When others were still chuckling, they found it hard to laugh at themselves. The once-dominant Internet color TV brands, which had momentarily lost touch with global trends, now find themselves at a critical juncture. They're either stuck in the quicksand of price wars or planning to pivot and secure a better position in the next phase of the market.
Since its launch in 2013, the Internet color TV sector has surged, swiftly eating into the market share traditionally dominated by established brands. By September 2016, their online market share hit its peak at 45.8%, nearly half of the total market. However, after reaching the zenith, these brands' market share plummeted sharply over just four months, dropping to around 20%. It has remained below 25% ever since, with many brands either losing ground or struggling to hold onto what they have.
Ove Cloud's data corroborates this downward spiral. In the first quarter of 2017, the overall TV market contracted. Foreign brands saw a 5.8% rise compared to the same period last year, while domestic traditional brands experienced only a slight dip of 1.6%. Meanwhile, the market share of Internet brands fell by 4.1% from the previous year.
As the "leader" of the Internet color TV brands, LeTV's TV division is grappling with challenges both domestically and internationally. At the company's 2016 shareholder meeting, LeTV CEO Liang Jun admitted that the company has seen negative growth since the first half of the year. Industry experts attribute LeTV's downturn to a mix of internal issues—branding, channel management, product design, and supply chain inefficiencies—as well as external market pressures. One thing is clear: the "magic" of Internet color TV brands is fading, and the strategies that once worked are no longer viable.
The "Three Axes" Have Become Outdated
Explosive promotions, massive content offerings, and discounted memberships used to dominate the marketing pages of Internet color TV brands. Content, cost-effectiveness, and e-commerce channels remain the "Three Pillars" of this segment.
According to He Xianghui, senior research manager at China Consumer Electronics Co., Ltd., young consumers in the digital age are quick to embrace new brands and innovations. The rise of Internet color TVs brought fresh ideas to the industry, leveraging content, cost-efficiency, and online distribution to grow rapidly. However, the market conditions that once favored these brands have shifted dramatically. Relying on old tactics is no longer feasible.
The 2016 China TV Market Summary Report by China Yikang reveals that the growth红利of online channels in the TV market is diminishing, with online and offline channels moving toward equilibrium. The growth rate of the online TV market dropped from 109% in 2013 to 36% in 2016. With the saturation of netizens and online buyers, the benefits of e-commerce are waning, and the reliance on online channels alone is unsustainable.
Moreover, the content and price advantages that once defined Internet color TVs are crumbling. Traditional manufacturers have launched their own Internet-connected smart TV brands, employing multi-brand strategies and building their own content ecosystems. This has diminished the uniqueness and leadership edge of Internet TV content.
Additionally, since the second half of 2016, TV panel prices have skyrocketed, increasing by over 50% for some popular sizes. Under rising cost pressures, Internet color TV brands have been forced to hike their product prices. This effectively shattered the final line of defense against traditional brands. The "Three Pillars" are now obsolete, leaving Internet color TV brands at a crossroads.
Peng Jianfeng, deputy secretary-general of the China Electronic Video Industry Association, emphasized that low-quality, low-price competition is detrimental to long-term industry health. Brands should focus on value-based competition, avoiding homogenization and price wars.
“Now we’ve adopted a new approach, moving from loss-leading pricing to cost-based pricing,†said Renjun, LeTV’s new CMO. Although cheaper sales have yielded positive results, the limitations of online sales and the need for user experience via physical stores are becoming apparent.
Competition Enters Phase Two
With the domestic consumer market saturated, the TV market has transitioned from growth-oriented competition toå˜é‡competition. Companies are innovating through technology and service differentiation to escape homogeneous competition and open new paths.
According to Lu Jiebo, deputy secretary-general of the China Electronic Chamber of Commerce, consumer surveys show a growing interest in AI and OLED TVs, representing 38% and 22% of respondents, respectively. The adoption of advanced display technologies and artificial intelligence will drive the TV industry forward.
A survey by China Yikang found that among the factors influencing consumer purchases, price accounted for 11.6%, price-to-quality balance 51%, and quality 37.4%. As consumption patterns evolve, price-driven purchasing is fading, with brand and quality becoming paramount.
He Xianghui believes that for Internet color TV brands to thrive in future competition, they must differentiate their products through unique features such as design, interactive capabilities, and user experience. Building brand equity and loyalty will help them transition to the next stage of brand competition.
Lu Jiebo added that sales data shows China’s TV market is trending toward larger screens and premium segments. Continuous technological advancements and product restructuring will be key to securing advantageous positions.
Despite these shifts, some brands like Xiaomi are integrating AI technology and focusing on user experiences. Even amidst struggles, others are expanding offline channels. Some may revert to aggressive pricing strategies to survive.
At this crossroads, the decision to remain mired in price wars or to adapt and innovate is pivotal. The captains of these brands face a historic choice.
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