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Analysts Look For TV Growth For Holidays

10/26/2009 02:00:00 AM Eastern

Analysts tracking the consumer TV industry are expecting aggressive holiday pricing to drive unit sales growth in some segments during the upcoming holiday selling season, particularly among models with 32-inch and smaller screen sizes and 40-inch-plus models priced less than $1,000.

Most agree that the continuing economic tribulations will make for more frugal shoppers, but holiday gift buyers will still be hunting for TV bargains as they look to add secondary flat-panel HD sets to other rooms of the home or replace old analog models that were recently hooked up to set-top DTV converter boxes or digital TV services.

According to Riddhi Patel, iSuppli TV systems principal analyst, LCD TVs should see moderately strong sales during the fourth quarter, particularly in screen sizes ranging between 32 and 50 inches.

Several other analysts are also calling for the 32-inch segment to be particularly strong, as they have been for most of the year.

“Unit sales so far this year have been better than expected, and most of the surprise volume has been at 32 inches and below,” said Paul Gagnon, DisplaySearch North American TV marketing research director. “Certainly, 32-inch is leading in terms of unit volume, accounting for more than a quarter of units.”

As for holiday pricing, Tamaryn Pratt, Quixel Research principal, said, “Prices are already very low at many screen sizes, and we have seen solid brands like Toshiba and Philips offer up holiday prices early in Q3, which pushes the deals to the consumers who want premium brands at a hot price. They will be able to find many 32-inch LCD TVs at $399 during the holidays.”

iSuppli’s Patel is calling for 32-inch LCD TV prices to drop to as low as between $299 and $349 for Black Friday specials in some aggressive retail accounts.

“This holiday the TV category should be about value. Because of that, $500 will be a key price point, so lots of 32-inch, 26-inch and 19-inch specials should be available. Also, 40-inch-plus class 1080p sets with sub-$1,000 price points will be available,” Gagnon said.

In the 40-inch and larger range, Quixel’s Pratt said to look for heavy activity in the 40-to-42-inch 1080p LCD TV class, “where it seems a given that the premium brands will have models priced at $649, and we are expecting $599 where retailers want to put more skin in the game.”

“In the 46/47 segment, premium brands will be offered up at $799 to $899,” she continued. “Also expect LCD TV values at 60-inch this year. For the solid brands who already offer these prices, we may see additional discounts in these larger screen sizes vs. the 32-inch class.”

Unlike last year and early 2009, when panel shortages limited supply of some smaller-screen-size LCD TV models — particularly in the 32-inch class — no inventory problems are expected across the television category this year, analysts said.

As for sales of plasma sets, DisplaySearch’s Gagnon said sales are currently steady at around 10 percent of the TV market.

“Plasma could have a strong holiday season given the better value per inch compared to LCD. In fact this is plasma’s biggest asset right now, value, and most of the units sold tend to be mainline models at the lowest price points, mostly HD,” he said. “I would expect Black Friday prices for plasma to be a couple hundred dollars lower this year compared to last year.”

Patel of iSuppli said, “Plasma set shipments will account for 12 percent or about 4 million units of the total U.S. flat-panel TV market. LCD continues to dominate the market because of its availability in all different sizes and its rapidly declining prices coupled with aggressive promotions.”

She continued, “Recent trends are not very likely to help the plasma industry as the technology upgrades are being overshadowed by the changes in LCD technology. Plasma could be the loss leaders once again on Black Friday if they can work with aggressive price points. The prices that would be aggressive for plasma are $399 to $499 for a premium-branded 42-inch and about $599 for a 50-inch FullHD set. No specific newcomers in the plasma market to look out for.”

As for step-up TV promotions, Patel said that in the 40-inch range, LED backlit LCD TVs will be pushed heavily by both the brands and retailers.

“Also, brands will continue to focus on Internet connectivity in TVs as well as bundled deals like Blu-ray Disc players with TVs, audio systems with TVs, game consoles with TVs or even free installation with TVs along with aggressive pricing,” she said.

Quixel’s Pratt also said that the Connected TV revolution seems to be catching on with consumers.

“There has been significant media attention and publicity around Connected TVs — more manufacturers are including widgets, RSS features and so forth, and Quixel has seen the number of units sold double each quarter,” she said. “In fact, in the large area display market (all display technologies above 40 inches), connected TV sales are tracking at 17 percent of the total and we expect share to top 20 percent for 2009.

“When looking at the total LCD TV category, connected TV sales will account for 9 percent of the total category and 28 percent of the PDP category,” Pratt predicted.

Patel of iSuppli said Internet-enabled TVs are currently being pushed by brands more than retailers.

“iSuppli believes that Internet-enhanced TV (IETV) connectivity features will be added to new sets rapidly and penetration rates will be high, but whether consumers actually use the feature or not is another story,” she said.

The biggest concern with IETV connectivity is bringing Ethernet cables from the Internet router to the TV, Patel said.

She said that IETV set sales currently represent about 20 percent of flat-panel TV purchases (LCD and plasma models included).

Patel said she is looking for an increased push on IPTV products from brands over the holiday selling season.

“There will be increased marketing dollars spent on the same to increase consumer awareness. While marketing is a key to increase awareness, it will depend on the user interface and ease of use from consumer perspective for adoption of this feature,” she offered.

Once again the brand-share war in flat-panel TV marketing will be waged at the top with tier one brands offering prices that appear to present the highest value to consumers, analysts said.

“Japanese brands who’ve been hit with major profit losses this last year will be conservative while Korean and Chinese brands will be most aggressive,” predicted Gagnon. “It will be challenging for everyone though to go deep on price cuts for a wide range of models or on high volume deals since the production costs have risen a lot recently due to panel price increases for LCD.”

Second-tier lines with very competitive opening price points will do well as well, they predict.

“Best Buy’s private-label business is taking off,” observed Gagnon. “So far, they’re the only retailers to achieve success in private labels. At the same time, the brands that saw the strongest growth in our Q2 ’09 shipment numbers were so-called opening price point (OPP) brands like Funai (Sylvania, Emerson, Magnavox, Philips), Sanyo, RCA and value brands like Vizio. I think the major brands are just trying to remain competitive with consumers hyper-sensitive to value right now.”

Quixel’s Pratt said, “The economics are challenging for house/private labels as well as what the industry used to call 'Tier 3’ brands. The landscape has changed and CE brands need to be either vertically integrated or generate significant volume to provide the best prices at retail. For the most port, the industry has moved from Tier 1, 2, 3 to the Premium or A brands and B brands.

“We will see the role of the house/private-label and Tier 3 brands migrate to a more opportunistic one — spot buys, slot ins, etc. The B brands are all major label brands that are offering great products at great prices and at the same time A brands have entry products that are very price competitive. There is no room for Tier 3’s to offer full lineups like they did in the glory days. It is likely that we could see a traditional brand or two function as the de facto house brand for a retailer,” she continued.

North America TV Shipments Units in 1,000s

2007 2008 2009 ’09 Y/Y % Q4’09 Q4’09 Y/Y %
Source: DisplaySearch Global TV Shipment and Forecast Report

© TWICE 2009
LCD TV 24,240 30,065 33,956 13% 9,210 6%
PDP TV 3,655 4,062 3,934 -3% 1,302 -3%
OLED TV 1.9 0.4 -79% 0.1 -80%
CRT TV 5,441 3,084 530 -83% 100 -79%
RPTV 1,615 417 141 -66% 16 -86%
Total TV 34,951 37,630 38,561 2% 10,628 0%

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