Despite the economic downturn, Panasonic is approaching 2009 International CES in a business-as-usual fashion, anticipating continued strong demand for both LCD and plasma television sets, but understanding that retailers and suppliers alike must clearly understand and deliver their value propositions to the consumer to succeed, according to Bob Perry, Panasonic television marketing senior VP.
In a Q&A interview with TWICE before CES, Perry assessed Panasonic's product roadmap, the impact of the economy on the business and offered retailers advice for maximizing the opportunities that will continue to exist through good times and bad.
TWICE: How has the economic downturn affected Panasonic's TV product planning for 2009?
Perry: Panasonic, like most manufacturers, has completed the product planning cycle for next year, and for the most part a lot of those decisions were made earlier in 2008. This current economic environment was not anticipated or factored into our plan. Having said that, we do believe our product plan was appropriate for the marketplace. We've met with key retail partners to discuss our strategy, lineup and distribution and have begun our implementation.
In general declines in the economy do not reduce the unit volume of the business. The TV, unlike an MP3 player or a video game console, for most households is a necessity. The average unit volume was about 28 million in 2008, going into about 105 million households. Those fundamental things have not changed.
In the TV business there probably will be some changes in consumer behavior. They may buy smaller screen sizes than originally planned. They may buy less featured televisions, which have slightly lower price points. We believe that while consumer behavior may be modified, and we may see a different mix of products we sell, but we believe that continued innovation is necessary to maintain our brand position in the marketplace.
TWICE: What advice do you have for retailers in this environment?
Perry: We are coming off of a very long-term bull market and retailers who are used to running their businesses in that climate sometimes forget what the market is really like when it is just average — controlling operating costs, really understanding their value proposition to the consumer and really being able to demonstrate it. A lot of companies have been saying, "Hey it's flat. Come buy it." That is not a value proposition. The value proposition comes out of understanding what the customer needs and is willing to pay for and delivering that to them. If you don't know your retail proposition, you don't have an inherent right to exist.
TWICE: Will fear of the economy skew consumer interest back to price-friendly 720p plasma and LCD models, which Panasonic continues to promote aggressively?
Perry: It's our belief that some manufacturers tried to kill 720p way too early. The reality is there are a huge number of consumer households that want to buy a great high-definition TV in a fairly large screen size at a reasonable price. The people who make the argument that all TVs must be 1080p are not thinking about the value proposition to the customer. For years to come 720p televisions will function wonderfully in people's homes. We don't think demand will shift away from 1080p and back to 720p, but as much as half the market or more will continue to be 720p. We will continue to offer a full range of televisions, and help consumers understand the value proposition for each of those products, but we are not walking away for 720p or that value proposition for the consumer.
TWICE: Who's responsible for bringing excitement back into the television market, manufacturers or retailers?
Perry: Both. Over the next few years we are going to see a lot of new technologies bring excitement into the market and we are going to see the television experience change. The race for higher and higher resolution now that we have 1080p is a bit ridiculous because it is not delivering value. If the highest resolution source that you can get is 1080p, there is no reason to go above 1080p unless the screen is billboard size. The next change in television will be to improve the overall experience, and that will be with 3-D. We believe that 3-D is going to be very significant, and you will see various 3-D displays at CES from various manufacturers including Panasonic.
TWICE: What is your strategy for 3-D?
Perry: One of the unique things about plasma is that it has a refresh rate that is so fast that when we display 3-D we can do it in full 1080p. Other display technologies have slower refresh rates, and when they do 3-D on a 1080p display, they do it at half the resolution. We see 3-D changing the experience of television, offering content on packaged media such as Blu-ray Discs, and we believe it will also be possible with broadcast and IPTV.
TWICE: What does the future hold for the type and amount of content consumers will receive via IPTV connections?
Perry: It is realistic to assume that within three to five years consumers will be able to get the kind of content they want, how they want and when they want to watch it on an a la carte basis. We will be making additional announcements on content partnerships for our Viera Cast IPTV platform at CES. The future remains to be seen as to what the consumer truly wants, and we will be making improvements all the time in trying to get there and earn our value proposition. Our Viera Cast IP-enabled TVs connect to a Panasonic server and all of the content, applications and capability is on that server, and the server streams that content to the TV. That allows us to constantly upgrade the content and functionality of the server so that the very first IPTV we sold has access to all of this content. There will be a whole host of new IP services people will want on their TVs, and we believe our platform should give the consumer comfort that the IPTV they buy today will continue to improve as we improve the content on that server.