The quick and dirty take on the news from the TV manufacturers is that it was bifurcated by region—most of the news from the Japanese manufactures had already been previewed at CEATEC in Japan in October, and the Korean manufacturers were really the source for “new” news from CES 2012. To us, there were some very interesting near-and longer-term themes and topics from the TV industry at the Show, and we’ve broken them down and added our take on what it means to the strategies of companies involved up and down the food chain.
- More stuff being jammed into the TVs. Literally. And they’re “smart.”
- What happened to the Green Theme?
- 3-D. Again. And again. And no one is still really buying yet.
- The subtle hand of Apple–not at the Show, but still present.
- Should movie theatre owners be a little more worried today?
- So what is the early read now for CY2012 and CES 2013?
1. More stuff being jammed into the TVs. Literally. And they’re “smart.”
TV news from the week included TVs that come with dual core processors, more on-board storage, 3-D TV cameras, 2-D cameras, microphones, other sensor bars. Plus, every new TV is either “smart” and/or “connected,” and you can’t have a “smart” TV that isn’t connected.
This theme is a new twist on a typical CES theme, which is “how did the TV hardware manufacturers get consumers excited with new features this year?” In the past few years, it’s been about thinner, bigger, lighter, brighter, and more power-efficient TVs. Now, the trend has moved to putting more “smarts” and connectivity into the devices after early stabs in the past two years. At some point, TV manufacturers will max out on how thin, how “connected” a TV can be, or how big a TV can be, but the variables of screen clarity will continue (4K to 8K TVs already this year), and how OLED will enable new form factors (such as wrapping a TV around a pole).
In the mean time, TV hardware manufacturers are mimicking new advancements such as Microsoft’s Kinect bar for the Xbox 360 console by putting a 3-D camera into the bezel of the TV or as a snap-on. To be clear—while the TV manufacturers such as LG or Samsung can add that capability, they aren’t adding a services layer with content such as gaming as the Kinect provides. It is not a core strength for these companies, but doesn’t prevent a company such as Samsung, loaded with cash, from trying to either solve by a) building games themselves or b) buying a video game publisher company or developer team. It’s an unlikely scenario to us at this point, but then again, who thought Amazon would be developing games? Worth noting, too, is that LG is loaded with cash, too.
Back to the “smart” theme—this year’s show demonstrated improved user interface (UI) that takes advantage of connectivity to the internet to enable primarily social networking services. Some of these improvements are driven by improved software, others by improved hardware, processors, and storage. Of all the examples on the Show floor, the Google TV examples from Sony and LG, in our opinion, had the best UI for the TVs. We still think the improvements in the UI from Xbox Live (and Kinect) are terrific steps, but what was notable to us from CES was that between the Japanese- and Korean-based TV manufacturers, the best examples were those based on partnering with a US-based software company. In our opinion, UI development remains a hugely significant hurdle for the Japanese and Korean companies, and partnerships will still be the best, longer-term route, without massive research and development investments that will take a few more years to bring to fruition.
2. What happened to the Green Theme?
This has been a hugely significant trend for the TV industry, especially in Japan. However, the eco-points program in Japan has ended (think government-backed rebates for buying more energy-efficient appliances such as TVs, refrigerators, etc.) and we found it disappointing that only Panasonic really featured a green theme.
Panasonic had several impressive green sections in their booth, and the likelihood of the company longer term is that the panel fabs they have may wind up making more solar panels rather than TV panels, and Panasonic winds up becoming more of a battery company as they are a world-leader in energy storage. This theme obviously works hand-in-hand with the solar panel business. Oh yeah, and Panasonic was showing off more energy-efficient TV models in their booth as well. They showed a voltage meter running with a 2011 model LCD TV vs. 2012 model LCD TV, and the improvements in lower energy consumption. While this type of display is a novelty at CES for most attendees, it has been a common way to show off TV models at retail in Japan.
The only other green-related piece from the Show that we found interesting was the 80-inch TV from Sharp–representatives noted that if the TV was run 5 hours per day for an entire year, that total energy bill would be roughly $22. If true, it’s a truly impressive statistic. Then again, after paying north of $5,000 for the TV, it’d be nice to have a cheap electricity bill.
Green themes from Sony, Samsung and LG? Not much in our opinion.
3. 3-D. Again. And again. And no one is really still buying yet.
We are in the corner of skeptics on 3-D TV adoption. Sure, the industry had a rollout of numbers of TV sets sold or shipped that were technically “3-D enabled,” but it is our position that utilization remains relatively low. To us, the faster that 3-D technology becomes a part of a TV, not the featured part of a TV, the better off for the industry. The challenges for 3-D adoption remain:
- Problems with varying standards–while there is now a standard for active shutter 3-D glasses, plenty of sets are still being built with passive glasses. Ugh. Consumer confusion will reign.
