The Strategic Impact of 4K on the Entertainment Value Chain - December 2012 - WikiLeaks

The Strategic Impact of 4K on the Entertainment Value Chain - December 2012 - WikiLeaks
The Strategic Impact of 4K on the
       Entertainment Value Chain

                    December 2012
The Strategic Impact of 4K on the Entertainment Value Chain - December 2012 - WikiLeaks
© 2012 Futuresource Consulting Ltd, all rights reserved

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For legal limitations, please refer to the rear cover of this report

                                                  © 2012 Futuresource Consulting Ltd
The Strategic Impact of 4K on the Entertainment Value Chain - December 2012 - WikiLeaks
Section                                                                  Page
1. Introduction: Defining 4K                                                4
2. Executive Summary                                                        6
3. 4K in Digital Cinema                                                     9
4. 4K in Broadcast                                                         12
5. 4K Standards and Delivery to the Consumer                               20
     a) Pay TV                                                             24
     b) Blu-ray                                                            25
     c) OTT                                                                26
6. Consumer Electronics: 4K Issues and Forecasts                           27
     a) USA                                                                31
     b) Western Europe                                                     33
     c) UK, Germany, France, Italy and Spain                               35
7. 4K in Professional Displays Markets                                     37
8. Appendix – Company Overview                                             48

                                    © 2012 Futuresource Consulting Ltd
The Strategic Impact of 4K on the Entertainment Value Chain - December 2012 - WikiLeaks
Introduction: Defining 4K
4K is the latest resolution to be hailed as the next standard for the video and displays industries. There
are a variety of resolutions that are claimed to be 4K, but in general 4K offers four times the
resolution of standard 1080p HD video.
      A number of names or acronyms for 4K are being used across the industry including Quad Full HD
      (QFHD), Ultra HD or UHD and 4K2K. For the purposes of this report, the term 4K will be used.
        ● These terms all refer to the same resolution: 3,840 by 2,160.
        ● The EBU has defined 3,840 by 2,160 as UHD-1.

Within the consumer TV market, the Consumer Electronics Association (CEA) has officially designated
4K as Ultra HD and defines it as one that displays at least 8 million active pixels, with a lower
resolution boundary of 3,840 by 2,160.

In Digital Cinema there are multiple variations of 4K in existence including 4096 x 2304, 4096 x 2160
and 4096 x 2048.

                                                                          Photo credit:

                                     © 2012 Futuresource Consulting Ltd
The Strategic Impact of 4K on the Entertainment Value Chain - December 2012 - WikiLeaks
2. Executive Summary
The Strategic Impact of 4K on the Entertainment Value Chain - December 2012 - WikiLeaks
Executive Summary (i)
4K is seen by many in the industry as a major new opportunity, but serious obstacles will need to be
overcome to enable development of the market. Most notable of these are the very limited supply of 4K
content, lack of distribution standards and the need for an installed base of 4K TV sets to create an
addressable audience.
As many elements of the broadcast equipment market become increasingly commoditised, manufacturers
continue to explore technological advancements that will capture the imagination and allow price points to
be stabilised. In addition, as global demand for TV displays starts to soften, LCD TV panel and set makers are
looking for the next value-add feature to kick-start a wave of consumer flat panel replacement. 3D in the
home was an attempt to achieve this and, while the technology hasn’t died away, it has yet to become the
solid success that many had hoped for. 4K represents a more natural progression for the industry, but one
that brings its own problems.
For the panel makers, the issues of producing 4K panels at higher yield rates are many, while prices for
commercialized sets are expected to remain out of the reach of mass market consumers for several years.
Furthermore, TV makers face the task of persuading consumers to upgrade to a higher resolution set at a
time when most consumers are just starting to recognize and enjoy the benefits of full HD. Despite these
barriers, Asian panel makers are moving forwards with the production of large screen 4K TVs and most major
TV brands will likely launch models over the next 12 months.
Looking to the broadcast industry and pay TV, the primary challenge is the increased bandwidth required to
transmit 4K. Providing four times the resolution of 1080p HD, 4K demands four times the data rate. In
addition, due to motion-blur being more visible at higher resolution, the frame rate should ideally be
doubled to counter this. This would mean the data rate would then also be doubled, hence the
uncompressed data rate of 4K would be eight times that of 1080p and 16 that of 1080i.
Clearly this has implications for the compression industry and while the new High Efficiency Video Codec
(HEVC) is due to be ratified in January, hardware-based, real-time encoding required for live transmission is
realistically at least two years away.
                                       © 2012 Futuresource Consulting Ltd
The Strategic Impact of 4K on the Entertainment Value Chain - December 2012 - WikiLeaks
Executive Summary (ii)
As with HD and more recently 3D, 4K consumer technology is ahead of the rest of the content chain and,
while 4K equipment is starting to emerge, there is currently no cross-platform 4K video source material
available for the market, meaning the TV or projector has to upscale the incoming signal to 4K resolution.
      Sony is, however, bundling a 4K hard drive media player with its 84-inch 4K TV in the USA. The player
      comes pre-loaded with 10 4K movies and some short-form content from Red Bull Media House. According
      to Sony, the player will periodically be updated with new content.
The consumer electronics industry is showing willing to market 4K capable TVs and create an audience (as it
has previously done with ‘HD ready’ and ‘3D ready’ sets) but a sustained flow of 4K content will be critical to
its long term success.
Hollywood will be a key source of 4K content and will be keen to see the implementation of a Blu-ray 4K
standard in the near future. This will then usher in a new generation of 4K capable disc players.
A number of Pay TV operators have commenced testing of 4K acquisition and are expected to continue
investment in development technologies to enhance existing services and stave off competition.
With the backing of the consumer electronics, television and motion picture industries, Futuresource
believes that there is a positive commercial scenario for consumer 4K, although realistically this is likely to
take at least 5 to 6 years to develop.

