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Quarantine pressure cooker may yield smart TV's next killer app

The growth of fitness and gaming apps, and a new reliance on video chat, has provided a new opening for startups to play a part in the future of TV.

Hollie Mason

Hollie Mason participated in a live virtual yoga class on April 13 in Brixworth, England.

Photo: Clive Mason/Getty Images

Netflix, YouTube and … air squats? With much of the world at home, consumers have begun to use their connected TVs for much more than just binge-watching. Fitness, meditation and even education apps are seeing a huge upswing, and consumer electronics companies have noticed, with some accelerating plans for launching this type of content.

TV makers have long tried to figure out what they can offer consumers in addition to the now-ubiquitous streaming services, especially since their devices are getting more powerful every year. The quarantine-boosted adoption of fitness, wellness and related apps, and our growing reliance on video chat, has accelerated the quest to find TV's next killer app, providing a new opening for startups to play a part in the future of TV.

The huge growth of streaming has been one of the least surprising stories of the COVID-19 era. After all, people who don't leave their house watch more TV. But there's also growth in unexpected areas, said Fire TV GM and VP Sandeep Gupta. "The home has become your theater, your restaurant, your gym, your school," Gupta told Protocol. And often, TVs play a central role in all of this.

Cases in point: Use of Peloton's Fire TV app has doubled in recent weeks, and fitness apps overall are seeing a 40% surge worldwide on Amazon's smart TV platform. Meditation and Yoga apps have enjoyed a 25% growth in users, and the entire health and fitness segment is growing faster than entertainment on Fire TV. "TV has become a more holistic experience, as opposed to purely an entertainment device," Gupta said.

Amazon isn't alone with these observations. Installation numbers for non-video-streaming apps have nearly tripled on Google's Android TV platform in the last 28 days, said Android TV product lead Anwar Haneef. This includes, in addition to fitness apps, a notable increase in music and games, with dancing games leading the charge in the latter category.

And Vewd, which operates app stores on a range of devices, including TiVo DVRs, connected TVs and Blu-ray players, has seen significant growth in games, game streaming and fitness, as well as local news.

The expanding interest in fitness on the TV prompted Samsung to accelerate its 2020 launch schedule. The consumer electronics giant announced plans at CES to bring its Samsung Health platform to its smart TVs later this year. Last week, it launched health and wellness apps from six partners ahead of schedule, before the formal integration into Samsung Health was finished.

Samsung Electronics SVP Sang Kim argued that it only made sense for consumers to turn to the TV for fitness and wellness in these times. "TV is the largest screen in your house," he said.

At CES, Samsung had demonstrated a design concept that paired consumers' phones and smart watches with their TVs to monitor exercises. "I don't think that this is far away from a technology perspective," Kim said. Consumer acceptance may be another matter, especially when it comes to introducing cameras into the living room. But again, the forced lockdowns and daily video calls may quicken this process.

Zoom's success in particular has been a massive learning moment for the entire consumer electronics industry, Kim said. Not only in demonstrating demand, but in struggling with privacy issues and being forced to respond. "It is teaching us a lot," Kim said. "This is accelerating our learning curve."

Underlying this evolution is that, thanks to faster processors for video upscaling and smart apps, TVs and streaming devices have gotten a lot more powerful in recent years. The industry has long tried to figure out what else it could do with all that processing capability, with mixed success. Amazon's first Fire TV device sold with a game controller, but the company ultimately pulled back on gaming, conceding it couldn't compete with traditional consoles.

TV manufacturers have also begun to incorporate smart home control into their devices, and Vewd Chief Product Officer Sascha Prueter suggested that new display technologies may yield always-on scenarios, which could turn TVs into ambient smart displays. "The caveat with these examples is that these technologies have to become a lot cheaper from a hardware perspective to achieve," he said. "Because they are additive use cases, it's tough to convince a consumer to buy a new TV for them."

Consumers replace their TVs less frequently than their smartphones, which is why even new services must work with existing devices, Gupta said. "We try lots of things," he said. But most of those ideas never leave the lab because they don't work with what consumers have in their living rooms. "We always want to make sure what we are doing is accessible to all," he said.

Fitness, meditation and similar activities, on the other hand, don't require hardware changes and come with a low barrier of entry for startups looking to break into the smart TV market. "These can be great revenue streams for them," Gupta said. Kim agreed, arguing that startups like meditation app provider Calm face little competition on the big screen. "This is a white space for them," he said.


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The big question is whether these companies will retain a receptive TV audience once everyone returns to the office. Kim seemed cautiously optimistic. "Fitness is all about growing your habit," he said. "I hope it sticks around."

Gupta asserted that new use cases for smart TVs wouldn't go away, in part because we might feel the economic aftermath of the COVID-19 crisis for some time, which could lead consumers to, for example, rethink gym memberships. "Some of these things can be more cost-effective over time," he said.

Prueter was more skeptical, saying, "Consumers are turning to their TV sets now more than ever to be entertained, and the majority of that entertainment is 'lean back' — fairly passive, not a lot of thinking, and totally focused on escapism."

