Pricing Wars Could Lead Discount TV Brands in the Dust

As the price of flat-panel TVs continues to come down to jaw-dropping levels, we're seeing signs that the value brands, which often managed to take a significant chunk of the pie because of their cost advantage, are now feeling the heat. Why? Because the name brands have reduced pricing to a point where they're often times actually in line with the value brands!

Research firm iSuppli reports that, during Black Friday weekend in the U.S., premium TV brands like Sony, Samsung, and LG, advertised pricing that was 23% lower than their average, while value brands like Vizio and Westinghouse reduced pricing by only 19%. Continuing on to today, Tina Tseng, an Analyst for the consumer electronics channels at iSuppli, says that the price differential between a 32" premium and value-branded LCD is just US$61. For an extra $60, would you opt for the brand name model over a lesser-known brand? Things probably won't be changing much any time soon either, as retailers scramble to move product during these difficult times.

So what does this mean? Will the value brands be obliterated by the premium models? On the flip side, however, how much money are the premium brands losing by selling products for prices that are essentially almost at cost? While the consumer comes out on the winning end of this stick, the business situation surely can't sustain itself like this for any great length of time.

It will be interesting to see how things pan out once the crazy pricing wars, not to mention the recession, come to an end. Stay tuned.

Discount Retailers Attempt to Take a Big Bite Out of CE Sales

Discount retailers are arguably profiting more, in some sense, from the downturn in the economy as shoppers flock to those stores known to always offer great "deals". So it comes as no surprise that many discount shops are attempting, more so than ever, to take a big bite out of the consumer electronics market this holiday season.

This weekend, I was surprised at the number of Wal-Mart commercials that aired (during my favourite primetime programs!) centred around flat-panel TVs, home theatre, and even Blu-ray. I'm used to seeing plenty of TV marketing dollars from the mammoth retailer, but of all product segments, I wouldn't peg Wal-Mart to be spending so much to plug things like Blu-ray and flat-panels. Kid's toys, home decor items, clothing, DVDs and CDs, yes. But big-ticket CE items? I'm genuinely surprised that so much of the marketing budget went toward this category. The move is a clear indication of one of two things: Wal-Mart is making its mark known as a CE retailer; and/or the retailer is responding to the prospect that home theatre is going to take over as the main activity of choice during these sad, economic times. And of course it goes without saying that one should

Aside from that, pricing is also mind-boggling. Right now, a name-brand 42" 1080p LCD is $950, and an up-converting DVD player is $50. (Interestingly, no Blu-ray players are featured on the Wal-Mart Canada Website, although Blu-ray discs are in abundance). At Costco, a 42" plasma is $860, and a Blu-ray player is $270. At retailers like Tiger Direct, pricing is relatively the same. A colleague told me this morning of a friend who just bought a 46" TV (name brand) for $800 over the weekend! If you can spare the cash and are in the market, now is certainly the time to buy a new TV!

But from a retailer perspective, what happens when these pricing wars continue? The same thing that has been happening for the entire year, even before the recession came into play: other retailers are forced to lower their prices; if not to be in line with discount stores, at least to be close. Products are sold off at almost no margin just so smaller companies can sustain themselves and make it through the storm. And more focus is placed on "added value" services, like free delivery, after-sales service, installation, and product expertise (certainly not a bad thing).

Still, it's an incredible observation overall knowing that just a few years ago, a plasma or LCD could not be had for less than a few grand. To put this in perspective, I searched for some old news stories on our sister Website, http://www.marketnews.ca/, and cam across this 2002 announcement from LG Electronics about the company's brand new plasma displays: the cheapest was $8,500, and the most expensive 60" model was a whopping $26,000: the price of a new car! My, how things have changed...

[Photo: Screen shot at http://www.walmart.ca/]

CES: Huge Leaps or Status Quo?

