Tencent gets smart with television venture

The vigorous expansion of Chinese Internet companies in the smart television sector is set to alter the landscape of the traditional TV market, analysts said after Tencent Holdings Ltd joined hands with LeTV.com to make and sell smart TV sets.

Tencent, China's most valuable Internet company, said on Monday that it has launched a "deep collaboration" project with major online video provider LeTV to promote smart TVs.

"The large user number base and traffic of Tencent will help us build a stronger paid viewer base," said Yang Yongqiang, chief technology officer of LeTV.

Yang added that TVs with screen sizes over 55 inches will be the first choice for Chinese families in the coming years.

Industry research firm All View Consulting estimated that the penetration rate of smart TVs - TV sets equipped with open-source platforms, video on demand, interactive capabilities and application stores - is on track to break 47 percent by the end of this year.

The country's total TV sales hit 82.2 billion yuan ($13.4 billion) in the first six months of this year, beating industry estimates. More than 23 million TVs were sold from January to June, an increase of 29 percent year-on-year, said AVC.

"Internet companies have rich technological reserves and the ambition to enter the smart TV market," said Zhou Xiaoxiao, an analyst who follows the flat TV segment at AVC.

Video website iQiyi.com, a subsidiary of online search giant Baidu Inc, said earlier this month it will develop smart TVs with local manufacturer TCL Multimedia Technology Holdings Ltd.

E-commerce company Alibaba Group Holding Ltd also launched set-top box and TV operating systems in a bid to acquire online traffic from living rooms.

Alibaba's smart TV products, co-developed with TV maker Skyworth Group, are expected to hit the market in October.

Meanwhile, Xiaomi Corp, a Beijing-based smartphone maker, has recently released a 47-inch 3D smart TV featuring a self-developed operating system.

Although the smart TV industry in China is in its infancy, some top players are already mapping out a profit model based on their major businesses, according to Zhou.

"Online video providers such as LeTV and iQiyi are betting on smart TVs to enlarge viewer numbers while Alibaba is trying to sell goods on its TV platform," Zhou added.

Chen Xudong, head of Lenovo Group Ltd's China business, said the top priority for smart TV vendors is to build up a product chain big enough to cover most buyers' demands.

"I don't think our smart TV unit is ready to generate profits anytime soon, the market is far from maturity and we need at least two more years to educate traditional TV users," said Chen.

Analysts said the future battleground for smart TV makers will likely be viewers' experiences and video content. Companies with no video resources should find a strong partner to supply enough programs.