CE Execs Expect Aggressive Q4 HD Pricing

DENVER — Demand for CE during the fourth quarter, especially flat-panel TVs, will be tremendous, but pricing — especially around Black Friday — should be as aggressive as last fall.

That's the consensus of top executives TWICE met during CEDIA Expo.

Other topics on their minds included concerns about more of the flat-panel TV category becoming a commodity; worries over the general economy; and how top-tier brands differentiate themselves in such an environment where predatory pricing is a foregone conclusion, hurting everyone's bottom line.

In discussing the mixed general economy, Jay Vanderbree, president of Sony Electronics Consumer Sales, noted, "I hope this isn't taken the wrong way, but when the economy is down, [the industry] does better. If [consumers] cut back on vacations, trading up and buying a new house, cut back on going out for entertainment, historically consumers hunker down and spend more money on home entertainment."

The veteran Sony executive volunteered this about Black Friday: "We expect it to be as competitive as it was last year," which is saying a lot.

Max Wasinger, sales and marketing senior VP for Mitsubishi, is hopeful that "flat-panel demand will be off the charts in the fourth quarter." But he warned "the landscape has changed" based on Black Friday. "Our whole [flat-panel] industry changed last year" in terms of Black Friday and the fourth quarter. "I think the industry will be very aggressive this year."

Wasinger noted that for top-tier brands like Mitsubishi to break out of the trend toward commodity pricing, they have to come up with "new, unique technologies" such as the demonstration of 3-D technology via HDTV that was featured at its booth during CEDIA Expo.

Fred Towns, senior VP of distributor New Age Electronics said, "Retailers are all struggling with the change of selling more units for fewer dollars [per sale]. Consumers were making more money on display, but now? Third-tier brands are not state of the art but offer good value in terms of price point. On Black Friday it will be flat panel to the max. We will see incredible prices for second-tier brands."

Bob Scaglione, Sharp product and marketing group senior VP, agreed. "There is no question that in flat-panel pricing [in the fourth quarter] this year will be as aggressive as last year." During CEDIA Expo, Sharp introduced its first Blu-ray player (see p. 1) and Scaglione said the company believes "Blu-ray will eventually prove to be the clear winner" but it will take another year or so to see if the format will best rival HD DVD.

In discussing the custom installation market specifically, Daniel Lee, Hitachi America marketing VP, said, "Custom is a very significant segment for us to focus on. Our Director Series [of HDTVs] is a perfect fit for this market. We like to say is that [Hitachi] provides an 'affordable luxury.' We are focusing on the [custom installation] market to insure that the Hitachi brand is perceived as one being of high quality and value."

In that vein, reaction to Hitachi's Blu-ray camcorder has been "phenomenal," according to Lee, since it is "a world first. We are a technology leader ... and want to be considered a profitable brand. We want to be the 'go-to' brand for profit."

Concerning the fourth quarter, Lee said, "We expect very strong flat-panel demand [since] it is the centerpiece of home theater systems. This should be a favorable trend for all brands."

Steve McNally, sales and channel marketing VP, LG Electronics, discussed the custom installation market and general retail trends. "Based on economic conditions I'm surprised about what installers are saying here. They say that business is good but 'you have to work for it more.' That means there aren't seeing a lot of new people but are going after existing customers." McNally said that retailers and installers he visited with during CEDIA Expo seemed "more relaxed" this year vs. the frenzy of activity of last fall.

In discussing the fourth quarter, McNally noted, "This fall there will be opportunities to gain share because demand will be great in flat panel. Last fall [price cuts] created insanity. There were prices out there that had no justification in reality. Consumers didn't know if they were a good deal or not, but in most cases they did." That being said, his opinion is that this year's Black Friday will "probably be" as aggressive as 2006.

Also, McNally commented on the changes at Tweeter (see p. 1), "I've believed for a long time that we need retailers like Tweeter. Their role is to explain new technology and sell advanced higher-priced products."

Speaking of Tweeter, the executive director of its buying group, Dave Workman of the PRO Group (see p. 1), had some ominous words about Black Friday: "It will be like last year, not pretty. I have my predictions in, but I think a $699 42-inch is a given, maybe even $599." But he added, "Demand will be OK."