As anyone in the CE industry knows, CES, North America's largest technology trade show, is fast approaching. Returning to Las Vegas this January, the show will feature everything from the latest in consumer electronics, computing, wireless technology and other portable gadgets, digital imaging, and entertainment. You name it: if it's a really influential, really cool, and attention-getting device or technology, it'll be at CES. But just as quickly as all the facets of the technology industry are coming together in harmony, so, too are they branching off in various directions. Because of this, does CES still have the same clout that it used to?

When you think about it, the show, despite its massive magnitude, is surrounded by several other smaller, more focused events. In September, CEDIA EXPO is where the custom A/V companies congregate, while PMA EXPO, held in March, is the show for the photo industry. If you're looking at wireless, whether we're talking handsets, software, apps, or business systems, April's CTIA WIRELESS event is a must-attend. Do you work on the commercial side of things? Then InfoComm is the show for you! So where does this leave CES?

Sure, CES gets the most media attention, and the most visitors, especially internationally. Because of this, many companies hold out for the iconic show to make major announcements. But what if you don't have that much happening in a year? If you're a flat-panel TV maker, for example, you can't hold back the following year's big items until January. Then what will you show at CEDIA? Hey, here's my old stuff. Thanks for coming. See you at CES! (?) Likewise, a camera maker might wait until March to make its big announcements at PMA, but then what do they show at CES? Do you divy up the line-up, showing off some teasers at CES followed by the grand reveal at PMA? Granted, it makes absolutely perfect sense to display the same products at CES that you did at CEDIA or PMA or whatever show floats your boat, because the smaller-scale events certainly don't target the same, massively mainstream audience that CES does. But if your dealers, partners, and specifically targeted media members were already at that other show, is CES worth it for the remaining exposure you're going to get?

The answer to this, of course, depends on a number of factors. How much does the rest of the exposure mean to you? What percentage of your dealers attend CES but don't attend the other targeted show(s), whether that be CEDIA, PMA, or what have you? How important is your message to both targeted and mainstream audiences? And finally, how major is the new product or technology that you're featuring this year? Even if it isn't a "revolutionary" breakthrough as so many companies claim the smallest adjustment to represent, the more exposure your company gets, the better. Exposure is everything. As they say, people might not notice you were there, but they'll certainly notice that you weren't.

With that said, while the 2009 CES might very well be a "status quo" year where we don't see any mind-blowing technologies introduced like we might have in previous years (Blu-ray and HD DVD, flat-panels TVs and 1080p, digital photo frames, and satellite radio, to name a few), it still remains a worthy event to attend if you're in the industry.

**Speaking of those in the industry, I'd love to know your favourite spots in Vegas to take dealers/clients, hang out for a drink or two, or relax during down time. If you send your top recommendation(s) to me via e-mail at cpersaud@marketnews.ca, we'll compile a "top spots" list to publish in the mag and/or online that you can peruse and get some ideas. Because hey, just as much as the show is about learning about products, it's also about wining and dining your dealers, potential dealers, and American/overseas affiliates. Here are a few of my recommendations to get you started:

Japonais in the Mirage Hotel: it serves a fusion of Japanese and French food, and has sushi dishes that are absolutely amazing. The ambience is great, and service is impeccable.

Cirque de Soleil’s LOVE at the Mirage: It’s an exciting, captivating show that’s worth experiencing at least once, especially if you’re a Beatles fan.

The Shadow Bar in Caesar’s Palace: Having stayed in that hotel for the past three years, it’s almost become like my “local bar” a few times every year. It can, in many ways, be considered the new Bugsy’s Bar because it often ends up being a meeting place for Canucks. You’re sure to run into some Canadian industry members there.

And of course who can forget Canada Night at Caesar’s Palace: It’s the event for the Canadian consumer electronics industry. No invitation is required, and all are welcome. We’ll see you there on Friday, January 9, 2009 at 6 p.m.! Click Here for more details.

The deadline to send me your suggestion(s) is November 20, 2008.

Front Projection: Will it Ever Hit Mainstream?

I was inspired to examine the front projection category after my recent trip to Tokyo, Japan. Does the average consumer really understand what a front projector is, and what's more, are they really interested in having one in their living rooms? An even more important question is whether or not issues of ambient light can effectively be combated such that front projection becomes a viable option in the main living room.

