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The Strategic Impact of 4K on the Entertainment Value Chain

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The Strategic Impact of 4K on the Entertainment Value Chain The Strategic Impact of 4K on the Entertainment Value Chain December 2012 © 2012 Futuresource Consulting Ltd, all rights reserved Reproduction, transfer, distribution or storage of part or all of the contents in this document in any form without the prior written permission of Futuresource Consulting is prohibited. Company Registration No: 2293034 For legal limitations, please refer to the rear cover of this report 2 © 2012 Futuresource Consulting Ltd Contents 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 3 © 2012 Futuresource Consulting Ltd 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: HDMI.com 4 © 2012 Futuresource Consulting Ltd 2. Executive Summary 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. 6 © 2012 Futuresource Consulting Ltd 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. 7 © 2012 Futuresource Consulting Ltd 3. 4K in Digital Cinema 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. 9 © 2012 Futuresource Consulting Ltd 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 10 © 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.
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