Conversely, domestic sales of IPTV devices have experienced explosive growth in the past two years. According to the 2014 Internet Trends report released by Kleiner Perkins Caufield & Byers, a US-based venture capital firm, in 2013, sales revenue of smart TV devices grew 39 percent worldwide.

In the first quarter of this year, LeTV, a leading provider of smart TV and over-the-top content, which refers to the delivery of audio, video, and other media over the Internet without a multiple system operator, covered 19 percent of sales revenue in the Chinese TV market, ranking first in the industry.

China's Internet TV market is expected to hit $1.38 billion in 2016, according to a study by Digital TV Research, a consultancy.

Game changer

"Internet TV has revolutionized the way in which Chinese audiences receive information and entertainment in their living room," said Xie Wen, a Chinese IT expert and former president of Yahoo China.

"It is being seen as the new hope for those in the TV industry to win back audiences."

Research by TNS, a global leader in market research and business analysis, showed that the lack of diversified content and creative modes has led to the decline of traditional TV and boosted the development of Internet-based media.

"For traditional consumer electronics manufacturers, their job is done once they deliver a TV set to the customer. But for Internet-based media providers, our job has just started," said Yu Guangdong, vice-president for the search business of Internet company Qihoo 360.

"Internet TV has drawn a large number of Chinese viewers back to the living room, sitting in front of the television set. The refocus on the industry also brings more investment, covering operational costs and promising to help rake in more profits," said Zhang Yuxia, CEO of Future TV Co Ltd, a subsidiary of China Network Television, which is the online division of State broadcaster CCTV.

The emergence of Internet TV, combining services, facilities, video content and terminals, has obviously threatened the traditional profit model of the TV industry. That is prompting traditional TV set manufacturers to change their mindset and seek cooperation with online video providers.

From late last year, a group of China's leading TV set makers have joined hands with online video providers. Sichuan Changhong Electric Co Ltd teamed up with Youku.com, while TCL and iQiyi.com cooperated to produce Internet TV. Hisense Group announced it would work with 18 online video websites.

"The joint cooperation will provide advanced technology in producing TV facilities and innovative video services for users, helping to establish a positive cycle in the future," said Wang Zhihao, chief technology officer of Hisense Group.