MD-RPTV, Flat-Panel Lead TV Sales Growth

Falling prices boosts demand

By Greg Tarr -- TWICE, 7/12/2004

Sidebars:
Strong Integrated HD Sales Expected
Camcorder Market Pins Hopes On DVD

NEW YORK— Citing forthcoming price cuts and key technology and cosmetic advances in microdisplay rear-projection (MD-RPTV) and flat-panel TVs, leading television manufacturers gave glowing reports of midyear industry performance and forecast more explosive results in the second half of the year.

Although analog television sales predictably are in decline for most screen size segments, manufacturers said sales of digital products have never been stronger, and consumers are almost eagerly spending more money than ever before in stepping up to advanced television technologies.

The leading growth contributors by display type in the first quarter of 2004 were MD-RPTV sets and monitors, and LCD TV, particularly in 30W-inch screen size, which according to a Quixel Research/ Home Theater Research Group (HTRG) study was up 174 percent year-to-date over the first quarter of 2003.

Another big winner through the first quarter of the year is MD-RPTV — including models using DLP, LCD and LCoS technologies. According to Quixel/HTRG research, first quarter U.S. MD-RPTV sales to dealers were 250,928 units, up 528 percent over the first quarter of 2003, and up 64 percent over fourth quarter 2003 numbers. Full year 2003 sales for the category were 328,506 units, according to the study, and that is expected to rise to 1,102,460 units for full year 2004.

"Microdisplay is growing at the rate that we expected, so we are extremely pleased," said Leo Delaney, Hitachi America's marketing VP. "PTV [projection television] in general is up over 40 percent over last year in sell-in volume. It's a good time to be in the business. There is a lot of demand out there, and retailers are responding to it by putting in product."

Mike O'Hara, Thomson's executive VP, said, "microdisplay is 15 percent of the industry. And it is a part of the industry that is growing by leaps and bounds. Consumers are looking for value" compared to higher prices currently asked for similarly sized plasma displays.

Hitachi, Thomson and other manufacturers are positioning MD-RPTV products as more affordable alternatives to flat-panel TVs. In some cases, MD-RPTVs sell for roughly half the price of comparably sized plasma displays, today.

Besides price, one of the key benefits of MD-RPTV over plasma panels is unit longevity and screens that are not prone to static image burn-in. Compared to LCD-TVs, MD-RPTVs are typically larger and significantly more affordable in comparable screen sizes.

A key trend in this area is to make cabinet depths slimmer while changing unit styling to closely resemble the look of a plasma panel when seen from most viewing angles. This is winning over women shoppers who are attracted to the clean, contemporary look of the cabinet that takes up much less space in a home.

Thomson, for example, will introduce later this year a line of DLP HDTV sets that measure less than seven inches deep, while Hitachi has introduced a series of LCD-based rear-projection sets that look virtually identical to plasma panels when viewed head-on. Similarly, Samsung has unveiled DLP HDTVs based on a cabinet that looks like a pedestal stand.

According to Quixel/HTRG research, first-quarter U.S. plasma display factory sales were up 66 percent over the year-ago period at 114,924 units, but that was down 11 percent from the fourth quarter of 2003. Quixel/HTRG reported 379,421 unit sales of U.S. plasma panels for full year 2003, and the firm predicts full year 2004 plasma sales rising to 712,346 units.

"Plasma is still doing well, although it's a little lower than people thought it would be at this time," said Ed Wolff, Panasonic's display group merchandising VP. "I think that is due to a combination of the price points at the time, the uncertainty of the economy, and the seasonality of the category that we are beginning to realize."

Bob Perry, LG Electronics' sales VP, picked plasma as a major producer for the second half of 2004, adding that sales of plasma displays, spurred by aggressive price moves from brands with core manufacturing capability, could impact sales of MD-RPTV products.

"New price points, integration with digital tuners and digital cable-ready CableCARD capability are key factors in the maturity of this product segment," Perry said. "We expect plasma to strongly impact other competitive technologies. As pricing and feature sets become more comparable, we believe that the consumer will always choose flat and cool."

Jonas Tanenbaum, Samsung's flat-panel products senior marketing manager, said that "depending on who you speak to, projections for LCD and plasma are both going to basically double for this year. The question I ask is, 'How is that going to happen?' Are consumers going to suddenly wake up one day and say, 'I need to have a flat-panel TV?'

