 million units, a year-on-year increase of 51.2%. In the context of the integration of three networks, information consumption, and the 4G era, smart TVs have huge market development space. The current competitive landscape is not yet stable. What new disruptors will appear in the smart TV ecosystem, where the business model will go, what kind of changes will occur in the marketing channels, and what kind of miraculous effects will big data technology play in TV are all issues worth looking forward to in the smart TV field in 2014.

Table 1 Smart TV ecosystem

Source: Compiled by CCID Consulting, February 2014

Business model: Transformation to "hardware + platform + content + service"

With the rise of smart TVs, China's color TV industry is undergoing a revolution. The mutual penetration of industrial reforms and Internet technology has brought tremendous changes to the ecosystem in the TV industry. Traditional enterprises have been operating in the hardware field for decades and are the original pioneers of smart TVs. They still use hardware manufacturing as a profit point. LeTV and Xiaomi, which emerged halfway, jumped out of the inherent thinking of front-end hardware profits, weakened the proportion of hardware profits in the business model, and attempted to make profits by charging for services in the future with the thinking of the Internet. The exploration of business models in the field of smart TVs is constantly innovating, gradually transforming from the inherent "hardware" profit ecological model of traditional TVs to the "hardware + platform + content + service" profit model. There are currently two ways of transformation, one is integration and the other is cooperation.

1. Ecosystem Integration Methods

The ecological chain integration method is to integrate upstream and downstream resources to form a complete production chain model that integrates hardware, software, content, and core applications.

1. Forward Integration

Internet companies that do not have an advantage in terminal manufacturing have established a complete industrial chain by forward integrating manufacturing resources. LeTV has integrated hardware, software, content, and core applications through independent research and development, and has built a complete ecosystem from terminals, platforms, content to services through the collaboration of various industrial chains under the Internet model, with revenue from hardware, paid content, advertising, and application sharing. Xiaomi continues the model of Xiaomi mobile phones on TVs, continuing the advantages of MIUI and MiLink. Through independent research and development, it integrates hardware and software, and directly cooperates with upstream suppliers for hardware and sells it on its own;

2. Backward Integration

Traditional color TV manufacturers, which do not have the advantages of developing smart TV content and application services, have built a complete industrial ecosystem by backward integration of content providers and technology providers. Konka, relying on its advantages in manufacturing, complete after-sales system and logistics system, has cooperated with UnionPay, iFLYTEK, Bestone, CNTV, etc., introduced relevant technologies and content, and formed a complete production chain; Changhong has also taken terminal services as a breakthrough point, integrated internal and external resources, created content and service platforms, strengthened the application of smart technologies, and integrated the business model of "terminal + platform + content + service" to be basically clear.

The fact that this closed ecological chain model is too comprehensive may be somewhat questionable, but the power of multiple profits after successful market selection should not be underestimated.

2. Eco-chain cooperation mode

The ecological chain cooperation mode integrates the strongest players in various fields, allowing participating companies to play to their strengths and get what they need. TCL uses its strengths in production, logistics, after-sales service, and the support of content, architecture and technology provided by its partner iQiyi. The lethality of the strong combination has brought a great shock to the industry; Skyworth also uses its advantages in manufacturing capabilities, industrial design, logistics and after-sales service, and integrates them with Alibaba's operating system, sales channels and other advantages, and cooperates with content suppliers to join this battle group; at the same time, Wasu, Alibaba, Zhaochi and other multi-party cooperation ecosystems have proposed a "pre-deposit service fees to get smart cloud TV" cooperation mode. Wasu Media is responsible for providing cloud TV operation services, Zhaochi shares are responsible for the research and development, design and manufacturing of smart cloud TV terminals with Alibaba Cloud OS as the operating system, and Haier provides brand authorization. This kind of trial cooperation with specialization is coming in full force, but the tacit understanding of cooperation and the reasonable distribution of benefits need to be tested in the market run-in.

At present, various business models are still in the exploratory stage. As the competition landscape of smart TVs becomes more stable, business models will become more mature.

Marketing channels: Online channels are becoming a battleground

In the home appliance industry, after years of precipitation and accumulation, traditional TV manufacturers have relatively complete and stable sales channels. Traditional sales channels such as home appliance chain stores, shopping malls, and supermarkets are still the main battlefields for smart TVs. However, with the rapid development of e-commerce, the Internet characteristics of smart TVs also make it easier for products to reach the target customer base online. Coupled with cost advantages, online channels have become a battleground for smart TV merchants. Merchants such as LeTV and Xiaomi, which do not have traditional sales channels, only have online layouts. Xiaomi TV is only sold on Xiaomi.com. In addition to LeTV Mall, LeTV Super TV also has layouts on third-party e-commerce platforms such as Yixun. Traditional TV manufacturers have also established their own official sales platforms, such as Haier Mall, Changhong Official Mall, Lenovo Official Online Mall, Hisense Mall, etc., and have entered third-party platforms such as JD.com, Yixun, Tmall, and Suning.com to expand sales channels. In 2013, the sales volume of smart TVs through online channels reached nearly 2 million units, accounting for 9.4% of the market share. Although the proportion of online channels in the smart TV field is less than 10%, with the changes in people's consumption awareness and consumption patterns, the proportion of e-commerce channels will increase rapidly, and the expansion trend cannot be underestimated.