                                       © 2012 Futuresource Consulting Ltd
The Strategic Impact of 4K on the Entertainment Value Chain - December 2012 - WikiLeaks
3. 4K in Digital Cinema
The Strategic Impact of 4K on the Entertainment Value Chain - December 2012 - WikiLeaks
Digital Cinema – the 4K Pioneer (i)
The digital cinema industry has been one of the pioneers of 4K video over the past few years, largely due to
the transition away from film.
     Before 2007, there were a number of digital cinema cameras on the market, but the first camera that
     made a real impact was the revolutionary Red One from Red Digital Cinema.
     The launch of the Red One kick-started the digital revolution in the world of cinema, but also ushered in
     the age of 4K.
     The Red One can shoot in resolutions of up to 4.5k and so anyone opting to shoot digitally also had the
     option to shoot in 4K from this point onwards.
     Fast forward to 2012 and there are now a number of 4K digital cinema cameras on the market, at
     varying price points and from various brands.
       ● In addition to the Red One, digital cinema cameras currently available include:
             Red Epic
             Red Scarlett
             Sony F65
             Sony F55
             Sony F5
With 4K digital cinema equipment now ubiquitous, Hollywood is embracing 4K production. Many studios have
been acquiring movies in 4K for the past 18 months in order to future proof productions for the time when a
format is available for delivery to the consumer.
     4K digital cinema productions are heavily centred on Hollywood or Hollywood-affiliated productions
     currently. Other major film industries such as Bollywood have yet to make the transition to 4K,
     although the move to digital is starting to gather pace.
     In addition to this, existing titles are being scanned at 4K resolution to add to the 4K back catalogue.
       ● Titles so far given this treatment include Lawrence of Arabia, Jaws and Taxi Driver.
                                         © 2012 Futuresource Consulting Ltd
The Strategic Impact of 4K on the Entertainment Value Chain - December 2012 - WikiLeaks
Digital Cinema – the 4K Pioneer (ii)
Despite the extensive amount of 4K production taking
place, the number of titles making it to the cinema
in 4K is limited.
     So far only around 50 have done so.
     4K digital cinema projectors have been
     available for several years but only represent a
     small but growing proportion of the installed
     base. The limited number of 4K-equipped
     screens means that the demand for 4K content
     is currently limited, but will grow considerably
     over the coming years.
     One of the factors holding back investment in 4K
     is that many movie theatres purchased digital
     cinema projectors over the past five years in
     order to show 3D content. After making such a
     significant capital outlay, many will be looking
     to recoup some of the investment before
     upgrading to 4K.
     As many movie theatres are unable to show 4K,
     content acquired in 4K is downscaled to 2k or
     transferred to film for cinema distribution.

                                                                           Movies released in 4K

                                      © 2012 Futuresource Consulting Ltd
4. 4K in Broadcast
4K in Broadcast - Situation Report (i)
4K within professional video production is currently largely limited to digital cinema productions and
experimentation by broadcasters.
     High profile broadcasters such as BSkyB and ESPN have confirmed that they have 4K cameras and are
     experimenting with production techniques, while some broadcasters are already using 4K for high-end
     production genres such as drama, but are downscaling to HD in post-production.
One of the key reasons behind the lack of television production is the dearth of 4K equipment currently on
the market.
     With the exception of products targeting the digital
     cinema market, there are very few products available for
     mainstream 4K television production.
     Products, including JVC’s low-end GY-HMQ10 4K
     camcorder and Sony’s PMW-X300 4K production monitor,
     are slowly being released to aid mainstream production,
     but 4K products remain extremely rare.                            The Sony PMW-X300 4K Production Monitor
     Even in the world of digital cinema, certain aspects of the
     production chain are far from ideal.
       ● For example, in order to grade 4K films at full resolution,
         expensive 4K digital cinema projectors are used as there
         are no 4K reference monitors available on the market.
       ● There are a number of 4K professional broadcast video
         monitors available today, but so far sales have been far
         from significant.
             In EMEA, a grand total of just three 4K monitors                 The JVC GY-HMQ10 4K Camcorder
               aimed at the broadcast market were shipped in
               2011.                                  12
                                          © 2012 Futuresource Consulting Ltd
4K in Broadcast - Situation Report (ii)
When looking at the current state of 4K production in broadcast
it is important to put it in context of the market overall.                                         Real-time Multi-screen
       4K is coming along when the transition to HD is still very                                  Transcoder Market Value
       much in full swing, even in the regions with the most
       advanced broadcast industries.                                                       70

                                                                        Market Value ($m)
         ● For example, at the end of 2011 42% of US                                        60
             households still do not receive HD programming and,
             in parts of Europe, production is still migrating from
             analogue to digital.                                                           40
       4K is also up against a more pressing technological                                  30
       advance for the industry: multi-screen delivery.
         ● Multiscreen programming is becoming expected of
             operators and is one of the areas of the industry                              10
             showing real growth.                                                            0
                  The global real-time multi-screen transcoder                                  2010 2011 2012 2013 2014 2015 2016
                   market is expected to grow to $187m by 2016.                                      North America     Europe
         ● Investment in multi-screen programming and delivery                                       APAC              Rest of World
             is therefore taking budget away from potential
                                                                                             The explosion in the number of smartphones and
             investment in 4K, especially for publicly funded                                   tablets owned by consumers has meant that
             broadcasters.                                                                  demand for content for mobile devices is increasing
                  Publicly-funded broadcasters’ revenues are                                rapidly. This has resulted in significant growth in
                   dependent on licence fees or government                                     the transcoding market as content needs to be
                                                                                                    repurposed for use on these devices
                   grants, sometimes enhanced by advertising
                   revenues, and remain relatively stable at best,
                   irrespective of investment needed in new
                   technology.                             13
                                            © 2012 Futuresource Consulting Ltd
4K in Broadcast - Situation Report (iii)
4K is also being introduced to an arguably more cynical
market after 3D failed to live up to its over-inflated hype.
      3D was promoted as revolutionising the broadcast                         EMEA Professional Monitor
      industry but after a few years the hype has died away                           Shipments
      to reveal that 3D is, at the moment at least, a niche           100%       0.4%        3.1%        1.9%     0.7%
      requirement within broadcast.
      There is a considerable risk that 4K will be associated
      with 3D in terms of being a similar attempt by the               60%
      broadcast equipment industry to find the “next big                         99.6%      96.9%     98.1%       99.3%
      thing”.                                                          40%
        ● Certainly demand is currently very much being                20%
           pushed from the manufacturer side rather than
           generated by the end users themselves.                        0%
        ● 4K does have advantages over 3D, though.                               2009        2010        2011     2012*
               The main advantage is that production                                          2D   3D
                 techniques can remain the same. 3D
                                                                              *2012 – Jan to Sept
                 required content to be shot differently and
                 for different expertise to be hired.
                                                                                 After initial investment by production
               Another advantage is that 4K content could                     companies and broadcasters looking into 3D
                 be described as giving the same viewing                      production, 3D pro monitor sales dropped off
                 experience as HD just enhanced, whereas                                          in EMEA
                 3D is a completely different experience and
                 one that requires glasses.

