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Analog Remains Viable Big Screen Business

Although wide-screen digital television is becoming the dominant technological theme in big-screen home theater displays, 4:3 and even analog sets continue to represent the majority of industry sales in all market segments except for rear projection TV. This has led some manufacturers to develop differentiated marketing strategies to capitalize on what they each see as the prevailing trends.

Toshiba was the latest manufacturer to reveal a twist in its 2002 big screen TV strategy, which includes almost equal emphasis on both digital and analog TV lines — particularly in large-tube CRT direct-view models and rear projection.

Scott Ramirez, Toshiba color TV marketing VP, told dealers last month that his company is committed to maintaining its big screen analog business, especially after watching competitors like Mitsubishi, Hitachi, Sony and Zenith scale back their analog offerings.

Toshiba wishes to continue being a one-stop shopping resource for its dealers, Ramirez said, and he expects to pick up new business from dealers looking for alternate sources of analog big-screen product and curved glass direct view sets.

Similarly, Hitachi’s marketing VP Leo Delaney, said his company also offers three analog rear projection models, but he added that was done primarily at the request of retailers who were concerned about analog shortages.

“Our larger customers are asking us to stick with analog, and also some secondary markets appear to have some consumers who prefer to have a larger screen size for the price, rather than participate in new technologies,” Delaney said.

Citing shrinking price points and virtually non-existent profit margins both Mitsubishi and Zenith opted to drop analog rear projection televisions from their 2002 model lines. Both companies are also focused on playing up their “digital leadership” images to the public.

Mitsubishi sales senior VP Max Wasinger said at his company’s spring line show, that Mitsubishi was demonstrating its digital leadership by stepping away from the analog television business altogether. Several years earlier, it had dropped direct view CRT television to focus on an expanded rear projection assortment.

Hitachi recently announced its decision to stop manufacturing direct view models (although it still intends to market models acquired from other factories), while Sony elected to produce only flat-tube direct-view TVs in digital and analog lines going forward.

Despite the analog dropouts, Tom Edwards, NPD Techworld market analyst, said the industry is in no real danger of big screen analog shortages this holiday season.

“In big-screen direct view, this leaves an opportunity for some of the Chinese manufacturers to come in underneath” the more established brands, Edwards said. “For rear projection, I don’t see a big crisis looming because the brands that have cut back or dropped analog have been more focused on the specialty distribution channel. The big volume manufacturers like RCA and Philips will continue to sell analog to the volume chains.”

In support of its position to maintain its analog business, Toshiba quoted industry sales projections that large-screen direct-view color televisions are expected to grow 6.8 percent in 2002 to 4 million units. Within that segment the percentage of high- definition-capable models is projected to grow from 9 percent in 2001 to 15 percent.

At the same time, the percentage of HD direct view CRT displays with wide-screen aspect ratios is expected to grow from 17 percent in 2001 to 33 percent in 2002.

According to NPD Techworld market research, next year 20 percent of an estimated 4.2 million big tube sales are expected to be HD capable. About 47 percent of those will have wide-screen aspect ratios. In 2004, 23 percent of 4.3 million big tube displays are projected to be HDTV capable and 60 percent of those should be wide-screen models, according to Toshiba market estimates.

“Although HDTV is growing, we think most of the SuperTube business will be 4:3 analog for the next few years,” said Scott Ramirez, Toshiba color television marketing VP.

Flat-tube models represent another growing segment of the large screen direct-view business, according to Toshiba forecasts for the industry.

In the 31-32-inch screen size, flat-tube CRTs grew steadily in 2001 and early 2002 until peaking in March at about 30 percent of the business, where it appears to have leveled off so far, Ramirez said. Similarly the 35-36-inch screen size segment grew rapidly last year and early this year, before leveling off at about 44 percent of the market.

In contrast, digital television is a bigger factor in projection television sales, according to Toshiba forecasts. In 2001, 53 percent of 1.97 million projection TV unit sales, as estimated by Toshiba, were HDTV capable displays and 59 percent of those had wide screen aspect ratios.

This year, Toshiba’s industry forecast calls for 73 percent of 2.25 million projection TV sales to be HDTV-capable models and 79 percent of those to have wide screen aspect ratios.

Hitachi’s Delaney also sees the DTV rear projection marketing skewing toward a 70 percent widescreen mix this year, explaining his company’s decision to expand its mix of widescreen offerings for 2002/2003.

“By 2004 we predict 94 percent of 2.6 million projection TVs to be HD and 92 percent of those will have wide screen aspect ratios,” Ramirez said.

Sales of integrated HDTV sets (including built-in ATSC tuners) represent 5 percent of total digital TV display purchases, and that has inched ahead to 6 percent of the business so far this year.

Ramirez said, “we think that will continue growing up to 8 percent this year, but right now we don’t expect it to go much further.”

The company’s forecast calls for the percentage of integrated HDTV sets to grow to 12 percent of the digital TV market in 2003 and 22 percent in 2004.

Some believe the popularity of high-ticket plasma display panels has somewhat hindered the market for the more expensive integrated HDTV sets. Ramirez said Toshiba opted not to expand its integrated assortment at this time, but will offer plasma display panels in both the 42W-inch and 50W-inch screen sizes. Both are labeled “true HD” because they do not employ interlacing of any kind, and both include DVI connectors.

According to Toshiba’s research, approximately 16,000 plasma display panels were sold to consumers in 2001. That is expected to grow to 40,000 in 2002, 80,000 in 2003 and 160,000 in 2004.

As for the driving factors in the digital television transition, Ramirez pointed out that terrestrial digital TV transition is behind schedule. As of the May 2002 start of service mandate, only 410 of 1,304 (or 31 percent) commercial broadcast stations were on the air with digital programming. The National Association of Broadcasters had estimated in December that at least 874 commercial digital stations would be on the air by the May 1 due date.

The biggest roadblock, Ramirez said, has been lethargy in the cable industry to provide digital and HDTV programming.

“We cannot hit 85 percent penetration [of U.S. households] without [the cable TV] sector,” he said.