Date
25 April 2018

Picture not bright for smart TV players as price war rages

The year 2013 has brought a lot of interference to the smart television market. Almost all leading domestic players have been engulfed in intense competition. TCL Multimedia Technology Holdings Ltd. (01070.HK) is the latest victim — the traditional TV set maker has warned of a loss in the third quarter. The new entrants are not doing well, either.

But this should not be the case. By combining the strengths of the internet, computer and big screen, smart TV carries immense potentials in terms of viewing enjoyment for the consumer and earnings for the tech firms. But the chief problem is that players have yet to find a profitable business model. Instead, they find themselves locked in a vicious price war with no end in sight.

Leshi Internet Information & Technology Corp. (300104.CN) became the first mover when it unveiled its Super TV in May. Initially, the price tag of 6,999 yuan (US$1,143) on the 60-inch Super TV was quite competitive and even triggered a brief bout of frenzied buying. But soon afterwards, iQIYI, Alibaba and Xiaomi rushed to the market with their own products in the same category. In just five months of undercutting, the price of the next generation of Super TV has been slashed to 2,499 yuan despite the higher specifications.

As things now stand, manufacturers have no choice but to market their products at break-even prices in order to prompt consumers to switch from traditional models to internet TV.

Xiaomi boss Lei Jun {雷軍} admitted that his company would incur a huge loss if actual sales volume of its MiTV turned out low.

Leshi appears to be more optimistic. The video streaming website operator assured its investors that it can make money once Super TV sales hit 200,000 units. That makes sense, however, only on the hardware side. The truth is that the greater the sales, the greater the overhead for the company.

Full HD video streaming to entertain a large number of smart TV household viewers will lead to greater consumption of bandwidth. According to an estimate by a commentator at technology portal Huxiu, Leshi has to pay at least 30 million yuan monthly for internet bandwidth alone if 200,000 Super TV units are sold, not to mention other huge recurring outlays involved in sourcing exclusive media content and creating its own productions.

In the first half of 2013, Leshi earned 112 million yuan but it spent about 63 million yuan on content delivery network and bandwidth service charges.

– Contact the writer at [email protected]

CG

 

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