Personally, I think that front projection is a technology that should be used with a flat-panel TV. I'll use my 40" or 50" plasma/LCD to watch sitcoms and the like; but pull down the screen and fire up the projector when I'm ready to watch a movie, or I have a large group of friends over to play Wii bowling, or catch the Superbowl or NHL play-offs. Of course that set-up needs to be in a really dark room (or the screen needs to employ technology good enough to combat light issues, or I'm willing to sacrifice in picture quality). Not to mention that price considerations come into play: I don't know about you, but the price of a flat-panel, projector and screen, along with surround sound equipment, not to mention the labour rate for a qualified installer, is slightly above my budget!

Nevertheless, when you take the cost of the average movie ticket these days into consideration, combined with the number of movies an avid movie-goer might see in a year (and overpriced popcorn and candy consumed), a front projection system in the home just might be a worthwhile option.

See the full article on our sister Website at www.marketnews.ca/news_detail.asp?nid=3769, and feel free to leave your comments!

Have Partnerships & Acquisitions Become a Necessary Evil in CE?

Looking back at all of the companies that have either partnered up or followed through with a complete acquisition, I'm wondering if this activity has become a sort of necessary evil in the consumer electronics space. Do these companies need to join forces in order to remain competitive within the market, or are the moves made strategically in an effort to boost profits?

The latest company to join the rumour mill of acquisitions and partnerships is D&M Holdings, the parent company to brands like Denon, Marantz, and Boston Acoustics. The company is reportedly auctioning off a major stake, and several sources cite that current bidders include mammoth retailer Best Buy (yes, you read that correctly), Merrill Lynch, the Advantage Partners LLP, and, most recently, a joint bid with Kenwood and Bain Capital. The press section of the D&M Holdings Website states that “recent press reports concerning the potential sale of D&M shares is not based on any information provided by the company.” When contacted, D&M Canada said that the company had “no official announcement to make at this time.”

Although that information is merely based on speculation, Blockbuster's recent bid for Circuit City is indeed true. As mentioned in a previous post, this move was in an obvious attempt to revitalize a business that has been experiencing tremendous pressures as of late. Blockbuster likely hopes that, in combining its DVD rental business with Circuit City's consumer electronics hardware offering, it can become a sort of one-stop-shop for consumers.

Back to the manufacturing side, it appears that many partnerships are forged in an effort to remain profitable rather than gain additional profitability. Take the flat-panel arena, for example, where companies like Toshiba and Pioneer have partnered with Sharp on LCD TV initiatives (with both companies also providing specific technologies and expertise to Sharp). Pioneer also recently announced it would outsource plasma panel manufacturing to Panasonic, while Philips has inked a similar deal with Japanese manufacturer Funai. The reasons for these partnerships are obvious: reduced costs, simplified manufacturing process, and the need to keep up with the increasingly competitive market. Flat-panel pricing has come down tremendously over the years, while new entrants are being added to the foray by the dozens. Will we reach a point where all TV brands eventually lead back to just one or two factories?

In the audio manufacturing arena, Canadian manufacturer API, maker of the Mirage, Energy, and Athena Technologies brands, was acquired by Klipsch Audio Technologies back in 2006. In many cases (like this one) the acquired brand or company remains an independently-operated entity. Was the acquisition made to strengthen the brand? After all, API is one of the biggest speaker manufacturers in the world!

The list goes on and on. In some cases, partnerships are indeed made to strengthen a company/brand by utilizing resources that the other can provide. In others, it's to "take out" the competition. But it appears that, as of late, we're seeing more and more traditionally considered "competitors" looking at one another and saying "I need you and you need me. We can't do this alone."

Whatever the reason, is the competitive nature of this industry in danger?

