Gauging the addressable market for UHD

The latest (and provisional) forecast from the research firm Strategy Analytics is for 7.3 million UHD television sets to ship globally in 2014 and then 15.7m in 2015, 28.2m in 2016 and 44.3m in 2017. This would take the total of UHD televisions installed in homes to over 90 million by 2017.

UHD TV prices, viewed by the firm as a critical factor in uptake, along with content availability, are expected to fall significantly in 2014, with 50-inch models from the major TV brands likely to sell for less than $2,000 later in the year.

The analyst firm also issued some important statistics recently about consumer propensity to buy a UHD television set. Based on around 6,000 interviews across the U.S., UK,

Germany, France and Italy (carried out late December) 55% of people said they are likely to buy a new UHD or 4K television within the next two years. The proportion who said ‘Very Likely’ in the U.S. was 19%; across the European markets the proportion of ‘Very Likely’ consumers averaged 14.5%. The question asked respondents to assume significantly improved pictures and that pricing was acceptable to them.

When gauging the addressable market for UHD television services, a key question is whether you can enjoy the benefits of the new format on mid-sized televisions rather than 80+ inch monsters. The majority opinion is that below 55 inches the benefits are limited but above that UHD will deliver a noticeably better experience than HDTV.

There is already a trend towards larger televisions. “55 inches has emerged in Q4 2013 as the most important screen size in terms of unit sales,” a spokesman at Futuresource, the UK consulting firm notes. “This size strikes a nice balance between price and screen size. We anticipate that 84+ inch televisions will remain prohibitively expensive and though the benefits of UHD are more significant in the large screen sizes, depending on your viewing distance, the 55-inch screen size gets a discernable improvement.”

Futuresource says consumers go into a store with a budget in mind and come out with the largest screen size they can get for their money. Vassilis Seferidis, Director of European Business Development at Samsung, senses a desire for bigger screens even before the content is available to fill them with UHD pictures. “When you get to 55 inches you start to reach the limits of HD. Then you have to go to UHD or higher resolutions if you want the same level of experience,” he argues.

Futuresource issued figures at International CES 2014 suggesting that UHD sets will account for 5% of the televisions sold this year. According to Seferidis, when we reach the point where 5% of all the televisions installed in homes (rather than 5% of new sales) are UHD-capable, the major Pay TV operators will start launching their UHD services.

He points out that 5% compatible screen penetration was the trigger point at which platform operators and channels launched their HD services last decade. Samsung is working on the basis of a viable starter mass-market for Ultra HD (with 5% set penetration) in 2017 in Europe.

Streaming services are already appearing to meet early demand for ultra high resolution content. Video Unlimited, the movie download service from Sony, already offers a catalogue of 140 titles in 4K, while Netflix announced deals with Smart TV manufacturers for 4K streaming this year and Comcast will make 4K streamed content available via a Samsung Smart TV Xfinity app during 2014. As anticipated, streaming will provide the first sight of ultra high resolution content, if not true UHD, in consumer homes.

Ian Trow, Senior Director Emerging Technology & Strategy at Harmonic, a leading encoding and storage vendor, thinks streaming will be a major delivery channel for this new format. “It will play an instrumental role in the introduction of 4K/Ultra HD services. Once it is established, I believe this viewing habit will be difficult to shift and streaming will be here to stay.”

According to David Watkins, Director, Connected Home Devices at Strategy Analytics, “It is highly likely that, initially, premium streaming services along with Blu-ray will be the main conduit for 4K content to address the demanding, high-end and early adopting market segment. Once 4K capable sets penetrate the mass-market in a meaningful way, broadcast will step up to the plate, although we do not see this happening until 2016 at the earliest.”

Ian Trow says the market or linear UHD will be held back if screen manufacturers put sales figures ahead of a quality experience, especially with the public already in a guarded mood after the 3D ride. This concern is echoed by Watkins, who warns that Chinese set manufacturers are mainly focused on pixel count, with little consideration about compression, colour depth and frame rate, all of which are critical, he says, when displaying high quality native 4K content.

“This is why Chinese vendors have been able to sell very low cost UHD television sets, like sub $1,000, into their domestic market. As these vendors make a push into other markets there is some concern that sub-standard implementation of UHD technology will cause a backlash amongst consumers.”

There have been some notable experiments with UHD, mainly involving sports, like the screening of a Bayern Munich vs. Dortmund Bundesliga football game by Sky Deutschland. But there is definitely no sense of urgency from Pay TV operators yet.

Among the obvious candidates to pioneer a next-generation format, DIRECTV believes 4K will have broad appeal once there is a convergence of reasonably priced 4K television sets and more 4K content. The U.S. satellite operator says it will be ready if and when the consumer demand materializes. BSkyB says it is watching the rate of UHD set penetration while continuing its R&D projects.

Swisscom has not made any firm decision about introducing UHD yet but the company is looking at the possibility of offering UHD VOD in 2015. “For this we need a new set-top box supporting HEVC and HDMI 2.0 and, of course, we need to get hold of the content,” Peter Fregelius, Head of Entertainment Devices at Swisscom, notes.

His company thinks UHD makes sense for consumers with TV sizes of 55-inches and above and the telco is confident that there is a place for this format, although it is quite conservative in its estimates about when it will take off. “It will start with VOD content and consumer produced UHD content. It will take a long time, at least five years, before we will have broadcasting of UHD,” Fregelius suggests.

This is an excerpt from a recently published Videonet report, ‘Completing The Ultra HD Jigsaw’ that outlines how Pay TV operators will be able to differentiate their true UHD services from 4K streaming. The report also highlights important changes in the emerging UHD ecosystem, including the arrival of MovieLabs specifications that could herald a new era in content protection. Content protection has hardly been discussed in relation to UHD until now and these specs could be considered the last piece in the jigsaw for this new format. The report includes insights from Strategy Analytics, Futuresource, Swisscom, Farncombe, Verimatrix, Harmonic and Elemental Technologies, among others. You can download it (free) here.