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Panasonic Presses Ad, Technology Edge

Building upon its successful “Panasonic — Ideas For Life” ad campaign, and its successful rollout of DVD-RAM recorders, SD flash memory-based audio/video products and both plasma and LCD HDTVs, the manufacturer plans to aggressively expand on both the product and marketing fronts during 2004.

Panasonic spent $100 million for media and materials to get its ” Ideas For Life” campaign up and running during calendar year 2003, which included efforts by the consumer, industrial and systems divisions of Panasonic in the United States.

While Andy Takani, president of Panasonic Consumer Electronics, did not specify what the advertising budget was for his division or for Panasonic in the U.S. for last year or 2004, he did its future commitments. “In consumer electronics our advertising will be two and a half times as large [in 2004] as 2003, and 2005 will be four times the size of last year.”

And the promotional effort has begun to work. According to Gene Kelsey VP/general manager of the Brand Strategy Group, Panasonic is now in the top ten of “coolest” electronics brands for teens and young adults, and is reportedly moving upward.

On the product side Panasonic will push its advantage during International CES in Las Vegas this week with its “3D Value Chain Strategy,” namely the DVD-RAM recording format, SD flash memory storage and digital television display. What Takani calls “cool and sexy products” will continue to flow from Panasonic, he said, in all three areas.

For a major CE company that has been known over they years for reliability, technological innovation and massive manufacturing capabilities, being provider of unique and fashionable products might be considered a stretch. But under the direction of Takani, Panasonic is making headway.

In an interview with TWICE at Panasonic headquarters, just few weeks before CES, Takani, Kelsey and John G. Iacoviello, product and marketing VP, outlined the progress of their collective efforts and gave us a peak at some future plans.

TWICE: What is your assessment of the major advertising and promotional campaign behind the Panasonic brand during 2003?

Andy Takani: The campaign has been successful. We will continue it in 2004 and will begin it earlier in the year during May and June. We will promote products that are suitable for the gift-giving season, smaller items like digital cameras and optical products.

Gene Kelsey: This gives us more of a year-round presence. One thing that Andy had us do in the past two years is focus on products for the “Moms, Dads and Grads” time frame with ads in the spring. That is unusual for us. In promotions [in Spring 2003] we’ve gotten involved in street team events, spring events and extreme sports promotions.

TWICE: What’s been the result of the new promotions?

Kelsey: We learned from an independent survey company that we’ve moved up the list significantly of manufacturers of “cool products” in the past two years for young people. In that group are a lot of brands you’d expect — video game and cellular phone companies — but not many pure electronics companies. There were only two [pure electronics] companies on the top ten. Last year we moved up significantly. That’s a combination of the advertising working and also the production of the products.

Takani: Panasonic and Dell were in that top ten.

Kelsey: And we’ve seen the same improvement with women, and how women perceive the brand as well. They view us as the second highest electronics brand. That’s a combination of advertising working with the development of strong products.

For the first time all of our divisions are using the same theme, same brand identity — consumer, industrial sector, systems. It’s all about “Panasonic — Ideas For Life.”

TWICE: How have sales of your products, especially the “3D Value Chain Strategy” technologies, been changed by your promotional efforts?

Takani: Obviously what is driving the business now is flat-panel digital. Mostly plasma and LCD. We introduced a 50-inch plasma display in August, and in one month gained an 18 percent share of the market. During September and October we have kept a share of 17 to 18 percent with one more model. We’ve added a 60-inch model and whatever we can ship we can sell. No inventory! That’s thanks to good inventory management and other controls. Everything has improved, but profits do need to improve too.

TWICE: How many SD-based products will you have available during 2004? What’s the status of the format? How many SD-available digital TVs will you have in the U.S.?

Takani: We are planning 68 products worldwide. There are so many, at this point, I’m not sure how many we would have available in the U.S. yet.

John G. Iacoviello: We will have SD, PC-MCIA capabilities in every size [digital TV] except 37-inch sets, and that’s only because they don’t have the room in LCD projection TVs.

Takani: Globally SD exceeded Memory Stick earlier this year. SD’s share is now 33 percent world wide and in the U.S we have a 24 percent share. We are number two behind CompactFlash.

TWICE: What plans do you have in terms of SD?

Takani: By next spring we will have a 1GB available, double capacity of 512MB, with 2GB and 3GB on the horizon.

Iacoviello: For instance in our video display area, we will be putting in digital cable tuners in all of our plasma products. We will add SD and PCMCIA slots in a package to add value to the digital cable tuner package. Those tuners have a premium from $300 to $500, so you have to provide a [value-added] package.

TWICE: What do you think of your progress with the DVD-RAM recording format, another part of your “3D Value Chain Strategy”?

