Key Points
- 4K Ultra HD, or 4K for simplicity's sake, is the new TV standard that will lure consumers with the promise of a future-proof TV set that will deliver the best TV content, at the best possible resolutions. 4K has four times the pixel density of standard HD, but in practice only the largest screens will deliver audiences a noticeable improvement in picture quality.
- Nonetheless, consumer uptake will come relatively quickly, because average selling prices of existing 4K sets have dropped a great deal and will drop much further, and content creators are getting on board. Half of all of North American households will have 4K-capable televisions by 2024, just ten years from now. The average selling price for 4K-capable televisions has dropped 86% worldwide in just two years, falling from $7,851 in 2012 to $1,120 in 2014.
- 4K content will roll out much faster than standard HD content. The first wave of 4K content will come from streaming services: Netflix, Amazon Instant, YouTube, etc. These Internet video providers can instantly get 4K-quality video to end users without having to make significant investments in new infrastructure. Broadcasters will have to make a lot of upgrades in new hardware, and so will be slower to roll out 4K.
- 4K television shipments will reach 11 million units worldwide by the end of 2016, but China will dominate this market. China currently accounts for 78% of 4K television shipments, according to NPD. And Chinese TV manufacturers are driving about 36% of 4K shipments globally.
Introduction
Ultra High Definition (Ultra HD) made a huge splash at this year’s Consumer Electronics Show. Nearly every major television manufacturer announced a 4K-capable display during the Los Vegas-based electronics conference.
But many industry analysts rushed to throw cold water on the excitement surrounding the new digital video format. They pointed out that the TV industry and electronics consumers were both slow to adopt standard high definition, and consequently were bearish about the prospects for fast 4K adoption.
We think Ultra HD will actually roll out much faster than many industry analysts believe for two reasons: Prices for Ultra HD-capable televisions have fallen dramatically in just two years. Also, Ultra HD content will become available very quickly, thanks to the present-day pervasiveness of Internet-based (or over-the-top) video services.
That's because OTT video providers don't face as many technical hurdles in adopting new formats as cable and broadcast television do. Services like Netflix can quickly absorb new formats, and deliver compatible content to audiences online — provided that the Internet bandwidth capable of handling the data traffic is there.
China will be the quickest country to adopt 4K. The country is currently the largest recipient of 4K Ultra HD television shipments, and China boasts the lowest average selling price for a 4K-capable TV (though there's some debate about whether many of these TVs will truly be 4K-capable, since they don't support adequate frame rates.) China's rush into 4K is mainly due to these low prices, and aggressive marketing.
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The 4K Format
The ultra high definition format actually includes two resolutions:
- 4K (or 2160p), at 3840 pixels wide by 2160 pixels tall
- 8K (or 4320p), at 7680 pixels wide by 4320 pixels tall
In other words, 4K has twice the vertical and horizontal resolution, and four times the pixel density, of standard HD, at 1080p.
The Ultra HD format only comes in progressive scan, meaning each and every single line of resolution is drawn for every frame of video. Standard HD allows for progressive and interlaced scan (interlaced scan inevitably loses information between frames, since these are effectively reproduced in two sequential parts known as fields, each with only half the lines.)
The benefits of 4K's high-pixel density are much more pronounced on larger screen sizes.
Screen sizes above 55 inches, depending on the distance of the viewer, will lead to an image quality that shows off 4K's higher resolution. With smaller screens, the difference with standard HD might not be noticeable to the naked eye unless you're standing close to the screen (although, importantly, TV shoppers tend to stand pretty close to the screen in TV showrooms).
This report will focus on the 4K (2160p) format. Nearly every major television manufacture has scheduled 4K Ultra HD-capable displays for imminent release. 8K Ultra HD, however, is still in the early stages of development.
Adoption
4K Ultra HD-capable televisions will be in 10% of North American households by the end of 2018, up from only 5% of homes in the previous year, according to an ABI Research forecast. Based on this growth, we forecast that 4K televisions will be in roughly half of all North American households by the end of 2024, just ten years from now.
In the long term, we expect that 4K Ultra HD will be in nearly all North American households by 2030.
Content
4K Ultra HD content will become available much faster than content did for standard HD.
- Initially, the vast majority of 4K content will come from over-the-top (OTT) content providers, such as Netflix, Amazon Instant, YouTube, and M-GO.
- The Blu-ray Disc Association (BDA) is developing an extension to the Blu-ray Disc format that will support 4K Ultra HD, but we expect physical discs to be increasingly irrelevant as a delivery vehicle for 4K videos.