                                        © 2012 Futuresource Consulting Ltd
4K in Broadcast - Situation Report (iv)
                                                                       4K is one of the most widely discussed topics in the
               Pro Camcorder ASP ($) - USA                             broadcast industry at the moment and one of the key
            7,000                                                      reasons behind this is that many hardware manufacturers
                       5,846                                           need 4K to maintain revenues.
            6,000                 5,592
                                          5,154    5,073                     At the lower end of the market, technology is
            5,000                                                            improving to the point where low-end equipment

                                                                             can often do a good enough job and so is replacing
            4,000                                                            higher-end equipment. This is forcing down the
                                                                             price points of professional video equipment, in
            3,000                                                            some cases commoditising the markets.
            2,000                                                            A good example is the professional camcorder
                                                                             market. In the US, price points have fallen 13%
            1,000                                                            ($773) over a four year period.
                 0                                                             ● Over the same time period, volume is up by
                                                                                  12%, whilst value is down by 2%. (Based on Q1-
                        2009      2010    2011     2012*
                                                                                  3 2009 vs Q1-3 2012).
            *2012 – Jan to Sept                                              New technology drivers are needed to bolster price
                                                                             points and since 3D has failed to live up to the
            The pro camcorder market is just one example of                  hype, vendors are now starting to look at 4K.
            a market where professional video equipment is
             becoming commoditised and is in need of a new
                technology to help maintain price points

                                                      © 2012 Futuresource Consulting Ltd
Barriers to 4K in Broadcast (i)
Upgrade Fatigue
    The broadcast and professional video industries have been through over 20 years of upheaval brought
    about by continual innovation.
Past                                                                                                 Future

Digital      16:9       1080i                           1080p            3D     Multiscreen            4K
  Some of the many technological advancements over the past 20 years
       The pace of change in the industry and the constant need to upgrade to the technologies listed above
       have left many in the industry fatigued.
          ● Often, products have an effective lifespan far in excess of the length of time they are actually
              used for in the first instance.
       The majority of these upgrades have come at a time of relative economic prosperity, however.
          ● The economic situation in some of the countries that tend to lead the way technologically is
              certainly not as bad as it has been, but the economic downturn has significantly changed
          ● In the past, engineering teams took centre stage in the purchase decision, but the financial
              pressures that arose during the economic downturn forced a change towards an operations or
              finance team led decision-making process.
          ● End users are now much more concerned with reducing CAPEX and OPEX, with a focus on
              equipment that is “good enough”, not “best in class” as once was the case.
       It is against this backdrop that 4K needs to gain traction but at the same time competing for budget
       with other new technologies such as multi-screen.
                                           © 2012 Futuresource Consulting Ltd
Barriers to 4K in Broadcast (ii)
Lack of Interfaces
    There are currently no interfaces capable of coping with the extreme bandwidth demanded by
    uncompressed 4K. There are a number of solutions available, though.
       ● 3G-SDI is the fastest real-time link available for the broadcast environment at the moment and so
          the use of a quad 3G-SDI solution (four individual 3G-SDI interfaces used concurrently) is one
       ● The second option is to use a fibre optic-based link that exists – 10GSDI, although this still may not
          be enough to handle 4K unless a degree of compression is applied.
    For 4K to be embraced throughout the production chain, an industry standard interface is essential.

Motion Blur
    The paradox of 4K video is that whereas when static or
    slow moving images are shown the picture quality is
    noticeably better, when fast moving images are
    introduced motion blur is also more noticeable.
    This is a significant problem as historically sports has
    been the genre that has encouraged uptake of new
    technologies and fast-moving action or rapid moves of
    the camera are endemic to sports coverage.
    The way to counter motion blur is to increase the
    frame rate, but this brings its own problems in that it
    also increases the bit rate, which for 4K is already