TV Prices to Drop Like Flies

It's no secret that price erosion in the flat-panel TV market is running rampant. Pricing usually dips to an all-year low during the final months of the year, due to holiday season promotions and the like. Now with many retailers already reducing prices in wake of the strong Canadian dollar, how significant of a drop can we expect to see over the next few months? According to Consumer Reports, pricing will be somewhere in the ballpark of 30% cheaper than we saw this time last year.

Consumer Reports predicts that plasmas will see the cheapest pricing, with a 42" 720p model available for as little as US$1,000 (so would this translate to $920 CDN?), and some 50-inchers flying off shelves at $1,500 a pop.

Translation: if you're in the market for a flat-panel TV, and even think you might be in the near future, now is the time to buy. Pricing probably isn't going to get any better than it is now, given that so many factors are coming into play to drive it to an all-time low.

Picking the Right Size Flat Panel

From the desk of Lee Distad's Professional Opinion:

Talking with clients, friends and family about their prospective flat panel purchases, I’ve come to realize that most people seriously underestimate what size screen would work best in a given environment.

What people shopping for a new flat panel typically don’t take into account is that with a flat panel, there is zero footprint into the space of the room, unlike the old days of CRT Rear Projection where a 50-inch screen was two-and-a-half feet deep. Combine the lack of depth with the reduced minimum viewing distance (owning to the greater level of resolution and clarity that new sets deliver), and you can wrangle a much bigger screen into your den or living room than you could 10 years ago. Add falling prices, and bigger panels are accessible to a broader range of customers than ever before.

Since last spring, the catchphrase in the industry has been: “Fifty is the new 42.” Okay, I admit that I started it, but everyone I speak with in the ‘biz’ agrees with me. Fifty-inch panels are the new default main room television, with 42-inch sets basically being a bedroom or small condo size television now.

Really, the only limiting factors in flat panel size selection are logistics: having the set be able to fit lengthwise and height wise on the wall with regard to millwork, art, and anything else that shares wall space with the set. Oh, and budget. How much television your clients can choose to buy is also a factor; but I consider that a minor detail, since the majority of the retailers who read this site are pretty upscale.

I’m not saying that you should strong-arm your clients into buying a bigger set than they thought they wanted. But make sure you do the job that a consultative salesperson should: show them what their options are, and open their minds to the possibilities. I suspect that when you do that, they’ll agree with you, and order bigger panels. Mark my words, by next spring, the catchphrase will be: “Sixty is the new 50.”

http://businessopinions.blogspot.com/ (For more of Lee Distad's Professional Opinions)

Big Changes Come in Small Packages

From the desk of Lee Distad's Professional Opinions:

One of the hottest stories on the daily tech e-newsletters today is Sharp’s demonstration at CEATEC JAPAN 2007 of a new 12.7-inch LCD display that is only 20mm (less than an inch) thick.

Sharp’s announcement follows on the heels of last month’s declaration by Sony that they will be bringing a similar sized OLED panel to market this Christmas.

The biggest flat panels often hog all the attention at trade shows and media events. Witness the arms race of the last few years between Samsung, Sharp, Panasonic, and LG to show off bigger and bigger LCD and plasma displays. In fact the same press release that trumpets Sharp’s new super thin panel is dominated by the announcement of their 108-inch LCD panel (the subtext there being “Take THAT, Panasonic!”).

While the competition to build bigger panels is fun to watch, and certainly important to technological development, it’s almost a sideshow compared to what may be the main event: better, brighter, thinner, more energy efficient displays.

While the sizes may be unexciting, the leaps that are being made in LCD and OLED are going to be earthshaking, and will have a huge impact on devices with displays, from phones and pocket computers (will there even be two different categories in three year’s time?) to kitchen appliances, onwards to obvious things like laptop monitors and, of course, televisions.

Besides, today it’s a 12-inch display that’s less than an inch thick. Tomorrow it might be a 70-inch television hanging on your wall that’s no thicker. Now are you excited?

I can’t resist drawing a parallel to 65-million years ago, when dinosaurs ruled the earth. The thunder lizards may have been mighty indeed, but the future was being made closer to the ground, as tiny little mammals began to proliferate.

