For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment
There’s been a surfeit of statistics this week as a combination of
December data and forecasts for 2010 converged to confuse us all. Pity poor
home entertainment consumers trying to make sense of the glut of new
technologies on offer at almost every price-point, when all we want to do is
escape the economic downturn, sit back and enjoy a good film.
Keeping up with technological trends is rather like ordering a
Chinese meal – in more ways than one, given the origin of most consumer
electronics equipment these days. Fundamentally, you are hungry but the menu
has so many options, combinations and side dishes that you end up choosing Bat
Col Sui Mai with extra meatballs and gelatinous rice. And then you wonder how
to eat what’s on your plate with just chopsticks.
The point is that customers must find buying content – let alone a
Chinese meal – a satisfying experience or they’ll be back to demand a refund.
Where once a simple television set kept the whole family amused for hours,
setting up a “connected home” has today become a job for a specialist
installer. Getting one remote control to work with another manufacturer's
hardware can be almost impossible and for something like 3D there’s no
guarantee that one set of glasses will work with another screen.
After years of raised expectations, convergence has arrived. CE
retailers offer more types of hardware than ever before, so it is no surprise
that problems arise from the vast number of possible inter-connections. Instead
of making things easier, the combinations of phone, media player, games
console, screen and computer stretch half way to infinity. “Do you want active
or passive glasses with that, sir? And perhaps a little BD Live for madam?”
Faced with so many mystifying media options, the softly, softly
approach to 3D that Sky is planning might prove to be very wise. Both in
hardware and software, the company has chosen to take the simple route at the
expense of a slight loss of quality. Sky has been evaluating 3D in-house over
the past 18 months and has opted for an easy-to-understand solution that will
allow many existing customers to retain their current Sky box.
For owners of other hardware, things might not be quite as simple.
The Blu-ray Disc Association has agreed on a 3D standard although it seems that
many current Blu-ray owners will have to buy a new box when 3D discs start to
arrive – apart from PS3 owners of course. For subscribers of IPTV and cable
services, their current set-top box (STB) is unlikely to work and in nearly
every case, a new flatscreen TV will be required.
Just when the HDTV market for 2010 was looking good, consumers
might decide to wait until mid-year for 3D to arrive. When it does, there is no
certainty that the hardware will sell in any great quantity, which places CE
retailers in a difficult position, since conventional flatscreens have been
good news for the whole industry.
Market research released on Tuesday by the European Information
Technology Observatory (EITO) predicts 2010 sales of more than 50 million
flatscreen TVs in the EU. More than 10 million will be delivered to British
homes, the largest market in Europe, up 5% from 2009. The love affair with HDTV
is forecast to continue in every country in Europe (apart from Italy), as
consumers fall for the charms of World Cup Football and the Winter Olympics on
ever-bigger 2D screens at ever-lower prices.
Technology has been kind to the domestic budget when it comes to
flatscreens. The EITO report reveals that the average price for flatscreen TVs
has almost halved over the past four years, from €1,000 to €530, with an
anticipated fall of 8% over 2010. Specialist CE retailers may view 3D as a
chance to enhance margins but it is a speculative gamble. The ability to sell
3D content this year is heavily dependent on the CE industry’s ability to
manufacture and supply sufficient units into the retail chain to meet
anticipated demand. CE retailers face dealing with the risks associated with
the launch of high-cost 3D screens when conventional 2D HDTVs continue to be so
successful.
DSG International, owners of Currys, said that sales were “better
than expected” over Christmas, up by 8% and easily beating analyst predictions
of less than 3% for the period. But CEO John Browett also revealed that gross
margins were “largely flat” at the moment, with a “relatively subdued time of
it” for electricals, both at Currys and at competing supermarkets. He claimed
there’s a risk that UK demand could weaken again and said that issues within
the economy mean that DSG is not expecting strong economic growth.
Over at Comet, which reported a decline in seasonal sales of just
less than 4%, CEO Thierry Falque-Pierrotin blamed Tesco’s presence in non-food
retailing for the increasingly competitive UK market for low-priced electrical
goods: “It is putting some pressure on entry price products,” he said.
A report from Verdict Research this week noted that retailers were
“very cautious” with stock levels, which reduced the need to mark down prices
and led to shoppers buying the same quantity of goods as last year while paying
more for them – and this despite the reduced VAT rate. Verdict forecasts low
growth rates for several years to come with retailers having to work harder to
win a share of consumer spending. It doesn’t sound as though 2010 bodes well
for investment in stocks of high-ticket and complex entertainment hardware.
Some companies have reason to celebrate Christmas 2009, however,
which managed to be a success for many e-tailers, as research this week from
the Interactive Media in Retail Group (IMRG) shows. Consumers continued the
trend to spend more online than ever before, parting with more than £5.5
billion in December, a 17% year-on-year increase.
As for the Italians and their apparent reluctance to buy
flatscreen TVs, could it be that they have a life beyond home entertainment?
Maybe the “slow food movement” in Italy is part of the same relaxed approach to
life that makes them least likely to stay indoors and watch TV. Never mind
Chinese, if you are hungry, few things are more satisfying than a plate of
pasta on a Tuscan terrace as you watch the sun go down.
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