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Viewing report
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Focus Report On Digital TV Industry
Analysys International, June 2005, Pages: 95
- Industrial environments
- China's digital television market has started, but it is still in the development stage.
- Since national standards and policies were not issued for quite some time, the digital television receiver industry has not entered the stage of mass production. Because of this, no one wants to invest in it, resulting in tremendous difficulties that are now being faced by the industry. If those standards are issued before the end of 2005, China's digital television industry will enter a rapid development era from 2006 to 2008. These standards would cover implementation specifics like Host-Card Separation and digital transmission technologies.
- The content resources of digital television are in short supply and the service platform has not been completely established.
- Commercial mode
- From examining commercial operation models of cities where digital television is currently operating, the following features have been identified. Large cities are intermediately developed and citizens have a relatively stronger purchasing power. Government plays an important role in the process of promoting digital television and boosting its development. The problems of high investment and sluggish returns are addressed by the joint assumption of investment risk for all parties. In the early stages of market development, promotion should be stressed but efforts should be take to minimize its popularity.
- At the same time, some common problems with the development of digital television have been discovered. The availability of suitable content is the most important bottleneck to the development of digital television. Current models of STB sales go against the development of digital television market. The costs of partnerships are unclear and there are potential disagreements with the division of the returned benefits. Interactive TV programs are in short supply. Finally, the digital television industry does not show its advantages. These problems should be solved as the industry grows and development proceeds.
- User scale and market scale
- In 2004, there were 1,020,000 subscribers of digital television, and in 2005 it is estimated that there will be 5,350,000 home subscribers. The beginning of an explosive growth trend gradually appears. After this rapid growth from 2006 to 2007, it is estimated that there will be 50,000,000 residential subscribers of digital television by the end of 2008. The compound growth rate of digital television subscribers is estimated at 164.6% from 2004 to 2008.
- The number of digital television sets sold from 2004 to 2008 is expected to exceed 25 million. This has a compounded growth rate of 79.7%. The volume of digital STBs sold during the same time is expected to exceed 21 million, reaching a compound growth rate of 126.4%.
Suggestions
Suggestions to SARFT
- Problem of standards
Standards of host-card separation should be published as soon as possible. The lack of standard has resulted in incompatibility issues between DTV systems in different regions. It is impossible for competent set-top box manufactures to bring large-scale resources to the DTV field. Therefore, they are unable to introduce huge social resources for the development of DTV, which severely affects the speed of DTV development.
At the same time, agreements on standards related to services and interactions should be strengthened. CA agreements of different manufacturers are widely adopted in front end systems, which mean that front-end systems are closely related to STBs. This increases the production and maintenance costs for STB manufacturers, effects STB upgrades and next generation deployment, consequently slowing the DTV development.
- Ideas for development
The SARFT needs to create a highly unified awareness of digital television within its own ranks. They also need to decide how fast they want to develop the technology, as well as define the desired scope of development. If they blindly push the technology to high speeds too fast, they will lose the consumer confidence and trust.
Our Findings indicated that only 15% of consumers are aware of DTV. SARFT should promote the concepts through various channels, allowing the consumers to become aware of new technologies.
At same time, SARFT should think about different development designs according to the variable conditions across regions. The integral translation method does not fit all. For example, if the integral translation method were completely adopted in Beijing or Shanghai, it would be an enormous investment, demanding large amounts of content and a continuous flow of funds. The integral translation method will bring substantial difficulties to the development of medium or large cities.
The administrative authorities of Radio, Film and Television should separate the production and distribution of television programs into a step by step schedule. This would allow them to design good programs and integrate all resources into the development DTV. Using regulations and market economy laws, special corporations could be built to fulfill the content and service needs of DTV.
- Cooperation for a win-win status
The relationship between cable digital TV and IPTV is not competitive, but complementary. The DTV market dominates with wider audiences, but IPTV is more convenient to use and can be viewed without being online. The users of cable television consist of most consumers, yet the users of IPTV are a small consumer subset. So the State Administration of Radio, Film and Television and the Ministry of Information Industry are cooperating with a concerted effort to develop DTV and realize its win-win status.
Suggestions to Network Carriers and Managers
The operators and managers of networks will be the immediate beneficiaries of the rapid development of the digital television industry. This is because of the monopolies held in various regions of China. We offer the following suggestions to network carriers and managers.