"I think we will see some new brands in the marketplace. We will see products delivering higher performance than ever before and pricing is coming down. But it hasn't really eroded year-to-date to any significant degree," he continued. "So we are probably set up to see more rapid price declines in the second half, particularly in plasma."

Advantages of plasma displays are their thin form-factor, wide viewing angle and good image quality.

LCD TV has astounded most industry observers with its strong performance in the first quarter. According to Quixel/ HTRG, U.S. factory unit sales of LCD TVs topped 792,000 in 2003, and had already hit 265,814 units in the first quarter of 2004. The research firm projects full year 2004 LCD TV unit sales climbing to 1,705,071.

The 30-inch and larger segment tallied unit sales of 22,627, which Quixel/ HTRG said is "already more than half of the 2003 total" of 43,461 units.

Sharp Electronics' display devices product marketing director Bruce Tripido projected full-year LCD TV industry sales "of somewhere between 1.8 and 2 million units. Last year it was about 800,000 to 850,000. A number of factors are driving demand, including many more options for the consumer — there are more screen sizes, and more product iterations.

"With the different types of products and screen sizes also comes the entrance of a number of competitors into the marketplace," Tripido continued. "The end result is pricing compresses a bit; products become a bit more affordable for the end user; and the industry becomes very hot, very quickly, which is what we are seeing right now."

"Consumers look at flat screen and think that is what it is all about," said Greg Godorf, Sony Electronics Home Products VP. "The entire industry, from manufacturers, retailers to the guys on the selling floor must explain the differences between ED flat screens and true HD. We need a full education message, a clear message to the consumer to focus on value."

Des Power, Philips Consumer Electronics' senior VP said "We are preparing, absolutely, for the consumer value proposition in flat-panel TV — as we go into the back half of this year — becoming extremely enticing."

Many in the industry believe that if large panel LCD TV pricing can be brought down to meet or beat plasma, it will stand as the format of choice in the future. LCD TVs offer strong color saturation, thin cabinet form-factor, long life span without threat of static image burn-in, and a continually improving contrast performance.

Strong Integrated HD Sales Expected

NEW YORK — One of the biggest questions in the television industry this year has been how to gauge demand for fully integrated HDTV sets.

Through the first quarter of 2004, manufacturers said sales of fully integrated HDTV sets — those that carry built-in tuners to receive ATSC digital broadcasts — have been flat or even down. That status even extends to the first models that were digital cable ready (DCR) — meaning, they carry slots for new uni-directional CableCARDs that permit conditional access to premium programming.

But as the industry push toward fully integrated arrives in force in the second half of the year, most expect the segment to be building momentum rapidly. According to CEA forecasts for 2004, over 1 million fully integrated HDTV sets will be sold by the end of the year. Most of those will also be DCR models.

As of July 1, 2004, television manufacturers are mandated by the Federal Communications Commission to integrate ATSC digital tuning into all sets measuring 36-inches and larger, and 100 percent of those a year later. Next year, the mandate extends to 50 percent of sets measuring 25-inches through 35-inches, growing to 100 percent in 2006. And by July 1, 2007, all sets and video devices that normally carry analog tuning must integrate terrestrial ATSC tuning.

Some retailers, manufacturers said, have been reluctant to merchandise integrated products because they can cost $500 more than similar monitor-only models, and many customers plan to receive standard- and high-definition channels using digital cable boxes, supplied by their cable operators.

Another issue dragging down acceptance has been a lack of availability of digital CableCARDs through local cable operators.

"Sales so far this year of integrated products have been very slow," said Ed Wolff, Panasonic's display group merchandising VP. "I think consumers are confused by ATSC and don't understand why they need it. Another issue has been finding it on the floor," he continued. "As a manufacturer, I can make a line with half of the sets having ATSC tuners, but I can't put them out on the retail floor."

Wolff, whose company expects to carry up to 25 fully integrated/DCR products this year, said integrated tuning will sell better in higher priced products, such as plasma displays.

Sony is slated to introduce 20 different integrated/DCR tuners by the end of the year, said Greg Gudorf, Sony Electronics Home Products VP. "Fifty percent of all sets sold that are 36-inches and above must have this technology. With a fully integrated set with digital CableCard consumers can finally use their Sony remote for all cable functions."

Some industry manufacturers said that any early lack of enthusiasm around integrated sets is due to the fact that most manufacturers have included DCR capability into the sets, and many cable operators are waiting for the sets to arrive in the second half before rolling out CableCARDs.