                                        © 2012 Futuresource Consulting Ltd
Barriers to 4K in Broadcast (iii)
Camera Technology
   Most 4K cameras and camcorders on the
   market today feature large sensors and are
   largely targeted at the digital cinema and
   high-end drama markets. For 4K to succeed
   in broadcast, it needs to be possible to shoot
   4K using cameras with sensors sized from 1/3"
   to 2/3".
   Unfortunately, this means that investment in
   sensor development needs to be made,
   specifically in the area of light sensitivity.
     ● This is due to the need to make the
        pixels smaller in order to fit them onto a
        smaller sensor. Smaller pixels means
        that less light is picked up by each pixel.
     ● Increasing gain is one way around this,
        but this renders the encoding process
        less efficient, which is far from ideal
        due to the need to compress 4K as much
        as possible.
     ● In addition to this, if frame rate is
        doubled to counter motion blur, half the
        amount of light will reach the sensor,                   Some of the large sensor cameras currently available
        which again furthers the need for much
        more sensitive sensors.                     18
                                        © 2012 Futuresource Consulting Ltd
5. 4K Standards and Delivery to the Consumer
4K and the HEVC Standard
HEVC (High Efficiency Video Codec) is the next generation compression standard that is due to be ratified in
January 2013.
     It offers between 33% and 50% greater encoding efficiency when compared to H.264 (dependent on
     The high bandwidth required for 4K means that for many 4K and HEVC are intrinsically linked. When
     bandwidth is tight, using HEVC brings the bit rate of 4K down to manageable levels.
        ● In tests, a bandwidth of 18 to 20Mbps for HEVC 4K is achievable, which is similar to the bit rate of
           MPEG-2 HD, making 4K commercially viable.
        ● Luckily the higher resolution of 4K means that the encoding process can be completed a lot more
           efficiently than with HD. Whilst uncompressed 4K requires four times the bandwidth of 1080p, this
           does not equate to four times the compressed bandwidth.
     HEVC is going to be particularly important for contribution and distribution over satellite as transponder
     space is already at a premium. A sound business case will have to be built, though, as many will
     question the economics of carrying one 4K channel in place of multiple SD channels.
Contribution and distribution of live content requires low-latency encoders but arguably the only way to
achieve this in real-time is to use hardware-based encoders and decoders.
     Unfortunately, the dedicated silicon needed for such products is not yet available.
     Expectations are that the first HEVC silicon will be available by the end of 2013 at the earliest,
     indicating a likely launch of the first generation real-time HEVC encoders around NAB 2014, if not a little
There is an argument that 4K does not depend on HEVC. Where bandwidth isn’t at a premium; where a cable
operator has invested heavily in a fibre optic network for example, then 4K can be distributed using H.264.
     This would mean that 4K services would theoretically be viable much earlier than previously thought.
                                        © 2012 Futuresource Consulting Ltd
Delivering 4K to the Consumer (i)
Despite much of the current hype in content being the ability to
view video on portable devices, content owners are still keen to
maintain viewership on the primary device for which the content               65m+ HD Households (WEU)
was created and in the highest quality. The main TV-set and 4K                 80m+ HD Households (NA)
represents the natural evolution of continued improvement in                 Consumers Still Want High
image resolution.                                                                Quality Content
It is evident through the continued rise in pay-TV penetration,
growth in new CE hardware adoption and popularity of new OTT
services (e.g. LoveFilm and Netflix) that consumers still have a                      Blu-Ray
keen interest in the consumption of high quality premium
                                                                                  34m BD HH (WEU)
                                                                                   52m BD HH (NA)
However, securing the public’s viewing time and in turn
                                                                               Large Installed Base of
generating revenues is more challenging than ever as consumers
are presented with more options for consuming media, with                      Compatible Hardware
several platforms across multiple devices now offering services
and content.
                                                                                    Online (OTT)
As content owners look to differentiate and add value to their
                                                                             140m Broadband Homes (WEU)
product proposition, improvement in image quality will be a key
consideration. The success of HD, particularly in broadcast,                  130m Broadband Homes (NA)
indicates consumer’s willingness to pay for higher quality video            New Platform Driven by Rising
content. However, the relative failure of 3D indicates that not all             Speeds Penetration
new features prove successful.

                                       © 2012 Futuresource Consulting Ltd
Delivering 4K to the Consumer (ii)
Several pay-TV operators have already begun to undertake evaluation and testing of 4K acquisition,
particularly on live events (predominantly sports). As operators are likely to apply premium pricing to 4K
channels/content, they can justify the financial outlay in light of the potential revenue stream.
Although no standard has yet been ratified by the Blu-ray Disc Association (BDA), Blu-ray is also expected to
become a distribution platform for 4K content. The uptake of hardware, although lower than anticipated,
has still secured a significant footprint, present in 86m households (inc. PS3) across North America and
Western Europe. Hollywood is expected to be keen to support 4K through Blu-ray in an effort to improve disc
sales, which to date have been relatively disappointing.
Improved broadband speeds are allowing the distribution of broadcast quality video content over IP, as a
result of which OTT video services now represent an alternative delivery platform for content owners to
deliver high quality video content to consumers.
With several significant players present in this space, including Amazon, Apple, Google and Microsoft all of
which are keen to exploit their respective video services, the launch of 4K content offers a new level of
quality and value to the customer base.

                                       © 2012 Futuresource Consulting Ltd
Delivering 4K to the Consumer: Pay-TV
Pay-TV operators continue to be on the                                      Key Operator Activity
cutting edge of new service development,
enhancing and evolving their platforms in                           • Early adopters of many new technologies
order to attract and retain subscribers, in                         • Announced head-end upgrade roadmap incorporating
                                                                      4K compatibility
addition to seeking to create new revenue
                                                                    • Possible test channel launch in 2013
streams through the roll-out of new services
and the enhancement of existing ones.                               • Demo of test broadcast with NBC Universal
                                                                    • NBC link likely to drive 4K roll-out & monetisation
This continual development is driven by                               through cable platform.
competition between operators and a need to                         • No announced 4K channel roll-out yet
stave off competition from traditional free-to-
                                                                    • In Oct’ 12 commenced test 4K broadcasts
air broadcast services and newer OTT                                • Initial test have been on Football
operators that are vying for a share of the                         • No definitive plans to roll out 4K, currently evaluating
premium content space by securing premium                             ahead of TV-set roll-out
content deals across movies and TV content.                         • Sky Deutschland also announced 4K tests.
Particularly in Western Europe and North                            • Currently evaluating 4K production.
America, where subscriber numbers are                               • Understood to be planning dedicated 4K channel.
saturated, the requirement to drive up                              • Sports & movie content will be key genres
revenues through upsell of existing subscribers                     • In advance of forthcoming Football World Cup &
through the sale of 4K content, for example,                          Olympics, currently testing 4K acquisition with
is of paramount importance.                                           intention to air 4K broadcasts of both events.