Competition landscape: Cross-border cooperation trend is prominent

Traditional TV manufacturers are pioneers in the field of smart TVs. Their years of TV brand accumulation, core TV technology research and development capabilities, and profound TV channel sales experience are incomparable to cross-border invaders. In the short term, traditional TV manufacturers will still be a powerful main force in the field of smart TVs, but cross-border players are coming in full force. Many traditional TV manufacturers have gradually recognized the situation and sought cross-border cooperation and integrated into the Internet circle. While leveraging their own hardware manufacturing advantages, win-win cooperation with relevant content providers and service providers will soon become a response strategy for traditional manufacturers to transform and upgrade to meet various challenges.

IT manufacturers such as Google, Apple, Lenovo, and chip manufacturers such as Intel and Qualcomm are actively involved in the field of smart TVs. The biggest advantage of IT manufacturers in entering the smart TV market is that they have a deeper understanding of operating systems, application software, and Internet services. However, in terms of recent developments, the IT manufacturers involved do not have much potential to attract consumers and occupy the market. With traditional TV manufacturers blocking the way in front and Internet companies rushing in behind, IT manufacturers still have a long way to go in the development of smart TVs.

The emergence of Internet companies such as LeTV and Xiaomi has created a huge wave in the field of smart TVs. Smart TVs themselves have obvious Internet characteristics. LeTV and Xiaomi, with their professional and unique Internet thinking and advantages, have injected new vitality and new ideas into smart TVs. Internet companies implement the practice of front-end micro-profits and back-end charging, attracting customers' attention with low prices, content and Internet marketing, which has been warmly sought after by consumers, increasing the speed of popularization of smart TVs and bringing considerable pressure and challenges to traditional manufacturers who make profits from hardware. The disruption of the market with the advantage of low prices has created a certain influence in the industry, but overall, the sales volume and market share of smart TVs of Internet companies are still very low, and they still need to gradually improve their weaknesses in brand influence construction, core technology, traditional sales channels and after-sales service.

As the providers of backward long-tail services for smart TVs, platform operators, video content service providers, application software providers, and network operators all have their own strengths. The seven major platform operators have Internet TV integrated business licenses, and the licenses are the "entry tickets" for TV manufacturers to develop Internet TV products. Therefore, as an important role in the field of smart TVs, platform operators have great advantages in the competitive situation. In addition to platform operating expenses and licensing fees, their video content is also an important resource for profit. Video content service providers, such as iQiyi and LeTV, have already entered the battle in different ways based on their video content advantages. Persistent services such as advertising and video on demand will also become intruders in the industry's competition for interests. Similar to smartphones and tablets, rich application software will become the core value embodiment of smart TVs and an important selling point for TV to return to the center of home entertainment. Although the consumer concept of using paid software is still weak in the Chinese market, the profit space of advertising and game applications also determines that application providers have more room to exert their potential in the field of smart TVs. It is not surprising that network operators with the killer weapon of network communication services will become the next disruptor. With the advent of the 4G era, in order to meet users' needs for watching TV video resources outdoors and promote TV usage, network operators' "bundled service" of phone charges + broadband + 4G packages may become the driving force for multi-screen interaction and an important means for network operators to gain interests in the TV field.

All parties in the smart TV ecosystem are eyeing this territory, and the trend of cross-border integration is becoming increasingly obvious. A win-win cooperation approach to ensure the interests of all parties may be the only way to establish a good ecological system. However, it is undeniable that whether it is cooperation or establishing an independent circle, each party must preserve its foothold in the melee in order to continue to stay on this stage.

The final verdict: User experience is king

Playing with concepts, marketing, technology, and appearance, but the final winner is decided by the users. In recent years, with the rise of the Internet and mobile Internet, television has gradually become a decoration, and the central position of home entertainment has been replaced. People's consumption concepts and pursuit of quality have been changed with the development of the Internet. As the third information access terminal after PC and smart phones, and the last screen in the Internet era, smart TVs carry not only the concept of participating in multi-screen integration, but also subvert the user's deep-rooted concept of TV. Including product design, quality, human-computer interaction, operational convenience, content services that meet user needs, pre-sales experience, after-sales service, etc., which runs through the entire process of product purchase and use, directly affects consumers' use and choice of smart TVs. The improvement of usage rate is the core of continuous innovation and development of technology and products. Therefore, no matter which link in the ecological chain, only from the perspective of user experience, providing high-quality content services, making full use of advanced technical means to build a fast and accurate user behavior data analysis system, making TV smarter and more operable, and promoting more convenient and practical applications, can we stand out in the fierce competition of smart TVs and become a real winner.

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.