Fewer U.S. Consumers Interested in Buying New TVs
The worldwide television market has been declining since the end of 2011, with global TV shipments down a projected 9% this year on top of a 6% decrease in 2012. With shipments – and profits – shrinking, manufacturers are betting on new technologies such as smart televisions and ultra-high-definition sets to change the grim market outlook.
by Veronica Thayer
THE U.S. TELEVISION MARKET is no exception to the global TV slowdown. In results from a consumer survey conducted by IHS in the U.S. during August 2013,1 the number of consumers that had not purchased a TV in the past year or were not planning to purchase a set in the next 12 months was rising, from 35% of respondents in 2012 to 53% this year. The main reasons cited by consumers were: “Do not need another TV” and “Purchased one in the last 2–3 years.”
Manufacturers are therefore looking to create new incentives for consumers to upgrade their existing sets. Before we examine their plans, it is helpful to take a closer look at the consumer-survey data. The above-mentioned results point to two major current issues in the TV market. First, the number of TVs per household is reaching saturation point in the U.S., as most consumers own at least one flat-panel TV. Second, consumers are increasingly getting used to accessing video content on other devices such as laptops, tablets, and smartphones, raising the question as to whether such devices are affecting the need for a secondary TV set.
TVs vs. Tablet Ownership
One inquiry answered by survey results is whether tablet ownership affects TV purchase intent and screen-size preference. In terms of overall TV purchase intent, survey results revealed that tablet ownership did not cause any variance, with 20% of owners and non-owners alike planning to purchase a TV within the next 12 months.
However, the percentage of consumers purchasing a TV in the past year was nearly twice as high among tablet owners. They showed a clear preference for bigger screen sizes, with 49% of tablet owners preferring a 40–49-in. screen size and 16% preferring 30–39-in. sizes. Non-tablet owners were 32% and 33%, respectively, with regard to these sizes. Demand for 50-in. and larger screen sizes was unaffected by tablet ownership.
The modern connected household frequently contains more than one device with which to access the Internet and from which to consume content. Of the consumers surveyed, 68% owned at least a smartphone, tablet, or smart TV. Nearly 56% of smart-TV owners also owned a tablet and smartphone, and nearly 10% of total respondents owned all three devices. The survey’s results imply that not only can smaller screens be complementary to smart TV ownership, but that there is substantial opportunity for companies in the multi-screen video delivery ecosystem to take advantage of the smart-TV installed base.
Smart TVs and Their Impact
While tablets and smartphones have propagated through the U.S. market with lots of momentum, one of the clearest bellwethers of the connected home’s evolution is the connectivity of TVs; i.e., the extent to which consumers are connecting the primary media consumption device in the home to the Internet. Although U.S. consumers show relatively high awareness of the term “smart TV,” in fact they have a very shallow understanding of what a smart TV does and the kinds of services to which it provides access. In fact, the term “smart TV” is rather loosely defined, but generally means a TV that is connected to the Internet and provides computer-like capabilities such as access to video playback, apps and games, social media, and more.
Among the 2013 survey respondents, smart-TV awareness is at 87%, with the term mostly perceived to denote a TV set that connects to the Internet. Even so, respondents showed less understanding of what that does for them and how it can improve the TV watching experience. A surprisingly high 88% of respondents stated they connected their smart TV to the Internet via Wi-Fi, Ethernet, or dongles. Pay-TV through the set-top box continues to be the main source of video entertainment in the home. Most consumers are not familiar with the capabilities of smart TVs and all the video content they can access through them.
Still, more than a quarter of consumers expressed their intent to purchase a smart TV within the next year (Fig. 1). Samsung and Sony are the top brands considered for a smart-TV purchase, with about 70% of consumers preferring these two. The top brands considered for purchase are reasonably aligned with their prevailing market share of smart TVs. These five most popular brands are, in order, Samsung, Sony, LG, Vizio, and Panasonic.
Fig. 1: More than a quarter of customers surveyed who do not currently own a smart TV plan to buy one in the next year. Source: IHS.
Beyond individual brand-purchase intentions, getting consumers to specifically adopt smart TVs continues to arguably pose the same challenges that have existed since the category came into being. In order for smart TVs to be widely adopted, there are indications that consumer-electronics manufacturers will need to invest more deeply into generating greater awareness of such sets and their value proposition.
In general, consumers unaware of smart TVs seemed no more inclined to purchase them beyond the average level seen in buying TV sets, with purchase intent within the next 12 months registering only 7%. Meanwhile, for those aware of smart TVs, the intent increased to 31%. Manufacturers desiring increased adoption of their smart TVs will need to ramp-up efforts, from advertising to point-of-sale branding to retail associate training, to increase mainstream awareness of the product category while boosting understanding of the value and capability offered.
One good sign for smart TVs is that among devices being used to watch Internet video, consumers are relying more and more on such sets as their go-to device. A primary reason is simplicity: smart TVs are less complicated to use than conventional TVs, as they require only one remote and feature a consistent user experience. This compares favorably to more prevalent methods of TV operation that require the switching of video sources, juggling among different devices, and negotiating clunky user interfaces.
Yet, a considerable amount of progress must be made by manufacturers for wider adoption by consumers. Many of those who purchase smart TVs do not use the connected features very heavily, even when they are connected to the home wireless or wired Internet. The results indicate that among smart-TV owners surveyed, more than 11% of those who had their sets connected did not actually use any of the applications on the television.
The Eclipse of 3D television, and the Rise of UHD
One TV feature that consumers are not particularly excited about is 3D (Fig. 2). Results show that only 9% own a 3D TV, and among consumers who do not currentlyown a 3D set, only about 10% are interested in purchasing one in the next year. Instead, an overwhelming majority indicates no need for a television with this feature. Additionally, 22% of 3D TV owners have never used the 3D function on their sets.
Fig. 2: Price outweighs all other motivational factors when it comes to buying a TV, both in 2013 and 2012. Source: IHS
It is also now evident that the market’s focus is shifting toward 4K resolution – four times the resolution of standard full-definition 1080p. A number of manufacturers have launched UHD products since the third quarter of 2012. The new technology has already brought about price competition, mostly due to
the entry of lower-priced, second-tier brands.
But while UHD now promises to be the next big thing in televisions, various factors – the lack of native 4K content, high retail pricing, and the need for big-screen TVs in order for viewers to genuinely appreciate the technology – mean that it will take time for UHD to resonate with consumers and for content developers to back the advanced mechanism.
Survey results confirm this, with only 13% of respondents indicating interest in purchasing a UHD TV in the next year. Among consumers not interested in buying, 40% indicate high price as the main hurdle.
Still, given how far high-definition TV has come since its inception, there is hope for the future success of 4K-resolution TVs and for consumers to eventually warm to their appeal. Recent survey results show that higher resolution is the third-biggest purchase motivator for new televisions behind screen size and price, with 46% of consumers being “very” or “extremely” willing to pay more for higher resolutions.
This seems to indicate that as more UHD TV models enter the market and as prices come down, the sets not only will be sold in greater quantities, but may also be deemed appealing enough for consumers to make that all-important commitment to buy. If consumers become more familiar with the advantages of smart TVs, this capability may spur purchases as well. Looking farther ahead, it seems likely that it will become more difficult for brands to differentiate themselves and that prices will continue to decline. Certainly, larger-screen sizes with added features such as connectivity will become the norm, and TV viewing will become more interactive and more interconnected with mobile devices.
1The study comprised 1000 respondents in the U.S. •