In other words: Even with a growth in new use cases, TV's killer app may ultimately remain … simply watching TV.

Image: Yuanxin

Yuanxin Technology doesn't hide its ambition. In the first line of its prospectus, the company says its mission is to be the "first choice for patients' healthcare and medication needs in China." But the road to winning the crowded China health tech race is a long one for this Tencent- and Sequoia-backed startup, even with a recent valuation of $4 billion, according to Chinese publication Lieyunwang. Here's everything you need to know about Yuanxin Technology's forthcoming IPO on the Hong Kong Stock Exchange.

What does Yuanxin do?

There are many ways startups can crack open the health care market in China, and Yuanxin has focused on one: prescription drugs. According to its prospectus, sales of prescription drugs outside hospitals account for only 23% of the total healthcare market in China, whereas that number is 70.2% in the United States.

Yuanxin started with physical stores. Since 2015, it has opened 217 pharmacies immediately outside Chinese hospitals. "A pharmacy has to be on the main road where a patient exits the hospital. It needs to be highly accessible," Yuanxin founder He Tao told Chinese media in August. Then, patients are encouraged to refill their prescriptions on Yuanxin's online platforms and to follow up with telehealth services instead of returning to a hospital.

From there, Yuanxin has built a large product portfolio that offers online doctor visits, pharmacies and private insurance plans. It also works with enterprise clients, designing office automation and prescription management systems for hospitals and selling digital ads for big pharma.

Yuanxin's Financials

Yuanxin's annual revenues have been steadily growing from $127 million in 2018 to $365 million in 2019 and $561 million in 2020. In each of those three years, over 97% of revenue came from "out-of-hospital comprehensive patient services," which include the company's physical pharmacies and telehealth services. More specifically, approximately 83% of its retail sales derived from prescription drugs.

But the company hasn't made a profit. Yuanxin's annual losses grew from $17 million in 2018 to $26 million in 2019 and $48 million in 2020. The losses are moderate considering the ever-growing revenues, but cast doubt on whether the company can become profitable any time soon. Apart from the cost of drug supplies, the biggest spend is marketing and sales.

What's next for Yuanxin

There are still abundant opportunities in the prescription drug market. In 2020, China's National Medical Products Administration started to explore lifting the ban on selling prescription drugs online. Although it's unclear when the change will take place, it looks like more purely-online platforms will be able to write prescriptions in the future. With its established market presence, Yuanxin is likely one of the players that can benefit greatly from such a policy change.

The enterprise and health insurance businesses of Yuanxin are still fairly small (accounting for less than 3% of annual revenue), but this is where the company sees an opportunity for future growth. Yuanxin is particularly hoping to power its growth with data and artificial intelligence. It boasts a database of 14 million prescriptions accumulated over years, and the company says the data can be used in many ways: designing private insurance plans, training doctors and offering chronic disease management services. The company says it currently employs 509 people on its R&D team, including 437 software engineers and 22 data engineers and scientists.

What Could Go Wrong?

The COVID-19 pandemic has helped sell the story of digital health care, but Yuanxin isn't the only company benefiting from this opportunity. 2020 has seen a slew of Chinese health tech companies rise. They either completed their IPO process before Yuanxin (like JD, Alibaba and Ping An's healthcare subsidiaries) or are close to it (WeDoctor and DXY). In this crowded sector, Yuanxin faces competition from both companies with Big Tech parent companies behind them and startups that have their own specialized advantages.

Like each of its competitors, Yuanxin needs to be careful with how it processes patient data — some of the most sensitive personal data online. Recent Chinese legislation around personal data has made it clear that it will be increasingly difficult to monetize user data. In the prospectus, Yuanxin elaborately explained how it anonymizes data and prevents data from being leaked or hacked, but it also admitted that it cannot foresee what future policies will be introduced.

Who Gets Rich

  • Yuanxin's founder and CEO He Tao and SVP He Weizhuang own 29.82% of the company's shares through a jointly controlled company. (It's unclear whether He Tao and He Weizhuang are related.)
  • Tencent owns 19.55% of the shares.
  • Sequoia owns 16.21% of the shares.
  • Other major investors include Qiming, Starquest Capital and Kunling, which respectively own 7.12%, 6.51% and 5.32% of the shares.

What People Are Saying

  • "The demands of patients, hospitals, insurance companies, pharmacies and pharmaceutical companies are all different. How to meet each individual demand and find a core profit model is the key to Yuanxin Technology's future growth." — Xu Yuchen, insurance industry analyst and member of China Association of Actuaries, in Chinese publication Lanjinger.
  • "The window of opportunity caused by the pandemic, as well as the high valuations of those companies that have gone public, brings hope to other medical services companies…[But] the window of opportunity is closing and the potential of Internet healthcare is yet to be explored with new ideas. Therefore, traditional, asset-heavy healthcare companies need to take this opportunity and go public as soon as possible." —Wang Hang, founder and CEO of online healthcare platform Haodf, in state media China.com.

Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.

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