- Developing diversified services
High returns in a short amount of time can't be accomplished with basic monthly service charges. Network carriers and managers are encouraged to expand their services to include data transfer, Internet access, and other services according to the customer needs and resource availability.
- Cooperating with STB manufactures
The generalization of STB becomes an opportunity for DTV carriers. This opportunity allows DTV carriers to seize market shares, which is an important characteristic of the present market. Under this condition, the network carriers should select 3-5 set-top box manufacturers as their associates. Various models of cooperation can be adopted, including leasing, subsidy, or leaguing.
- Outside competition is not negligible
The telecommunication carriers have gazed at the digital television market for a long time. Although the types of consumers viewing TV can't change a lot over the next couple of years, the development of DTV has to be sped up to prevent the telecommunication carriers from surpassing the former DTV carriers.
- First tests should be at hotels, foreign residential areas, specialized user groups
The network transmission carriers, as the leading actors that desire the general use of digital television, can start their deployment plans at hotels, foreigner housing areas and specialized user groups. This can be accomplished with few funds and resources.
Currently, part of the consumers that accept satellite signals directly are four and five star hotels. There are three good reasons to rebuild their DTV networks. First, DTV transmission can be submitted over current network wiring. Second, the consumers will not reject the high costs of using the new service. Third, the number of potential consumers is considerable, which provides a large user base and plays an important foothold which could drive the entire market.
- Build up return transmission channels
It is important to build two-way communications with the end user devices. Return transmission channels could be built using various technologies that are already deployed. These include PSTN, ADSL, IP and wireless networks. This preempts the need to overlay bi-directional cables during DTV deployment, which reduces the immediate investment requirements. This is possible because heavy content, like television and radio, requires downstream bandwidths much larger than that needed to facilitate service requests. By developing return transmission channels, the industry creates the user demand that will push interactive content.
- Problems with transitions between enterprises
The industry of cable digital television cannot build full cost accounting system, the enterprise cannot develop independently and be stronger until all the network operators and managers change their system into enterprise and the enterprise run according to the enterprise system.
Suggestion to Manufacturers of Facilities
The development of digital television brings forward new requirements for a good many of related facilities. It provides huge business opportunities for the digital image, network facilities, television, and digital device industries.
By the end of 2005, the SARFT should establish standards for the separation of machines and cards. This is being pushed by public opinion and the slow development of DTV. Once the anticipated standard arrives, the market will explode with opportunities for companies that produce end user devices. These devices will begin to appear in 2006.
The manufacturers of end user devices should take part in running DTV services. By adopting models like 'payback by installment + business sharing', the manufacturers increase the rate of return and reinforce the relationship with the DTV carriers. The carriers will face huge pressures when they develop IPTV. The pressure can be abated by installment agreements with the manufacturers. This means that the manufacturers have to wait longer for returns on their investments, but it can reinforce and strengthen the relationships with the DTV carriers and increase revenues to some degree.
Some small or middle sized manufacturers cannot endure the pressure of reshuffling caused by the uncertainty of standards. The large-scale manufacturers of end user devices should actively cooperate with others to strive for large a market share and keep the advantages they have gained in the past
Suggestions for Program Providers and Integrators
- Domestic content is currently the major user demand
Currently, the available content is not enough to meet the demands of DTV carriers. Private content producers are encouraged to create programs on their own. This can not only allow them to control the costs but also easily grasp the style and characteristics that they strive for. This will also help meet the current demands for new entertainment.
- Intervention of new parts in program market
The digital arena provides opportunities for outsiders to intervene in the content creation industry. This should enrich the competition in the DTV content market. Providers mainly come from related fields, i.e., radio, publishing, education, video games, and other industries. The industry should encourage new participants to get involved in some new services, such as interactive programs. In general, the digital content market is relatively open with some roles offering potential content or technique. Vertical integration is under way.
The vertical integration trend in the television content realm is quite obvious. Some digital platform operators or DTV platform shareholders provide television content and Television Network integration. Others have become part of a tidal force integrating TV content providers and integration carriers.
The large state-owned organizations of content distribution and production should make full use of their content resources. They should seek out opportunities under multi-layer distribution systems. Doing this allows them to cooperate with various aspects of the market and build new profit models. At the same time it also secures the traditional television market.
The private film producers should pay close attention to the reuse of content resources and aim the content innovation at target audiences.
- Establish an operable business model for IPTV service production
- Clarify the profit model according to available resources.
- Design strategies to bind production services, sales and distribution channels
- Target the strategies towards specific consumer groups.
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