So yes, sometimes very small things are a prelude to big changes.

http://businessopinions.blogspot.com/ (For more of Lee Distad's Professional Opinions)

Plasma Continues To Be Maligned In The Trade Press

From the desk of Lee Distad’s Professional Opinion:

It seems like only yesterday that LCD and plasma flat panel televisions were a mysterious future technology, just off on the horizon of the CE Industry’s future, when really it was more like 10 years ago. In that time, we’ve all see the sea change. Even as recently as four years ago, we were all still talking about the coming “Flat Panel Revolution.”

Well, the Flat Panel Revolution is over, and the flat panels won. In that time, I’ve witnessed plasma technology be the victim of concerted vicious rumors on retail sales floors about their durability and lifespan. Granted, the earliest iterations of Plasma tech had birthing pains, but these stories have grown legs all out of proportion to the original shortcomings of the technology.
Fact: The big boys of the plasma world, such as Pioneer, Panasonic, Hitachi, and LG have spent boatloads of money over the years to make plasma a viable display technology for home consumers. The end result is flat panel sets with a lifespan in the neighborhood of old-school tube televisions, and brilliant, dynamic picture quality.

That’s why this morning, I was shocked to see an article in a daily trade newsletter riddled with misinformation about plasma.

The Retail Bridge: It's Official: Plasma Isn't Dead Yet
Sure, the technology is expensive, delicate and prone to burn-in, but sales of plasma HD television sets are expected to grow by as much as 25 percent in 2007, according to a report published Tuesday by the (admittedly biased) Plasma Display Coalition.

I’m sorry, but “expensive, delicate and prone to burn-in”? This isn’t 2001 anymore. If you look at the median prices for major manufacturers, it’s pretty much a level playing field for both LCD and Plasma in terms of what the customer pays for a set.

While I can remember five years ago the boxes for Hitachi plasmas had a little level gauge on the outside to warn if the box had been tipped in transit, that’s pretty much a non-event now. I’ve seen plasmas that were stored face down for a week with no ill effect. Granted, that’s not what the manufacturer recommends, so I don’t recommend it either, but there you go.

The “burn in” thing is a boogey man that’s right up there with “dead pixels.” Every major brand uses a technique in their sets’ video processing that slowly creeps the picture vertically and horizontally, pixel by pixel to reduce the likelihood of any cells permanently etching themselves. The static logos that networks run in the bottom corners of the screen are no longer the television-ruining threat that they were back when CRT-rear projection was the standard.
From an image quality perspective, while I have been much more impressed by the last two generations of major brand LCD panels than I have been in the past, I still have to give the nod to plasma for clarity, sharpness, and colour saturation in the 50-inch and larger category, at least among all the panels I’ve critically examined (hint: it’s a LOT).

Despite having to swim through a sea of misinformation, the plasma category continues to sell well to consumers, which is really all the rebuttal that is needed.

http://businessopinions.blogspot.com/ (For more of Lee Distad's Professional Opinions)

Don't Adjust Your Set: This is a 50'' LCD TV That's as Thin as a Tube of Lipstick

Imagine an LCD TV that’s just 20mm thin, boasts 100,000:1 contrast, reproduces 150% of the standard NTSC colour gamut, and only uses an average of 140 kWh/year. Sound impossible? Perhaps futuristic, even? Well, such a display isn’t that far off the horizon: Sharp Electronics has already built a prototype that fits the bill.

The display measures 29 mm thin at the frame, and just 20 mm within the main display section. At 50-inches in size and weighing 25 kg, Sharp says the LCD would consume just 140 kWh a year, based on the average of 4.5 hours of daily use.

It will likely be a very long time before such a model actually come to fruition as a saleable product, but it’s an interesting look into the future of flat-panel TV, and exciting evidence that development in this category shows no signs of slowing down. If you haven't joined the flat-panel train yet, it's about time you jump on!

[Photo: This is just one concept design of Sharp’s prototype 20mm thin LCD TV that has already been developed in Japan].