Takani: Since we spoke last year the DVD-RAM recording format share in the U.S. is 55 percent. Our share of the market is 51.4 percent.

Iacoviello: We increase our share [in the fall of 2003] while the other format has gone down. We will be introducing four models this year, with channel guide services. We will have two DVD-RAM camcorders this year. When you have a DVD-RAM recorder [and camcorder], a hard disk and a SD card slot, this could be the core of home networking.

TWICE: Panasonic has been a technology innovator in consumer electronics for quite some time. Gerard Kleisterlee of Philips said recently that innovators in this business that invest heavily in R&D, like Panasonic, have “less and less time to enjoy the fruits of their labors before the ‘me-too’ producers catch up.” Do you agree with that opinion?

Takani: All of the digital products that [the industry] develops today involves how you can create more quickly LSI chips to build these products. If you don’t have a good ‘black box,’ technology that can be copied easily, you can be in trouble. In display, for plasma and LCD, plenty of companies sell those sets. But how many make their own screens, and make it with quality. In the digital era things have become very competitive. Some products can be easily copied in three months, resulting in price cuts prior to the products being shipped.

TWICE: In recent months we have seen dramatic changes with established CE innovators. For example, Sony announced a major worldwide restructuring and the proposed merger of video business with China’s TCL. How is Panasonic handling this era of ‘hyper-change’?

Takani: Panasonic is not the only exception to the rule. The industry has changed. No one can now afford to make [all their components] from A to Z, because major investments must be made. Still, if you talk about the display business we are investing a lot of money in plasma because we believe that the larger screen, more than 40 inch, will be the major screen size for the future, at least three or four years.

Now this year our share, global production, will be 23 to 24 percent. The No. 1 producer is now Hitachi. By spring, we will add one more plant in Osaka, which will triple today’s capacity. Within the [next] fiscal year we will have five times more production than currently.

TWICE: Is the industry changing that quickly?

Takani: I think so. That is why Thomson and Sony — they have been kings of TV for years with the best picture and best quality for many years, have made changes.

We met 364 days ago. That was yesterday, which is a big difference. Yesterday you could be a king, but now you are your humble self. This is our industry. Our competitors are reforming, and we have to do the same thing, we have to reinvest.

TWICE: This year the entire industry is faced with the ATSC broadcast tuner mandate. How will this new technology play out during the next 12 months?

Iacoviello: We will include ATSC tuners in the majority of our products next year. We will be ready to do business. But we do have some concerns. The FCC’s 50/50 mandate is a concern. We are going to constrain supply based on how many sets are sold. There will be a strain on Panasonic and everyone else in the industry. If the consumer doesn’t want to pay a premium for a tuner, there will be a penalty for manufacturers.

We eventually may have to tell some consumers call and say we can’t provide non-digital cable product, even if they want to buy it. Going forward every year the ratio will change. We just wish the mandate was 100 percent [digital cable tuners] now.

TWICE: With all the talk and emphasis on plasma and LCD displays now, what will happen with CRT-based TVs, the majority of today’s market? When will that go away?

Takani: CRT demand, round, flat or whatever, will decrease. Our forecast is 20 million units of CRT sets and 10 million of a ‘mixed bag’ of flat-screen technologies. CRT is still big. It will not disappear immediately. But by sometime in 2004 we will exit the CRT round tube analog business. For flat analog CRT tubes we will exit it in 2006.

Kelsey: When you talk about younger consumers, there are kids today who have no memory of black and white television. You will be able to argue that babies born in the next 12 to 24 months, when they get older, they will have no recollection of tube televisions. From computers to TVs they will experience flat panels, no tubes.

TWICE: One more HDTV related question, and that is about Blu-ray. Will you show it during CES? When will we see it in the U.S.?

Takani: We will have a Blu-ray demonstration at our booth during CES. We already have been focusing on it and other technologies that involve copy protection issues. We think we are very much advanced versus our competitors.

Sony is already introducing Blu-ray in Japan. I don’t think it is the time. Consumers haven’t completely seen and understood DVD recording yet. Also there is the issue of HDTV and copy protection. We can introduce Blu-ray now. But will there be prerecorded Blu-ray product available? Will copy protection issues be settled? For all these reasons for the next two or three years, DVD recorders will still be the main format.

TWICE: So, going forward, how do you think Panasonic’s “3D Value Chain Strategy” will evolve this year? What are your goals for this strategy and for Panasonic this year?

Takani: Between digital TV, our focus on DVD-RAM recorders with hard disk and SD, you have the makings of the control center of the home. In the next year we will have a clearer picture of whether the DVD-RAM recording format and SD are de facto standards. We will have expanded our plasma production tremendously, and made investments with digital cable. We made all these investments to achieve the goal of being No. 1.