Xiaomi borrows from smartphone experience to crack emerging Smart TV market

Xiaomi, a company which doesn’t really have a long history of selling televisions, occupies the top spot in the Indian smart TV market. Much like its smartphone business, the brand has managed to retain its leadership position over the last nine consecutive quarters. As per Counterpoint Research, Xiaomi grabbed 27 per cent of the Indian smart TV market in Q1 2020, followed by LG (14 per cent) and Samsung (10 per cent).

Smart TVs started out as a pricey premium offering (around 2010) by dominant TV brands like LG, Samsung and Sony, which offered their own UIs (LG’s webOS and Samsung’s Tizen), instead of Google’s Android TV platform. The scenario changed (around 2018) as players like Xiaomi lobbed extremely price competitive offerings into the market.

Apart from the traditional TV makers, the market has seen several entries from players like TCL, OnePlus, Nokia, Kodak and Vu. Android TV (where Xiaomi is a leading player) currently accounts for 60 per cent of the smart TV market.

Close to 150 million of the 248 million Indian households have TVs. The current smart TV base stands at 15-20 million households, the flat TV base is at 50 million, and the remaining 100 million households still use the CRT (cathode-ray tube/box) TVs. Reports suggest that the smart TV penetration in 2018 was 18 per cent. It grew to 30 per cent in 2019, and 55 per cent in Q1 of 2020.

Apart from the choice of the brand and the ‘smartness’ factor, the key purchase drivers are picture quality, audio quality, and design. The prices start a little over Rs 10,000, and go up to a few lakhs. The pricing is influenced by features, like screen size, resolution, audio quality, design, etc.

Xiaomi has been selling TVs in China since late 2015/early 2016. At Xiaomi India, work on TVs started around the end of 2016/early 2017. The brand launched its first TV in India in February 2018. Xiaomi had shipped four million TVs in India till February 2020.

Eshwar Nilakantan, category lead, smart TV – Xiaomi, tells afaqs! that apart from access, two major changes that drove adoption are pocket-friendly data and regional language video content on platforms like YouTube and OTT.

“We were able to foresee the change, and the bet has played out well for us. Given the access to data, people wanted to consume content on the best and the largest screen available and that’s the TV.”

Nilakantan says, it is the combination of updated technology, ‘honest’ pricing and quality across products that helps the brand stay ahead in the game. “We always put the consumer at the centre and not the competition.”

He shares an example from March 2018, when Xiaomi launched a 32-inch TV in India. “Our competitors were selling the same at over Rs 25,000. We could have launched at Rs 19,999, but decided to launch it at almost half the price at Rs 13,999. Now, over a period of 1-1.5 years, the competition has moved to that price point.”

Other than the price, Xiaomi extends all its non-hardware features across the portfolio. A key factor is its PatchWall User Interface that focuses on curating content from across its 23 content partners (OTT), instead of an app-first interface (unlike smartphones).

The brand’s ad film for the upcoming festive season highlights its dominant position, wide range of content options, while making a case for its nationwide base of 700 service centres. It also presents the common Mi TV remote as a unifying factor for Mi TV users (like a community thing).

“The patented Mi TV remote is same across price points, and offers the same PatchWall experience. We wanted it to be remembered. The idea was to make it simple for people to understand as we go deeper into the next segment of users. We had to keep it fresh to avoid the media fatigue of current times,” says Sumit Sonal, marketing lead, Mi – Xiaomi.

The film has been crafted by McCann and was shot in Romania during the COVID-induced lockdown. The agency got an Indian producer in Romania to identify Indians for the cast of the film. It was directed via a Zoom call.

In 2019, Xiaomi realised that an average Mi TV consumer was watching 70-80 minutes of streamed content, a duration much lower than that of linear TV viewing (220-plus minutes).

“The consumers revealed that they watched less on streaming because of the limited mobile data. In India, data is cheap, but there is a limit on the daily usage. We worked with Google to create a ‘data-saver’. Since September 2019, consumers are watching three times more with the same data limit. It was launched as an exclusive Mi feature, and is now being introduced as an Android TV feature. Competitors will take over a year to match what we have to offer in the PatchWall experience,” Nilakantan reveals.

