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/]

Does Recession Mean Increased Interest in Technology?

I have said many times that, in a recession, consumer electronics is likely the one category that won't suffer as much as the others. Today, a study commissioned by Blockbuster reports the same. Why? When people don't have as much disposable income, they stay home. What do they do at home? Watch TV or movies, play videos game, and surf around on the 'net.

So while the restaurant, vacation, and other like recreational industries are suffering, consumer electronics are becoming more central to people's daily lives. Granted, while people are watching more TV at home (87% of survey respondents said they would be using their home theatre more often in the coming months) they aren't exactly spending more money: your cable/satellite bill doesn't go up if you watch more TV, unless you opt for pay channels. But this means that consumers might become more aware of new technologies as they place more focus on digital entertainment. They might learn about channels they don't have and look into subscribing (I'm saving hundreds of dollars by not eating out every Friday anymore, so what's another $5/mo. tacked onto my cable bill?)

As lagging consumers stare at the old clunker of a TV in the middle of the living room that they didn't spend so much time with before, they might even start thinking of upgrading. If you're watching it more now, that justifies the purchase, right?

Of course Blockbuster hopes that this increased interest in "staying home" will also amount to lots and lots of movie rentals. It probably will. And hopefully once the recession has passed, consumers will look to invest in a fancy new home theatre so that they can enjoy these movies, as well as regular TV programming, and even video games, in all their glory.

Sharp Caters to the Ladies, Teaches About HD

According to Sharp's research, 75% of the consumer electronics purchases within the home are made by women (or at least "OK'd" by them), yet just 2% of females actually feel confident on their knowledge of high-definition TV. Given these staggering numbers, the top LCD manufacturer hosted an educational event for about 25 journalists to teach them about HD, answer questions, and squash myths. Surprisingly, the questions came flooding in so much that an official presentation almost wasn't needed.

What's the difference between LCD and other technologies? Asked one woman. What does 720p, 1080i, and 1080p mean? Chimed in another. Questions even touched upon topics that us in the "tech" field often take for granted. What's a bezel? inquired a puzzled female journalist. Sharp Canada's Kevin Andrews calmly explained that it's just the tech industry's term for the frame around the TV. This gal wasn't dumb, nor was she uninformed. But we often don't realize that people really don't recognize these terms, nor buzz words like 1080p, 16:9, or letterboxing. Just because we use them every day doesn't mean they do! Questions continued on to span topics like how to clean a flat-panel when your kids run their grubby hands across it, and where would one buy such a solution?! Attendees even touched upon issues of energy consumption, proper viewing distance, and yes, surround sound. Apparently women do understand that you need a good surround sound system to go along with your high-def flat-panel TV, but they just needed some reassurance from a reputable source.

A demo showing the movie Enchanted playing via a standard-definition DVD player on the left and a Sharp Blu-ray player on the right (both on Sharp's new special edition AQUOS SE94-series LCDs) provided further evidence that the high-definition experience really is worth it. Rogers Cable provided the high-definition set-top boxes for the demo, while reps from both companies were on hand to answer questions related to both flat-panel technology and source devices.

After the demonstration, which ran for about an hour and a half, I was able to chat with some of the journalists, none of whom worked in the technology sector. When I asked one gal whether the demo convinced her to buy a flat-panel TV (she's still living in the CRT world), she explained that, although she wasn't jumping out of her seat to buy one today, she certainly feels more confident having been educated on the technology. It's just like buying a car, after all. No one wants to walk into a store or sales office being vulnerable or uniformed.

Interestingly, one journalist told me that she didn't even know she could connect most flat-panel TVs (like the aforementioned Sharp AQUOS models) to her computer or notebook and view digital photos, or even surf the 'net, on the big-screen. "That's a huge selling feature for women and moms," she said, "and companies should really focus on features like that." Many attendees also seemed pleasantly surprised to learn about Sharp's AQUOS Net feature, which provides real-time tech support whereby a rep can actually adjust your TV settings remotely to optimal viewing. (This feature was officially announced at CES in January 2008).

The main reason I attended this event was to gain some insight into where the "average" consumer stands with HDTV, and I was truly blown away by how many terms, buzz words, and high-tech features are taken for granted within the industry. Imagine that, while we spend so much time focusing on the minutia of picture quality, something simple like PC connectivity makes all the difference with the core buying audience. It was truly an enlightening experience. Kudos to Sharp for taking the initiative to start educating consumers on the benefits of HDTV, and how to get it. The more customers that jump on the bandwagon, the better.

Stay tuned for video footage from the event, including eye-opening commentary from some of the female attendees.

Photo: (l-r) Sharp Canada's Chris Matto, Bill Friend, Eteinne Kwan, and Kevin Andrews were on hand to answer questions, and demonstrate the differences between SD and HD content.

TiVo is Here!

I've always wanted TiVo, and to be honest, I'm not quite sure why. I have a set-top box at home with a built-in PVR that lets me record TV programming on the fly, set future recordings, and pause, rewind, and fast forward live TV. But yet I've always wanted one of those "cool" TiVo's that they talk about on American TV all the time. Maybe it's sort of like the iPod vs. every other portable audio player on the market. They all essentially do the same thing: let you listen to digital tunes (and sometimes video) while on-the-go, or through a home audio system or separate speakers. But the iPod arguably does it best, with an easy-to-use, and quite sexy interface. Is that what TiVo promises?