- Broadcast 4K will move far more slowly than OTT 4K. On the other hand, broadcasters' move to 4K will take place much faster than their earlier transition from SD to standard HD. The earlier transition was stymied by deeper technical barriers, like the industry-wide shift from analog to digital broadcasting.
Netflix, in particular, announced that it would vastly expand its 4K content library at this year’s Consumer Electronics Show. The company even produced the second season of its hugely popular "House of Cards" series entirely in 4K Ultra HD. YouTube has also announced a 4K channel.
Amazon is also laying the groundwork for a mass rollout of 4K Ultra HD content in the near future. The e-commerce giant has signed deals to distribute 4K content from several major studios, including 20th Century Fox, Discovery, Lion’s Gate, and Warner Brothers.
M-GO, a joint venture between Dreamworks Animation and Technicolor, is partnering with Samsung to make a number of 4K titles available exclusively to consumers who purchase televisions from the Korea-based manufacturer.
Efficient compression will be a key factor to the success of streaming 4K content online.
OTT video providers will have to adopt new video compression formats that will allow them to stream data-intensive 4K shows and movies to run-of-the-mill broadband Internet connections, with download speeds no greater than 15 megabytes per second.
What are the barriers to broadcasters' implementation of 4K? These include the cost of 4K-capable video production and storage equipment. Most broadcasters do not have immediate plans to produce primetime television content in 4K.
Special events, however, may be filmed in 4K. The International Federation of Association Football (FIFA), for instance, plans to film the final round of the 2014 World Cup in 4K.
Average Selling Price
4K TV adoption will largely be driven by the rapidly falling average selling price (ASP) of 4K-capable televisions.
In just two years, prices for 4K declined by more than 85% worldwide, falling from $7,851 in 2012 to $1,120 in 2014, according to NPD.
Prices fell even faster in North America. The average price for a 4K-capable TV fell by 89% in North America, dropping from $18,668 in 2012 to $1,986 in 2014.
China has the lowest average selling price for a 4K television. The country’s average price for a 4K-capable TV fell by 78% between 2012 and 2014. China broke the $1,000 mark this year, with the price of a 4K Ultra HD television averaging just $973.
4K TVs are still more expensive than their standard HD counterparts, but this difference is not as dramatic as one might expect. The difference in the manufacturer's suggested retail price (MSRP) for Samsung's 55-inch HD (8000 Series) and 4K (9000 Series) flagship models, is only $700, at $2,299 and $2,999 respectively. We expect this price difference to decline even further in the near future.
Shipments
4K TV shipments will reach 11 million units worldwide by the end of 2016, more than doubling from just under 4 million units at the end of this year, according to NPD.
North America will account for 18% of 4K shipments by the end of this year, at 700,000 units. The continent's share of 4K Ultra HD shipments will grow to about 23% by the end of 2016, at 2.5 million units.
China currently accounts for the greatest share of 4K Ultra HD television shipments.
The country will receive 78% of 4K Ultra HD TV shipments this year, according to NPD.
This distribution is likely the result of China's sub-$1,000 average selling price, and the country's rapidly emerging consumer base, which means many new TV buyers are coming into the market every quarter.
However, some of the TV sets marketed locally in China as 4K don't support modern frame rates — the speed at which source footage is reproduced — which will limit their ability to faithfully render images filmed at higher speeds (according to Display Search analyst David Hsieh, many Chinese 4K sets only support 30 or 60 frames per second).
Market Share
Unlike the smart TV market, in which American, Japanese, and Korean companies are dominant, China-based manufacturers account for a major share of the global 4K TV market.
- Sony has the largest market share of 4K-capable television shipments globally, at over 18% in the fourth quarter of 2013, according to NPD.
- Samsung has the second-largest market share, accounting for just under 15% of 4K televisions.
- Skyworth, a low-cost Shenzhen, China-based electronics manufacturer, accounts for 13.9% of the 4K TV market, just 1% less than Samsung. Together, Chinese television manufacturers account for slightly less than 36% of global 4K Ultra HD TV shipments.
The Bottom Line
- Fifty percent Of North American homes Will Have 4K TVs in just 10 years.
- In the near term, most 4K content will come from streaming services, such as Netflix, Amazon Instant, YouTube, and M-GO.
- The average selling prices for 4K-capable televisions have dropped dramatically over just two years.
- China is currently the largest market for 4K TVs.
- Chinese television manufacturers account for one-third of the global 4K TV market.