- Content remains challenging. Not every movie will be made with 3-D viewing in mind, which means the quality of the content will vary.
- Only a few tent pole movies since Avatar. While the theatre reports on the recent Hugo movie in 3-D have been solid, our take is that other than Transformers in 3-D, there has been a real void of movies after the beautiful and exciting cinematic 3-D experience of Avatar. Maybe Star Wars in this Spring? The 3-D movies-in-the-theatre experience are still a vital pipeline, in our opinion, to demonstrating the possible benefits of buying a 3-D TV for the home.
- Prices for TV sets are still relatively early on, and therefore pricey. As volumes on 3-D sets manufactured grows, the cost reduction curve will move, resulting in lower retail prices. It’ll likely be another two years before a $1,000 3-D set today is down to $650-$700, given a range of 15%-to-20% reductions per year.
4. The subtle hand of Apple — not at the Show, but still present
The influence of Apple was clear to us in two areas of the Show. The first, and easiest, was the prolific number of announcements around Ultrabooks, based on the Intel chipset. It is clear to us that they are targeting preventing current laptop users from making the switch to Apple’s Macbooks. The second was a bit more subtle–with the expected upcoming news from Apple on a TV product, in our opinion, some of the TV food chain was trying to position themselves ahead of whatever news comes from Apple.
The unspoken fear is clear: Apple will announce a pricey, yet superior TV product this year that will have easy, fun, and cool features in a package that no one has either thought about so far or been able to pull off. The phrase that is bandied about with Apple is “the best combination of hardware, software and services,” and usually with phrases such as “world-class.” Hence, to us, we saw a range of tech announcements for TVs that were likely closer to tech demos, rather than ready-for-prime-time TV tech products. The 3-D cameras built into TVs—nice, but not fully formed. The 2-D cameras for Skype (FaceTime, anyone?) were nice but an add-on and not new.
One other note: It’s one thing to pick apart what was announced at the Show, and it’s another thing to note what wasn’t announced at the Show. One piece that wasn’t announced was TV manufacturers with smart and connected TVs, with no real cloud strategy. To be fair, cloud storage isn’t a core strength for Samsung, LG, Sharp or Panasonic (Sony has a cloud service), but it will likely be a significant part of whatever Apple announces, whenever they likely announce it. The only tangible cloud service we’ve seen recently in relation to TVs is from Microsoft—offering significant cloud storage for things such as game saves and your Xbox Live account ID, among other media, through Xbox Live.
5. Should movie theatre owners be a little more worried today?
Yes. The phrase: “OBJECTS IN THE MIRROR ARE CLOSER THAN THEY APPEAR” is highly apt. There are concurrent trends here: while movie theatre owners are becoming more flexible in filling theaters through the installation of digital theaters, the fire should be squarely lit and burning under the business strategists to figure out other utilization models for the space such as, say renting a theatre to watch the Patriots-Broncos playoff game on Saturday night. This utilization concern will likely grow because the TVs that are coming out are spectacular. And, in our opinion, this is not just about 3-D. The 8k TV from Sharp was one of the coolest things on the Show floor, the 55-inch OLED TV from LG was stunning, and with Sharp’s Gen-10 fab is built to efficiently cut 80-inch TV glass. And, the 80-inch TV from Sharp on the floor? Gorgeous.
The competition from the living room for theater owners continues to stiffen, and as the displays improve, TVs improve, tablets improve, and the service providers and content aggregators get more aggressive, in our opinion, theaters lose. In our opinion, we are at a tipping point, and unless the 2012 slate of blockbuster movie sequels show good legs at the theaters, this trend gets worse.
6. What is the early read now for CY2012 and CES 2013?
Over the next 12 months, we believe there are a couple of scenarios (some more likely than others) about new entrants adding to the TV hardware landscape:
1. Apple (in case you hadn’t heard this one…). Likelihood? 99%
2. Microsoft. Seed the market. Embed the Kinect bar. Take the UI learnings from Kinect and Windows Mobile and extend it into hardware. There will likely be TV manufacturers ready to party with a variety of sizes. Likelihood? 30%, and higher % for CY2013.
3. Amazon. Tablet. Phone. TV. Extend the value proposition of Amazon Prime to the key platforms where purchasing is already being done. They are being nipped on in mobile by apps such as Google Goggles and Red Laser, and by launching (or again, seeding) a TV product, they can be out in front of the competition assuming that purchasing via interactive TV will soon become practical as the technology has been around for several years now. The end game for Amazon becomes simple; they are already a content aggregator, and working toward being a content creator in multiple media verticals, and having a TV that would strengthen Prime Memberships is obviously in Amazon’s best interests. Likelihood? 31%