Will Japan jump start 4K?

The market push for UltraHD is expected to be led by three key regions of the globe, notably North America, Western Europe and East Asia, according to NSR.

The UltraHD (or 4K) industry is in need of market champions to develop the ecosystem as uncertain market take-up and revenue potential has led to hesitation in investments to promote the platform.

On the heels of Eutelsat’s initiative late last year in deploying the first 4K TV channel for experimental and demonstration purposes, the Japanese government is set to launch the world’s first 4K TV broadcast in July 2014, roughly two years ahead of schedule, to help stir demand for UltraHD TV sets.

The service will begin from communications satellites, followed by satellite broadcasting and ground digital broadcasting. Japan is likewise looking to develop super high-definition 8K TVs where the Ministry of Internal Affairs and Communications plans to launch the test 8K TV broadcast in 2016.

The announcement is worth noting: first, the Japanese initiatives are government-led, aimed at boosting the country’s consumer electronics sector, which accounts for a relatively large share of the country’s GNP;

Second and more importantly, the initiatives being government-backed may not necessarily address or be in sync with pure market dynamics such that their impact may or may not work in boosting the UltraHD proposition.

Key questions are the following – Will the government initiatives lead to the envisioned faster or earlier development of the market cycle as well as improve UltraHD take-up rates? Or will the take-up rates remain the same even without the government initiatives thus following a “normal or natural” market cycle?

In NSR’s view, the government initiatives on the supply side will have some positive effect on the ecosystem. Developments in next-generation compression standards, which in NSR’s view is one of the most important to truly jumpstart the market, should proceed at a faster rate.

However, the level of impact will likely be relatively minimal as the market economics or “free market” economics affecting the demand side cannot be changed dramatically by these initiatives. Unless the government directly provides incentives such as direct subsidies towards the purchase of UltraHD TV sets that lowers the price of UltraHD TVs (which incidentally could lead to “anti-dumping” measures when applied to the export sector) the abovementioned supply-side measures will have little overall impact on demand.

Worldwide TV channels by formatAs such, UltraHD will remain a niche proposition accounting for a relatively small share of the globe’s total channel count, which should continue to be dominated by SD and HD channels. UltraHD due to expected high costs associated with bandwidth requirements as well as outlays from customers in the form of highly expensive UltraHD TV sets and added service costs for content bouquets, are longstanding issues that should continue to restrain investments in UltraHD from content providers as well as service providers in the cable TV, DTH and IPTV camps.

Industrial policy-type measures where government’s influence to boost industries and sectors have worked well in the past, particularly in the case of Japan. Strategies by Japan’s Ministry of Internal Affairs and Communications, as well as that of Eutelsat, are certainly valuable. However, in the latest UltraHD market initiatives where stimuli affect the supply side and not the consumer, the impact in NSR’s view is likely to be minimal.

Demand-related initiatives need to be developed to truly impact the overall UltraHD proposition. Yet, measures when exported outside of Japan could potentially lead to violations in international trade laws and regulations, limiting the use and impact of demand-side initiatives.

UltraHD will likely follow the traditional course of the product life cycle. Although government-led stimulus will certainly help hasten market development, the measures forwarded thus far will unlikely highly affect the strategic investment decision-making of the most important players, namely content providers and service providers.