World Cup comes two years too early for Samsung, LG UHD TVs

By Se Young Lee and Sophie Knight

SEOUL/TOKYO (Reuters) - Football fans who have splashed out on top-of-the-range ultra-high definition (UHD) TVs in time for the FIFA World Cup next month may not get to watch any matches in the new format.

Only three matches will be filmed in UHD, which boasts resolution four times higher than the full HD standard. That is because even in Japan, where the format was invented, few broadcasters have the ability to transmit the large amount of data required for UHD over conventional broadcast satellites.

Analysts say World Cup fever is likely to give UHD sales a quick boost, though the longer-term outlook remains unclear, partly due to the uncertainty surrounding content distribution.

Dependence on broadcasters highlights the risks TV makers such as Samsung Electronics Co Ltd and LG Electronics Inc take when promoting new technology. Plasma screens were short-lived, 3D is widely regarded as a gimmick, and smart TVs - with features akin to smartphones - have not become mainstream.

"Distribution and content are the biggest hurdles for UHD adoption," DisplaySearch analyst Hisakazu Torii told Reuters.

The World Cup is arriving at least two years before regular UHD broadcasting becomes plausible, analysts said.

UHD content is indeed scarce. Sony Corp, which sees widespread UHD adoption taking as much as seven years, is among a minority in offering films in the format over its online Video Unlimited service, accessed through smart TVs.

Even so, Samsung and LG - the biggest TV makers by market share - are not missing a chance to boost UHD sales. The World Cup, which comes every four years, offers an opportunity to charge a premium for UHD before competition drives prices down by as much as 50 percent by year-end, industry watchers say.

"Demand for UHD TV will drive global TV market growth," Simon Sung, vice president of Samsung's visual display division, told analysts last week while discussing 2014 market conditions.

UHD shipments will reach 13 million TVs this year from 2 million last year, or about 6 percent of an overall market destined for its third straight year of decline, according to researcher IHS.

Sung said he expects the global TV market to grow this year, albeit by a low single-digit percent, citing the World Cup as a factor.

INVESTMENT

The process to make HD and UHD TVs is not so different, said analysts. So Samsung and LG - like panel makers such as LG Display Co Ltd - likely invested in UHD just a tiny fraction of the pair's 26.5 trillion won ($25.65 billion) in combined 2013 capital expenditure.

Samsung, LG Electronics and LG Display declined to comment on the level of their UHD-related investment.

Broadcasters, on the other hand, have to contend with a high barrier to entry. In Samsung and LG's native South Korea, public broadcasters plan to invest around 61.8 billion won in UHD infrastructure and content over the next two years.

A group of cable providers aims to invest about 650 billion won by 2017. At present, there is one UHD cable channel airing for 20 hours a day.

"The channel should get about 200 hours' worth of content by the end of year, though that won't be enough to provide fresh programming on a daily basis," said Korea Cable Television & Telecommunications Association spokesman Kim Yong-bae.

Concern over content is exaggerated, said Shinhan Investment analyst Soh Hyun-cheol. Content production costs may rise by 20 percent to shoot in UHD, but that is far less than for 3D, and the better picture quality offers real benefit, he said.

"At sizes above 50 inches ... UHD TVs offer better readability than full HD TVs even if they're not showing UHD content," said Soh.

A bigger worry is that a honeymoon period of wide margins is unlikely to last very long, indicating the technology might not be a long-term growth driver. Competition will see prices pushed lower as makers fight for market share, and margins may be as thin as those of HD within two years from now, analysts said.

The average sales price for a 55-inch UHD TV is likely to be around $1,078 by the October-December quarter from $2,057 a year earlier, showed projections from researcher DisplaySearch.

"It only takes one vendor to drop their pricing and they'll all have to go that way," said Strategy Analytics' director of connected home devices David Watkins. "That's just how the TV market works."

ADOPTION

Samsung expects UHD to catch on at a quicker pace than previous technology, though neither Samsung nor LG provided forecasts of when UHD will become the primary standard.

"The market and the industry are moving together with UHD content being released this year," Samsung said in an emailed statement.

While broadcasters and cable providers are busy developing infrastructure, any void could be filled with online services which will depend on more Internet bandwidth for distribution rather than satellites.

Netflix Inc is offering content in UHD such as the second season of drama "House of Cards" and expects to broaden its lineup later this year.

Amazon.com Inc will popularise the format in partnership with Samsung and media firms such as Warner Bros and Lions Gate Entertainment Corp, while Sony plans to make a promotional film with footage of the three World Cup matches.

FIFA spokesman Giovanni Marti told Reuters in an email that the matches would be delivered on a world feed, but had no information on any broadcasters picking up the feed.

"The demand for such a format is still in the early stages of development," Marti wrote. "To set up double production [to film in UHD] at every match makes no sense at present."

(Editing by Christopher Cushing)