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Racing To The Bottom

No, the sky isn’t falling. But when CTA’s chief economist Shawn DuBravac pointed out at last week’s CES Unveiled event that TV demand has been disappointing, and thus fewer big tickets may be written this holiday season, you could feel the room’s breath catch.

But, the fact is, the TV category has been shrinking in importance for quite a while now. The second-screen phenomenon is real, and consumers are spending more of their hard-earned dollars on ever-improving smartphones and tablets.

Retailers have struggled for the better part of two decades to make any sort of reasonable margin on TVs, except for on the largest of screens and cutting-edge of features.

The TV industry is, in a big way, a victim of its own success. When the digital TV revolution kicked off, there was a dramatic difference in the quality of the new models. HDTV offered a clear, defined, dramatically improved user experience over the standard definition we all grew up on. Everyone who saw an HDTV immediately wanted one, and eventually got one, or two, or more.

Now consumers are told that there is another revolution at hand: 4K Ultra HD. It’s better; it’s twice as good as HD; who wouldn’t want one?

But, much like in the earliest days of HD, there is a lag in available content. Sure, Amazon and Netflix can stream some 4K shows but until the networks buy in — until the Super Bowl, or the World Cup, or the season finale of “Empire” is broadcast in 4K — the average consumer will see no reason to step up and spend four or five figures on a 4K model.

If there is one thing I’ve learned in my 22 years of covering this industry: The CE business is not a patient one. Consumers, on the other hand, are.

As Black Friday deals are being leaked, we’re seeing the inevitable race to the bottom. 4K models are dipping below the $1,000 mark. There isn’t even a real market yet, and the margins are already being sucked out of it.

When I sat down at a table with a bunch of tech reporters and Sony president Mike Fasulo this past spring, he spoke of the fledgling highres audio market and how Sony and other manufacturers had a responsibility to put aside their competitive weapons and spend some time educating the consumer on the benefits, the quality, the improved listening experience of high-res audio. “It is up to us to create a market,” he said. “We learned some hard lessons from the launch of 3D TV. If the consumer isn’t convinced beyond the shadow of a doubt that their life will be enhanced by buying that product, we have lost that sale, and likely, that consumer, for good,” he added. His words ring true for 4K.

CE sales continue to grow. Demand for technology is steady. Three-quarters of holiday shoppers intend to buy a technology product this year. There is opportunity for retailers and vendors alike.

Newly minted CE Hall of Famer Tom Campbell summed it best in his acceptance speech: “Only those who continue to evolve will grow and prosper.”