Although some services such as 3D have                              • SES planning to launch 4K showcase channel in 2013.
failed, operators will continue to invest in                        • Several demonstrations of 4K transmission tests,
                                                                      including live content at IBC in conjunction with Sony.
order to satisfy subscribers’ needs through the
continual enhancement of their services.
                                       © 2012 Futuresource Consulting Ltd
Delivering 4K to the Consumer: Blu-ray
As margins continues to be pushed down on CE
products, vendors are continually seeking new                               Blu-ray Hardware Installed Base
opportunities to offer value-add features and                    70
improvements on existing technologies to increase
the price point and attractiveness of the product.               60
Furthermore, as the video industry seeks out new
revenue streams to compensate for the erosion of
DVD, it too is looking to promote and entice                     40
consumers to new products, namely Blu-ray which
traditionally commands a premium price point.                    30
In both instances, 4K is likely to be key to each
industry's’ strategy moving forward. At launch                   20
                                                                                             BDA Ratification of 4K &
[should Blu-ray push 4K], it is certain to attract a             10                          Product Launch Expected
premium price point.                                                                                   2013
To date, Blu-ray has seen disappointing uptake and                0
industry feedback indicates scepticism as to how                           2012       2013         2014        2015     2016
much of a positive impact 4K will have on the                                          Western Europe          USA
overall Blu-ray trend.
Finally, 2013 is also expected to see the launch of
                                                                                 Key Concerns for 4K Blu-ray
additional 4K up-scaling Blu-ray players, reducing
the requirement to purchase dedicated 4K Blu-ray                        • Consumer confusion about 4K & 3D Blu-ray
software.                                                    •        Threat from Over-the-Top Services e.g. Netflix, LoveFilm

                                      © 2012 Futuresource Consulting Ltd
Delivering 4K to the Consumer: OTT
4K signifies new opportunities for OTT video platforms such as Netflix, LoveFilm and Apple, strengthening
their service proposition to include premium content, delivered in a comparable quality to that on offer from
traditional pay-TV platforms.
Furthermore, OTT platforms are expected to look to 4K in the future in order to create higher value
offerings and higher-priced subscription tiers, which will support continued revenue growth from increasingly
saturated subscriber bases.
4K is certain to place increased pressures on the IP infrastructure (which in many places is still struggling to
deliver HD). Therefore, in order to guarantee bandwidth and ensure no contention on the network, tie ups
between ISPs and video service providers are likely to ensure subscribers obtain a high quality of service.
The roll-out of Smart 4K TV-sets also presents an opportunity for OTT services to be delivered direct to the
TV-set and possible partnerships between CE manufacturers and content owners to promote 4K – particularly
in the early days.

                                        © 2012 Futuresource Consulting Ltd
6. Consumer Electronics: 4K Issues and Forecasts
4K in the Consumer TV Market (i)
The consumer TV market has been in a state of flux during the last few years. The traditional powerhouse
brands in Japan are struggling amid weak demand in developed markets and slowing growth rates in
emerging regions. Meanwhile, recent technology innovations such as 3D are not proving compelling enough to
consumers to warrant upgrading existing flat panels.
TV vendors are now looking to new display technologies and improvements to existing LED set designs to
drive replacement moving forwards. The two technologies that have been getting the most attention over
the past 12 months are OLED and 4K.
OLED is seen as a technology that will ultimately replace existing flat-panel display solutions, offering
significantly better picture quality, thinner form factors and perhaps most importantly much lower energy
consumption levels than today’s TVs.
      However, despite the announcement of large-size OLED TVs from Samsung and LG in early 2012,
      commercialization timescales of these sets have been put back to 2013 at the earliest following
      difficulties in improving manufacturing yield.
      Initially, OLED displays will have a resolution of 1080p although 4K versions will inevitably emerge as
      production techniques improve.
4K, under its official consumer label of Ultra HD, is already beginning to be implemented into the home-
theatre environment via home-theatre receivers with either 4K pass-through and/or 4K video upscaling
capability, 4K home projectors, Blu-ray players with 4K video upscaling and 4K-capable TV displays.
      4K LED TVs have rapidly emerged in 2012 thanks to the far simpler production process than for OLED
      and most major TV brands are prioritising 4K over OLED in at least the short to mid-term.
There are currently no commercialized 4K Plasma TVs although it is technically possible to produce them
(Panasonic showed a 152” 4K Plasma set at CES 2010). However, producing 4K plasma panels at sizes under
60” will mean halving the cell size.
      Plasma R&D is likely to start winding down moving forwards so it is likely that only extra large (100”+)
      4K plasma panels will come to market.
                                       © 2012 Futuresource Consulting Ltd
4K TV Products and Pricing
         Brand                    Screen Size                          Panel Supplier        Price

                                                 Launched in 2012

     Toshiba (55ZL2)                   55                                        AUO       $10,000

    Sony (XBR-84X900)                  84                                 LG Display       $25,000

     LG (84LM9600)                     84                                 LG Display       $20,000

                                               Announced for 2013

         Toshiba                   50, 60, 84                      AUO, LG Display (84)      n/a

        Samsung                        85                             Samsung Display        n/a

          Sharp                        60                                    Sharp           n/a

         Hisense                   50, 58, 65                                    CMI         n/a

*Models expected for launch in the USA and/or W Europe. Several Chinese vendors including Changhong, Konka,
Skyworth and TCL are expected to launch 4K TVs into their domestic market soon.