To be honest, I don't know because I've never had the chance to play around with one. Well now, I just might. The company has confirmed its entrance into the Canadian market, and now I feel like an anxious Mac-addict that salivates every time he sees the iPhone commercial. We've waited so long for this device to come to Canada, I was beginning to think that Canadian broadcasters might have to bleep out the word "TiVo" every time it was mentioned and voice-over "PVR" just so we wouldn't feel left out.

In the U.S., "TiVo" has become much like the terms "Kleenex" for tissues and "Xerox" for photocopies, both of which are actually brand names, not products. The same thing happened with the Sony Walkman in the '80s, where virtually every portable player, whether made by Sony or not, was simply lumped into the "Walkman" category. When it comes to TiVo, I, in Canada, will say I missed Dexter last night, but no worries: IPVR'd it; while U.S. TV watchers are more likely to say I missed Dexter last night, but no worries, I TiVo'd it! Do you catch my drift?

Back to TiVo in Canada: although the box that will be available in early December ($199) does not support high-definition signals, up to 80-hours of standard definition content can still be recorded for later viewing. A reader to our news Website http://www.marketnews.ca/ commented that the move is "a day late and a dollar short", stating that, since so many people have already converted to HD, they won't bother with standard definition recording. Au contraire, I say. There are tons of consumers out there that haven't yet bought into the HD craze: in fact, the penetration in Canada is projected to be just about 48% by the end of this year, according to the CEMC. Even so, I'm an HD viewer, but I'd rather record a program in SD than not record it at all (of course I'd prefer HD if given the option).

A subscription will cost $12.95/mo. (in U.S. dollars, not that it makes much of a difference), or less depending on how many years you sign up. As for compatibility, a press release issued by TiVo says that it's "optimized for cable households". A TiVo spokesperson tells me that it will also be compatible with satellite boxes; and dial-up Internet connections (albeit with the turtle speeds that dial-up users have become accustom to).

Maybe it's marketing. Maybe it's U.S., pop culture TV. Maybe it's the same juice iPod-fanatics are drinking. But I'm happy to see Canada added to the TiVo culture. Better late than never, as they say. Next up: the iPhone. We're waiting....

Don't Mess With the Cuban

I reported last week that HDNet Chairman and President Mark Cuban filed suit against DIRECTV because the U.S. satellite TV provider wants to move the company's two HD channels to a new, HD package that would cost customers an additional $4.99/mth. Today, SkyREPORT says that Cuban has succeeded in a temporary restraining order that would prevent DIRECTV from moving the HDNet channels. The actual hearing will take place on December 7, but it looks like Cuban is a force to be reckoned with!

Cuban claims that HDNet would suffer "irreparable harm" if it lost customers due to the extra fee that DIRECTV wants to invoke for its channels. The Dallas judge agreed with Cuban that this was a likely scenario, thus granting the temporary injunction. How many of HDNet's faithful fans would be willing to pay an additional $60/year to access the channels, which include live sports, licensed programming, movies, and original content, all broadcast in 1080i high-definition? Currently, HDNet's two HD channels are part of DIRECTV's basic $9.99/mth. HD offering.

Although DIRECTV is currently not permitted to move the HDNet channels, the company is still moving forward with promoting its new HD Extra Pack package, which will include MGM HD, Smithsonian HD, and MHD. (The Extra Pack was to be offered as a free "preview" until December 15 anyway). No word yet on whether DIRECTV will move two alternate HD channels to the new package should the court rule that HDNet has to stay where it is.

I do agree with Cuban's decision to fight for his content and customers. But I still believe that what's more important than disputing price packages is to get lagging customers on board with HD, period. Isn't it a bit soon in the high-def game to be charging customers more for services?

Marc Cuban Has it Out with DIRECTV

HDNet.com Chairman and President Marc Cuban isn't just busy dancing with the stars. He's also duking it out with DIRECTV over how much the satellite providers' customers should pay for the HDNet channels. Currently, Cuban's two HD channels are included in DIRECTV's "basic" $9.99/month HD subscription package, but DIRECTV wants to move them to the higher-tier HD "extra" package that would cost another $4.99 per month. According to SkyREPORT, HDNet has filed suit, claiming that DIRECTV is "trying to destroy it" by forcing customers to pay more for the HDNet channels.

It sounds a bit childish (not to mention superhero-ish) to claim that a company is "trying to destroy you", but I can see HDNet's point in that customers might be reluctant to now pay for a service that they were already recieving. On the other hand, being classified as having premium offerings says a lot for the content you offer, right? If HDNet fans truly are fans, they'll pay the extra $5/mth which, in addition to HDNet and HDNet Movies, will also include MGM HD, Smithsonian HD, and MHD.

This leads to an even bigger issue: should HD content be classified into different packages, or should all high-definition channels be offered to subscribers for one fee? Of course you don't want to pay a premium for channels you are never going to watch, but why should one person's interests cost more money than another's? Canadian HD providers have adopted the same tiered approach to HD content, with things like special sports channel add-ons, or additional high-definition movie channels. The bottom line is that if you want it, you'll pay for it.

Back to the issue in the U.S.: HDNet feels that DIRECTV's decision represents a "gross violation of contractual obligation"; while DIRECTV deems the lawsuit unnecessary, with no evidence to support it. Let the drama ensue...

On a related note, Leichtman Research Group reports that only 32% of consumers actually know there's a difference between HDTV and digital TV, and that, of almost 28 million U.S. households with HDTVs, only half actually subscribe to HD service. That being said, I don't think the issue should be about splitting up content: it should be about promoting the very existence of HD content so that the other 50% of consumers can get on board!