The strong smartphone brand presence is also helping Xiaomi sell its TVs. “We see a lot of intersection between Mi phone and Mi TV users. Almost 80 per cent of Mi TV consumers have used a Redmi or Xiaomi smartphone. Customers or someone in the family might have used a Xiaomi phone.”

In the smartphone ecosystem, consumers today are being promoted to directly to 4G from feature phones. Nilakantan expects CRT TV users of today to adopt smart TVs directly, instead of regular flat screens once the GDP and disposable income grows.

“We have the core MI Fans, who fall in the 'early innovators' bucket who influence others. Then we have the early adopters, and then the early majority. Smart TV consumers in India are in between early adopters and early majority. Early adopters are about 15-20 per cent of the market. We expect that a few quarters down the line, everybody will want to buy a smart TV,” says Nilakantan.

Xiaomi is known for keeping its retail margins low and earning from alternative sources, like online services, advertising, etc.

“We try to cut all costs that don’t add to consumer value. For example, we are particular about lowering our distribution costs. At the end, this cost has to be borne by either the consumer or the brand, and most likely, it will be the consumer. We’ve largely stayed away from expensive distribution channels, like large format retailers where you need a promoter, big display and need to pay higher margins. We are present in limited places,” says Nilakantan.

The brand, however, is trying to push its offline retail presence via its own offline channels. Nilakantan mentions that unlike phones, buying a TV is a family experience and that its Mi Stores have helped the brand take its smart TVs beyond metros. It is usually the husband who visits the store first to explore and the family (wife and kids) visit again while making the purchase.

“We entered offline stores six months from launch. We have 3,000 Mi Store outlets so far and most of these are located in Tier-II and III towns. The basic metro experiences like AC stores and tiled floors have had a significant positive impact on footfalls in smaller towns. People in Tier-II and III towns do have a lot of consumption power, it is only that the selection of products were not made available to them. Also, there isn’t a lot of openness for buying online. They want to touch and experience products before purchase,” says Nilakantan.

While the COVID-induced lockdown stopped business in its tracks, severely impacting production and distribution, manufacturing processes are ramping up slowly with relaxations under lockdown 3.0. Things are expected to get back to normal by Q4 of this year.

“Post-lockdown, we have witnessed a 50 per cent increase in the usual demand for our products across offline and online channels. Considering that everyone is at home and hooked up to their larger screens for content consumption, the demand for smart TVs and streaming devices has seen a steep spike. Also, the apprehension towards visiting cinema theatres and OTT first releases could increase the demand of smart TVs,” says Nilakantan.

He adds that the deeper penetration of fibre broadband, services like Jio Fiber and ACT Fibernet, will increase the demand for larger TVs. “Today, the panel manufacturers are unable to keep up with the demand. While we see growth, we are trying to match the supply.”

He mentions that depending on how long the pandemic lasts, smart TVs might soon come with built-in microphones and cameras, as kids spend more time on screen for academic purposes, and adults take to online healthcare. This could be driven by Android TV apps for platforms like Cult.Fit, etc.

Adding to Nilakantan’s view, Sonal adds that the fear of missing out is leading to the adoption of smart TVs among young people and families. “That’s where the growth is going to come from.”

While Android TV doesn’t yet support ads, Xiaomi has bumped up its PatchWall UI as a booster for discovery for partnered content. It displays an assortment of content in the form of display cards. Nilakantan explains that while these cards help to display popular content, they also double up as a showcase for content partners.

“For example, we have a page fully curated by Hotstar. We’ve been working with Hotstar very closely since the Indian Premier League (IPL) was around the corner. We ran a countdown for the IPL. Then the landing page leads to discovery of more Hotstar content. We even partnered with Hotstar to premiere a Hotstar movie on the Mi TV PatchWall even before it went live on the Hotstar platform. Similarly, whenever there is an original launch from a partner, we run promos, etc. We treat it almost like a product launch for content partners. I don’t think there is another player with such a capability.”

Advertising directly on Android TVs (like Xiaomi does with its smartphones) is not on the cards at the moment.