"For LG, our [integrated DTV] sales are up, and in several key categories, such as some PDP models, we have sold through faster than expected," said Bob Perry, LG Electronics' sales senior VP. "In general, some consumers may be waiting for CableCARD products, and this is putting some pause in the market. We do expect demand to increase strongly as digital cable-ready product enters the market in the second half and awareness increases."

In addition, some retailers still remember struggling to sell early iterations of fully integrated HDTV sets that lacked cable-ready capability.

But manufacturers said that once cable companies begin offering Cable-CARDs, the addition of DCR capability puts a new light on the sales prospect.

"CableCARD makes fully integrated HDTVs viable," said Scott Ramirez, Toshiba America marketing VP.

"We believe strongly that the DTV tuner mandate, coupled with the new digital cable-ready standards and regulations, are good for the market," LG's Perry said. "We think that over the next year the digital tuner will not be a premium feature, but a standard feature on any good television."

Camcorder Market Pins Hopes On DVD

New York— MiniDV camcorders can be forgiven for feeling slighted, for while the format has just crested over 50 percent of the unit volume in March, propelled by rapidly falling price points, vendor excitement and an increasing portion of dollar sales are coming from the new DVD camcorders.

According to Jeff Fochtman, product manager, home electronics division, Hitachi America, the DVD camcorder segment has taken the market lead for the first time in format share over $600.

"In fact, May 2004 numbers indicate that DVD camcorders command well over 50 percent total share in camcorders over $600. Hitachi expects this trend to continue," Fochtman said.

Indeed, several major manufacturers are hoping to ride the DVD wave through the holidays to prop up a category that is otherwise softening.

According to NPD consumer data, overall unit sales are down 4.3 percent from June 2003 through May 2004 vs. the year-ago period. Dollars are down more significantly, 13.5 percent, over the same period.

While vendors think the declining unit trend will persist through year's end, they're more optimistic about dollars.

"It's not in terrible shape by any means," said Linda Vuolo, product director, camcorders, Sony. "We think we can beat CEA's dollars forecast [which predicted unit and dollar decline across the category] thanks to the demand for DVD camcorders."

A Canon spokesman agreed that there has been a "lull" in the market driven largely by macro-economic concerns.

Recent bellwethers of economic upsurge notwithstanding, consumers were pinching pennies through the first two quarters, and if they were willing to part with $400, they were often lured by a digital still camera, Vuolo said.

"It's not a function of better video capture on still cameras," Vuolo added, but more an issue of allocating limited resources.

The other marked shift of the first two quarters was the rapid diminution of the analog business, said Rudy Vitti, national marketing manager, optical group, Panasonic.

"Digital camcorders are becoming very popular and are replacing analog camcorders at a higher speed than the industry expected, not only at the low end, but at higher retail price points," Vitti said. The accelerated shift has been driven by technologies like 3CCD and DVD camcorders, Vitti noted.

The beneficiary of the conversion has been MiniDV camcorders, which have captured the majority share of the market for the first time in March and accounted for 54 percent of the market in May, according to unit sales figures from the NPD Group.

This momentum looks to continue in MiniDV's favor through the holidays, said Ross Rubin, director, industry analysis, NPD Group. Inside the MiniDV category, units with flash memory card slots are growing rapidly, with 32 percent of the units sold through May 2004 having slots, up 29 percent from 2003 (full year).

Indeed, according to the Canon spokesman, the ability to take quality still images with the camcorder is becoming an important step-up feature for high-end customers. He noted that the company was planning a full-court marketing press through the end of the year to emphasize Canon camcorders' still capability.

The DV Photo Plus campaign, similar to the multi-million dollar "DIGIC" campaign launched on behalf of the company's still cameras, will emphasize the various technologies integral to video and still image quality, including the ability to print quality photos from still images captured by a camcorder.

"We're expecting a strong fourth quarter," the Canon spokesman said.

As is Sony's Vuolo. She noted that thanks to the excitement around DVD camcorders, new customers are being attracted to the category outside of the demographic bread and butter of the category, new parents. Hitachi's Fochtman agreed. "There will be more DVD camcorders sold this holiday season than ever before," he noted.

Aside from the new technology, customers will also be shopping for larger LCD screens and increased megapixels, Vuolo said.

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MD-RPTV, Flat-Panel Lead TV Sales Growth

Falling prices boosts demand

By Greg Tarr -- TWICE, 7/12/2004

Strong Integrated HD Sales Expected

Camcorder Market Pins Hopes On DVD

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