UHD TV: Beyond Sets and Content to Packaging and Pricing

By Bob Wallace July 24, 2014

Hoping to put the costly and extended failed experiment of 3D TV in the rearview mirror, the video industry is working hard to make ultra HD (aka 4K TV) a reality—despite the high cost of capable TV sets and a dearth of programming shot in the higher-resolution format.

Though it offers twice the resolution of 1080 HD by using four times as many pixels, UHD has a solid shot at success, but only if stakeholders in the movement think well beyond TV set price and 4K programming to address early on two questions of equal or greater importance.

A fast-forward look at the movement-in-progress presupposed sets will eventually proliferate and much more content, especially live sports matches, will be shot in 4K compression format. The next big question is how the magnetic programming will be offered to and priced for video viewers by cablecos, telcos, and online streamers such as Netflix and Amaxon.

Free: A Four-Letter Word

Perhaps the safest assumption is that you won’t get UHD programming for free, especially given the new TV sets, set-top boxes, cameras and far-reaching network infrastructure upgrades and additions needed to deliver the higher-resolution programming to traditional and OTT viewers.

In keeping with ongoing trends, cablecos and others don’t plan to eat the costs of items that affect them. Combine that reality with the need to sell UHD TV at the consumer end and you have to ask the core question: How will or won’t it be offered?

Given past introductions, such as HD, viewers are at least looking at a monthly HD fee and the need for a box that can handle the HD signal. But there will very likely be more to packaging and price structures for 4K TV, such as will it be included with current HD channels in current programming packages? That’s highly unlikely, at least in the beginning.

Expert Opinion

“I’m sure we’ll see pay TV operators begin offering a 4K tier, with a select group of premium channels bundled together for early adopters,” said Jeff Heynen, principal analyst of broadband access and pay TV for market analysis and guidance firm Infonetics Research.

Aware that the impact also affects online streamers who have already begun shooting original series (season two of “House of Cards”) and/or movies (on Amazon) in the UHD format, Heynen sees competition not standing pat or offering anything new and improved for free as well.

“On the OTT side, we’ve already seen Netflix raise subscription fees for the overall service. I suspect they will also move 4K content to a premium tier, but will also limit 4K streaming to only those customers of broadband providers who have connected directly to Netflix’s CDN, as the transport costs for 4K files will be more costly,” Heynen explained.

Concerned about the performance and quality of its gazillion streams, Netflix built its own content delivery network, to which any service provider can connect. That and the transports costs that Heynen references are brought on by the far larger bandwidth pipes (even when encoded/compressed) that the UHD programming requires.

This issue is nothing to sneeze at or dismiss as Netflix has since cut a deal with Comcast to pay the cable and Internet access giant for faster and better connections to its subscribers. And recent research by global CDN and more Akamai Technologies claimed only 17 percent of the U.S. is 4K-ready bandwidth-wise and that was assuming compression of the video programming.

UHD: The Home Front

Another cost element that will factor into the packaging and pricing thinking will be the cost of in-home equipment with consumers needing 4K-capable set-top boxes for traditional pay TV service and 4K-capable media players for OTT-delivered programming, Heynen noted. The same held true with the intro of HD.

The need to upgrade and enhance network infrastructure to support adaptive bit-rate switching (ABR) and encoding 4K programming in HEVC format are steps needed to successfully deliver 4K content.

There may be less worry about TV sets, players and cameras than has been discussed given that the third certainty in life beyond death and taxes in falling prices for most all consumer electronics prices.

Though prices for large UHD sets are hovering at the low end around $2,500, retailers (Best Buy) and club chains (BJs Wholesale Club) are offering discounts in the area of $700 on these sets to entice shoppers.  Just this week, Groupon posted the deal below claiming a 47 percent off select UHD sets.

Heynen doesn’t think UHD set pricing will hold its spot as a top challenge down the road.

“The prohibitive cost of HD sets at the time was a limiting factor. But that won’t be a problem with 4K,” said Heynen.

The Bottom Line

While cost may fade as a challenge to advancement of the UHD movement, pricing and packaging of UHD programming will likely make all the difference in the world. Potential 4K TV service providers need to prioritize accordingly in their strategizing.

Founder, Fast Forward Thinking LLC

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