                                            © 2012 Futuresource Consulting Ltd
4K in the Consumer TV Market (ii):
                      Key Drivers and Inhibitors
    The large screen 50”+ TV market is set for strong growth. At today’s best resolution of 1080p, individual pixels
    can become noticeable at large screen sizes (particularly those upwards of 60”). 4K resolution provides such a
    high level of visual data that pixels on large screen displays are virtually unnoticeable.
    The higher resolution of 4K will also benefit current 3D solutions. Passive 3D cuts the horizontal resolution in
    half to create a 3D image and so a 1080p 3D movie seen with passive glasses is actually viewed at 540p. By

    doubling the horizontal resolution, a Full HD 3D image delivered to each eye is achieved. Most first generation
    4K sets are expected to include Passive 3D technology.
    4K is also expected to be a key enabler of auto-stereoscopic (glasses-free) 3D technology as 4K will allow
    resolution to be regained on multiview lenticular displays.
    4K resolution can produce a level of reality that surpasses 3D.
    Good 4K up-scaling can provide noticeable picture quality improvements in the absence of true 4K source
    material. All 4K TVs are expected to include up-conversion engines, enabling the TV to deliver higher detail
    from current SD and HD sources.

    Native 4K content is virtually non-existent today. There is no 4K standard for Blu-ray yet. Broadcasters are still
    in very early trial phases while delivery over the Internet is dependent upon significant improvements in
    average broadband speeds within the home.
    The benefits of 4K only start to become visible on very large displays (60”+) under common viewing distance

   conditions. In order to benefit from 4K on smaller screen sizes, viewing distance would have to be closer than
    typical consumers are used to.
    The rapid shift to 720p and 1080p resolutions was driven by the unprecedented boom in TV sales over the last
    10 years – a result of dramatically shortened replacement cycles during the transition from CRT to Digital HD
    Flat Panel displays. TV upgrade cycles are extending out to previous levels of 8-9 years while most markets are
    contracting to more natural sales levels.

                                         © 2012 Futuresource Consulting Ltd
4K in the Consumer TV Market (iii)
The 4K TV forecasts for the USA and Western Europe set out on the following pages assume that a steady
flow of native 4K content will emerge over the next 2-3 years. Despite this, Futuresource expects 4K TV sales
to remain relatively low for at least the next 4-5 years.
4K is not expected to penetrate the TV market as rapidly as the 720p and 1080p high definition resolutions
did, as many TV viewers will struggle to justify paying a premium for a set on which they may find it difficult
to see a noticeable difference in picture quality.
      The rapid growth in demand for 720p and 1080p coincided with the transition from CRT to flat panel as
      well as the shift in broadcasting standards to digital and HD and there do not appear to be any similar
      upgrade drivers on the horizon that could facilitate a more rapid build up.
      Many TV viewers actually struggle to see a difference between 720p and 1080p on 40” or 50” sets and
      so TV vendors may find it difficult to convince consumers of the benefits of upgrading to 4K.
With this in mind, Futuresource expects 4K to be restricted to large screen displays (50” and upwards) for
the next 2-3 years with demand coming from wealthy home-cinema enthusiasts.
      In the USA, 4K is expected to reach just 4% of all TV sales by 2017 (13% of 50” and larger TVs). After this
      time, price points for 4K will fall to more affordable levels and a wider range of models will emerge
      including smaller screen sizes below 50”. By 2020 4K will account for 13% of total TV sales (31% of 50”+
      Europe will lag behind the USA due to European customers favouring smaller screens. However, large
      screen TV sales will experience strong growth across the region moving forwards making it a market
      with high potential for 4K equipment and content.

                                        © 2012 Futuresource Consulting Ltd
Screen Resolution Migration: USA
        Annual Sales (000s)                                             Annual Sales (000s)
40000                   Total TV Market                         12000            Large Screen 50”+ TV Market



20000                                                           6000



    0                                                               0
         2012 2013 2014 2015 2016 2017 2018 2019 2020                    2012 2013 2014 2015 2016 2017 2018 2019 2020
    Standard Definition       720p/1080i   1080p     4k               Standard Definition     720p/1080i   1080p   4k

                                            © 2012 Futuresource Consulting Ltd
Long Range 4K TV Forecasts: USA
                     2012     2013     2014        2015          2016         2017     2018     2019     2020

Sales (m)
Total TV Sales (m)    33.9     32.4     31.6          31.2          31.9       32.7     33.4     33.8     33.9
% 4K                   0%       0%       0%            1%            2%         4%       6%       9%       13%
4K TV Sales (m)        0.0      0.0      0.1           0.3           0.7        1.4      2.1      3.1      4.4

< 49”                  0.0      0.0      0.0           0.0           0.1        0.2      0.4      0.7      1.1

% of
Screen Resolution Migration: W Europe
        Annual Sales (000s)                                             Annual Sales (000s)
50000                   Total TV Market                         8000             Large Screen 50”+ TV Market

30000                                                           5000

25000                                                           4000


5000                                                            1000

    0                                                              0
         2012 2013 2014 2015 2016 2017 2018 2019 2020                   2012 2013 2014 2015 2016 2017 2018 2019 2020
    Standard Definition       720p/1080i   1080p     4k                Standard Definition    720p/1080i   1080p   4k

                                            © 2012 Futuresource Consulting Ltd
Long Range 4K TV Forecasts: W Europe
                     2012     2013     2014        2015          2016         2017     2018     2019     2020

Sales (m)
Total TV Sales (m)    43.1     40.0     38.7          38.4          39.1       39.6     40.1     40.7     41.0
% 4K                   0%       0%       0%            0%            1%         2%       4%       7%       11%
4K TV Sales (m)        0.0      0.0      0.0           0.1           0.4        0.9      1.7      2.9      4.5

< 49”                  0.0      0.0      0.0           0.0           0.1        0.3      0.8      1.5      2.4

% of
4K TV Display Forecast: W Europe

     Annual 4K TV Display Forecast: W Europe                                                     4K TV Ownership

