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Market Insight

Samsung launches Smart TV Evolution Kit

June 10, 2013

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Samsung has launched its first Smart TV Evolution kit. The kits can upgrade a range of 2012 Smart TV models, allowing consumers to utilise Samsung's 2013 Smart Hub and its associated content, as well as enabling their use of Samsung's voice-enabled S-recommendation engine. The compatible range includes all LED models from series ES7000 and above, as well as all PDP series E8000 models. In addition, the kit comes equipped with a 1.5 GHz quad-core processor capable of improving Smart TV functionality and video streaming performance. The units are retailing for $299 (€225) in the US and €299 ($397) in Europe.

The development of this module reflects the growing importance of insuring more uniform software performance across Samsung's Smart TV installed base as it continues to grow. Enabling owners of old models to access the latest software upgrades will help ensure a larger market to monetise new apps and paid downloads, reflecting the anticipated importance of achieving lifetime revenue from software sales given narrow TV hardware margins. Additionally, the prospect of easily upgrading Smart TVs may help prevent consumers from becoming disenchanted with the idea of purchasing a new Smart TV soon to be obsolete in terms of its software capability.

The launch price of $299 for the evolution kit represents a price point ranging from just 3 per cent up to 30 per cent of the average selling price (ASP) of a compatible 2012 Samsung Smart TV model , depending on screen size(which varies from 40-inch to 75-inch) and model range. This price point may to some extent dissuade Samsung Smart TV owners from upgrading to new software by adopting less-expensive streaming boxes like Roku, Apple TV and Google TV, which retail for around $100. This prospect, however, may remain particularly attractive for consumers who purchased smaller screen size Smart TV models that retail under $1,500.

An important limiting factor for this upgrade method will be consumers' willingness in the long run to purchase additional hardware devices to upgrade software capability. This problem could possibly be addressed by producing models with higher processing power and performance capabilities at release, allowing newer software to utilise initially unexploited spare capacity, already common practice in the games console market. The drawback of this would however be the upward contribution to manufacturing costs and retail price that such change would bring.  The uptake of such an alternative strategy therefore seems a possibility only for high end models, given the low margins obtained across specifications in the pricing and commercial production of most TV hardware.

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