Traditional TV facing challenge from the Web

Internet companies are changing the landscape of the television industry by combining entertainment with commerce

Within 28 minutes, 5,555 over-the-top TVs were sold out by LeTV, an online video portal in Beijing, on Nov 11. The TVs, which deliver video and audio over the Internet, cost 6,999 yuan ($1,140) each for 60-inch models and 1,999 yuan for 39-inch versions.

The buyers made a great contribution to the spending spree on the so-called Chinese Singles' Day, invented by e-commerce entrepreneurs to boost sales.

Also on that day, 1,111 OTT set-top boxes from LeTV were sold as soon as after they became available. Each box cost 490 yuan, providing one-year access to the portal's online video service plus a gift card offering an additional three months of access.

The hot sales came just 20 days after the company took orders for 21,000 50-inch OTT TVs on Oct 22, though it had only 10,000 in stock.

"Market demand went far beyond our expectations. Consumers started to realize that over-the-top content delivery is the future direction of television," said Zhang Zhiwei, vice-president of LeTV.

Since the beginning of this year, OTT TV and set-top boxes have grown in popularity. Web users are no longer satisfied with watching copyrighted movies and TV series online on the small screens of their personal computers, laptops or tablets.

They feel more comfortable watching a wide range of content on a large screen with better visual quality.

"I got tired of connecting my laptop to my TV. It's not convenient," said Han Peng, a software development manager at an information technology company in Beijing.

He bought an OTT set-top box from Xiaomi Corp, a mobile Internet company that develops smartphones, apps and consumer electronics. The box is mainly used for playing children's cartoons and movies for his family.

"Before I bought a MiBox, I had to watch whatever was shown on TV at a fixed time. But now, I can choose what I want based on my own schedule," he said.

Many users of OTT TV and set-top boxes share his delight. Not long ago, they abandoned TV broadcasts by downloading movies from the Internet or watching their favorite content online.

According to iResearch, a market research firm focusing on the Internet industry, the active audience for online videos in China hit 450 million for PCs and 120 million for mobile phones and tablets in August.

Viewers watched online videos for an average of 43 minutes on a PC every day that month and 18 minutes on mobile devices.

The Internet is posing a real challenge to the TV industry, but it also brings opportunities for change. Experts said that TVs will become the next device to offer Internet access in addition to PCs, mobile phones and tablets, because they are one of the most important home appliances, connecting all family members.

"A large TV screen at home is the best partner to a small mobile screen," said Peng Gang, senior vice-president of LeTV.

"Today, we regard TV as a device for Internet access. This revolution is inevitable, thanks to the continuous efforts of Internet companies to enrich their content resources and improve user interaction," he said.

The change is taking place with the increase of Internet speed in China, said Liu Chuang, general manager of the flat display panel consulting division of All View Consulting.

The average Internet connection speed in China stood at 3.3 megabits per second in the second quarter, according to ChinaCache International Holdings Ltd.

The State Council, the country's cabinet, plans to further increase household Internet connection speed to 20 Mbps in the city and 4 Mbps in rural areas by 2015.

Competition for the Internet market on big screens has become increasingly fierce this year, as many well-known Internet companies have expanded into the TV industry.

The e-commerce giant Alibaba Group Holding Ltd gave 1 million set-top boxes — each costing 399 yuan — to its customers for free on Nov 11 as a reward for their patronage.

IQiyi, a video provider owned by China's largest search engine Baidu Inc, debuted its 48-inch OTT TV jointly with TCL Multimedia Technology Holdings Ltd, a leading consumer electronics manufacturer, on Sept 3.