                   Sales (Units 000s)                                            % of homes owning
          4000                                                              8%
          3500                                                              7%
          2000                                                              5%
          1500                                                              4%
             0                                                              2%
                   2012 2013 2014 2015 2016 2017 2018 2019 2020
Rest of W Europe    0    1    6    28   86    181   367   615   916         1%
Spain               0    0    2     9   30    68    136   243   385         0%
Italy               0    0    3    13   44    101   194   328   507              2012 2013 2014 2015 2016 2017 2018 2019 2020
France              0    1    5    21   67    143   261   429   621
Germany             0    1    9    36   112   234   434   718   1071
                                                                                    UK     Germany    France   Italy   Spain
UK                  0    1    5    25   81    187   356   616   956

                                                      © 2012 Futuresource Consulting Ltd
7. 4K in Professional Displays Markets
4K in Professional Display Markets - Situation Report (i)
4K displays are gradually entering the professional market, but with sales limited to very specific niche markets where
ultra high definition is specifically required.
      Most of these markets have very specific requirements and often need dedicated sku’s in order to ensure suitability.
These high-end commercial markets are likely to act as product innovators for 4K solutions (and effective markets to drive
R&D) as the usage requirements are extremely demanding.
      Vendors such as Sony, Christie and Barco have leveraged their digital cinema platforms to offer high-end 4K
      projection-based solutions. Many of these 4K models are also 3D and are used in verticals seeking advanced graphics
      such as simulation, visualisation, planetariums etc.

While the transition to high resolution displays has happened rapidly in the consumer sector, the projector market has
seen an extremely slow uptake.
     The majority of projector sales (over 95%) are into corporate meeting rooms or the education sector where the main
     usage is for presentation purposes.
     With PowerPoint/Excel still the main content shown on presentation devices, the sales argument for high definition
     projectors has not been compelling for ‘mainstream’ market verticals.
     The use of high definition video however is becoming more common within corporates, especially as large corporates
     develop their own internal communication channels.
Large format flat panels have transitioned at a much faster rate, in part driven by developments at factory level (where
the consumer market is rapidly driving the transition towards high definition).
     Panel vendors are developing 4K solutions and beginning to seek opportunities for 4K in commercial markets.

                                             © 2012 Futuresource Consulting Ltd
The Projector Market Is Only Gradually Transitioning To
            Higher Definition Resolutions
   The projector market is seeing declining or flat sales in developed countries, with emerging markets
   providing the overall volume growth opportunities. Most volume in emerging markets is coming from
   the education sector, purchasing entry-level solutions.
   WXGA is gradually gaining traction (18% in 2012), but adoption has not been as high as anticipated.
   Price premiums are reducing but there are still price premiums due to chipset considerations.
   WUXGA resolutions and above (1080p, 2k,4K) only account for 1.8% of market volume in 2012 YTD
   (96k) highlighting the fact these resolutions are only selling into niche markets.
            Global Business-to-Business Projector Market (Excluding Digital Cinema)
                                %’s Refer to HD % of Total Market
7,000,000                                                               17.7%
6,000,000                           4.1%             8.4%                                          20.8%
                  1%                                                                                         HD
4,000,000                                                                                                    SD
                  2007            2008             2009                2010             2011     2012 YTD
         HD      49,618          200,673          416,288             874,482        1,184,772   1,029,114
         SD     4,889,764       5,233,228        4,801,897           5,686,209       5,750,889   4,243,923

 * HD refers to the following resolutions – WXGA, 720p, WUXGA, QXGA, 1080p, 2k, 4K
                                             © 2012 Futuresource Consulting Ltd
Opportunities Exist for 4K Solutions At The High End Of
                      The Market
            Global Business-to-Business Projector Market (Excluding Digital Cinema) –
                                   High End Resolutions Only


1,000,000                                                                               4k
 800,000                                                                                2k
 400,000                                                                                720p

                  2009              2010                       2011      2012 YTD
   4k              762              1166                        428         799
   2k              563              2021                       2995        1695
   1080p         15879             35807                       52247      53197
   WUXGA          5709             12675                       39297      40023
   720p           6057              2108                        798        1915
   WXGA          387318            820705                     1089007     931485
                                    © 2012 Futuresource Consulting Ltd
The Large Format Flat Panel Market Has Transitioned
              Rapidly Towards 1080p
  Driven by developments at factory level, many vendors have transitioned the majority of their
  commercial ranges across to 1080p.
  Corporate and Digital Signage are the two largest markets for flat panels, so high definition content
  tends to be shown on flat panels more frequently than projectors.

                    Global Business-to-Business Large Format Flat Panel Market
                                              811,422                    1,209,440
                                                                                               1,071,679   1080p
 800,000            294,335

 600,000                                                                                                   720-768p
 400,000                                      737,121
                    689,662                                                                                480p
 200,000                                                                                        387,338
                      2009                     2010                         2011               2012 YTD
* Data refers to flat panels designed for ‘commercial’ use only, not TV’s sold into commercial markets

                                             © 2012 Futuresource Consulting Ltd
Existing Product Developments
                                                                                  LG – 84” ‘UD’ IWB
LG has announced an 84” ‘Ultra Definition’ interactive whiteboard targeting
the K-12 Education Sector.
     The Interactive Whiteboard and Flat Panel market is expected to reach
     890k units in 2012, flat on previous years due to the impact of the
     economic slowdown but additionally the fact that the leading markets
     of the US and UK are now heavily penetrated and in decline.
     LG’s solution appears to be significantly ‘over-specified’ for market
     requirements (the requirement for 4K resolution within education is
     unclear), with price points rumoured to be starting at over $5000.
     Flat panel vendors have to compete with leading market providers’
     (SMART and Promethean) turnkey offerings that include
     hardware/software and content designed specifically for education.       Sharp – 32” ‘4K’ Monitor
Sharp has announced a 32” monitor targeting specific niche markets such as
medical and CAD/CAM.
High-end projector vendors Barco, Christie Digital, JVC and Sony all have
numerous 4K projectors on the market targeting specialist market niches.

