In­ter­net TV brands tune into drama

China Daily (Hong Kong) - - BUSINESS - By FAN FEIFEI fan­feifei@chi­nadaily.com.cn

China’s pre­vi­ously buoy­ant in­ter­net TV brands are cur­rently play­ers in their own drama, watch­ing a down­turn in the sec­tor this year.

As the price of pan­els con­tin­ues to rise, the paid-for­con­tent busi­ness is fail­ing to pro­duce enough rev­enue to sub­si­dize hard­ware sales, an­a­lysts said.

In­ter­net TV brands are com­pa­nies, such as LeEco and Xiaomi, which in­te­grate on­line TV pro­grams into their tele­vi­sion sets. There are also tra­di­tional TV man­u­fac­tur­ers that part­ner with in­ter­net ser­vice providers to es­tab­lish new in­ter­net TV prod­uct lines.

Some of the other brands are Wha­ley Tech­nol­ogy Co Ltd, a Chinese in­ter­net TV startup backed by China Me­dia Cap­i­tal, and FFALCON, TCL Corp’s first in­ter­net TV brand.

“This year has proved a turning point for in­ter­net TV brands, af­ter wit­ness­ing a rapid growth in the past few years,” said Liu Buchen, an in­de­pen­dent re­searcher in the home ap­pli­ances sec­tor.

“They have posted a de­cline in sales and losses con­tinue to rise.”

Liu said TV unit sales of cash-strapped en­ter­tain­ment com­pany LeEco reached about one mil­lion in the first half, lag­ging far be­hind its tar­get of seven mil­lion. In 2016, five mil­lion LeEco TV sets were sold.

“Apart from LeEco, the sales of other in­ter­net TV brands are not op­ti­mistic.”

The ris­ing price of dis­play pan­els is giv­ing in­ter­net TV com­pa­nies, which sub­si­dize hard­ware through paid con­tent, a mis­er­able time, ac­cord­ing to Liu.

“Pan­els ac­count for more than 60 per­cent of TV costs. The price rise of pan­els has continued for 14 months, the long­est pe­riod in the past five years,” Liu said.

In­dus­try sta­tis­tics show av­er­age prices of in­ter­net TV sets, which range from 2,000 yuan ($294) to 5,000 yuan, are up 20 per­cent this year com­pared to 2016.

TV panel prices, av­er­ag­ing 1,400 yuan to 3,500 yuan, are up 40 per­cent on av­er­age com­pared with 2016.

Sta­tis­tics from Sig­main­tell Con­sult­ing Co Ltd showed the costs of 32-inch and 40-inch LCD TV pan­els rose 70 to 100 per­cent in May, and the 50-inch and 60-inch LCD pan­els in­creased 30 per­cent.

“In the long term, in­ter­net TV brands may have good prospects, but the process could be very long,” said Xu Chun, an an­a­lyst with Changjiang Se­cu­ri­ties.

“Even though the model might be im­proved, their prof­itabil­ity may not meet in­dus­try ex­pec­ta­tions.”

Sun Taitong, an an­a­lyst from in­dus­try watcher China Mar­ket Mon­i­tor, said in­ter­net TV brands grew rapidly last year, but their sales ex­pe­ri­enced a down­turn in the first quar­ter.

Tra­di­tional TV mak­ers, such as TCL Corp, can bar­gain on prices with up­stream com­po­nent pro­duc­ers, an­a­lysts said. Their costs can also be re­duced by boost­ing man­u­fac­tur­ing ef­fi­ciency and sup­ply chain man­age­ment.

In con­trast, in­ter­net TV com­pa­nies, which buy fewer pan­els, pos­sess less bar­gain­ing power with panel mak­ers and other up­stream sup­pli­ers.

In Novem­ber, LeEco an­nounced it was in­creas­ing the prices of some TV sets by 100 yuan and oth­ers by 300 yuan. Ri­val Xiaomi, around the same time, raised the prices of its HD tele­vi­sions by 300 to 700 yuan each unit.

“Some in­ter­net TV users com­plained they sel­dom see in­ter­net TV pro­grams, as they need to pay ex­tra fees,” Liu said.

Weng Zhen­hua, gen­eral man­ager of the TV de­part­ment at con­sul­tancy All View Cloud, said the de­mand for high-end and di­ver­si­fied TV prod­ucts was in­creas­ing and low-price com­pe­ti­tion wasn’t sus­tain­able.

XING YUN / FOR CHINA DAILY

A model poses in front of two in­ter­net tele­vi­sions at the Ap­pli­ance & Elec­tron­ics World Expo in Shang­hai.

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