Ultra HD is the real thing; get ready for disruption

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    Ultra HD is not another 3DTV, set to grab the headlines and then fade away, but is the next big consumer-facing development in television and one that will prompt a new arms race in the Pay TV industry and new infrastructure investments. That was the conclusion from a Videonet webcast last week that looked at what we learned from International CES 2014. On a panel featuring experts from Strategy Analytics, MTM London and Genovation Capital, it was argued that the early efforts of OTT service providers like Netflix to get UHD content in front of consumers will not give them any long-term advantage over the Pay TV industry.

    David Mercer, VP, Principal Analyst, Digital Consumer Practice at Strategy Analytics, the research and consulting firm, declared that UHD is the real deal, quoting research from his company showing a strong interest in buying UHD televisions among U.S. consumers, assuming the price of the television sets is acceptable. [In the consumer survey 19% of people declared themselves very likely to buy a UHD set in the next two years and 37% said they were somewhat likely to, at the right price].

    “Pricing is the challenge now for the industry and we saw encouraging signs from vendors that price points will become extremely competitive this year,” Mercer declared. He referred to Vizio and its $1,000 4K television [the new P-Series 50 inch model], saying, “They are breaking the dam for the entry point for UHD this year. That is a real sign of intent.”

    The panelists noted the importance of content availability and the deals announced at International CES between content owners and television makers. Notably, several of these involve OTT providers, with Netflix taking a lead (SVOD content available in 4K on 2014 models of LG, Sony and Samsung UHD televisions). You can see 140 movies and TV shows from the Video Unlimited store (part of Sony Entertainment Network) and Samsung unveiled partnerships with Amazon, Comcast, DIRECTV and M-GO in addition to Netflix.

    Jon Watts, Director and Co-founder of MTM London, a research and strategy consultancy, is also sure UHD will be a real market, given time. “What is interesting is that when HD arrived in the 2000s it was Pay TV platforms who drove the initial take-up as they tried to differentiate their services from free-to-air broadcasters. It is interesting that the current 4K announcements are primarily coming from OTT players but that is symptomatic of the competition in the TV market.”

    He anticipates a drip feed of 4K content into the market while Pay TV operators ready themselves for the new format. “Then, depending on the price points and ranges of TV sets coming into the market we will see a steady transition to UHD this decade. There is no doubt that the market will shift in that direction over the next six years.”

    Jeff Binder, General Partner at the Boston and Denver (USA) based private investment firm Genovation Capital, reckons the content partnerships announced at International CES improve the value proposition for purchasing a 4K television but are unlikely to have a dramatic bearing on consumer choices. The main reason for buying a 4K set will be because it becomes the defacto product eventually, he predicts.

    Binder does not think the early availability of online video in this format, ahead of broadcast TV, gives OTT providers any meaningful advantage over platform operators. “We have seen in the recent past that OTT providers tend to do small things at the margins, things that Pay TV is not quite ready to do and that will be the case here,” he told the live webcast audience.

    Eventually the Pay TV operators with the capacity to launch UHD services will deploy to exploit their advantage and that will then prompt an arms race among the traditional platforms, Binder predicts. We will see this play out during the next 4-5 years.

    Binder thinks the implications of 4K on the distribution market are significant from a business perspective. “Pay TV has been lucky to have low CapEx over the last few years as digital migration and PVR deployment have tailed off,” he explains. “Now we have this new and massive bandwidth-hog sitting in front of us and I don’t think UHD is going away – it is real and serious and has significant capital implications for the market.

    “UHD is the thing that will have the biggest impact on the Pay TV industry looking ahead. Any time you create a new format that requires four times the bandwidth, you disrupt the entire distribution ecosystem.”

    You can listen to the Videonet webcast, ‘What we learned about the future of TV at CES 2014’ on-demand and free by registering here.

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