                                      © 2012 Futuresource Consulting Ltd
Business to Business Markets - Vertical Market Segmentation
 Initial Demand for 4K Solutions Likely To Come From Niche
                                              Leisure /                                                             Niche         Rental and
 Corporate         Transport     Retail                        Education         Healthcare          Hospitality
                                              Pleasure                                                             Verticals       Staging

   Meeting                       Shopping       Pubs &            Nursery                                            Control
                     Airport                                                        Doctors                                         Concerts
    Room                          Centre         Clubs           Education                              Hotels       Rooms
Opportunities for 4K in Niche Markets (i)
The Medical Sector
   The Medical sector is likely to be a key consumer of 4K products. The digitisation of the Medical sector
   (patient records) is driving the requirement for high definition displays. Patient diagnosis specifically
   requires ultra high definition displays.
    Market entry to the medical sector is difficult, however, with stringent product compliance regulations (that
    often differ by country) and a relatively specialist route to market and, as a result, quick volume wins are
    unlikely. Dedicated sku’s are typically required in order to penetrate this market.

Patient Diagnosis/Monitoring                  Operating Theatres                         Medical Schools

    Operating theatres use high definition displays to support complex procedures, especially camera-based
    surgical procedures such as endoscopy.

                                              © 2012 Futuresource Consulting Ltd
Opportunities for 4K in Niche Markets (ii)
CAD/CAM & Visualisation
   Advanced visualisation markets require extremely high resolution displays. At present projectors are
   often blended to develop high resolution large screen displays. This can, however, lead to loss in screen
   size and shifts in brightness/colour. It is also costly and time consuming to run/align/maintain multiple
   High resolution, immersive displays (often using 3D and where 4K has the benefit of allowing full 1080p
   per eye) can be used in the product design phase to speed up time-to-market of a concept product.
   Visualisation is also used heavily in the science industry (especially by oil and gas providers).

                                       CAD/CAM & Visualisation

                                           © 2012 Futuresource Consulting Ltd
Opportunities for 4K in Niche Markets (iii)
Simulation                                                                               Simulation
   The military, police, army and aviation industry all use
   high-end simulators to train their staff.
    4K displays increase the immersive nature of the display
    and, as with visualisation, have obvious benefits when
    utilised in conjunction with 3D.
    Displays are sold as part of a very advanced solution and a
    very small number of specialist channel providers per
    country control access to the end user.

Broadcast Post Production
    4K projectors are typically used within post
    production applications such as colour grading and in
    pre-release screenings.
               Control Room                           Control Rooms
                                                         Video wall cube technology remains the dominant
                                                         technology in control rooms due to reliability and
                                                         colour reproduction needs.
                                                           Super narrow bezel flat panel displays gradually gaining
                                                           traction, however, and 4K displays both projector and flat
                                                           panel-based could penetrate the control room market.
                                                           The majority of growth in the control room sector is
                                                           coming from emerging markets and significant investments
                                                           into the monitoring of their natural resources (oil and gas
                                                           industries etc).
                                               © 2012 Futuresource Consulting Ltd
Opportunities for 4K in Niche Markets (iv)
Museums and Theme Parks
   Museums and Theme Parks use high resolution displays
   (often blended and /or warped) to create immersive
   and impactful entertainment environments.
   Museums and Theme Parks have to continue to
   innovate in order to attract visitors.
   Many Museums are using 3D solutions to create high
   impact displays.

          Casinos - Sports Book                           Casinos – Sports Book
                                                              Sports broadcasting is increasingly transitioning to
                                                              HD. Split-screen 4K solutions could be a cost-
                                                              effective way of showing multiple feeds in high

                                         © 2012 Futuresource Consulting Ltd
4K in Professional Display Markets Summary
       4K flat panels are expected to significantly outsell projectors. Vendors are likely to launch 4K panels in the
       60”+ ranges from 2013 onwards targeting niche markets and rental channels.
            Developments in the consumer TV market are then likely to result in a supply-side push of 4K into
            commercial markets from 2015 onwards with vendors beginning to offer 4K solutions in the more
            mainstream 40”/55” screen size segments.
            For 4K to significantly penetrate ‘mainstream’ commercial verticals such as corporate presentations,
            education and digital signage, major developments in the content/software drivers for these markets
            will be needed. While viewing high definition content in commercial markets is gradually becoming
            more commonplace, the number of users regularly utilising multiple content sources (video, graphics,
            presentation, videoconferencing) will need to grow rapidly for 4K to be required.

      Global Business-to-Business Projector                              Global Business-to-Business Flat Panel
       Market - 4K Sales (Excluding Digital                                 Market – 4K Sales in Thousands
              Cinema) in Thousands
10                                                 600                                                               12.4%

 8                                           0.05% 500
 7                               0.05%             400
 6                                                                                                            7.6%
 5                         0.04%                   300
                     0.03%                                                                           3.6%
 3                               5.6    6.3 6.6 200                                           0.7%           314.1
 2             0.01%        4.4                    100                                 0.3%
 1                    2.8                                                                            135.9
 0   1.2 0.4 0.8                                     0                                  9.1 22.5
     2010 2011 2012 2013 2014 2015 2016 2017                            2010 2011 2012 2013 2014 2015 2016 2017

                                               © 2012 Futuresource Consulting Ltd
8. Appendix
Company Overview

  © 2012 Futuresource Consulting Ltd
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While every effort is made by Futuresource Consulting Ltd to provide accurately researched information and
carefully supported conclusions and recommendations to its client, in no event will the company or its
professionals be liable for information, analysis, advice or recommendations provided to the client at any stage
of the project, or be liable for actions and decisions taken©as2012
                                                                a result
                                                                         of this report. Consulting Ltd
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