As we enter the 90th year of television in the UK, the sales of large screen TVs remain remarkably resilient. It is often predicted that, in a world of media disaggregation and high powered mobile video enabled devices, a big screen sat in the corner of a living room is increasingly outdated, soon to be shunned by the millennial content consumer. But the truth is somewhat different.
Large screen TV volume sales in the UK are above five million units a year, similar to the six million unit sales per annum that we have seen, on average, over the last 30 years. Volume decline is almost fully accounted for by the demise of the sub 32” sector; replaced by the tablet and mobile viewing devices, whilst larger screen sizes continue to sell very well.
Less than 4% of the 27 million UK homes do not possess a large screen television according to BARB data. In reality, the average home probably has at two or three televisions in use. High quality drama content via Public Service Broadcasting and must see event based viewing, such as sport or a royal wedding continue to drive the British love affair with TV. Combine this core Free-To-View offering with the excellent choice of new and old content from global giants such as Netflix and Amazon and it is easy to see why TV remains the UK’s No.1 leisure activity with, on average, 25 hours of viewing per week.
2019 predictions are that total market volumes will remain similar to 2018, with the potential for growth in total market value to circa £2.5Billion as a result of a continued shift to larger screen sizes. Ultra-High Definition 4k capability is already pretty much a minimum specification standard for all but entry priced models.
In spite of this market consistency and resilience, many independent electrical retailers have reduced or removed televisions from their stores, citing low net margins and fierce competition as reasons to focus finite shelf and stock holding space elsewhere. But is this a wise decision, bearing in mind that the value of the UK television market is more than double that of any sector of white goods, and larger than both cooling and laundry combined?
Surely there are ways to secure, from what is the largest single value sector of the CE market, a profitable return? I believe television remains a profitable opportunity for all those retailing and etailing in the electrical sector, so let me explain why I think this is the case.
Having established that the market is unlikely to reduce in volume and likely to increase in value it is worth looking in greater detail at the factors behind the sector resilience. For a concept that has been around nearly 100 years, the amount of investment in innovation and improved product performance remains incredibly high. A visit to any of the leading CE brands’ booths at this year’s CES2019 global tech trade fair in Las Vegas demonstrated that television is still very much the lead product that all the global CE tech giants use to showcase their capabilities in bringing new ‘Wow’ factor technology to market.
TV is constantly evolving, driven by an accelerating breadth of high quality content (high quality in both story telling and production as a result of ever increasing budgets), increasing choice thanks to the focus on long form video content from global Pay-Per-View players, and increasing opportunities for a more immersive and impactful viewing experience thanks to larger screen sizes and higher quality image and sound reproduction. We’ve never had it so good in terms of choice and quality. Netflix is forecast to spend a massive $13 billion on content in 2019; compare that to the BBC’s spend of £1.5 billion and ITV’s of £1 billion in 2018 and you get a sense of just how big and powerful Netflix are on the global stage. Netflix and Amazon now claim over 10 million subscribers to their services in the UK, not far behind the reach of UK giant Sky, incentivising viewers to consider regular upgrades to their home AV systems. Many viewers now pay more in annual content subscription and licence fees than the cost of a new premium 50”+ Television, which surely helps close the sale when comparing the low relative cost of the viewing device over its life versus the cost of the content?
Producers now view the quality of reproduction as highly as they view the quality of the story. The availability of superb quality productions combined with the digital distribution platforms that can deliver live streamed high band content into homes has encouraged television manufacturers to continue to invest heavily in continued picture and sound quality improvements. Every year, when I see the latest models on demonstration, I think that perhaps television has reached its zenith, a plateau of development and quality, and then, every year I am proved wrong as the latest models deliver noticeable improvements.
Manufacturers are incentivised to continue to invest as they know the market is healthy and is forecast to stay that way. Consumers rarely wait until their TV stops working to purchase as the pace of improvement and ‘more for less’ market pricing, encourages a replacement cycle that is far faster than the working life of a device.
Premium television prices are increasing and margins, whilst tough, are no worse than the average across the sector. Television remains a product that nearly every household, every person living in the UK, interacts with on a daily basis. Millions of consumers every year need to go somewhere to research their future purchases so why would any electrical retailer choose to exclude one of the largest and most active sectors in the market?
The fierce competition between global players continues to drive innovation. As design become less of a differentiating factor, superb picture performance though both OLED and QLED screen technologies has become a platform on which to deliver constant innovation. Voice control and AI features support simpler device control along with an intelligent learning capability, allowing the television to help the user identify and select content of interest to them based on historical viewing preferences.
Televisions of today are increasingly able to adjust their settings automatically to render the best picture and sound quality for any source, relative to the ambient viewing environment. In just a few years we have moved from highly capable, if largely inflexible devices to ones that deliver unbelievable image rendering with an absolute minimum requirement from the user to set up and adjust.
With the already superb UHD image quality, many are asking “What is the point of 8K image resolution, surely 4K is enough for any television”. If we apply 8K image resolution to today’s typical home set-up, considering viewing distance and screen sizes it is perhaps fair to say that 8k is unlikely to offer a benefit to the majority. Even 4K resolution needs a 60” plus screen size viewed up close to really deliver a difference in image quality. The major quality improvements from today’s 4K TVs come from High Dynamic Range (HDR) and Wide Colour Gamit (WCG), technologies that deliver benefits whatever the pixel resolution capabilities.
However, and as we have seen from the journey of SD to HD to 4K UHD, improved image rendering, and quality, opens up possibilities and incentives to continually re-invent the television. 8K opens up new possibilities; advances in production, screens that can be the size of a wall, superb detail when up close and a marketing story that helps keep the large screen TV format very much alive and kicking and front of the mind for viewers.
At CES2019, 8k TVs were positioned by the majority of the leading CE brands as the next iteration of leading edge viewing technology. Whilst sales of these TVs, which command a sizeable premium over 4K, are expected to be very low this year, the narrative provides clear evidence of a healthy future for global TV sales, based on constant innovation, demonstrable improvements in picture and sound quality and the drive from manufacturers to grow share and reach the coveted No.1 market share position. TV remains, by a long way, the largest value contributor of any consumer electronics sector.
Device performance and complexity is increasing. The Connected Home market is now gaining traction. Consumer interest in bespoke home solutions is growing.
If you look at the television market as a commodity sector, a box shifting exercise with no added value then it is easy to understand why many electrical retailers have given up on this sector. However, if you consider it as the most dynamic of any CE product sector in terms of innovation, brand investment, market resilience and consumer appetite for spend then, perhaps, more retailers would or should look at how a focus on the added value opportunities can enhance their overall customer offer.
We are most definitely in a Golden Age for television, the best content, the best choice, the best technology and the best value. Our love affair with television is as strong as ever. Millennials are being engaged in television through both long and short from content delivered over IP and Baby Boomers continue to view several hours of linear broadcast content every day.
Television really does offer something for everyone. That includes electrical retailers. Think about it.