NEW YORK –
The days of new unit volume records may have faded for the flat-panel TV category, but the big-screen segment (40-inches and larger) stands as perhaps the last bastion of opportunity for profit growth from the industry’s former rainmaker.
Vendors and retailers report seeing elevated consumer interest in big screens this year – particularly the 60-inch and larger classes – as customers come to the realization that bigger is better when buying a TV.
What’s new is that more and more TV shoppers are looking beyond the lowest-price-point SKUs in favor of better-featured models with the best possible picture quality.
At the same time, manufacturers are opening up distribution for even the largest models to mass-merchant and warehouse club retail channels. This includes Walmart’s adoption of Sharp Aquos LCD TVs in the 60-, 70- and even 80-inch classes (the latter in select locations) within the last three weeks.
For retailers and manufacturers that have suffered from eroded profit margins on small- and midsized TVs, the heightened demand couldn’t be better.
Industry observers reported retailers are starting to reserve more floor real estate in their TV showrooms for the big-screen SKUs.
In addition to generating higher turns, the segment is also delivering significantly higher average profit margins than commodity-sized models.
“The 60-inch and larger category is already generating 15 percent of the LCD industry dollars, so people are devoting more time, more dollars and more attention to large screen,” said Mark Viken, Sharp Electronics Marketing Co. of America marketing VP.
Helping to drive interest in the segment is the fact that more vendors have introduced 60-inch-plus screen sizes; per-inch prices have become significantly more affordable; and most of the biggest screen models now incorporate popular features, including 3D and Internet connectivity for over-the-top streaming video services.
TV market researchers are picking big-screen flat panel as a rare growth opportunity this year.
“From 2010 to 2011 we saw an increase [in 60-inchplus TV sales] of almost 90 percent, and in 2012 we are looking at an increase of almost 45 percent,” said Tamaryn Pratt, Quixel Research principal. “We expect more 65-inch models in the market this year as well as 70 inches. In addition, many new retail outlets will be carrying large-screen models, which will support the overall increase.”
Paul Gagnon, NPD’s DisplaySearch TV market research director for North America, forecast 20 to 25 percent growth from the previous year in North American unit shipments of 40-inch and larger flatpanel TVs for 2012.
“Observing some of the sell-through figures, it’s apparent that the 40-inch-plus TV market is growing and much better than smaller sizes,” he noted.
Within the segment, Gagnon said the highest volume levels will come from the 40- and 42-inch classes, both of which see prices fall to around the $500 price mark with regularity.
“But one of the most interesting sizes, and the one garnering a lot of attention, is the new 50-inch LCD TV class,” Gagnon said. “It is being rolled out by a number of brands and mostly at very aggressive price points to steal share away from plasma and to move consumers up from 46- and 47-inch models, which sold well last year. We are expecting the LCD TV unit volume from 50- to 54-inch to more than double in 2012 to 2 million units.”
Quixel’s Pratt said that in addition to screen size, more and more consumers are attracted to better-featured products than in recent years.
“To date, we have seen de-featured or simple models lead sales, but that will change this year,” she said. “There will be very few [CCFL-backlit] models, and almost all big-screen models will be connected and/or have 3D capability.”
Brian Siegel, Sony Electronics television VP, agreed: “For the past couple of years, consumers shopped with an idea of buying the largest screen size for the lowest price. However, we’ve also seen an increasing dissatisfaction related to poor picture quality – a kind of buyer’s remorse – from consumers buying discount brands.”
Siegel continued, “There is a technology advantage that delivers very appreciable benefits to consumers, and both manufacturers and retailers are beginning to communicate that better to consumers. For Sony and our retailers, it’s about delivering the right TV for a customer’s needs and desires, and making consumers long-term customers of the brand.”
Siegel said connected features take a back seat to picture quality with most Sony customers.
“Connected features are clearly important to our customers and connectivity becomes progressively more important as time passes. However, connectivity without superior picture performance usually brings a less-than-satisfying experience,” he said, adding that Sony is now trying to capitalize on both areas by offering TVs with Sony’s X-Reality and X-Reality Pro chipsets to improve picture performance for a wide range of sources, including “lower-resolution content often found online.”
The company is also offering customers a range of connected-entertainment sources through Sony-only offerings, including the Video Unlimited and Music Unlimited services offered through the Sony Entertainment Network.
As for 3D, Pratt said most 60-inch-plus SKUs this year will have 3D capability built in as a feature.
“In 2011, only about 25 percent of the 60-inch TV category had the 3D feature, and that percentage was about equal for plasma TV and LCD/LED TV,” Pratt said.
New in 2012, manufacturers LG and Samsung are trying to stay a step ahead of Apple by releasing bigscreen models incorporating voice and gesture-controlled interfaces in some high-end models. If nothing else, the feature should bring even more attention to the category, analysts said.
Despite reports of some manufacturers scaling back panel production as losses continue to pile up from TV operations, Pratt said she couldn’t see any threat of price increases on the horizon.
“Unfortunately for manufacturers, there will be very few, if any, price increases due to increased competition from 65-inch LED models and also value-priced 60-inch and 65-inch plasma TV,” Pratt said. “In this case, models are getting bigger and better.”
DisplaySearch’s Gagnon said the impact of panelproduction cutbacks and unilateral pricing policies imposed by a few brands “will be more stable pricing on the mid- to high-end models. The entry-level models from the top name brands are not really governed by new pricing policies, so they should continue to be priced competitively to hold share against lower-tier brands.”
“Time will tell if the industry can hold the line on pricing,” he continued, “but the low-margin situation and our outlook for fairly stable panel pricing would suggest limited maneuvering room on retail pricing if everyone wants to operate profitably this year.”
Another driver of big-screen volume this year will be a greater representation of brands in the segment.
Sharp stands as the big-screen leader, with better than 60 percent market share, according to company estimates, after helping to pioneer the category through the release of products in the 60-, 70- and 80-inch screen sizes.
Sharp’s Viken said the 60-inch class has been a strength for Sharp in the past, but “70- and 80-inch is gaining momentum, and we think 70 is really going to drive our business year.”
He attributed the growth in the bigger sizes to consumers becoming more accustomed to seeing very large-screen displays in the market, which has led some to regret not having purchased a larger screen size from the beginning.
“So they are returning to buy a larger model,” Viken said. “The American consumer has the room in their home and loves the big-screen experience.”