Net TVs are popular sellers

Internet TV sets were on display at a recent Internet Protocol Television promotional fair in Beijing. The sets are proving popular sellers among young, technically savvy consumers. Asianewsphoto

Newlyweds Owen Lu and Shirley Li got married in May and bought a Hisense Blue Media V88 series Internet TV for their new home.

The couple represents the urban post-80s generation. Both work for international firms. They are digital-gadget fans and enjoy experiencing new trends.

"Internet TV is the new fashion," Li said. "That's why we chose it."

Although the price is much higher than that of a common LED television set, they consider it a cost-effective purchase.

Lu said the merger of Internet and TV functions was practical.

"Instead of one us lying on the bed staring at the PC screen while the other sits on the sofa watching TV, we can sit together and share the pleasure," Lu said.

"In addition, Internet TV makes our living room an entertainment center for family parties and gatherings for friends," he said.

Since Internet TVs were introduced to the domestic market in March, the products have become popular sellers.

For Hisense, Internet TV sales exceeded 1,000 during the May Day holiday.

Other domestic Internet TV producers such as TCL, Changhong and Chuangwei also reported strong sales.

To expand their share of this emerging market, each brand adds distinctive features to attract more customers.

Chuangwei added a Karaoke function to its Internet TV. Changhong features educational programs. But challenges remain, according to industry watchers.

First, Chinese manufacturers must keep a watchful eye on the foreign competition.

Although Samsung is the only foreign company to introduce Internet TVs in China, foreign makers have been introducing Internet TVs in other markets since the early 1990s.

Thus, foreign producers have a more established marketing system in place. There are other differences in how Internet TVs are packaged.

According to Xu Liyan, an information technology analyst at SeriChina Economic Research Institute, domestic companies are concentrating their services on video offerings.

Each brand in China offers only one or two Internet websites, making the source of information limited in comparison to foreign brands.

Foreign producers offer joint platforms from open suppliers such as Intel and Yahoo.

"Domestic Internet TV acts more like a video player, but foreign producers have taken a further step to integrate information. The latter will surely be more competitive in the long term," Xu said.

Another challenge lies in profit margins.

Updating

While a traditional television set is a one-time purchase, TV producers still have to invest in updating their platforms.

Internet TV maker Changhong, according to a recent study by SeriChina, has invested 150 million yuan for its current store of more than 10,000 movies. That expense will mount as more movies are released via the Internet.

"Producers must realize that relying on the cooperation of video websites is far from a long-term resolution, due to the stricter administration of copyrights," Xu said.

"Few websites can provide free videos, especially when the revenues from advertisements can barely cover the costs of purchasing copyrights," he said.

In addition, more consumers are avoiding the higher price tags of Internet TVs by connecting the Internet to their existing television sets.

For example, many LED TV sets have digital interfaces and USB ports on them, making it easier to play downloaded videos on TV sets.

Another issue is how to maintain customer loyalty to emerging products.

Ensuring security is important, since combining Internet access with traditional electronics products tends to raise the level of the threat of a potential Internet virus attack.

"How to prevent and resolve security problems will be a great challenge to the after-service market for Internet TVs," Xu wrote in his recent report, Marketing Strategies of Internet TVs in China.

The report also raised concerns about how to balance traditional TV programs and Internet content.

"Instead of making Internet and TV services two separate systems, customers prefer to directly insert Internet windows into TV programs," Xu's report stated.

Although the Internet TV industry has enormous potential, domestic producers still have a long way to go, industry experts said. Devising a strong marketing strategy and developing integrated functions are crucial to growing this new sector, they said.

Xu Liyan is a researcher at the SeriChina Economic Research Institute. China Business Weekly also contributed to the article

(China Daily 07/20/2009 page5)