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Consumers in China are adopting smart TVs at a pretty brisk pace. Projections from iiMedia Research released in March 2017 put sales of the devices at 46.6 million this year, and climbing to 52.2 million by 2018.
Electronics manufacturers like Xiaomi are working to cater to this new demand. In July 2017, the company gained attention when it launched a 32-inch smart TV for RMB1,099 (roughly $165), its cheapest model to date.
The smart TV phenomenon is one that’s not lost on advertisers in the Middle Kingdom. According to new estimates from iResearch Consulting Group, connected TV ad spending in the country is expected to grow dramatically over the next few years, jumping from RMB1.68 billion ($252.9 million) this year to RMB12.83 billion ($1.93 billion) in 2020.
(iResearch Consulting Group included advertising served both via smart TVs and set-top boxes that deliver over-the-top [OTT] content, such as Xiaomi’s Mi Box and Alibaba’s Tmall Box in its tally.)
Connected TV ad spending is dominated by a handful of industries, according to iResearch Consulting Group. The firm found that the food and beverage sector accounted for 28.3% of connected TV ad spending in China in January to July 2017. Online services made up 23.8%, while cosmetics and beauty products accounted for 17.5%.
The increased ad dollars are a reflection of China’s maturing video-on-demand (VOD) sector. While digital video platforms in China were once dominated by pirated and user-generated content, services like Alibaba-owned Youku Tudou and Baidu’s iQiyi in recent years have taken to signing licensing deals with studios to acquire content.
Platforms providing desirable content legitimately—and at a reasonable price—appears to have struck a chord with China’s viewing audience. As a result, the number of subscribers to VOD services in the country has seen a significant gain. JPMorgan Chase & Co. estimates that the number of subscription VOD viewers in China will jump from 144.0 million this year to 234.3 million by 2020.
However, those gains may come at the expense of traditional cable TV; JPMorgan predicts the number of cable TV subscribers in China will fall from 252 million this year to 248 million by 2020.
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